Shaw JamesHon JAMES SHAW (Associate Minister of Finance): I have days like that too Madam Deputy Speaker. Honestly there are days when I struggle to remember my own name so that's fair enough.It's a pleasure to rise on this bill the Taxation (Neutralising Base Erosion and Profit Shifting) Bill which the Green Party also supports. I just wanted to start with a bit of a discussion about the history of this bill and the history that led into this bill in reference to some of the points that were made by Barbara Kuriger and Steven Joyce about the pace at which it had been introduced. It was actually in the year 2013 that the Inland Revenue Department officials first started flagging to the Ministers of both finance and revenue that multinationals were avoiding paying tax by profit shifting and that work to protect the New Zealand tax base was actually quite an urgent and ought to be a key area of focus for tax policy over the course of the 18 months from when inland revenue started raising that flag. Of course that was prior to the 2014 general election and then it took another few years before—actually the New Zealand Herald reporter Matt Nippert along with some other great investigative reporters as well got some explosive headlines that exposed the extent of the potential tax evasion that was at stake.As I understand it as I remember it the Herald's analysis then showed that foreign multinationals could be avoiding as much as $500 million a year in tax take. My office's calculation is that that's enough for about 9259 nurses 7601 police and 10498 primary school teachers.So in December of that year—2016—the then National Government decided that perhaps it was time to do something about this. When members of New Zealand First the Labour Party and the Green Party referred to the sluggish pace of reform that is essentially what we were referring to—the fact that it took three years and some fairly explosive investigative reporting to actually get the then Government to do something about it.The problem has been discussed in a number of speeches on this bill already and in various other debates in this House and in the media. But it is worth noting that in New Zealand for example there are about $4.2 billion worth of sales to the Apple company but they pay virtually no tax. Google booked something like $14.9 million of revenue at a cost of goods charge of 97 percent of their revenue which means that their profits before tax were merely just over $500000 and they had a tax bill of $361000 on revenues of $14.9 million. When you look at those kinds of numbers you have to say that while these companies are obeying the law—and they've got very good accountants and lawyers to make sure that they do obey the law—the question therefore has to be asked: is the law adequate? It clearly isn't particularly when those companies are competing with New Zealand service providers and companies who actually do have to pay tax because they are New Zealand residents and they don't have anywhere to shift their profits to. So this is an important bill in terms of starting to try and recoup some of that base.I mentioned that the Herald had said that they thought the estimates of lost revenues were about $500 million. Professor Craig Elliffe a tax expert told Radio New Zealand National that he thought it could be as much as a billion dollars and a UK-based organisation the Tax Justice Network found earlier this year that the likely losses were about $700 million. When the Government introduced this legislation in Budget 2017 they thought that the changes that are outlined in it would recover something along the lines of $100 million a year.So the amounts that we're talking about—there's some pretty huge variances in both what we think lost revenues may be and also the amount that may be recoverable through changes like the ones that are outlined in this bill. But having said that—and I know some of the criticisms about this in the past have been that well no one really seems to be able to put a hard number on it or we can't agree on a hard number about it but actually that shouldn't stop us from rolling it forward. Even at the low end at $100 million that's still a lot of teachers and nurses and doctors that that would pay for. But if it is as high as the high-end estimates of Professor Craig Elliffe—well you know a billion dollars here a billion dollars there and sooner or later you're talking about real money.The bill does a number of things that should prevent multinational companies from using high interest rates on loans between their external to New Zealand bodies to New Zealand bodies. Just to be clear about what that means it does seem that some multinational companies—one of the facilities that they're legally able to use is that in order to help finance either expansion or products and services into New Zealand they provide the New Zealand operator with a loan and then charge themselves essentially—the New Zealand operation—an extremely high interest rate on that loan meaning that it then subtracts from the profitability of the New Zealand operation meaning that it doesn't have to pay as much tax. But the cash of course gets retained in the parent body and that is frankly a rort. It might be legal but it shouldn't be and so one of the really good things about this particular bill is that it helps to start to constrain that kind of activity.Another one of course—and this is increasingly true in the internet age and with e-commerce—is that it is pretty easy for multinational companies to actually have very large presences in New Zealand in terms of bookable revenue. The kinds of internet companies like Google and others are the obvious ones where they're selling services into New Zealand at many tens or hundreds or more of millions of dollars. But they don't actually have a physical permanent presence in this country so then it does become difficult to be able to say Well if that revenue is gathered here what is the tax take on it if the company isn't technically operating here even though they've got hundreds of millions of dollars' worth of sales?" So having a permanent establishment is one of the measures that this bill goes to.Transfer pricing received a lot of coverage during the media storm that kind of led to the introduction of this bill. Companies are able to shift profits into offshore companies where they're taxed at a much lower rate in a manner that doesn't reflect the actual kinds of economic activities that are taking place here in New Zealand. A number of people who are interested in this kind of thing will remember of course that the European Union has recently forced Ireland to set up accounts because it believes that Ireland has been essentially subsidising multinational companies based in Ireland when they should have been paying tax elsewhere. It's saying actually "No you need to be taxing them at a reasonable rate."And then of course the fourth thing that this bill does is cut down on the ability of multinational companies to exploit the differences between different jurisdictions' tax regimes in order to get an advantageous tax position through hybrid and branch mismatches.These are all moves that the Green Party when in Opposition supported. There are a number of other things that other jurisdictions particularly the United Kingdom and Australia have introduced that we feel look pretty successful and that we think ought to be considered. We'll be hoping at the select committee to be able to advance some of those other things. I guess we should never look a gift horse in the mouth but when we finally do get some progress on something that we've been campaigning on for a number of years even if it doesn't go as far as we'd like—we think that actually the measures in here are all pretty sensible and very well thought through by officials. They do match what a number of other jurisdictions around the world are doing and we want to encourage them.I do want to note that one of New Zealand's leading tax experts Andrea Black has said that these measures are pretty good—that it's not a full-blown diverted profit tax but it is a sensible step in the right direction. On that basis we commend this bill to the House."