Goldsmith PaulHon PAUL GOLDSMITH (National): Thank you Madam Assistant Speaker. It's my pleasure to speak on this bill which National introduced and supports the Taxation (Neutralising Base Erosion and Profit Shifting) Bill. There's no question that we've moved a long way from the early days of the tax system where you physically could find a company down the road that was making sugar or shoes and taxing that. It was relatively simple. It's never simple trying to work out what the actual profit is as opposed to the turnover—Fletcher Tabuteau: Was it one shoe or two shoes?Hon PAUL GOLDSMITH: That's right; whether it's one shoe or two. But as we've had an increasingly internationalised and particularly an increasingly digitised global economy the tax-collecting process has become immeasurably more complex and difficult to handle. So we only have to think of New Zealanders consuming products that are produced digitally in many other countries. The arguments about where the actual value is added are complex and ongoing. It's not something that New Zealand can fix on its own and it is not something that we can respond to on our own but only effectively as part of wider international efforts. That's why New Zealand has been at the forefront of a lot of the work done by the OECD particularly to work on trying to internationalise more effective rules. So we're part of the broad global stream here and I think New Zealand has been one of the more active countries and I'm pleased that we've made progress with this bill.Will we have got everything right in this piece of legislation? Absolutely not. I'm sure there will be things that we will be revisiting in this House next year and in the years to come. Because of the inherently complex nature of the work we'll have to monitor it very closely and expect to have a rethinking of elements of it. But overall I do commend the work of the officials and the select committee process and the many submitters that put a lot of time and effort into it. Some of them will be disappointed that the Government hasn't picked up on all of those changes but we certainly agree with several of them that were done.If I could just use one example of changes that went through the Finance and Expenditure Committee it was in relation to the income interest tests for New Zealand borrowers from foreign lenders. Just to give people an idea of the complexity here the original bill stipulated that a New Zealand borrower who borrowed funds from a non-resident lender had to pass three tests to prove it was not a high base erosion and profit shifting risk. The point here is that the primary mechanism for avoiding the taxation is for countries to lend a New Zealand resident outpost money at an artificially high interest rate in order to reduce the profits made in New Zealand and accentuate the profits made in the other country which has a lower tax base. So there are all the arguments about what the appropriate interest rate to hold is and how to assess that. So the revised version of the bill removed one of the three tests because we thought that was too high a hurdle and that was in relation to whether a New Zealand borrower had an EBITDA—that's an earnings before interest and tax etc.—of at least 3.3 times after the interest's expense.Now I'm conscious of the fact that many eyes will have glazed over even touching into the topic so the reality is—Fletcher Tabuteau: Just the delivery.Hon PAUL GOLDSMITH: Well that could be it—I'm labouring under a bit of a cold. So the only point in conclusion I would say is that this is one of the areas that all sides of Parliament try to work on as collegially as they can in order to bring about an effective outcome on our tax policy. Like I say I think we've made progress in this area with this bill. It's a bill that the National Party in Government formulated and it's part of an ongoing effort by New Zealand Inc." to ensure that its tax settings are just that there is good integrity in our tax system and that it meets the demands of the modern technology in which it operates. But I'm quite sure that it's only the start of a very long ongoing process because of the inherently complex nature of the work. On that basis I'm very happy to support this bill. Thank you."