Cunliffe David: Taxation (GST and Remedial Matters) Bill — In Committee Speaker Recalled In Committee Procedure Third Reading 
Cunliffe David: Taxation (GST and Remedial Matters) Bill — In Committee Speaker Recalled In Committee Procedure Third Reading 
[Volume:669;Page:16129] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I thank the Minister in the chair the Minister of Revenue for that explanation which is particularly helpful in relation to the distinction between individual contributors and the portfolio investment entities at fund level. The clarification is appreciated.  
I think Newton’s law of holes applies to the Minister at the moment: when in one stop digging. The Minister previously justified the absence of a select committee process on the basis that the draft bill was consulted on with the industry. Were that to set a precedent the entire generic tax policy process would be down the chute as they say. For all we know the Minister is also saying that because a partial regulatory impact analysis may have been undertaken by the department on some aspect of this and it might be available on the website then there is no need to table it for the House or attach it to the bill. That is the inference because the Minister was saying that due process had been followed—unless he is now admitting that due process has not been followed in which case I would be happy to concur.  
I go back to Part 3. I raise another issue of substance that I would be grateful for the Minister’s advice on and a response from his officials on since we have not had the opportunity to ask this question in select committee. It relates to the notices of proposed adjustment in new clauses 82B 82C and 82D and the challenge provisions in new clause 82E set out in Supplementary Order Paper 187. What is somewhat confusing is the scope of the adjustment process in respect of several other exception and modification processes that cross-refer back to Part 2. My personal favourite by nomenclature is new subclause (2BAD) which is appropriately named in relation to company definitions. Beyond that there are the grandparenting provisions and the provisions in relation to adjustments for family scheme income from amounts derived by dependent children in new section MB11 and family scheme income from non-residents’ foreign sourced income in new section MB12. Officials may be able to assist us through the Minister.  
The substantive concern not a drafting concern is that we wish to be clear—and the Minister may be able to provide subsequent assurance to the Committee—that the adjustment process brought in in Part 3 through clauses 82B to 82E is not able to be used to double arbitrage if you like or make fine-tuning adjustments to what otherwise could be quite generous provisions around family scheme income or foreign-sourced income. The family scheme income is particularly important because it would be possible at least in theory to allocate through the ownership of look-through companies income from the company to pertain to the taxable income of individuals who might be at a lower tax rate than the principal owner.  
An example is if a principal owner owned shares in a company alongside the owner’s children who were on a lower tax rate or a spouse—and I wonder whether this is the Minister having another go at income splitting by another name. He was not able to get National to agree to income splitting. I would be really grateful for his guidance—he may not wish to give his guidance in light of that assertion—on whether any provisions are inbuilt in the bill that prevent the sort of arbitrage where the ownership of the look-through company could be flexed to reflect the tax rates of the underlying shareholders. We would not want the look-through company regime to operate like an income-splitting system. It would have been better although we opposed it for the income-splitting bill the Minister proposed to be agreed transparently than to have it done—if indeed that is the case and it may not be—by the back door in relation to this provision.  
Finally it is incumbent on me in respect of new section MB12 to say that the whole interface between the domestic savings regime and the international tax regime is devilishly complicated. I confess to finding myself in the uncomfortable position when I held the Minister’s current role of being in an ongoing reliance position in relation to technical advice on that matter.