Robertson GrantGRANT ROBERTSON (Labour—Wellington Central): It is a pleasure to be back in the House for 2017 debating a taxation bill seeing some familiar faces around the—Ron Mark: I raise a point of order Mr Chairperson. My sincere apologies to the honourable member for interrupting him. Can you enlighten me Mr Chairman. Is there not a vote on that motion that the—The CHAIRPERSON (Lindsay Tisch): No it is the discretion of the Government because the fiscal aggregates in the Government's view are such that Supplementary Order Paper 259 is ruled out of order under Standing Order 330 and Speaker's ruling 139/1. So there is no vote. GRANT ROBERTSON: As I was saying it is a great pleasure to be here debating a taxation bill again with the familiar faces who are here to pick our way through the detail of this bill. The Attorney-General has arrived—an expert on tax law as I know he is and a passionate person with a deep passionate interest in the Tax Administration Act—so we look forward to his contribution as well. This is a bill that the Labour Party in general supports. It does some quite useful things around making it easier for business to pay its taxes it improves the flow of information and it deals with—as we love to say in these tax bills—remedial matters of many shapes and forms and Andrew Bayly will go through those clause by clause in the next hour or so as we go through them. But the bit that I want to focus my attention on in this first set of calls is around Part 1 and the amendments to the tax disclosure rules for foreign trusts. It probably is a good idea just to rehearse how we got to where we got to with those measures that are contained in Part 1 of the bill. Everybody in the Committee will recall that Mr John Shewan was asked to conduct a review of foreign trusts by the Government last year. That did not happen because shall we say the Government wanted to do that but rather because upon the release of the Panama Papers the then Prime Minister John Key decided to tell the world that New Zealand's trust regime was robust and did not need any change whatsoever and that people who were saying that it did were effectively committing economic sabotage because they were undermining the $24 million foreign trust industry that we had in New Zealand. Perhaps—not unlike some other occasions during his tenure as Prime Minister—David Farrar did some polling and a focus group and John Key came out a few days later and said Well perhaps we should have a look at this after all." and he appointed John Shewan to undertake the review. The history of the foreign trust regime that is being amended here in Part 1 goes a little bit further back than that. It was firstly set up in 1988 and then altered again in 2006. But by 2013 as the number of foreign trusts operating in New Zealand increased rapidly—we now have 12000; I think it was around about 6000 in 2006 so there was a rapid increase in the number of foreign trusts—the very hard-working officials at the Inland Revenue Department (IRD) began to raise their concerns. In August 2013 they told the Minister that they were concerned that New Zealand's foreign trust regime and the way that it was being used ran the risk of damaging New Zealand's excellent reputation for having a very robust tax regime. They said this in a paper to Ministers in August 2013. By November 2013 the decision had been made by officials at the IRD to add to their work programme the drafting of some legislation around restricting foreign trusts. It was around this time—and again I am rehearsing this because it is relevant to Part 1 of the bill—that the Prime Minister's lawyer or then lawyer Ken Whitney got in contact with the then Minister of Revenue Todd McClay to ask him what was going on with this change in the regime and to say that the Prime Minister had suggested to Mr Whitney that he get in contact with Todd McClay to see whether they could stop this terrible change to the regime. And lo and behold that is precisely what happened. So here we are in the House in February 2017 doing something that the officials of the Inland Revenue Department wanted done in August 2013 and in that time damage has been done to New Zealand's reputation and we are considered by many people around the world as a tax haven. That is not the view of members opposite but it is most certainly the view of many people who have exploited New Zealand's foreign trust regime. In the wake of the Panama Papers we saw New Zealand's name associated with Mexican drug lords and people who were laundering money all over the world and that is not good for New Zealand. It also had the effect of undermining the confidence of New Zealand taxpayers in their own system. As many people will want to say they work hard they pay their own taxes and they do the right thing and then they see that somebody is using our tax system to exploit another country to not pay their fair dues there. So it was not just the Opposition parties; it was in fact the Australian Financial Review that produced a map of tax havens and on that map sat New Zealand. That is something that we in this Parliament should not only be not proud of but should not allow to exist. So the Government—finally slowly dragged to the table—decided that it would set up the review that John Shewan undertook. Mr Shewan despite—what should I say—a controversial start to that review managed to get it done in a way that I think most members of Parliament appreciated. It was a thorough review and it made a sweeping set of recommendations some of which we find contained in what begins as clause 10 of this bill replacing section 59B of the income tax Act.Fletcher Tabuteau: Oh nice reference.GRANT ROBERTSON: Thank you very much—I read that off here. I want to run through the good bits and then in the time remaining the bits that are missing. The good bits are that we are finally able to identify the name of the trust—the name of a foreign trust that is set up—the date and detail of each settlement of the trust and the name email address residential address country of tax residence and taxpayer identification number of not only the trustees but each settlor. This is a big and important development. It creates some sunlight on a practice that as I say has caused some real damage for New Zealand. There is a range of issues covered in new sections 59B to 59E about the annual returns time limits and various penalties on trusts that do not actually put in place their returns. That is all good stuff and on this side of the House we are happy to see that here and happy to support that. But we do feel that these clauses fall short in two particular regards. The first of those is that critically—and the Government could have done this. Alongside this in a core recommendation of John Shewan's report was the extension of the anti - money-laundering (AML) rules to real estate agents lawyers and accountants and the Government assured New Zealanders that legislation to put in place the second round of the AML changes would have been in this Parliament before the end of last year. That did not happen and we still have not seen them now and we are not going to see them in a time that I believe will see them pass before we rise for the election in September. That means there is still a giant hole in our regime. There is still a giant hole because the very people who are responsible for establishing these trusts are the lawyers they are the accountants and they are the real estate agents. New Zealand is lagging behind here. The rest of the world is getting ahead of us on making sure that their tax systems can robustly stand up. We need that anti - money-laundering legislation passed and on this side of the House I can say to the Government that we are here to help in this regard. We would like to see that legislation introduced. The Government has dragged its feet. There are all kinds of stories and rumours around Wellington about why that might be and about the influence of those real estate agents lawyers and accountants. Let us not repeat the mistake that happened in August 2013 when the Inland Revenue Department wanted to push ahead on a reform of foreign trusts but was pulled back because of the Government's mates. Let us not do that again; let us see that in. So that is a real weakness for us in this bill. The other weakness for us was actually not a recommendation of Mr Shewan but one that we on this side of the House believe should be here. We need transparency; we need sunlight. We are on our way here. This register now exists and people will be able to search it but the people who can search it—the people who know about it—are effectively limited to being the Inland Revenue Department the Department of Internal Affairs and the police. In our view we have a publicly searchable register for companies and we have a publicly searchable register for charitable trusts so why do we not have that register for foreign trusts? Of course we can make exceptions where somebody's safety may be at risk. That is an obvious exception to make. But on this side of the House we believe the Government has stopped short of the level of transparency that would give New Zealanders confidence that the tax system is robust and that would ensure that we could not be seen internationally as a safe tax haven. And if anyone thinks that this is dead and buried now the Panama Papers have gone away we have just in the last few weeks had the story of a Malaysian businessman who is being prosecuted at the moment. He was choosing where to hide his money. He chose two places in the world to do that: the Cayman Islands and New Zealand. That is not the company that we want to keep. We should be doing absolutely everything in our power to have a robust foreign trust regime and one that is transparent enough so that anyone who needs to see that information can see that information. Unfortunately this part does not do that."