Edmonds Barbara; Watts SimonHon BARBARA EDMONDS (Labour—Mana): Thank you Mr Chair. Actually I do want to continue that line of questioning because I think I perhaps oversimplified for the committee how a multinational enterprise (MNE) actually enters into these rules. So it is a new regime. They are a multinational enterprise not a significant enterprise. So there's a slight difference but if I hear the Minister of Revenue rightly he is saying that they will be treated by that same investigations audit unit which is the significant enterprises unit. So the Minister can clarify that afterwards.But I think what the Hon Dr Deborah Russell was trying to confirm is—because there's actually a number of steps in order for a multinational enterprise to actually fall within these rules. So as I've said there are multinational enterprises with consolidated revenues above €750 million. But there are a couple of other tests that they need to meet. One is that that multinational enterprise could be headquartered in New Zealand or have a constituent entity or even just a branch located in New Zealand so they need to take a couple of steps from that. One is that they need to determine whether or not they're subject to the regime so that's the €750 million threshold. Then once they've calculated that they then need to ask themselves—well they'll next need to determine for each country in which it operates whether or not any de minimis or safe harbour applies. Then after excluding the countries for which the de minimis and safe harbour applies the effective tax rate in each of the remaining countries in which that multinational enterprise operates needs to be calculated. Then the next step is for that MNE to calculate its mobile income in each country. So this involves calculating its GloBE—global anti-base erosion—income and then deducting the amount of its substance-based income exclusion which is a figure based on the tangible assets and payroll costs in that country. Then the final step is to pay a top-up tax to Inland Revenue that will consist of either amounts payable for foreign operations under the income inclusion rule and amounts payable under tax New Zealand operations under the domestic income inclusion rule. So I can understand where the Hon Dr Deborah Russell was asking—because in terms of the significant enterprise case manager—that's the unit that it's coming out of—at what point in those different tests do they actually provide compliance advice or do they provide auditing or assessment advice? Those aren't quite specific tests which are set out within the legislation.Then the next question really is: well what about those MNEs who are actually headquartered out of New Zealand? Do they still have a case manager even though they're headquartered out of New Zealand? They could be liable to pay a top-up tax in New Zealand if they have an intermediate parent located in New Zealand or if they have a liability under the undertaxed profits rule. So is it that the significant enterprises case manager that they have—are they basically case managing the intermediate parent that's located in New Zealand or are they case managing a multinational enterprise that's headquartered outside of New Zealand? If it is the latter which is that they are outside of New Zealand how does Inland Revenue therefore enforce that? So how does that case manager actually practically case manage provide a right-from-the-start compliance angle which I understand Inland Revenue use—how do they do that with a multinational who's not actually headquartered in New Zealand?So I understand where the Hon Dr Deborah Russell is going because there are numerous tests and I had simplified the entry test into these particular rules but right throughout this particular bill there are actually more tests that you have to go through which then goes back to the earlier point that Dr Deborah Russell had raised around the reference to the OECD rules. It's important that that clarity—and the Finance and Expenditure Committee did support it not being in the primary legislation but doing it in reference to those rules. The question then begs: OK you've got your case manager that will do you the compliance or assessment—will need to clarify that bit; not too sure at what part of that test or tests. And then if the rule changes in the OECD by reference my question to the Minister is: I can understand why there are some benefits by reference why you'd want it in the primary legislation because taxpayers would have ease of access to the necessary materials without having to locate them on the OECD website. I don't know if anybody here has actually tried to go on the OECD website. It is actually not the easiest website to actually navigate. Once you make sure you turn it into English then it's even still difficult. The other reason why you could see why you'd want it in primary legislation is because they were able to have certainty when there are no other materials that they've had to take cognisance of and then they would be alerted to changes in the rules because those changes would be made by way of an amendment here in New Zealand through an Act of Parliament because there is no Order in Council ability. It's not through regulation; it is through an Act of Parliament.So my second part of this question for the Minister is: if there's a case manager when can actually the general public—anybody who is just wanting to be really involved and engaged in making sure these multinational enterprises pay their taxes under this new regime—expect by reference those changes to be alerted? Is there somewhere on the Inland Revenue website where that will be published; if so how often will it be published? Obviously I'm assuming in reference to the OECD but what's the time frame between the OECD changing the rules and then it basically being updated in New Zealand so that taxpayers in New Zealand whether they're a multinational enterprise or they're just a general member of the public can be aware that these rules have changed? I've been in the tax profession for a long time and you have a lot of engaged taxpayers. I've seen a lot of correspondence to different Ministers of Revenue and people watch this stuff. So I'm just wanting to know for a general member of the public as well where can they see it on the IRD website how often and what's the time frame being changed from when OECD change it to when New Zealand change it? Thank you.Hon SIMON WATTS (Minister of Revenue): Just in regards to the member's questions in regards to case management the Inland Revenue only case manage entities that are New Zealand – headquartered entities. While there are some 800 foreign entities that operate in New Zealand those are not within the guise obviously if they're headquartered overseas in the relevant tax jurisdiction and that relevant country will manage them in their own way. So IR is focused on the ones which are headquartered here in this country.In regards to the conversations around the—I can't help the member with the translation from French to English but there is an icon at the top for those watching at home. Hopefully they haven't tuned out because it's getting more exciting as the night goes on this conversation! But you can click up the top between English and French.CHAIRPERSON (Teanau Tuiono): Merci beaucoup Minister!Hon SIMON WATTS: We're not going to get into that but we could—that could be quite funny. But yes and IRD—you know while these rules come in 1 January 2025 IRD are working on guidance around that and will be providing proactive and regular updates of communication in regards to guidance in regards to that.There's about a hundred pages of these rules right? So it is a lot. We do acknowledge that these are complex but most of these large entities that are headquartered in New Zealand do have—as the member will appreciate—quite comprehensive in-house tax capability as well as using external support. So the relationship with the IRD is in fact that it is around relationship ensuring that we work together because the IRD wants to work with taxpayers not against them to support their needs in meeting the system.