Curran ClareCLARE CURRAN (Labour—Dunedin South): Can I turn my attention to clause 21 in Part 1 of this bill the Regulatory Systems (Commercial Matters) Amendment Bill which was before the Commerce Committee. There were good discussions and quite a lot of debate around various parts this one being one of them. Clause 21 actually relates to audit requirements and it is an amendment to the Companies Act. It affects section 206 of the Companies Act 1993. It goes to the question of allowing large overseas companies with small New Zealand businesses or group businesses not to be subject—not to be subject—to an audit requirement if there is no audit requirement in the home country.In the commentary on the bill it says that this is because this would have two benefits: removing excessive compliance costs and promoting entity neutrality." I just want to touch on this because it did actually evoke quite a discussion at the select committee and I have a question for the Minister and I hope that the Minister is able to answer it at some point during the debate on this. The question is ultimately: what analysis lies behind this part of the bill this amendment to the Companies Act in terms of the number of companies that this affects and the size of those companies? When I say "size" I am talking about the size of those home companies where they reside so that we have an idea of the scale of this and what it actually relate to.We had a second departmental report to the Commerce Committee at the end of January this year which addressed this particular clause in the bill. It was in response to questions from the committee on this because the committee sought information about why officials had recommended that the Companies Act 1993 should be amended so that large overseas companies with small New Zealand branches would not be subject to an audit requirement if there was no audit requirement in the home country. It relates to a submission on the bill from Staples Rodway which is an accounting firm—actually it is an Auckland-based accounting firm because I have got it right in front of me. They spelt out a situation where excessive compliance issues could arise in which the only business presence an overseas company has in New Zealand and they used the example of an airline say—they use the example of a sales office in Auckland. Their submission included the example of a Japanese company paying ¥20 million to ¥30 million—the equivalent is $250000 to $370000—to have the company's financial statements audited as a consequence of having a small New Zealand branch.On the face of it that sounded quite reasonable in terms of: if you have got a small branch in New Zealand of a big entity then should you have to be paying large amounts of money to tick the box to have an audit done? I do not think anybody is trying to impose through this legislation or even in the discussions behind this legislation any more compliance requirements on business. The issue that I have though is about what that leaves behind. Where is the accountability? Where is the assurance that there is tax being paid and that there is compliance with New Zealand's law in all of those other ways?We did have that discussion at the select committee and I am not resiling from that. I know that questions were asked around this. I do recall the figure of $30 million being used as the cut-off point for the size of the company. I see one of the officials shaking his head. What would be good is if the Minister could clarify for the Committee what the definition of a small New Zealand branch of a company is —I could not find it in my papers tonight when I was rifling through them—and what the criteria and the analysis that lie behind that are. Do we know how many of these are operating in New Zealand?I think I used the example in the select committee—I realise this is probably not applicable—of a kind of Compass Group situation. For those of you in the Chamber—and you all should know what Compass Group is—it is the organisation that is currently providing hospital food and Meals on Wheels particularly in my area of the Southern District Health Board. It is a multinational company. It is based in the UK but it is very good at shall we say tax fluidity in the way that it manages its tax requirements. Questions have been raised about that before.We are concerned I guess about this particular clause in the bill as to what potential impact the requirement not to have an audit has on compliance with New Zealand's laws rules and regulations? I think that is a fair enough question to ask. It received quite a lot of debate in the select committee and I think the officials were moved to give us a special report on that in their second departmental report.It also related to entity neutrality. They told us that there is a difference in the treatment of large overseas companies depending on whether they are small New Zealand businesses a branch of the overseas company or a New Zealand - registered subsidiary of the overseas company. So does that mean that the New Zealand - registered subsidiary of the overseas company does have to provide an audit but the branch of an overseas company does not? This disparity may encourage overseas companies to establish a New Zealand subsidiary or to restructure their New Zealand business by converting a branch into a company.I am all for incentives but if it means that there are fewer "eyes on"—given the issues around the Panama Papers and shelf companies and the ways that New Zealand can be used for purposes that are not necessarily in our best interests—I think there are some questions to be answered around this part of the bill. I hope the Minister will take a call."