Clark David: Taxation (Transformation: First Phase Simplification and Other Measures) Bill — In CommitteeText is incorporated into the Bound VolumeClark David: Taxation (Transformation: First Phase Simplification and Other Measures) Bill — In Committee[Sitting date: 10 May 2016. Volume:713;Page:10958. Text is incorporated into the Bound Volume.]Dr DAVID CLARK (Labour—Dunedin North): In speaking about transformation in respect of this bill what is I guess interesting—and unfortunate in my view—is that the bill is incremental. It is actually not about fundamentally transforming the tax system although the bill uses explicitly in its title the word “Transformation:”. What we do need in our tax system—and this will be agreed I think across the Committee—is transparency. We need rules that are simple and straightforward so that they can be understood so that they do not provide opportunity for abuse of the tax system.The Transparency International organisation in its Corruption Perceptions Index has viewed New Zealand as being less transparent over time. We were first in the world in 2012 and now we are rated as fourth in 2015 and that drop down the international rankings in terms of corruption perception is damaging to New Zealand internationally. So I want to commend the Government for the changes—the incremental changes—that are made in this bill to make the system clearer and more straightforward.If we refer to the information provided by the Inland Revenue Department (IRD) in the commentary it refers to the communications framework and clauses 60 through to 66 of the bill clarify—and we have heard some of the examples used already. The word “ask” is changed to “apply to” and so on. These changes seem trivial and in some ways they are but where they are clarifying things and making it more difficult for people to misinterpret them or skew them for purposes that are less than honest that has got to be a good step forward. A good deal of the communications changes we are told by the IRD relate to making sure that we have a system that can cope with electronic communications because that is the world we are living in today where we no longer necessarily send a written statement to the IRD ending an agreement or giving notification of change and so on but we do it by email. That is reflected in the changes that are being made in these clauses and specifically in clause 61. There is the opportunity to “notify the Commissioner” as opposed to doing it “in writing” as a limited example of what notification might mean.I note also that in the Supplementary Order Paper that is being discussed there is an attempt in there in the definition of “foreign trust” that is put forward to put it forward in an electronic form. So I do bring that to the Committee’s attention because there seems to be something in concert there with what the bill is trying to achieve. It is trying to make it easier for people to comply and to provide less ambiguity in the law because precisely when things are difficult and ambiguous is when we run into problems. I think the principles we could agree on across this Committee are that the tax system should be simple and it should be broad. We will have different definitions of that. The Government’s definition of “broad” is certainly not one that I share. The tax system seems from my perspective stacked in the interests of the mega-wealthy and most New Zealanders will feel hard-done-by when they look at tax legislation closely not only because they are being forced to look at tax legislation closely but because when they actually do that they will see that it is often written in the interests—and particularly some of the changes this Government has brought in—of those who are very well off indeed and that it is not in the interests of most New Zealanders.So I would commend this Supplementary Order Paper 173 of Julie Anne Genter because it has made an attempt to say that we can make this more straightforward. We can make sure that people are able to supply information in a way that is transparent that is straightforward and that attempts to ensure that as a country we are not perceived as having a tax system that is designed deliberately to be complex and to favour those who have wealthy and clever tax lawyers but rather as having a system that is easy to comply with for all New Zealanders—one that makes sure that we are perceived internationally as a fair place to do business. I come back to the point I made right at the start which is that concern about New Zealand slipping down the rankings in the corruption perception index because this is a very real thing.I have had the opportunity—and I consider myself very fortunate—to travel abroad recently and that opportunity—Hon Member: Who with?Dr DAVID CLARK: On the Speaker’s tour. My goodness I am not going to talk about that at length. But very seriously one of the opportunities that that provides is the opportunity to go and visit other parliaments and to see how they do their business and see just what they are wrestling with in their domestic affairs. Many countries that we visit as parliamentarians when we have that opportunity want to know how New Zealand has attained this reputation for being a fair place to do business. It is an incredibly important part of New Zealand’s story. It is what the rest of the world would like to be like. So they are concerned as we are concerned when we see New Zealand’s reputation dropping when we see a perception of corruption rising in New Zealand and when that reputation that we have fought for for so long to attain as being a place that is transparent and fair to do business is undermined.So I would say that any amendment to this bill and any Supplementary Order Paper that seeks to make the tax system fairer more transparent and easier to comply with and that makes it possible to comply with the tax system without having fancy tax lawyers well-versed in international tax avoidance is a good thing. We should be affirming it here in this House. We should be supporting the changes that make our tax system fairer and avoid the perception of corruption. It is a simple point—it is a simple point. We know that there is work going on in the OECD. The Minister of Revenue I am sure will regale us shortly with progress on the base erosion and profit shifting programme that the OECD is undertaking to try to make sure that there is transparent tax treatment around the world. From my point of view the Supplementary Order Paper put forward that would seek to define foreign trusts and require—The CHAIRPERSON (Lindsay Tisch): No no. That is out of scope.Dr DAVID CLARK: I will come back to the point.The CHAIRPERSON (Lindsay Tisch): Just concentrate on the provisions in the bill. I have already ruled about the foreign trusts so let us concentrate on Part 1.Dr DAVID CLARK: The simple point is that anything that seeks to make the tax system more simple and transparent should be viewed as a good thing. Any defensiveness on the part of Government members will reflect on them—it will reflect on them. I look forward to hearing their viewpoints on this material because they ought to be in favour of the measures that are in the bill that do make it more modern that make it clearer and that make it simpler. But by gum it is not transformative.Grant Robertson: By gum?Dr DAVID CLARK: By gum it is not transformative and it needs to be—it needs to be.I am sure the member David Bennett opposite who is a lightning rod for thinking in this sphere will have a constructive contribution to make which we will all want to hear about how the tax system can be made simpler and how the perceptions which are growing of New Zealand as a more corrupt country can be challenged so that we can once again seek to be viewed as the most transparent and fair place in the world to do business. That is something that I truly believe is worth striving for. New Zealand’s contribution on the world stage is something that we ought to be proud of and to those of us on this side of the House who see our ranking slipping over the years as other countries perceive us to be less transparent and more corrupt than we used to be it is of concern. It is of concern to us and I believe it should be of concern to this whole House.