Bayly AndrewANDREW BAYLY (National—Hunua): Thank you Madam Chair. I just thought I'd now talk about the accounting income method for businesses and we've been talking about businesses a lot today because they are the key driver of wealth in New Zealand and they are also the people who employ most people in New Zealand. So the importance to us in terms of creating the right framework in which they can flourish in which they can grow and in which they can continue to employ people but more importantly take on new people and also drive intellectual capital and create a more dynamic economy generally is just so vitally important.The National Party was very good when it was in power if I may say so in terms of introducing the accounting income method for a way that businesses accounted for their tax. I'm not sure everyone understands the arrangements for tax for businesses but they're a lot different from personal tax. The requirement to pay provisional tax on a number of occasions and then to pay a terminal tax payment which is a bit of a wash-up has traditionally always created problems for businesses that do not have strong cash-flow. That might be for quite legitimate reasons. They may be quite sound and sustainable businesses but they're very seasonal as an example so they get all the money up front and then for the last six months there's no money as it goes through a period of—you know maybe for climatic reasons; whatever do not have the access to revenue. Accounting for your provisional tax as you go through the year and paying it out at a time when you've got no money coming in or very little money coming in traditionally has been quite a problem. As a result many companies have actually ended up being late paying their provisional tax and the fees for being late are 1 percent for the day that it takes place—if you were due to pay a payment and you don't pay it by that due day you get 1 percent and thereafter you get charged 4 percent so a 5 percent tax rate or penalty rate. Of course what happens with penalties is they grow rapidly with time and in many cases they can blow out to be very large balances even though the original payment that was required actually was low.The other thing about provisional terminal tax is it requires the entity to have a very good view on its profitability going forward. It's based on last year's and often there's a 10 percent rule where if your profit was $100000 last year you will aim to pay $110000 and you will pay your provisional tax based on that and do the wash-up as terminal. But the issue with that is that many companies do not have that line of sight around either their revenue or their cost structures and the ability to be able to manage that and then actually pay the provisional tax on the due date is actually really really difficult and in many cases just an outright guess. I think the issue with this around the accounting method was a way of dealing with it. The traditional method was called the standard or the GST ratio method which is those payments but under the accounting process what happens is that you will pay it on a monthly basis if that's the way you want to pay it and you will pay it based on your actual profit—the tax that you will pay on that profit on a month-by-month or whatever basis you choose so that you can coincide your cash outlay with the money that you are receiving at the time. That means you don't have to get into the forecasting ability that's such a bane of many small businesses in New Zealand and you don't potentially get into a situation where you are late in paying your provisional tax. I think that's a crucial aspect of trying to help and support our businesses.Now this bill has some remedial aspects around it and I think one of the big things is when you could elect to join the AIM or accounting income method. Under the previous rules what it did is you had to make that decision basically for the next financial year and under the rules that we brought in—and it's something that the Finance and Expenditure Committee has worked very strong and hard on and I think that we came with the right conclusion. It is to allow businesses to make that election during the course of the financial year provided of course that they've paid their provisional tax or if they've used a pooling account a third party who pays that tax on your behalf—which is quite a normal method; using an intermediary account—then they could convert to an AIM method and again this is about making it good for New Zealand businesses.