English BillHon BILL ENGLISH (Minister of Finance): Thank you for the opportunity to take part in this debate about the Shewan report into foreign trust disclosure rules. I am pleased to hear the Labour Party—well the remaining centrist member of the Labour Party—say that Mr Shewan is a competent person because that is not what its leader was saying; nothing like it.As we see the Labour Party is resorting to one of its tried and true practices which is to try to scare people out of taking part in legitimate public debate. So Labour decided straight away when Mr Shewan's name turned up that he was in some way assisting people to avoid tax obligations offshore. Those comments turned out to be probably libellous. It was not actually tested in court so we do not know whether they were for sure but they led to a humiliating apology from the Leader of the Opposition who I might say in attacking him is showing a pattern of attacking people he disagrees with in a fairly personal way. Of course there are a lot of people in New Zealand who disagree with the Labour Party these days because it is a shadow of its former self and probably seven out of every 10 people in New Zealand do not support it and do disagree with it. So that was a bit of an unfortunate start but it is good to see the member for Napier indicating that there will be support from the Labour Party in the House on the legislation as it comes through.I think what is a striking feature of the report is the way that the report shows the context in which this issue around foreign trust disclosures can be dealt with. I think anyone who was not familiar before with the wide range of activity that is now going on in New Zealand and internationally around transparency will now be familiar with it. On that point there is a lot of nonsense being talked about here and over recent months about so-called damage to New Zealand's reputation. If anything what is surprising in the Panama Papers is how infrequently New Zealand is mentioned given that the Panama Papers cover participants in tax-related activities from all around the world including pretty well every developed country. So out of millions and millions of references there is a handful made to New Zealand and there is a reason for that some of which is referred to in the report. That is that New Zealand has set as a priority the protection of its own tax base and in pursuit of that priority has one of the tighter regimes for the taxation of companies and individuals that are domiciled outside New Zealand.Mr Shewan has done a thorough investigation not just into the foreign trusts and the disclosure regime but into the surrounding context. I just want to talk a bit about that context because when the House deals with the relevant bill related to this report it will find itself dealing with quite a lot of other issues that are directly connected to it. And just by way of example we just want to be clear about the principles that do apply because we do have one of the more principled consistent tax policy structures in the world and that has been a bipartisan effort over the last 20 years or so.The basic principle is that we tax all profits earned in New Zealand that all revenue earned in New Zealand should be reported and that any deductions should reflect actual costs of production and not be designed to reduce tax. So we focus now on really three streams of work: making tax law more robust increasing international cooperation and improving transparency and exchange of information. In that sense the Shewan report fits into that third work stream because in the debate that led to the report there was a quite misleading impression created that somehow these foreign trusts were part of some general erosion of New Zealand's tax system and that somehow the tax system was so slack that we could be designated as a tax haven only by the Leader of Opposition from what I could see—Grant Robertson: Read the report. Have you actually read the report?Hon BILL ENGLISH: Not by anyone who knew anything about tax policies including Grant Robertson. So the report says New Zealand is not a tax haven" and that is absolutely correct. I will give you just a couple of examples of the changes that have recently occurred. We have reformed the controlled foreign company rules repealing eight country-based exemptions for non-active subsidiaries as well as putting limits on interest costs that could be deducted in relation to outbound investment. We have strengthened the thin capitalisation rules to reduce the amount of debt a foreign-controlled entity can have before interest deductions will be disallowed. These rules were also widened to capture more foreign ownership structures. We have introduced bank minimum equity rules that limit interest deductions taken by foreign-owned New Zealand banks by requiring them to have a minimum amount of capital. We have removed the foreign dividend exemption for deductible foreign equity removing an opportunity for tax arbitrage between New Zealand and other jurisdictions. And just one more on this list: we have eliminated the conduit regime that allowed New Zealand subsidiaries controlled by foreign shareholders to flow foreign income through New Zealand without paying any New Zealand tax.If they all sound a bit detailed that is because they are. That is because they are incremental improvements on what is by any developed country's standard a comprehensive regime of taxing income in New Zealand of foreign-domiciled companies. And there is more in the pipeline—more that is coming through. The particular one that is relevant to this report is limiting the use of look-through companies as conduit vehicles. So this is when New Zealand companies are used by non-residents to invest in foreign markets to generate income that is not taxable in New Zealand. Certainly the advice I have seen via the Minister of Revenue is that this change which is in the current May 2016 tax bill will have a significant impact on activities that could be regarded as offshore companies trying to avoid taxation in their own jurisdictions.So we endorse the recommendations of this report. Essentially what it does is make available to Government agencies and enforcement authorities here and offshore the detailed information that is held by various parties to these foreign trusts. The indication is from Mr Shewan that making that information available to enforcement authorities will have the effect of reducing the use of foreign trusts. So that will be a good thing for offshore jurisdictions that may be concerned about the use of these vehicles in New Zealand. In the meantime the Government will focus on the international effort to deal with base erosion and profit shifting. There are not many if any measures that we can take unilaterally that are going to deal with the much broader issue which is potentially a threat to our tax base which is the growing problems of jurisdiction that arise out of the use of the internet for a great deal of commerce and the ability of what feels like the very large presence of companies like Facebook and Google to move their profits anywhere in the world that they choose.So we are going to work with other countries through the OECD where I might say there is a strong degree of interest in cooperation for the simple reason that almost all developed-country Governments are keen to have revenue and they have been losing it. This report is going to assist them to some extent but we will certainly continue to focus on maintaining New Zealand's tax base.The debate having concluded the motion lapsed."