Woodhouse MichaelHon MICHAEL WOODHOUSE (Minister of Revenue): There is one comment from the Leader of the Opposition that I will strongly agree with which was when he said something to the effect of: When one is in Government the foremost duty is to preserve the reputation of the country." But I find it really rich coming from that member whose Greens-Labour coalition has been at the forefront of the biggest attack on this country's reputation and that is the continued and relentless description of New Zealand as a tax haven. It is scurrilous it is wrong and it is also consistent with a pattern I think of derogatory comments coming from the Leader of the Opposition particularly in respect of the author of the Government inquiry into foreign trust disclosure rules. The Leader of the Opposition accused Mr Shewan of helping tax havens and took weeks to withdraw those comments—2 hours before a rugby test. The one thing I will disagree with the Prime Minister on—in his comments during question time—is that Mr Little still has not apologised. He could not bring himself to say those two simple words "I'm sorry." and "I made an accusation about Mr Shewan—a scurrilous accusation. That was wrong. It was probably libellous." He withdrew it but he could not bring himself to say sorry and that is consistent with a pattern of attack on this country's reputation and on that author's reputation that is wrong wrong wrong. Let me tell the House what the report said about New Zealand as a tax haven. It is quite simply this: we are not—by any measure—a tax haven. When one considers the attributes that contribute to that reputation New Zealand has none of them—none whatsoever. Mr Shewan then goes on to say that the issue of tax havens is somewhat passé these days; the more common nomenclature is around things on tax systems that are preferential or harmful. He then says New Zealand's tax system cannot be categorised that way. In no other aspect of the tax system could it be considered to be preferential or harmful. What is harmful is the relentless attack on this country's reputation. But let me just touch on another issue that was raised by Mr Little both in question time and in his interview on breakfast television this morning. That was the question of the degree to which record-keeping requirements are robust. Mr Shewan concludes this: "The record keeping requirements for foreign trusts are … quite extensive"—quite extensive—"and include constitutional documents … particulars of settlements or distributions and the name and address … of settlors and recipients of distributions." He goes on to say: "IRD advised the Inquiry that … requests [for that information] are typically met without difficulty and that the standard of records provided is consistent with the standard for business taxpayers." So I am trying to reconcile this comment—these accusations: (a) we are a tax haven and (b) the record-keeping requirements are poor. But as has been said the question is not what record-keeping requirements there are—and all of them not only have to be kept but have to be kept in English regardless of where the settlor and the beneficiaries are from—Grant Robertson: I can't find it.Hon MICHAEL WOODHOUSE: I can refer the member to paragraphs 6.6 and 6.7 on page 22 for his benefit under the term "Record keeping requirements". They are extensive he said. In fact he said they are quite extensive.Hon Annette King: Can you read the whole lot. Keep reading.Hon MICHAEL WOODHOUSE: Why would this member want to be held to a different account? If that member will cherry-pick so will this.Hon Annette King: Very selective.Hon MICHAEL WOODHOUSE: Very. Yes we have been have we not Mrs King? Because there was a lot said about this that says they were extensive—of their own volition. While there were 142 comprehensive disclosures of information to foreign jurisdictions 80 percent of them were provided on the initiative of the Inland Revenue Department (IRD) and I think 42 or 43 were provided at the request of the foreign jurisdiction. The system provided for a comprehensive sharing of information proactively or on request. Why would the system be so proactive? Why would 80 percent of them be proactive? Well primarily because the IRD's main interest in preserving the tax base is to ensure that New Zealand tax residents are not hiding behind foreign trusts as a way of avoiding paying New Zealand tax. This goes to another point that Mr Little made on television this morning. He believes—he honestly believes—that the whole taxing of foreign trusts should be reviewed. Never mind that a very very thoughtful policy position was put in place by the fourth Labour Government in 1988 because of the propensity of New Zealand tax residents to shelter their income behind trusts where the trustee was offshore because the tax point until that point was the trustee. I can tell this House without fear of contradiction that a return to that framework would have a massive negative effect on the New Zealand tax base. If he believes that our first priority is to preserve our reputation one very high priority has to be to preserve the New Zealand tax base. The change back to the old days would do quite the opposite; it would have a very very detrimental effect on that. The other matter that the Leader of the Opposition has raised is the question of the public register of foreign trusts. Mr Shewan is unambiguous about that—at paragraph 10.14 for Mr Robertson's benefit—"The Inquiry is [specifically] not recommending that the information obtained by IRD would be automatically exchanged with foreign tax authorities." This is for the simple reason that those authorities may use them for other purposes. That is a bit of code for the very legitimate reason that one might actually use a foreign trust for the protection of their family and their asset base—Hon Annette King: How many of those are there? Give us a number.Hon MICHAEL WOODHOUSE: Well that is a very good question. I wonder whether that member has a domestic trust. I am sure I could search the Register of Pecuniary and Other Specified Interests of Members of Parliament because as a publicly elected official she is held to a different standard—that is fair enough; we all are. But I wonder whether that member's family has a family trust? Why? The protection of an asset probably and the risk of litigation that could result—Grant Robertson: They pay tax on it.Hon MICHAEL WOODHOUSE: Well probably on the income and on the distributions of course. Grant Robertson: That's right. They probably do pay tax on it.Hon MICHAEL WOODHOUSE: Well what I'm saying is that Mr Shewan has made a very thoughtful recommendation not to have the register public and I agree with that recommendation. Any suggestion that the salacious searching of the public register would be necessary or appropriate is just inappropriate. One of the things of course in the many incorrect claims that the Opposition has led on this is that—Hon Annette King: I'm glad we've led on it. We've exposed you for what you are.Hon MICHAEL WOODHOUSE: Really? What is that?Hon Annette King: Supporting the rich and privileged who hide their tax.Hon MICHAEL WOODHOUSE: OK so we are supporting the rich and the privileged.Hon Annette King: Who hide their tax.Hon MICHAEL WOODHOUSE: OK—only here is the thing right? There have been what—how many million papers in the Panama Papers? Do you know what? My IRD officials for all the breathless descriptions of this have not been able to access the Panama Papers. The International Consortium of Investigative Journalists (ICIJ) has had these papers for a year. It has a register of names a register of references to New Zealand but nobody outside the ICIJ has seen the Panama Papers. But that member determines that means that we are helping our rich mates. I would love to know who these rich mates are. I would love to know how we are all flying around in Learjets and somehow in cahoots with these rich mates. You know what? Our No. 1 priority is to protect the New Zealand tax base. These are offshore individuals using legitimate vehicles for whatever purposes. Mr Shewan has said and I agree that with 11000 of these trusts it is probably likely that not all of them are absolutely squeaky clean in all of their affairs in relation to tax in their foreign jurisdictions. They have no obligation to the New Zealand tax base because they do not have assets here they do not have income here and the money is not coming through New Zealand's banking system—and I know that the Minister of Justice will touch on this in respect of the anti – money-laundering recommendations that are highlighted in the report. But it is simply not true to say—and that party has made very strong inferences that this is the case—that there is somehow money washing through the New Zealand banking system from foreign trusts on which tax should be paid in New Zealand but is not. That is just not true. There are a number of other things of course that we have heard about in respect of matters that the Government has already responded to. Minister Adams will talk about anti – money-laundering. I want to talk about look-through companies. There is one area where there was international media around it and that was with an Australian Business Review report that was critical of the frameworks that were revealed in the Panama Papers but focusing not on foreign trusts but on look-through companies. The Government has already got a solution to that. It put a bill into the House that will mean that a look-through company that has the greater of either $10000 or 20 percent of its turnover earned from foreign sources loses its right to have that tax set off against other individuals. That will effectively mean that the look-through companies have to pay company tax here in New Zealand regardless of where that income is earned. That is going to be a significant barrier to anybody who is using these vehicles to shelter or avoid income tax. This is a good report. This is a report that says—Grant Robertson: But there's no problem—so why is it a good report?Hon Annette King: You said there was no problem.Hon MICHAEL WOODHOUSE: I never said that.Grant Robertson: Yes you did. You've spent 8½ minutes saying it.Hon Nathan Guy: They weren't listening.Hon MICHAEL WOODHOUSE: No they were not. Why would anything be different? This is a solid report that highlights an area of potential reputational risk—and it is going to be removed. And it is going to be removed I have to say at a significant impost on the resources deployed by IRD Treasury and other agencies on a massive business transformation project that will be going on for the next 4 years. That was the issue that Minister McClay as my predecessor had to consider when he asked officials what would have to give in order for the foreign trust review to take place. They were reluctant to say anything about that. So the question answered itself. I maintain that the priority has to be the preservation of the New Zealand tax base. Obviously there is a reputational issue here as well. Although the record-keeping requirements were robust and there were plenty of examples of the sharing of information it is appropriate to beef that up and to put information into the custody of the IRD. So I want to thank Mr Shewan despite the scurrilous attacks on him by the Opposition parties. He has done a very good job. That is one individual whose reputation is certainly enhanced by this report. The Government obviously has to take advice on it but there is no recommendation that I can say we will not be following. There are a couple of areas around anti – money-laundering in that and although we have already announced effectively the remedy that Mr Shewan recommends the method obviously and therefore as a consequence the timing do need to be reconsidered. And there is an issue around whether or not the fee that would be charged for registration is consistent with other fees charged by the Government for similar registrations. But those are the only two things that spring to mind as possible nuances against the recommendations. Overwhelmingly I expect to be able to take recommendations to Cabinet that will support this and I want to do that in as timely a manner as I can. I thank Mr Shewan for this work."