O'Connor Greg; Russell Deborah; Watts SimonPart 3 Amendments to Tax Administration Act 1994 CHAIRPERSON (Greg O'Connor): Members we come now to Part 3. This is the debate on clauses 65 to 77C Amendments to Tax Administration Act 1994" and also Part B of new Schedule 1C as proposed by Amendment Paper No. 20. The question is that Part 3 stand part.Hon Dr DEBORAH RUSSELL (Labour): It's a real shame we weren't able to address some of the questions that were outstanding in the previous part but so be it. I want to—Tom Rutherford: Don't reflect on the Chair.James Meager: Off track already.Hon Dr DEBORAH RUSSELL: Take a call gentlemen—take a call. I want to focus on clause 74. Clause 74 starts to put in some of the penalties around the globe rules—so that's the global anti-base erosion rules. Those fines start to look quite significant. I'm looking at clause 74; it inserts new section 139AAB. So that's quite a long way through there. And in particular it says that an ultimate owner of a large multinational group who resides in New Zealand is liable to pay a penalty if the country-by-country reporting requirements are not met. And the penalty under this section is the amount specified by the commissioner. So the commissioner can set the amount but it must not see exceed $100000.So there's a number of questions around this. One is that that does seem like a large amount of money. I'd like to understand why we've gone for that amount of $100000. But I also want to understand—so this is in new section 139AAB(3)—the amount specified by the commissioner. So I want to understand the extent of the commissioner's discretion in that matter—whether she or he can impose different amounts under that and if so how that is going to be judged. I appreciate that the Minister can't tell the commissioner what to do but I guess there's a bit of a worry there around what precedents the commissioner might set.But the other interesting question around that particular penalty and that figure that has been set is to what extent it is consistent with penalties that are being set in other jurisdictions around these global anti-base erosion rules. Now obviously if people don't comply with New Zealand tax law we need to find ways to encourage them to do so and sometimes it takes a penalty to get them there. But of course the interesting thing about these globe rules is that they're not even contained within New Zealand law—all right? So they are contained within OECD rules and they are brought into the New Zealand law by way of reference.So we now have a situation where a New Zealand taxpayer could be fined a sum up to $100000 for not complying with rules that are being set by the OECD. Now I just want to understand how that compares really with the way that penalties are being set in other jurisdictions—whether other jurisdictions are making similar rules to this; whether that amount of $100000 is consistent with the fines that are being set in other jurisdictions. And I also want to have I guess some reassurance around the way that the commissioner is going to exercise her or his discretion with imposing fines that really amount to a considerable sum of money.Hon SIMON WATTS (Minister of Revenue): I thank the member the Hon Dr Deborah Russell for the questions. Again the Finance and Expenditure Committee in its deliberations did look at this matter as part of their considerations and the amount of $100000 has been set in the context of what is applicable to other penalties for other similar sized entities. The reality is that many of these are New Zealand headquartered aspects of multinationals and while the amount for those still watching at home may sound a lot it does need to be sufficient to convey the impact of a penalty on a multinational. So $100000 is the aspect.The question also raised in regards to the commissioner's powers: the commissioner does have the discretion to be able to assess the degree of penalty and the amount that's applicable as the commissioner has a wide range of powers in other aspects of tax law as well. And I don't think that's inconsistent. But it is important from an enforcement point of view that we do have appropriate penalties that send a clear signal for those entities that are not complying with New Zealand tax law—that in effect discourage them from undertaking behaviour that's not aligned with our legislation."