Volume 713 Week 44 - Tuesday 12 April 2016Text is incorporated into the Bound VolumeVolume 713 Week 44 - Tuesday 12 April 2016[Sitting date: 12 April 2016. Volume:713;Page:10363. Text is incorporated into the Bound Volume.]Tuesday 12 April 2016Mr Speaker took the Chair at 2 p.m.Prayers.Questions to MinistersTax System—Panama Papers and Tax Avoidance1.ANDREW LITTLE (Leader of the Opposition) to the Prime Minister: Does he stand by all of his statements in relation to the Panama Papers?Rt Hon JOHN KEY (Prime Minister): Yes.Andrew Little: Does he accept that the Panama Papers show that New Zealand-based foreign trusts are being used at the very least for tax avoidance?Rt Hon JOHN KEY: No I have not seen the Panama Papers so I cannot comment on whether that is the case or not.Andrew Little: Why did he limit the tax dodging review to only the operation of the law in respect of foreign trusts in New Zealand and not for example the law around portfolio investment entity funds and tax paid by multinationals?Rt Hon JOHN KEY: I think the review being undertaken by John Shewan will be quite comprehensive when it comes to disclosure and the issues around tax. Where that will ultimately go is a matter of us working with the OECD and our officials are going to Paris on Wednesday to be part of a global meeting on that.Andrew Little: Why did he push through a law in 2011 which Labour opposed that cut the tax rate for foreign funds to zero a move that PricewaterhouseCoopers said put New Zealand on a par with renowned tax havens like Ireland Luxembourg and the Caymans?Rt Hon JOHN KEY: That member would need to direct that question to the Minister of Revenue. I donot have those facts.Andrew Little: Can he confirm that New Zealand was kicked off the EU’s white list following his law change because New Zealand no longer had equivalent “legal requirements of money-laundering and terrorist-financing prevention”?Rt Hon JOHN KEY: No I do not have that data but I can confirm that New Zealand is ranked in the top 20 in the world when it came to disclosure matters according to the OECD.Andrew Little: Why does he defend tax-avoiding multinational corporations and owners of foreign trusts who are just using New Zealand to avoid paying tax?Rt Hon JOHN KEY: There are a variety of reasons why people use foreign trusts including ones that may be registered in New Zealand. I am sure many of them are legitimate.Andrew Little: Does he think he has achieved his goal of making New Zealand the Jersey of the South Pacific? And do not pull the wool over our eyes.Rt Hon JOHN KEY: I do think there is a role for New Zealand in the provision of financial services as part of a diversified economy. I think we can do that quite successfully. My other goal has been to lead National to 50 percent in the polls not 28 percent. [Interruption]Mr SPEAKER: Order! I do not mind a certain amount of interjection but when it is getting to that level I am going to have to start mentioning people by name.Andrew Little: Has he ever been involved personally or professionally in a foreign trust or other vehicle used to reduce tax?Rt Hon JOHN KEY: I have no ministerial responsibility for that but I am quite happy for the member to look at the answers I gave in my post-Cabinet press conference yesterday.Andrew Little: Will he join me and release his tax records to dispel rumours that he has benefited from the use of tax havens?Rt Hon JOHN KEY: Firstly there are no such rumours. Secondly I do not think the member actually should table his tax return. I think he should table his CV because he will be out looking for a new job soon.Andrew Little: I raise a point of order Mr Speaker. [Interruption]Mr SPEAKER: Order! The Leader of the Opposition wants to raise a point of order. Point of order Andrew Little.Andrew Little: I seek—[Interruption]Mr SPEAKER: Order! This is a point of order. It will be heard in silence.Andrew Little: I seek leave to table my income tax records from the year ended 31 March 2010 to the year ended 31 March 2016.Mr SPEAKER: Leave is sought to table those particular records. Is there any objection? There is none. They can be tabled. [Interruption] Order! Mr Robertson when I stand to my feet it is at that time—Grant Robertson: I was distracted over here.Mr SPEAKER: I accept that he may have been distracted but he needs to look in this direction a bit more often.Documents by leave laid on the Table of the House.Tax System—Bracket Creep2.DAVID SEYMOUR (Leader—ACT) to the Minister of Finance: Does he agree with the statement made by John Key in 2004 regarding stealth taxation through bracket creep that the government “loves taxing the hard-working productive sector of New Zealand. It loves taking extra dollars off those people at every opportunity it can”?Hon BILL ENGLISH (Minister of Finance): The statement made by the Prime Minister was not specifically about bracket creep; it was also focused on the significant personal tax rate increases that had just been introduced. But I do agree that the then Government did enjoy taxing the productive sector and hard-working New Zealand families. That is part of the reason we undertook the 2010 tax reforms: to cut the tax rates on businesses and hard-working families and to provide additional incentives to save work and invest. It is part of the reason this Government has a priority of reducing taxes further subject to fiscal conditions particularly for low and middle income earners.David Seymour: How does that square with the fact that by 2017 through stealth tax hikes through bracket creep this Government will have pinched an extra $2.1 billion from the back pocket of the New Zealand taxpayer since those 2010 tax changes?Hon BILL ENGLISH: We could debate the figures. We are currently in a situation where inflation is very low. Since the 2010 tax cuts we have seen inflation of 5 percent and wage increases of 15 percent so the main reason people find themselves in higher tax brackets is wage increases. However there has been some effect from the 5 percent inflation over that 5-year period.David Seymour: Is not a period of low inflation the perfect time to make the shift and index tax brackets to inflation so that New Zealanders will not lose money to stealth taxation?Hon BILL ENGLISH: It is a matter of weighing up a range of objectives that the Government has. If we did not have any debt or any need to spend then it would be a lot easier to reduce taxes at will but we have to cover the spending obligations that the Government has. This Government has set a target on stopping debt rising and beginning to reduce debt as a proportion of the economy. In that context there has not really been the room to make the kinds of changes the member is talking about.David Seymour: In light of all finance Ministers complaining of fiscal pressure is this not really just another example of National campaigning from the right and governing from the left?Hon BILL ENGLISH: No National campaigned from the middle and is governed from the middle and that seems to be reasonably effective. The cost of fiscal drag since 2010 is about half of what the member said—about $1.3 billion per year. Just to put that in context this very moderate middle-stream Government has cut ACC levies by $2 billion per year since 2010 twice the amount of fiscal drag.David Seymour: I seek leave to table research from the Parliamentary Library showing that the cost of fiscal drag from 2010 to 2017 will indeed be $2.1 billion.Mr SPEAKER: I will put the leave. Leave is sought to table that information. Is there any objection? There is none. It can be tabled.Document by leave laid on the Table of the House.Public Infrastructure—Capital Investment3.BARBARA KURIGER (National—Taranaki - King Country) to the Minister of Finance: What steps is the Government taking to lift capital spending in transport education and other core public infrastructure?Hon BILL ENGLISH (Minister of Finance): In recent years the Government has accelerated capital spending. The total investment by Government over the next 2 years is expected to be $11.5 billion $4 billion more than was spent over the previous 2 years. The reason for the increase is that the Government has brought into effect much more rigorous ways of assessing capital investment and we now have more confidence in the quality of capital investment propositions that we are seeing. Spending over the next 2 years includes $2.6 billion on transport $1.7 billion in Canterbury $1.4 billion on schools and $400 million on ultra-fast broadband.Barbara Kuriger: What will be some of the other consequences of the Government’s lift in capital spending?Hon BILL ENGLISH: The Government has a choice between the level of investment in infrastructure and other capital investment like information technology versus the amount and timing of debt rate repayment. All things being equal the lift in capital spending will mean a slightly higher debt track than would otherwise have been the case and potentially a later start date for paying down debt. The Government has lifted this capital spending though because of the quality of the initiatives—that is we believe they are sound investments in the future growth of the economy. At the same time we remain on track to meet the fiscal target of net debt of around 20 percent of GDP by 2020.Barbara Kuriger: How has the Government’s investment in infrastructure been making a difference in regions like Taranaki - King Country?Hon BILL ENGLISH: I have some information relevant to Taranaki - King Country. Earlier this year the Government announced that it is accelerating the Awakino Gorge tunnel bypass as well as the Mount Messenger bypass with these investments totalling around $100 million. As the member knows it is often pointed out that these are vital freight links into the Taranaki region. These are just one example of the accelerated regional roading programme that covers Gisborne the West Coast Horowhenua Otago and Northland.Barbara Kuriger: How is the increasing infrastructure investment supporting jobs growth?Hon BILL ENGLISH: We are lifting our investment partly because surrounding our workers with capital will over time boost productivity and lift wages. We are seeing significant job growth. Treasury estimates that the Government’s roads of national significance programme will involve around 35000 construction jobs and a further 4000 jobs are expected from the ongoing roll-out of ultra-fast and rural broadband. However long after the jobs of constructing have gone because the projects are finished the ongoing economic benefits of this consistent pipeline of high-quality investment will be paying off for the economy.Health Services—Elective Surgery Access4.Hon ANNETTE KING (Deputy Leader—Labour) to the Minister of Health: Does he agree with the findings of the recent TNS survey showing about 174000 New Zealanders are in need of publicly funded surgery but have not been placed on a waiting list; if not why not?Hon Dr JONATHAN COLEMAN (Minister of Health): No. The telephone survey by the health insurance industry of people’s perceptions of what they need is not the same as being medically assessed as being in need. Over 7 years this Government has lifted the number of specialist appointments by 25 percent and the number of operations by 41 percent. The only answer to increasing demand is to do more and we are.Hon Annette King: In light of that answer why does he dismiss the TNS New Zealand survey showing 174000 people are blocked from elective surgery as just the Health Funds Association of New Zealand trying to “drum up business” when his ministry used the same global research company to carry out research for the Government. Was that research shonky?Hon Dr JONATHAN COLEMAN: Why I do not agree with them is because we now have literally a handful of people waiting over 6 months for surgery—unlike 8 years ago when there were 30000 people waiting for over 6 months for surgery—and only 2000 waiting for over 4 months. It is very different to 8 years ago when $3 billion extra went into the Budget to deliver 2000 fewer operations and 7000 fewer appointments—under Mrs King of course.Hon Annette King: Having had time to read the research published last week in the New Zealand Medical Journal does he agree with the findings that patients currently being returned to their GP without an operation would have qualified for publicly funded surgery during the 2006-10 period; if not why not?Hon Dr JONATHAN COLEMAN: They may or may not have—I mean there are different surgical thresholds around the country. All we do know is that back in the period that the member mentioned 31000 people were kicked off surgical waiting lists by her.Hon Annette King: If he has read the research published in the New Zealand Medical Journal on 1 April will he now correct his Associate Minister’s answer from last week that hip and knee operations were up by 10 percent for the Southern District Health Board when the latest figures show that there has been nearly a 10 percent decrease—decrease—since 2011?Hon Dr JONATHAN COLEMAN: No. I dispute Mrs King’s figures and I am not going to correct the Associate Minister’s answer. I think that he did a really good job in showing you up actually.Mr SPEAKER: Order! [Interruption] Order! The Minister should not bring the Speaker into the debate.Hon Annette King: I seek leave to table an Official Information Act request delivered on 7 April 2016 by the Ministry of Health for the Southern District Health Board showing a 10 percent decrease.Mr SPEAKER: Leave is sought to table that particular information. Is there any objection? There is none.Document by leave laid on the Table of the House.Hon Annette King: When he said today that “there’s a difference between surgery people actually need and surgery people think they need.” does he really believe that people wake up in the morning and think: “I’d like to have an operation today. I feel like going under the knife. My pain is just phantom pain. I fancy one of those”—Mr SPEAKER: Order! Bring the question to a conclusion.Hon Annette King: —“hospital meals that the Minister tried.”?Hon Dr JONATHAN COLEMAN: Firstly I am very glad to hear that the member is following my interviews on Newstalk ZB so closely. I notice that she actually had the opportunity to try one of those hospital meals yesterday in Dunedin but I guess the crisis talks were so intense that there was no opportunity to go and front up and do what she challenged me to do. I did and it was a very good meal. Why do you not man up and do it yourself because you think you are so tough?Hon Annette King: I raise a point of order Mr Speaker. It is impossible for me to “man up”—I am a woman.Mr SPEAKER: And a very capable one as well. [Interruption] Order! We return now to question time.Tax System—Overseas Trusts Review5.JAMES SHAW (Co-Leader—Green) to the Minister of Finance: Will there be the opportunity for public submissions as a part of his review of foreign trusts?Hon BILL ENGLISH (Minister of Finance): The task of the review is to understand the technical issues and identify opportunities to strengthen the disclosure regime for foreign trusts. That is the purpose of the independent expert review. As is normal practice for this kind of review public submissions will not be heard at this stage. However as the Prime Minister has said the Government is open to considering changes to the disclosure rules that are warranted. Should legislative change be required for example public submissions will be invited in the usual way through the select committee process and generally changes in tax law if that is what was involved go through a public consultation process.James Shaw: If he will not allow the public to make submissions as part of the review process will he guarantee that transparency and anti-corruption experts will be invited to give their expert opinions?Hon BILL ENGLISH: They seem to be giving their opinions now. Some seem to be less informed than others but the independent review will continue. Mr Shewan is not going to be taking public submissions but I am sure he will be looking at all the relevant material the member is referring to.James Shaw: Am I to take from his answers then that Mr Shewan will conduct his review without referring to anybody external other than his own opinion?Hon BILL ENGLISH: I am sure he will refer to all sorts of external opinions and technical material but in the end he will give us a report that is his view of it. That will be open to contest by anyone who wants to argue about it.James Shaw: Will all evidence from the review be open and available for public scrutiny?Hon BILL ENGLISH: I am sure that it will subject to any relevant privacy considerations such as New Zealand’s tax privacy law—if that is relevant and I do not actually know whether it is or it is not.James Shaw: Does the Minister think that having a single poacher act as gamekeeper will restore public confidence in our foreign trust industry?Hon BILL ENGLISH: I reject the member’s characterisation. The fact is that nothing we could do will satisfy the Greens who are fundamentally opposed to capitalism profit taxation and people getting ahead and making money. We cannot deal with all those—James Shaw: I raise a point of order Mr Speaker. I was not asking for a review of Green Party policy. I was asking whether or not the evidence would be open to public scrutiny.Mr SPEAKER: The question was fairly loaded. The answer was certainly given in the first part and the second part of the answer does not add anything to the information before the House.James Shaw: Does it matter whether or not New Zealand fits the legal definition of a tax haven if it is being used as one anyway?Hon BILL ENGLISH: There has been a lot of discussion about whether New Zealand is a “tax haven”. Any country that has a commercial structure such as companies could be described as a tax haven if they are used by some people to avoid tax. We reject the label of tax haven but of course we are open to expert advice about whether the disclosure rules around foreign trusts are adequate or not.Economy—Diversification6.STUART SMITH (National—Kaikōura) to the Minister for Economic Development: What reports has he received about diversification of the New Zealand economy?Hon STEVEN JOYCE (Minister for Economic Development): I have seen a number of recent reports that demonstrate that diversification. Despite the downturn in the dairy industry last year our exports in the calendar year were up $1.9 billion to $69.3 billion. So even with the decline in dairy exports of $3 billion the rest of the export economy grew by $4.9 billion. Tourism is up; in the primary industries meat exports were worth $6.8 billion in 2015 up 15 percent in 1 year; wool exports were up 8.2 percent; fruit up 30.6 percent; and wine exports were up 13.6 percent with further growth likely. I am advised that just in the member’s area of Marlborough there were 2000 hectares of new plantings last spring with another 2000 hectares in the next year. High-tech manufacturing continues to grow. What was once a $100 million industry has grown to nearly $1.5 billion in exports.Stuart Smith: How is the Government encouraging continued diversification of the New Zealand economy?Hon STEVEN JOYCE: Encouraging businesses to innovate and create new products and services is a crucial part of diversifying our economy. That is why we have set up Callaghan Innovation our new high-tech innovation hub. We have established primary growth partnerships to extract more value from the primary sector and we have brought in a new research and development grants programme to replace the failed tax credit scheme. Our focus on encouraging research and development is bearing fruit. Last year business spending on research and development grew by more than 15 percent according to Statistics New Zealand. Through New Zealand Trade and Enterprise we are working with businesses in cities and regions to make the most of exports. We have established ICT grad schools to put more money into science technology engineering and mathematics education and we are signing free-trade agreements like the Trans-Pacific Partnership and the Korean free-trade agreement to give our businesses market access.Stuart Smith: How has this diversification provided more opportunities for New Zealanders?Hon STEVEN JOYCE: In a number of ways. New Zealand over the last 6 years has had the seventh-highest rate of economic growth across the OECD. Despite doom and gloom from some quarters New Zealand now has the third-highest rate of employment in the OECD. We have had employment growth of 10 percent over the last 6 years and also 10 percent growth in total hours worked. This is having a positive effect on wages. From 2003 to 2008 prior to the global financial crisis real wage growth over that period was just 5 percent. In the last 6 years real wage growth has been 8.7 percent.Ron Mark: Clearly out of touch.Hon STEVEN JOYCE: Yes it has.Tax System—Overseas Trusts Review Appointment of John ShewanRt Hon WINSTON PETERS (Leader—NZ First): This question is to the Prime Minister—[Interruption]Mr SPEAKER: Order! Sorry order! There is quite a lot of interjection occurring. I am going to invite the member to start his question again.7.Rt Hon WINSTON PETERS (Leader—NZ First) to the Prime Minister: Does he stand by all his statements?Rt Hon JOHN KEY (Prime Minister): Yes.Rt Hon Winston Peters: When he said that Mr Shewan was independent was he aware of his Westpac Banking Corporation Australian-owned bank settlement of $2.2 billion to the Inland Revenue Department which it had attempted to evade in terms of taxation?Rt Hon JOHN KEY: I would not want to agree with the member’s characterisation but yes I am aware he worked on the issue.Rt Hon Winston Peters: When he made the appointment about his expertise was he aware of the case Penny v Hooper where the Court of Appeal and Supreme Court dismissed Mr Shewan’s evidence as being inappropriate from an expert witness?Rt Hon JOHN KEY: I was not aware of that particular point but I would say this: John Shewan has been highly respected across the tax industry in New Zealand. He has been chairman of PricewaterhouseCoopers. He is someone who was given an award either in the Queen’s Birthday or in the New Year’s Honours. Frankly actually when it comes to financial expertise and knowing what he is talking about he runs rings around that member.Rt Hon Winston Peters: I raise a point of order Mr Speaker. My question was about a case in 2010. Either he was aware or he was not aware and after that he should have been stopped.Mr SPEAKER: The Prime Minister immediately said he was not aware of that particular case.Rt Hon Winston Peters: I raise a point of order Mr Speaker. When he said he was not aware—[Interruption]Mr SPEAKER: Order! It is a point of order. I wish to hear it in silence.Rt Hon Winston Peters: When the Prime Minister said he was not aware why then was he not stopped from rambling on about something he was not asked about?Mr SPEAKER: The member makes a reasonable point. As I have mentioned many times in this House I will determine when I think an answer has gone on for too long.Rt Hon Winston Peters: When the Prime Minister made the statement about the expertise of Mr Shewan was he aware of how his so-called expertise on form over substance on the wine-box allegations conflicted with the Privy Council the Court of Appeal and the full High Court of New Zealand?Rt Hon JOHN KEY: I am aware of John Shewan’s complete integrity. That is not something I am sure of when it comes to every member.Chris Hipkins: I raise a point of order Mr Speaker. There are reasonably clear rules—and that have in the past been enforced—about questioning the integrity of other members in the House which stops members from doing so for very good reasons.Mr SPEAKER: And on that occasion it was not addressed to any particular member as I took it.Chris Hipkins: I raise a point of order Mr Speaker. In which case it was directed at all members in which case I take offence.Mr SPEAKER: On the basis that Chris Hipkins is offended I am going to ask the Prime Minister to stand and withdraw the last part of that answer.Rt Hon JOHN KEY: Sorry Chris. [Interruption]Mr SPEAKER: Order! The right honourable Prime Minister will now stand and withdraw it correctly without any addition.Rt Hon JOHN KEY: I withdraw.Mr SPEAKER: Supplementary question—Order! [Interruption] When I am on my feet the Hon Amy Adams equally should be quiet.David Seymour: In what century did the wine-box inquiry take place?Rt Hon JOHN KEY: One so far back I can hardly remember it.Rt Hon Winston Peters: Why did he tell The Paul Henry Show yesterday that he was taking a paper to Cabinet that morning proposing the appointment of an international tax expert?Rt Hon JOHN KEY: Because I did.Rt Hon Winston Peters: So what happened to the international tax expert? Did he turn you down?Mr SPEAKER: Well he did not turn me down.Rt Hon JOHN KEY: The member can come into the House and abuse and bag Mr Shewan if he wants but Mr Shewan has a glittering career. I will get him to reflect on his own.Rt Hon Winston Peters: Point of order. Why—Mr SPEAKER: Order! [Interruption] I have not called.Rt Hon Winston Peters: I raise a point of order Mr Speaker. Why is the Prime Minister allowed to lace up the end of every inferior answer with an epithet or insult?Mr SPEAKER: I invite the member to go back and equally look at his question where he finished his question by saying “Did he turn you down?”.Rt Hon Winston Peters: Is this highly independent John Shewan the same John Shewan at National’s caucus party held at Premier House hosted by the Prime Minister?Mr SPEAKER: If there is any ministerial responsibility the Prime Minister.Rt Hon JOHN KEY: Probably and so were the parliamentary press gallery and many other people. People love coming to a National Party function. It is a lot of fun. You used to be the cheerleader amongst them Winston.Mr SPEAKER: Order! [Interruption] Order! I am just waiting for silence from my left.Rt Hon Winston Peters: I raise a point of order Mr Speaker. Once again why is the Prime Minister allowed to get away with an end to an answer like that over and over again?Mr SPEAKER: I suspect if I had been applying the rules very strictly the question was out of order. It asked about an issue for which there is no prime ministerial responsibility. It is a party matter.Hon David Parker: I raise a point of order Mr Speaker. Why is it that you allow a question presumably because it is in order and yet when challenged as to allowing out-of-order replies always flick the complaint away by saying “I shouldn’t have allowed the question.”?Mr SPEAKER: No I didn’t—[Interruption] Order! I am happy to try to help the member. I did not say I should not have allowed the question. I said the question was not strictly in line with the Standing Orders. I can start if the members want me to to apply them very very rigorously. I suspect it would not be to the advantage of the Opposition and I suspect after a relatively short period of time members would wish that I did not do that. But in that particular case given the question the way it was asked and the answer the way it was given I was satisfied that it was within the bounds of the rules.Hon David Parker: Point of order.Mr SPEAKER: Before I take any further points of order if it is in any way relitigating the decision I have made and the answer that I have given—Hon David Parker: No it is not.Mr SPEAKER: If it is a fresh point of order I am happy—Hon David Parker: It is a fresh point of order.Mr SPEAKER: A fresh point of order—the Hon David Parker.Hon David Parker: I raise a point of order Mr Speaker. How was the question out of order?Mr SPEAKER: I thought again—[Interruption] Order! I will try to explain it. The issue was about the attendance at a National Party function.Rt Hon Winston Peters: No.Mr SPEAKER: Well as I heard it it was and that is the—[Interruption] Order! My patience is running extremely thin with Dr Megan Woods. If she continues to interject particularly when I am standing on my feet she leaves me no choice but to ask her to leave.Rt Hon Winston Peters: Can he confirm that Mr Shewan was a longstanding partner and chairman of PricewaterhouseCoopers New Zealand the same accounting firm that was directly implicated in the 2014 Luxembourg Leaks scandal?Rt Hon JOHN KEY: In answer to the first part of the question yes; in answer to the second part of the question no I do not know what the member is talking about.Rt Hon Winston Peters: Is he aware of the connection between PricewaterhouseCoopers and the Cayman Islands organisations and companies and trusts and one Codan Trust Company (Cayman) Ltd? Is he aware of that?Rt Hon JOHN KEY: No.Rt Hon Winston Peters: I seek leave to table relevant documents that relate to that last question of the Prime Minister where he appears blissfully unaware of what is going on.Mr SPEAKER: Order! No. Just explain the documents.Rt Hon Winston Peters: Well you will not find them around.Mr SPEAKER: Just explain—[Interruption] Order!Rt Hon Winston Peters: This is a corporate record and register not available for public inspection that I seek to table.Mr SPEAKER: Leave is sought to table that particular corporate record. Is there any objection? [Interruption] Is there any objection? There appears to be no objection; the member can table it.Documents by leave laid on the Table of the House.Child Youth and Family—Reforms8.Dr PARMJEET PARMAR (National) to the Minister for Social Development: What feedback has she received regarding the overhaul of Child Youth and Family?Hon ANNE TOLLEY (Minister for Social Development): I have received overwhelmingly positive feedback on my announcement that Child Youth and Family will be transformed to be truly child-centred. Such feedback is heartening as we will need the continued support of a wide range of organisations while we continue this important work. Unicef has stated that the overhaul is “the most comprehensive example of Government actively seeking to hear diverse voices including those of children”. The Children’s Commissioner has said that the overhaul “is visionary and has potential to change the lives of many vulnerable children.” Barnados has said that it agrees “wholeheartedly … that all of us as New Zealanders must step forward and claim our vulnerable children as our own.” This is a fantastic opportunity to deliver lasting change for our vulnerable children and it is only the beginning.Dr Parmjeet Parmar: How will she ensure that the voice of the child is heard in the overhaul of Child Youth and Family?Hon ANNE TOLLEY: To create a truly child-centred system this transformation requires the voice of the child to be heard throughout which is why I am establishing New Zealand’s first ever independent advocacy service for children and young people in care. The advocacy service will involve children and young people in the decision-making process throughout the overhaul and will ensure that their expectations are met by the system. I am also delighted that my Youth Advisory Panel will be re-established to provide advice and feedback to me as the work continues over the next year on transforming the system. Our vulnerable young people deserve to have a voice in their care and we want to ensure that their voices are heard.Jacinda Ardern: Will she rule out the use of private entities like Serco for the provision of directly purchased services as she has set out in her reform?Hon ANNE TOLLEY: As I have been very clear the proposals for the new operating system will be contracting out services on a direct purchase basis in order to provide for children’s needs as they need them. But as I have also been very clear these are about individual children and therefore the services would be based on that individual need. It is the intention that they be local and that they be immediate and that would discount any major large private enterprises.Tax System—Overseas Trusts9.GRANT ROBERTSON (Labour—Wellington Central) to the Minister of Finance: Does he stand by his statement “it has become pretty much unacceptable in the developed world at least to be running a tax haven that undermines other people’s tax bases”?Hon BILL ENGLISH (Minister of Finance): Yes.Grant Robertson: Brief but not memorable. How can he justify a regime which he helped to create and continues to defend that has led to the undermining of the tax base in a country such as Malta where senior politicians use New Zealand’s trusts and managed funds to make tax-free profits and that has led to the Maltese people protesting in the streets?Hon BILL ENGLISH: Of course it is up to the Maltese Government to decide whether any of those allegations are actually correct and it may well ask for information from New Zealand which of course it would supply. These matters will be dealt with by the expert review.Grant Robertson: How can he deny that New Zealand is eroding the tax base of a country like Malta when its tax evasion came via “a combo pack” from New Zealand designed to exploit New Zealand’s “weak … due diligence;”—as described by Mossack Fonseca—and has been made up of “New Zealand foreign trusts (which pay no tax on foreign income) and what is described as Look Through Companies … which could be owned by the trusts.”?Hon BILL ENGLISH: Not being an expert on those matters I would not want to comment on the tax affairs of the Maltese Prime Minister or whomever the member is actually referring to. The expert review will deal with the issue related to disclosure—about what happens with these foreign trusts. Bear in mind that anyone who transacts in New Zealand is now subject to anti - money-laundering provisions another regime called the Foreign Account Tax Compliance Act and a further regime called the Automatic Exchange of Information all of which are part of New Zealand’s effort to play its part in the global work to reduce tax evasion and avoidance.Grant Robertson: Was Chapman Tripp wrong in its advice about the changes his Government made to allow for a zero tax-rating of non-residents’ managed funds: that this put New Zealand “in the same league as Luxembourg” the very country he was talking about in the quote during the substantive question?Hon BILL ENGLISH: I have not seen its advice and cannot comment.Grant Robertson: Why should the international community take seriously New Zealand’s calls for a crackdown on multi-national companies in New Zealand that are not paying their fair share and are eroding our tax base when we are implicated in eroding the tax bases of countries like Malta and Mexico or has he lost his moral compass too?Mr SPEAKER: Order! The Hon Bill English—the first part of that question.Hon BILL ENGLISH: Our voice in these discussions is taken seriously because New Zealand has the most comprehensive and thorough tax system in the developed world with the least loopholes and tax breaks and actually some in New Zealand would argue the harshest treatment of foreign investors in New Zealand.Grant Robertson: I seek the leave of the House to table advice from Chapman Tripp from 10 October 2011 that puts New Zealand in the same category as Luxembourg Ireland and the Caymans.Mr SPEAKER: Order! Leave is sought to table that particular legal advice. Is there any objection? There is objection.Immigration Illegal—Overstayers10.MAUREEN PUGH (National) to the Minister of Immigration: What recent reports has he seen estimating the fall in the number of overstayers in New Zealand?Hon MICHAEL WOODHOUSE (Minister of Immigration): I have received the latest report from Immigration New Zealand which shows the number of overstayers is now at the lowest level it has been this century.Rt Hon Winston Peters: How many?Hon MICHAEL WOODHOUSE: There are now 10848 overstayers. That is 1300 fewer than the previous estimate from October 2014. The most remarkable thing about the number of overstayers is it is almost half what it was in 2005 when there were an estimated 20000 overstayers.Maureen Pugh: How much extra has it cost to achieve this reduction in overstayer numbers?Hon MICHAEL WOODHOUSE: Zero. In fact the Government is achieving significant savings with a halving of removal and deportation costs from $3 million 10 years ago to $1.3 million now. This Government’s smarter focus on encouraging overstayers to settle their affairs pay their own costs for departure and leave New Zealand voluntarily has contributed to this large decrease. Our policy gives them the opportunity to reset the clock and apply to enter New Zealand legally. Better visa application processes reduce the likelihood of visitors becoming unlawful further reducing the numbers and costs of overstayers.Burglaries—Increase and Resolution Rates11.STUART NASH (Labour—Napier) to the Minister of Police: What does she believe are the main contributors to the increase in the number of burglaries and the drop in resolution rates over the past 12 months?Hon JUDITH COLLINS (Minister of Police): In my opinion the main contributors to the burglary rates are criminals their dishonesty and a lack of deterrents. There is also the added fact that one-third of burglars are aged 16 and under and 65 percent are aged 24 years and under. There is an element of opportunism as well and I am advised that in some areas the increase has been seen in the burglary of residential construction sites. As to the second part of the question the reason I am advised for the drop of resolution rates is dependent on factors unique to each district such as drugs gangs youth offenders and construction.Stuart Nash: If she thinks it is criminals does she agree with Counties Manukau crime prevention manager Dave Glossop when he blamed the media for the increase in burglaries when he said: “The media around burglaries has been one of the contributing factors to the increase of burglaries because people think it’s a crime they can get away with.”?Hon JUDITH COLLINS: I have learnt that it is never wise to blame the media even if one’s views are honestly held.Stuart Nash: Does she think the actual reason that criminals think burglary is a crime they can get away with is that 90 percent of burglaries now go unsolved by police due to under-resourcing; if not why not?Hon JUDITH COLLINS: That member will be thrilled to know that after only 2 weeks of Operation Resolve following my firm discussion with the commissioner 17 arrests have been made in just 2 weeks.Stuart Nash: Supplementary. [Interruption]Mr SPEAKER: Order!Stuart Nash: Supplementary. [Interruption]Mr SPEAKER: Order! I am just waiting until I get some silence from your colleagues.Stuart Nash: Why has she dismissed the findings of the recent Police Association survey that found 86 percent of police think the front line is under-resourced by saying “they didn’t actually mean under-resourced” and does she not think that is a little condescending?Hon JUDITH COLLINS: Oh I could not possibly compete with the Labour Party for being condescending.Climate Change—Sea Level Rise12.EUGENIE SAGE (Green) to the Minister for Climate Change Issues: Does she agree with the statement made by GNS Senior Scientist Nancy Bertler that sea-level rise of 30cm in 30 years is “incredibly certain” and the Parliamentary Commissioner for the Environment’s analysis that a 30cm rise would result in 1 in 100-year high water levels in Wellington happening every year?Hon PAULA BENNETT (Minister for Climate Change Issues): In part yes but I would point out that even the Parliamentary Commissioner for the Environment and the scientist mentioned in the question disagree.Eugenie Sage: Would she discourage a first-home buyer from taking out a 30-year mortgage today on a home in a low-lying coastal area given the risks facing such properties over the next 30 years?Hon PAULA BENNETT: It would depend on where it is what mitigation happens over the next 30 years and what adaptation local councils are taking responsibility for.Eugenie Sage: Does she believe that councils are giving homebuyers enough information on the effects that rising sea levels may have on future property values in areas like the south coast of Wellington south Dunedin and Napier’s low-lying suburbs?Hon PAULA BENNETT: Not consistently no. I do not think they are giving enough information.Eugenie Sage: When rising sea levels cause worse flooding in coastal communities leaving some homes uninsurable will the Government be ready and willing to step in and compensate homeowners as it did with homeowners who were affected in the red zone after the Canterbury earthquakes?Hon PAULA BENNETT: That is not something that we have been looking at at the moment so I do not have an answer to it but it is not in our reckoning. I think we have got a big programme of work to do particularly after signing the Paris agreement and then working towards what ratification actually looks like and I am encouraging really looking at having a task force that includes business NGOs academics and agriculture and then bringing the public along as well so that we can seriously look at how we not only meet our obligations as far as the 2030 target but also bend that curve and become more of a lower-emission economy. So that is the target and I think if we get that sort of stuff right we can start addressing some of the concerns that the member raises.Eugenie Sage: What action has she taken if any to support her statement that New Zealand needs “a longer-term carefully developed plan on the financial implications from rising seas”?Hon PAULA BENNETT: As I just outlined I have been meeting with and talking with a lot of different groups particularly around businesses and NGO groups and others so I think what our focus needs to be on now is whom do we get together over the next couple of months to then work over a much longer term—and I think beyond 2030—to look at how we lower our emissions in New Zealand. So we are still working out exactly what that looks like and what the right forum is but we are really keen to see that be an in-depth process that is very transparent and open.David Seymour: Does the Minister believe that managing risk from sea level rise is the responsibility of central government local government or property owners?Hon PAULA BENNETT: In some contexts all of the above.Urgent Debates DeclinedOverseas Trusts Review—Appointment of John ShewanMr SPEAKER: I have received a letter from Andrew Little seeking to debate under Standing Order 389 the Government’s decision to appoint John Shewan to investigate the revelations from the Panama Papers. The Government’s appointment of a person to conduct some inquiry is a particular case of recent occurrence involving ministerial responsibility. The test for whether a particular case requires the immediate attention of the House is a high one. Not every ministerial announcement of an appointment will give sufficient grounds for an urgent debate to be held. There must be an element of urgency or substantive policy change for the matter to take precedence over other business. I am not convinced that the appointment of a person to conduct an inquiry warrants an urgent debate. The application is therefore declined.Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) BillIn CommitteePart 1 Amendments to Student Loan Scheme Act 2011STUART NASH (Labour—Napier): This is a reasonably complex bill. It deals with a number of issues that the Labour Party feels quite strongly about. In Part 1 we are talking about the Student Loan Scheme Act 2011 but we are also going to be debating in other parts Income Tax Act changes Goods and Services Tax Act changes Tax Administration Act changes as well as the title and commencementclauses. As mentioned there are a number of Labour speakers who I know will take calls on this technical bill because there are quite a lot of clauses and quite a lot of concepts that do need explaining. The reason for this is there is quite a lot of relevance in this bill that impacts upon others outside the stock-standard tax practitioner bracket.What I would like to talk about first and foremost is charities. The issue we are trying to solve here in Part 1 is that often what happens with students is they head off on an OE. They have finished their studies they have a student loan but under the Student Loan Scheme Act if a student with a student loan heads overseas they must pay interest on that student loan. But what is allowed to happen is if a student is working for a registered charity for a maximum time of 24 months then they are classed as still being domiciled in New Zealand. So even though they may head off they do not have to pay interest on their student loan.The problem we are trying to solve is that under the current law charitable organisations must be approved by Cabinet for the purpose of the student loan scheme interest write-off and listed in regulations. What can happen with this is by the time that goes through the approval process the student is overseas they have already accrued a whole lot of interest on their loan and they do not get full benefit. So what this bill does is it basically removes the need for Cabinet to approve a charity. What I will say which is quite interesting is that the level of disclosure required under this bill by the commissioner for charities is quite unusual compared with other pieces of legislation on the statute book when it comes to tax law.Grant Robertson: Oh well done.STUART NASH: I know. For example when I compare new sections 27A 27B 27C 27D and 27E inserted by clause 7—this basically relates to what the commissioner’s responsibilities are with regard to listing charities what qualifies as a charity whether the commissioner can delist a charity etc. etc. The regulations are quite prescriptive and the level of disclosure is quite onerous. In fact I suspect that if we were to compare this bill with other pieces of tax legislation like for example the legislation governing overseas trusts—The CHAIRPERSON (Hon Chester Borrows): Do not go there—stick to Part 1.STUART NASH: Absolutely Mr Chair but what I am saying is that I think this is very good because what this is doing is requiring a level of disclosure that meets the expectations of the general public of New Zealand. We like to know with our tax law that there is a level of transparency that cannot be overridden or abused in any way shape or form. This is what this does. Like I said what it does is it takes the onus from Cabinet and gives it to the commissioner. For example new section 27B prescribes the primary matters in which the commissioner must be satisfied for listing a charity and that goes into quite a level of depth around charity law etc. etc. There are a whole lot of requirements that must be met before an entity is listed as a charity.New section 27C is about an application by an entity to be listed as a charity so there is a process that every entity must go through before it seeks the listing which again is very transparent. It is out there so that organisations are left in no doubt as to what they must do. But having said that there is also in clause 7 new section 27D which says the commissioner may list a charity for tax purposes even if no application has been made or if in fact the commissioner requires more information. What this means is that a student traveling overseas to work for a charitable organisation will not be disadvantaged if that organisation has at the point of registration or application met all the requirements. There are a number of clauses in here that I will talk on at a much greater level of depth but I thought that this is importantfirst and foremost because I know—FLETCHER TABUTEAU (NZ First): Thank you Mr Chair. Thank you for this opportunity to stand up on behalf of New Zealand First in relation to this taxation legislation. I wanted to touch on just a few things that coincidentally have already been raised and just reaffirm some of the words that have been spoken already in the Chamber. This is a highly complex bill and a number of the pieces of legislation that are being altered are significant and quite varied. It is important that we get this opportunity to come back and touch on each and every one of them.I first of all want to add New Zealand First’s voice to the charity discussion. The intent there is to ensure that a student is recognised as still being domiciled in New Zealand for the purposes of repayments in terms of their student loan. We acknowledge that this is the right and fair thing to do but in reference to new section 27Ainserted by clause 7 “(1) The Commissioner must keep a list of entities that are charities for the purposes of section 25(1)(b). (2) The list must specify”—I will not go and read all of that out because I think there seems to be a consensus already that the specificity is quite detailed. In fact there should be greater debate and perhaps a question for the Minister in the chair Michael Woodhouse about the level of obligation for charities in terms of declaring of information because I would suggest we may have gone too far in terms of the charity’s obligations.Also new section 27E—are there currently entities—oh yes I have a question to the Minister. New section 27E inserted by clause 7 is quite specific. It says that entities listed under the Act as charities do not meet the criteria set out section 27B. The question is are there entities listed under this charities component of the legislation that do not actually meet the current criteria? If that is the case then does the commissioner now have an arbitrary right to delist them from that charities list? It is a fair question a reasonable question and something that we would like clarity on.Then if you actually move on to new section 176A inserted by clause 23 the level of disclosure goes quite far. What the question is in new section 176A is a question around the charity being able to contest the decision of the commissioner around the charity listing in the legislation. It says the entity can contest the decision if it believes it “is not fair and reasonable;”. My question to the Minister is—new section 27B sets out a very clear and straightforward list of the definitions in terms of requirements for defining what a charity is so what is the opportunity there for entities to say what is not fair and reasonable about the decision? It is legislative—it is a tick in the box. There is no debate involved in it; they are either a charity under the Act or they are not. It is just a matter of confusing the issue there.If I could take the Committee’s attention to new section 209A inserted by clause 26 “Disclosure of information to Australian Taxation Office in relation to borrowers who are or may be overseas-based”. New Zealand First looked at this part of the legislation and said that actually that is quite reasonable. We are very clear on our expectations for New Zealanders in terms of paying back their debts and their obligations in terms of borrowed money. When we looked at the legislation we said: “Well it makes sense that New Zealanders overseas should be required to do the same thing.” and so we ran into the issue about information sharing. The solution in new section 209A(1) is to “(a) obtain or verify contact details of borrowers who are or may be overseas-based; and (b) administer the student loan scheme in relation to those borrowers. (2) For those purposes the Commissioner may provide the information set out …”.Again the level of detail there is quite high but I just want to take this opportunity to make a contrast because we have current issues in front of the House at the moment where we look at the clear ability for two Governments to come together talk very clearly with one another on information sharing data sharing contacting individuals—GRANT ROBERTSON (Labour—Wellington Central): Thank you Mr Chair for the call—that is terrific. I also want to talk about clause 26 within Part 1 which relates to the new provisions on disclosure of information in this case to the Australian Taxation Office. By way of background what is happening here is that effectively New Zealand has a new arrangement for the exchange of information regarding student loans which was signed between the Australian Commissioner of Taxation and the New Zealand Commissioner of Inland Revenue in March 2015.This sits alongside a range of provisions in New Zealand law to exchange information with other taxation jurisdictions; for instance double taxation agreements that we have with Australia and with around I think 40 other countries; and also what is called—as this is—a taxation information exchange agreement which we currently hold with 11 countries. It is not 12 countries. Malta is not on the list of countries with which we have a tax information exchange agreement despite what the Prime Minister told the House last week when he stood up and said that we did have a tax information exchange agreement with Malta—we do not. He has not come to—The CHAIRPERSON (Hon Chester Borrows): We are talking student loans here.GRANT ROBERTSON: I raise a point of order Mr Chairperson. We are indeed and what we are specifically talking about if I refer to the commentary on the bill provided to us by the Minister is an “Arrangement for the Exchange of Information”—those words all have capital letters on them. I am currently working through the arrangements for information exchange that are in the call.The CHAIRPERSON (Hon Chester Borrows): Taking the member’s point of order what we are talking about—and I refer specifically to the clause that he is talking about—is the disclosure of information with the Australia Taxation Office. If he wants to make some side reference then he has done that and he should move on.GRANT ROBERTSON: Thank you Mr Chair. So as I was saying it says in new section 209A(1): “The purpose of this section is to facilitate the exchange of information between the Inland Revenue Department and the Australian Taxation Office”. What I was pointing out was that we have a double taxation agreement with Australia. This taxation information exchange agreement is an additional agreement. I was just making the point that we do not have one of those with Malta and I am waiting for the Prime Minister to correct that.The reason that we have this clause in here is to enable a much clearer line of communication between our Inland Revenue Department and the Australian Taxation Office. There are certain details that are now required to be exchanged. Those details in new section 209A(3) include: “(a) a borrower’s name or any other name by which a borrower is known: (b) a borrower’s date of birth: (c) a borrower’s tax file number: (d) a borrower’s last known address and contact details: (e) any other information that the Commissioner considers relevant for the purposes referred to in subsection (1)(a) and (b).” That is quite a comprehensive set of details about student loan borrowers.Dr David Clark: And we know who the beneficiary is.GRANT ROBERTSON: Indeed. In fact the first one is well worth going into a little further—“a borrower’s name or any other name by which a borrower is known”. That is actually a comprehensive way of identifying who a student loan borrower is.If we compare that with other disclosure arrangements that the Inland Revenue Department has—in fact I will put the question to the Minister of Revenue as to whether he would like to compare that and see whether he thinks there is fairness here for student loans borrowers versus for instance those who run a foreign trust in New Zealand who actually can get away without even saying what the name of the trust is because if you do not know what the name of the trust is you do not even have to put it in the form. No. You have just got to describe it; you do not actually have to put the name in it. So a question for the Minister is whether he thinks it is fair that student loans borrowers have this obligation but those people who want to avoid paying their tax elsewhere in the world do not even have to put the name of their trust down.We can say the same thing here about the extent of these disclosure arrangements because there is no doubt in this—there is no “might” or “if”. Information has to be collected and available and shared. It is that sharing that is the essence of this clause. It is not just about making sure that a student loan borrower keeps that information because if we were comparing this with other disclosure arrangements in tax law the person who is a settlor of a foreign trust in New Zealand just has to keep the information. They do not have to share it with anybody; they do not actually have to make it available; they just have to keep it. I wonder whether the Minister would like to tell us whether that is fair. If student loan borrowers have to meet their repayment obligations—and I think everybody in this Chamber acknowledges they should because that is an important part of having taken out a loan—why are those sorts of obligations not on other types of people who interact with the Inland Revenue Department? I would like to hear the Minister justify some of those concerns.DAVID BENNETT (National—Hamilton East): It is a great pleasure to talk on the Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill. We are talking about the student loan scheme portion of the bill which is actually the smaller part of the bill. The bigger parts which we will come back to will be around other areas of the bill—the residential withholding tax and also the GST amendments—which probably will be more helpful for that last speaker Grant Robertson because he will actually be able to speak on the bill rather than to wander off and try to make political statements that are completely irrelevant to the actual bill that he is talking about.Dr David Clark: Don’t question the Speaker’s judgment.DAVID BENNETT: Oh the Speaker made no judgment Mr Clark—the only judgment is your judgment in your leadership so I would not be yelling out too much.The CHAIRPERSON (Hon Chester Borrows): Back to the bill.DAVID BENNETT: When we look at the student loan scheme amendments section of the bill—this is the important part of it; not as important as the other two parts but still important. Most student loan borrowers do the right thing and they repay the amounts on their student loans.Hon Clayton Cosgrove: Did you pay yours back?DAVID BENNETT: What is that Mr Cosgrove? Well he will be paying back his soon—when he has to go and get a real job and do some real work other than working for the Labour Party. Most student loan borrowers repay their loans but when we have borrowers overseas we have a lower rate of compliance and so there is a lower rate of return to the New Zealand Government from overseas-domiciled New Zealand borrowers of student loans.Basically over the last few years you have seen some legislation in this area to try to claw back some of that student loan from borrowers who are overseas and to make sure that we get a better repayment from New Zealanders who have taken advantage of our education system and got a good education have gone overseas and got a good job and have not paid back their student loan to the extent that those who have been living in New Zealand have.This bill contains further amendments in that area notably around the arrangement of exchange of information regarding New Zealand student loans with our Australian counterparts—that is the Commissioner of Taxation in Australia and the Commissioner of Inland Revenue in New Zealand. Basically there will be a greater exchange of information. Many New Zealanders who study and then go overseas do go to Australia to work so that is one thing: there is a higher preponderance of people who have not paid back their student loans who are in Australia compared with other countries. This exchange of information will allow the Inland Revenue Department to receive up-to-date contact details for New Zealand student loan borrowers living in Australia through matching borrower details against the Australian Taxation Office records of Australian taxpayers. It is important for New Zealand’s tax base that we have that information and therefore we can go further in seeking repayment of those loans.The bill also has a few smaller things in it around delegation of authority for charitable purposes to acknowledge that some organisations that borrowers may be working for are charitable. Basically there are situations where borrowers may volunteer and go to work overseas. They are treated as if they were physically present in New Zealand so they do not have to pay interest on their student loans whereas if they had been treated as being overseas working for a voluntary organisation they could have then been seen as having to pay interest on their student loans. So taking into account those New Zealanders who make a contribution to the world through the volunteer work that they do we are making it easier for the student loan legislation to be more efficient in how it impacts on those members of our community. The student loan scheme changes will apply from enactment of this bill so that will enable us to have that sharing of information with the Australian Taxation Office immediately.This is not the most complicated part of the bill or the most debated part of the bill—you will see that more around the residential land withholding tax; I am sure that there will be more opinions on that area and also in regard to the GST on online services—but it is part of this bill it is part of that work around student loans to enable New Zealand to get the best return that we can for those people who have borrowed and have gone overseas and are getting the benefit of the student loan especially in the Australian context. Thank you very much.Hon CLAYTON COSGROVE (Labour): Who needs John Shewan when we have that member David Bennett? The Government could have saved a lot of money by having a special inquiry appointing that member as an absolute expert on all things in respect of taxation. But I will move on from his fiscal prowess.There is an old adage in respect of tax that for a tax system to be credible with users it has to be simple it has to be transparent and it has to be consistent—consistent. Looking at new section 209A inserted by clause 26 of the bill and the other provisions around student loans I want to ask the Minister in the chair Michael Woodhouse a question in a comparable sense. We have taxation agreements with Australia in respect of liable-parent contributions. I do not want to track into that too much but I want to ask him a question around the inquiries that he may well have made of our Australian counterparts in respect of their robustness in doing their part of the deal in terms of the collection of student loans.In my experience having represented some constituents over the years when it comes to liable-parent contributions there is always an argument that is made that when you go to the Australian side of the coin—the Australian inland revenue service the Australian Taxation Office—they have got a bit of an attitude that says “We’ll get to that when we can” whereas our Inland Revenue Department in terms of policing on our side of the fence in respect of Australians tends to be a little more vigorous in terms of meeting our obligations with our Australian cousins. But it has been said by many a constituent that when they are trying to deal with their liable-parent contributions and representations are made to the Australian Taxation Office it does not prioritise this in a great way—it gets to it when it can as per its other work. I am being colloquial but that is the feedback that comes through from people.I suppose my question to the Minister is: have there been any representations made to the Australian Taxation Office in terms of what priority it will give in the collection of student loans and information sharing to doing its half of the work if you like in its jurisdiction? I think that is a fair question to ask and I look forward to an answer.As I said—and I know the previous speaker David Bennett did not touch on these issues—fundamentally there needs to be consistency within a tax framework. Simplicity and transparency: they are the fundamental tenets for the tax system to gain credibility with those who use it. It is worth making the comparison as Mr Robertson did with the level of detail that is required to be disclosed to the Australian Taxation Office in respect of new section 209A(1) (2) and (3) where we are talking about the borrower’s name—or any other name they may have been known by—date of birth tax file number and last known address and contact details. You are almost asking for the borrower’s shoe size with the length and depth of information that is required to be disclosed and passed on.Many would argue that that is fair enough. Like many members of this House many moons ago before I came in here I had a student loan. I was lucky enough to get a decent job and pay it back and I think most students just like most taxpayers would argue that they should meet their obligations. Many struggle because of the nature of the income—or lack of it—that they get but I think most fair-minded Kiwis would say that they will meet their obligations. However if you compare the depth and detail in the requirements under new section 209A with other parts of the tax system—the policing of foreign trusts for instance but I know that is a quarantined subject. It has had razor wire put around it in this House; we are not allowed to talk about it. Somehow it is like some disease that has come in here that has infected the place but we have got to pretend that it does not exist. What is it? Suspension of disbelief I think is the technical term that people use from time to time. If you compare the requirements on a student with the requirements on those who use foreign trusts within a jurisdiction you have got to ask: does this bill and does that matter though it is secondary to this discussion meet the test of a consistent transparent simply-put-together tax system and tax framework? I ask the Minister whether he could provide us with some information on that.There seems to be a gross inconsistency. No one is arguing that the requirements in new section 209A inserted by clause 26 are not required or are onerous or are too tough. What people are asking the Minister of Revenue is whether he still agrees with the tenet that a tax system should be transparent and consistent.Dr DAVID CLARK (Labour—Dunedin North): I want to pick up where my colleague Grant Robertson—The CHAIRPERSON (Hon Chester Borrows): As opposed to repeat it you are just going to pick it up are you?Dr DAVID CLARK: Yes pick it up Mr Chairperson. The clause 26 references that my colleague referred to and I trust he may speak further on this lead into other important aspects of the student loans aspect of this bill. As we have canvassed we are required under this part of the bill to record a borrower’s name or any other name by which the borrower is known a borrower’s date of birth a borrower’s tax file number a borrower’s last known address and contact details and any other relevant information.The CHAIRPERSON (Hon Chester Borrows): You are the third speaker to debate this issue.Dr DAVID CLARK: That is not the end of the matter; that is the precursor. That information then goes on through to other parts of the bill and is required as background for a number of other calculations that we find in subsequent clauses. That very information is used as background to inform calculations that say that the borrower must pay tax equal to the larger of two amounts and those two amounts are calculated using various formulae. In clause 30 to do with shareholders in close companies we have a calculation of the amount of earnings they might have as compared with ordinary earnings.That is a level of detail into which the bill delves. In new clause 11 of schedule 3 inserted by clause 30 there are requirements for borrowers who are settlors of trusts. We read that “This clause applies for the purpose of determining the amount that is included in the adjusted net income of a borrower for an income year when the borrower is the settlor of a trust (the borrower’s trust) …”. That amount is calculated again using a calculation in subclause (4) of new clause 11: “(a + b) ÷ c”. Again it is of the nature of where the income is either greater than zero or calculated by this trust greater again—so we have there calculations that build upon the information collected earlier in order to ensure that the borrowers pay their fair share. That is what it boils down to in plain language. It is about making sure the borrowers have complete transparency in the calculations that are made and that it is then calculated in terms of their fair share built upon what they earn via their various means or where their income sources come from.That is sensible. Nobody here I think will dispute that. But until we had these Panama Papers there was a saying that there are two things in life that are certain: death and something else that they seem to have forgotten on that side of the Chamber. It was about collecting taxes. Now we have a debate in this Committee about exactly whether these clauses should apply and how. We delve into the detail and we see that the principle underlying it is about making sure people pay their fair share according to the various interests they have. These interests are disclosed and known to the tax department because there is a high burden of proof on the taxpayer to declare all of their information including things such as other names and other relevant information which is a catch-all clause.That feeds through in fact into all of these subsequent clauses in the pages that follow. Those calculations add up to in many cases a greater amount than were the borrower simply a borrower simple with no other business interests with no trusts that they were the settlor for with no close companies that they were responsible for and so on. That is how the calculation is made. Were it the case that these people had foreign trusts where their interests were not disclosed that would not be captured in these clauses unless it was captured under “other relevant information”.That is why in this bill I commend the fact—and I am sure my colleagues will too—that we are collecting this wider set of information. It is a good principle of tax law to collect all relevant information to ensure that people pay back their fair share. I have been a student loan borrower as many others in this House will have been and I have not resented the fact that I had to pay that loan back. That is something that in my time was the expectation that I went in with. I do think that over time—JULIE ANNE GENTER (Green): I rise to speak on Part 1 of the bill. I note that this part of the bill is the most problematic for the Green Party. This is what I raised during my second reading speech. On the one hand we support the changes that mean that student loan borrowers who are working overseas for approved charitable organisations and for approved aid activities as volunteers are entitled to be treated as if they were physically present in New Zealand and as such they are not charged interest on their student loans for a maximum of 2 years. We thought that that makes sense and it is good that we are making it easier for borrowers who are working for charitable organisations to have that recognised so that they receive the benefit that they are entitled to—an interest holiday if you will. But overall the Green Party has great concerns about the student loan scheme generally.I suppose it goes to the overall priority about whether or not it is important to prioritise the opportunity for education for people without loading them up with a whole lot of debt. For the Green Party it would be a priority for us in order to create a knowledge-based economy a clean green economy all of that to ensure that we are investing in our people and giving them opportunities. We are not really giving them opportunities when at the same time we are offering them an education but loading them up with debt. But I would say that—as many of my colleagues have referred to in Part 1 of this bill—in terms of the aspects the changes to the student loan scheme on the one hand although overall we would question whether or not it should be a priority for the Government to ensure that students are paying for their education as opposed to the wider society which is going to benefit from that the principle of information sharing for the purposes of ensuring that say taxes are paid when they should be is really important.So I can understand this principle of information sharing and we thought it was a good thing in the bill that in clause 26 there is this full disclosure of information to the Australian Taxation Office and that a whole lot of information is provided so that people who have taken on student loans under the scheme—even though the Green Party does not fully agree with that scheme we want to ensure that the borrowers are paying it back. It might be $600 million or $800 million that is owing in student loans according to the regulatory impact statement which estimated it was something in the order of $600 million to $800 million for people living overseas who have not been paying back their student loans.One of the ways that we resolve this is through information sharing and understanding exactly who the borrower is what their name is their date of birth—all this information. That seems perfectly reasonable. But in the context of things the amount that is owing is quite small relative to the amount that we might be missing out on tax that is not being paid by multinationals for example that are avoiding paying tax in New Zealand. The amount that we are missing out on there—between $500 million to $1 billion possibly more—is considerable.So we have the resources of the Government being put to chasing down people with student loans rather than focusing on much greater amounts of money that we are missing out on on tax from multinational corporations that are not paying their fair share here. At the same time we are going through this process to do this information sharing with Australia and to gather all of this information about the borrowers and yet when it comes to foreign trusts in New Zealand we do not request any of that information.We do not make it possible for our partners in the world—other countries that are partners in double tax agreements. Even they cannot request information about very very wealthy people who might be using New Zealand foreign trusts to avoid paying tax in their home country. Virtually the only country that could request that sort of information is Australia and that is only because it complained to the New Zealand Government in 2006 because it knew that wealthy Australians were using New Zealand as a tax haven to avoid paying tax. Since we do not have that sort of agreement with other countries they are not able to request this information.Strangely when we proposed in the House last week to the Prime Minister that it might be good to have a register with more information about the settlors of these trusts so that other countries could request information from us and ensure that New Zealand foreign trusts were not being used to dodge tax—KRIS FAAFOI (Labour—Mana): Thank you very much Mr Chair for the opportunity to speak to Part 1 which amends the Student Loans Scheme Act 2011. I want to concentrate my contribution in the first instance to clause 17 which replaces section 114 of the principal Act. The original section was titled “Notification of worldwide income by New Zealand-based non-resident borrowers”. It sounds technical but I will get to the point soon.The CHAIRPERSON (Hon Chester Borrows): Good.KRIS FAAFOI: Thank you Mr Chair. There has been an argument made on this side of the Committee around the principles around a fair taxation system and around the obligations that people who have taken out student loans and have potentially moved overseas have to meet in order to pay their fair share—to repay their student loans back. We want to make sure there is consistency within this piece of legislation and with the taxation system as a whole.Clause 17 which replaces section 144 talks about worldwide income by New Zealand - based non-residents. New section 114(1) states: “This section applies to a New Zealand-based borrower who is a non-resident and who has Schedule 3 adjustments.” I have gone to schedule 3 of the principal Act to see what it might entail if there was a schedule 3 adjustment. In clause 30 of the bill clause 11 of the replacement schedule 3 talks about borrowers who are settlors of trusts. It goes on to say in clause 11(2) that schedule 3 does not apply if a trustee of the borrower’s trust is registered to a charitable entity. I think that many speakers have spoken about that—that the borrower’s trust is solely for the benefit of the local authority. I can understand that.But clause 11(3) of schedule 3 goes on to a very complicated—well not too complicated—formula to ascertain the adjustment within schedule 3 to the New Zealand - based non-resident’s payments in a specific year. The rough calculation is (a + b) ÷ c—I do not want to bore people at home with the detail but I have to because this is the Committee stage—“… where—a is the net income of the trustee of the borrower’s trust for the income year reduced to not less than zero by the amount of the trustee’s income that vests or is paid by the trustee as beneficiary income for the income year”; and b is “the greater of zero and the total of amounts calculated in accordance with subclause (4) for each company in which the trustee of the borrower’s trust and associated persons hold voting interests of 50% or more on the last day of the company’s income year”; and c is “the number of settlors of the borrower’s trust who are alive at any time in the income year including the borrower to which this clause applies.”My point is that that is a hang of a lot of information. I do not entirely understand it all but it is a lot of information to disclose for a New Zealander who has got their interests in a trust who has obligations back to the New Zealand people to pay back money that they have borrowed in order to study. It is a lot of information. We have been talking about the principle of consistency around the obligation to make sure you pay your fair share of income tax and I think there is an inconsistency here about the information that is demanded from someone who is a New Zealander resident overseas who has a trust and has an obligation to pay back to the State their student loan based on what they are earning and let us say a foreign trust where these people have come from overseas set up a trust and all we demand from them is a name.There may be a theme developing here but I think this is one instance in clause 17 where we must take a principled approach to taxation. If we are demanding information of the complicated nature that we have within schedule 3 under new section 114 which is in clause 17 and within this bill why have we not got that same consistency in terms of demanding information from those who hold foreign trusts in New Zealand? That is a question that I would like to pose to the Minister in the chair the Hon Craig Foss. Why is the Government not taking that move for consistency? Why is there not the consistency? I know that it might be a bit complicated for the Government. It might be too complicated for the Government.GRANT ROBERTSON (Labour—Wellington Central): It is opportune because I also want to pick up and develop the ideas that the previous speaker Kris Faafoi was working on in particular looking at—I can see how pleased you are about that Mr Chair; it is great to have your endorsement—the amendments to schedule 3. I am looking here at clause 11—Dr David Clark: I want to hear from the Minister.GRANT ROBERTSON: Oh no I am coming to that. Clause 11 of schedule 3 inserted by clause 30 of the bill is titled “Borrowers who are settlors of trusts”. It is very important to go back and recognise that all of the amendments in Part 1 of the bill relate to borrowers—or the vast majority of them—who are offshore. So this is when you are in Australia and you still owe the money but you—The CHAIRPERSON (Hon Chester Borrows): Student loan.GRANT ROBERTSON: Student loans—that is right; student loan borrowers offshore. But in this case we are talking about borrowers who are the settlors of trusts. That is the heading in clause 11—The CHAIRPERSON (Hon Chester Borrows): Student loan borrowers.GRANT ROBERTSON: This is an interesting conversation we are having here but yes I think we are on the same page metaphorically and literally. So as my colleague has mentioned there is an expectation inherent in this clause that we know the income that the borrower is getting from the trust. That is actually what the clause is based on and the formula that my colleague mentioned in clause 11(4) and (5) of schedule 3 are generated by knowing the income of the trust. That is essentially what lies at the heart of this clause.That would be right if you were a New Zealand resident borrower because if you are a New Zealand resident borrower and you have a trust you have income tax obligations but not if you are not in New Zealand—not if you are not a New Zealander. Changes that have been made in recent years mean that if it is a trust where those who set it up are not New Zealand residents they have no income tax obligations.Dr David Clark: None.GRANT ROBERTSON: Whatsoever. So here we are with student loan borrowers who are the settlors of trusts and have a string of obligations put upon them which we can enforce—which the Inland Revenue Department can enforce—because it knows the income that that trust is generating. A tax return is returned and then we can judge from that how much the borrower—the student loan borrower Mr Chair—would be paying back. That is a fair system.Contrast that with the information that we have about other types of trusts: foreign trusts where there is no information like that that could even be used to work out whether or not somebody owes money. Once again we have our concern on this side of the Chamber about the absence of the critical element of a taxation system: fair treatment. New Zealanders should be proud in general of our tax system. It actually is robust and it does work well. But where deliberate decisions are made as they were in a tax bill that went through this Committee in 2010 to create loopholes through which we could for instance zero-rate a managed fund we then create the opportunity for that to be exploited—The CHAIRPERSON (Hon Chester Borrows): Come back to the bill.GRANT ROBERTSON: —and unfairness to join in our system.My question for the Minister in this regard is somewhat technical but it is relevant: at what point does somebody become a non-resident for tax purposes? If the issue that we know of in terms of the setting up of trusts is that if you are not a resident that is where you can exploit the loophole how long would a borrower who is the settlor of a trust need to be away from New Zealand to no longer be considered a resident? This is a serious question because we are dealing within clause 11 of schedule 3 here with exactly that kind of person: a person who has been in New Zealand—The CHAIRPERSON (Hon Chester Borrows): Who is a student loan borrower.GRANT ROBERTSON: That is correct but in this case it is a student loan borrower who is the settlor of a trust. I am pretty sure we are still on the same page. At what point after they have been away is that student loan borrower no longer considered a resident for tax purposes? This matters when it comes to the question of their obligations as a settlor of a trust because we know those obligations are in fact different depending on whether or not you are a resident or a non-resident in New Zealand.Again it is a question of basic fairness and the reason I am raising it with the Minister is that we do now know that a lot of young New Zealanders are spending longer away having graduated from university with a student loan. Should they have structured their affairs in such a way that they are the settlor of a trust can the identity of that trust change over time so that it effectively becomes a non-resident’s trust and therefore no longer subject to these obligations?STUART NASH (Labour—Napier): I would like to talk about clauses 26 and 73. This is about the disclosure of information to the Australian Tax Office about borrowers who are or may be overseas-based. The issue this is trying to solve is one of the key problems in collecting overseas student loan payments: holding up-to-date contact information for defaulters. You know if you cannot get hold of them then how can you liaise with them or correspond with them? Many of them are believed to live in Australia and what this will allow is the exchange of information as has been talked about between the Inland Revenue Department (IRD) and the Australian Taxation Office to receive up-to-date contact details of New Zealand student loan borrowers residing in Australia through matching details against the Australian Taxation Office’s database of Australian taxpayers.What this will allow the IRD to do is to contact those individuals and keep them engaged with their student loan obligations and where appropriate recover outstanding student loan repayment amounts. The thing we cannot forget when we are talking about student loan borrowers and even more about student loan defaulters is that when a New Zealander has signed a contract with the Government to undertake a student loan it is a legally binding agreement and they must abide by the terms. I think it is just incorrigible that someone may head across to Australia to avoid paying off their student loan after arguably drawing the benefits of that loan in order to get educated or do whatever people do with student loans.The thing about this and this is where it is quite clear is that an amendment to the Tax Administration Act 1994 creates an exception to the taxation secrecy provisions. The one thing that the IRD values more than anything—what its whole integrity is based upon—is in fact maintaining the secrecy of individual taxpayers so no one knows what anyone else is doing. My personal view is that the IRD does act with complete integrity in this instance. It has a number of clauses and terms and conditions and individual employment contracts that ensure that all staff members know that they have to maintain the integrity and the secrecy of each taxpayer.So the interesting thing about clause 26 is that it limits who in the Australian Taxation Office is authorised to receive the information from the Commissioner of Inland Revenue. Again this just maintains the integrity of the tax system. But it also prescribes the information that may be provided by the commissioner and says that the information must be relevant for the purpose. What I mean by this is that the IRD cannot go on a proverbial fishing exercise. So it cannot say to the Australian Taxation Office: “We want everyone between the ages of 21 and 28 between A and Z who holds a New Zealand passport that is registered with these names.”This is the interesting thing: it can go after only those people who it knows have a student loan and who it suspects may be living in Australia. When I say “suspects may be living in Australia” the bill is actually quite clear. The IRD does not have to prove they are living in Australia; it just has to suspect they are living in Australia. This is again where we come back to a common theme which is that it has to actually know what it is looking for. If you do not know what you are looking for in tax law then you will never ask the important question to get the information. We have talked about overseas trusts and this sort of thing and I do not want to bring that up again but it is a great example—when someone says “we have a transparent system” how do we know it is transparent? Those who are seeking transparency will never seek answers for questions they do not know whether to ask or not.It actually would be good for the Minister in the chair Craig Foss to speak about this and the reason I say this is that I have a suspicion that Mr Foss is an expert in this. I know he is a financial whiz. He has worked overseas in financial markets—I say this as a positive not a negative—and I would like to hear his views on how this legislation compares with other pieces of tax legislation and whether he thinks this is consistent with other pieces of legislation.The other clauses I would like to talk about are clauses 8 and 9. This is about the treatment for over-recovered additional deductions. I will just give a bit of background on this. The Commissioner of Inland Revenue is able to require a New Zealand - based student loan borrower’s employer—i.e. the boss of a student loan borrower—to make additional deductions from that borrower’s wages and salary to meet previous shortfalls in repayment obligations. The commissioner is allowed to do this by law without actually seeking the permission of the student loan borrower.What the IRD does is it writes to an employer—it must be in writing—and the commissioner advises the employer of the total additional amount to be deducted and by law the employer must deduct this money from the employee’s account. But it is also recognised that there may be circumstances in which the commissioner might have got it wrong or the employer has deducted too much or something so what it does is it ends up creating an inherently unfair situation for that employee—that student loan borrower. There is one thing that I think one of my colleagues talked about and that is the inherent fairness of the tax system. One of the guiding principles of any tax system but certainly the New Zealand tax system is fairness.What clauses 8 and 9 do is allow a student loan borrower who feels aggrieved by the commissioner requiring an employer to take money without their knowledge to apply to the commissioner and say: “Hey I think you’ve made a mistake.” It has to be done in writing and there is a whole set of processes that a student loan borrower must follow but what it does allow at least is a sense of redress which again is important and I think just adds weight to the Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill.There is just one other thing that I would like to mention and it is a point of clarification I suppose. A number of speakers have talked about deposits in income equalisation accounts and shareholders of close companies. Income equalisation is an interesting topic. What this is intended to do is allow persons to carry on—initially actually it was agricultural fishing and forestry businesses—and smooth their incomes over years when they may have massive highs and massive lows. So this is where clause 30 “Schedule 3 amended” talks about deposits in main income equalisation accounts. Again it brings with it that notion of fairness.What it does allow I believe is the avoidance of the aggressive sort of tax planning that some individuals may feel they want to enter into in terms of avoiding their obligations which again is most important. But basically clause 30 inserts into schedule 3 new clause 7 which says: “The borrower’s adjusted net income is increased by the amount of a main income equalisation deposit the borrower makes for the income year.” So if the student loan borrower whacks $50000 into this equalisation account then his or her income increases by that amount. Again this is used as a smoothing tactic which is fair and it makes a lot of sense to be honest. But this just ensures that no one is avoiding paying their fair share.We have talked about borrowers in trusts but there are also borrowers who are major shareholders in close companies. Again what the legislation does is list the different entities a borrower may be engaged in in terms of just the normal I would have thought process of doing business—companies equalisation accounts trusts etc. etc. What it does do—and this is why we are supporting this part of the bill—is introduce that level of fairness. But it also ensures as mentioned that people cannot—well in my view—undertake the sort of aggressive tax planning that we want to avoid in our tax system.But that is probably all I am going to talk about for now. There still are some other issues that need to be clarified within Part 1 but let us see where we get to with the next speaker.TIM MACINDOE (Senior Whip—National): I move That the question be now put.Motion agreed to.Part 1 agreed to.Part 2 Amendments to Income Tax Act 2007STUART NASH (Labour—Napier): Part 2 of the Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill basically consists of amendments to the Income Tax Act. This is I suppose—I was going to say the substance of the bill. That is a little unfair. It is not because everything is important. This bill just to give a little bit of background is one of three bills that were designed to put the Government’s 2-year brightline test into force. So what that is about is there was a feeling that overseas speculators were coming into this country investing in houses for making a very quick capital gain and onselling the houses within 2 years. The Inland Revenue Department (IRD)—we talked about this before—suggested a 5-year brightline. Treasury or the Minister of Revenue rejected that. We are not too sure why because it was certainly recommended by the IRD. But once that was in place a whole lot of other legislation needed to fall in right behind it to ensure that there was no way that a 2-year brightline could be gained.What we are talking about here is clauses 34 through to—I am not too sure where Part 2 ends; it is quite a substantial part of the bill. It is quite technical and I must admit there was a lot of debate in the Finance and Expenditure Committee trying to really tighten this up. I must admit that we were lucky in the fact that we had our tax adviser. Our tax adviser is an incredible person who knows the tax law like the back of her hand and she was very very good in advising us on how we could actually make this better. She worked very closely with the IRD in terms of tightening this up. This is the residential land withholding tax.Like all withholding taxes it is a payment into an account. When a transaction has been undertaken and a full amount has been settled upon then an amount is paid to the Government. But because we are talking about overseas owners here or—well the definition is quite wide actually and Mr Faafoi may like to have a look at the definition of an overseas owner. Let me talk about the objective. The objective of the residential land withholding tax is to act as a collection mechanism for the brightline test. I think the Government calls it the capital gains tax you have when you are not having a capital gains tax.What it is designed to do is to address an anomaly in our system that we feel very strongly about and that is overseas speculation. Let us make no bones about this. This is overseas buyers coming into New Zealand buying houses not living in them—in fact not even moving to this country—and selling them without contributing anything at all. I am sure there are a number of speakers on our side of the House who will be keen to elaborate on this. As mentioned the residential land withholding tax would require as mentioned income tax to be paid on any gains from the disposal of residential land that is acquired and disposed of within 2 years subject to some exceptions—and we did look at a number of exceptions.With the introduction of the brightline test we thought it was highly likely that overseas vendors who sell residential property within the 2 years will have a tax liability in relation to income from that property. However we also acknowledge—and this is what this part of the bill does—that there is a general difficulty faced in collecting tax from foreign investors with no or limited presence in New Zealand. We think that this tax would optimise the effectiveness of the brightline test and support the integrity of the tax system. Of course the integrity of the tax system is something that has been talked about since we started debating this bill at 3 o’clock and I suspect it will still be talked about by the time we wrap this bill up and probably even in the next tax bill on the Order Paper as well.The proposed tax is payable from 1 July 2016 and what we see in these 2-year time frames is that it can allow some interesting behaviour. What we were really afraid of is that someone would buy a house and sell it in 2 years and 1 day reap the gains and pay no tax. The concern that we have here is that tax advisers in this country who are very very adept at—what should I say—minimising tax will provide advice that if you are an overseas speculator and you are looking to buy a house and you want to avoid the residential land withholding tax then make sure you can hold on to this property for just over 2 years. As mentioned this tax is payable from 1 July 2016 in the same circumstance as the Taxation (Bright-line Test for Residential Land) Act except there is no main home exemption for this. The reason there is no main home exemption is that we think that this probably was not a main home that you are investing or speculating in.The focus of the residential land withholding tax is on New Zealand residential land sold by offshore persons. Again as mentioned the definition of an “offshore person” is not necessarily what you may expect. New Zealanders are included in this definition but that is something that I will elaborate on a little bit later. A main home exemption is a compliance cost of marginal use. There will be an exemption for the disposal of inherited property as well as relief for relationship property. We see this a lot in tax law—if someone has to dispose of a property under urgency due to a marriage failure or something then there has to be a provision in tax law that allows this. It is proposed to impose the residential land withholding tax at a point in time when New Zealand land is sold by an offshore vendor so as to improve the collection of any annual income tax for the brightline residential income that the offshore person may have.It was argued here that the conveyancing lawyer would probably be the collection agent but what was acknowledged in the select committee is that that is not necessarily the case. Mr Scott may talk on this because he had some very interesting points to make in the select committee. We need to ensure that the conveyancing agent—which is as mentioned normally a lawyer and we can talk about a lawyer in this case I suppose but it is not always—is not held liable for information he or she might not have had at a time and point when the seller disposed of the property. The payment of the residential land withholding tax generates a tax credit that may be used to pay annual income tax liability for the brightline test of residential land income. If the tax credit for the residential land withholding tax is not needed to pay income tax liability then that tax credit is actually refunded. Again this goes to the principle of tax law: you take tax when there is tax payable; you refund tax when there is a loss. There is nothing unusual in that.Let us talk about an offshore person because an offshore person also includes a New Zealand citizen who is overseas—that is if they have been overseas for the last 3 years. So again what we are looking at here is speculating in a market where I suppose you could say that person is not contributing in any way shape or form. At least in New Zealand if you own speculative property you are paying tax and that tax is contributing to the upkeep of roads and schools and other core services. But if an investor is living overseas and they are investing in property then I think it is very difficult to make an argument that they are contributing even in another way through their taxes and their GST etc. So this does include a New Zealander living offshore if they have been overseas for 3 years.An individual who holds a New Zealand residence class visa may be an offshore person if they have been living overseas for the last 12 months. New Zealand trusts and companies may therefore be offshore persons if there is a significant offshore interest in them. And again we debated what constituted an offshore trust or an offshore company. At this point in time I cannot recall whether we looked at blind trusts. I suspect we did not. I suspect now if we were looking at this bill we would pay particular attention to trusts that are blind or are overseas trusts or that are holding assets in New Zealand. We might have looked at this in a slightly different way given the whole integrity of the New Zealand tax system has been called into account with recent events but that is a conversation for another day or another time or another reading.The mechanism proposed for the collection of the residential land withholding tax as mentioned is the point in time when the land located in New Zealand is disposed of which is primarily an obligation of the offshore person or vendor. It is proposed that the offshore vendor’s conveyancer as mentioned—usually a lawyer—or in absence of the vendor’s conveyancer the purchaser’s conveyancer is treated as the resident land withholding tax agent of the offshore vendor. In absence of the vendor’s conveyancer—Dr DAVID CLARK (Labour—Dunedin North): My colleague Stuart Nash was discussing the offshore persons aspects of this bill. I myself was not on the Finance and Expenditure Committee so I will preface my comments with that but I have identified particularly in the notes around the bill—and I will search further for future contributions into the actual clauses in the bill—the issues around anti - money-laundering identification in respect of offshore persons.There is a recommendation that comes back with this bill for amendments that will make gathering a bank account and understanding the bank account less onerous for those who are offshore persons. This I think is worrying in light of the events of recent days. I invite members of the select committee to also contribute because as Mr Nash just noted they might have looked at this in a different light in respect of blind trusts and other things had the events of the Panama Papers and so on which have become public fodder in recent days been in front of the committee at that stage.I note that in the commentary on the bill it says: “Officials have undertaken to continue to work on solutions whether legislative or operational for some of the … practical difficulties and unintended consequences.” It says that in a paragraph that speaks specifically to anti - money-laundering identity verification. Officials are wanting to maintain the integrity of the system to make sure that the people who are operating here are vetted and to ensure that those people are not involved in money-laundering but they are wanting to do that without placing too much burden on those people. Where that balance falls is a legitimate question to be asking in tax law. I think that what we have seen in recent days is that burden may not be in the right place.So I encourage those officials to look into that and I look forward to this debate as it continues and as it begins to open up those questions of whether the balance is struck right in this part of the bill.The anti - money-laundering verification undertaken by New Zealand entities—somebody is exempt I read if they already have this verification. If they have achieved that verification once it seems they are exempt—in this bill—from having to achieve it again to avoid duplication of process. Where are the checks and balances? Is that a once and for all thing? If somebody has been certified as being free of any kind of wrongdoing in respect of anti - money-laundering in one investigation are they free forevermore? I wonder whether Mr Foss may be able to shed some light on that as the person representing the bill to the Committee as the Minister in the chair because these are questions that I think now demand answers.We have in this country a reputation as a fair dealer when it comes to tax—historically that is true—but what we have seen over the years and during the time of this Government is the gap between rich and poor growing.We had tax changes that meant the top 40 percent of the benefits of those changes went to the top 10 percent of earners and the bottom earners got a few percent which was swallowed up in a GST change. We have got a tax system that has become less fair over time and people are concerned. The public whom I have spoken to in recent days have questioned me on whether our tax system is really fair any more and here we have in this bill exemptions for people who have previously been cleared of money-laundering allegations as I read it.I would appreciate it if the Minister in the chair would clarify whether there is a once and for all stamp of approval if people have been through one set of investigations or whether there are likely to be more investigations and whether the tests that are in place for money-laundering are sufficient in this bill because I am not clear having read the notes—as I said I do want to go back and speak to the individual clauses and come back to this debate.I might not carry my particular contribution much further at this stage because I do want to dig in and do a little bit more research having just stumbled across this particular matter of concern. But what I can say in closing is that I think we need to be assured that we have a fair tax system. I think we are right as Kiwis to be worried when we see non-resident people taking advantage of our growing status as a tax haven and the damage that that does to New Zealand’s reputation. I think that the Panama Papers have cast a whole different light on the tax legislation that we pass through this House and it will need to be more closely examined.FLETCHER TABUTEAU (NZ First): I rise to oppose this part of the legislation and I just want to underscore and talk about where we have come from to get to this point. In my opinion this is the third part of what is a broken attempt on the part of this Government to basically claim that it is fixing up the issue of overseas speculators buying up New Zealand homes. Of course I am speaking specifically to Part 2 of the legislation and the amendments to the Income Tax Act.What we do know is that Aucklanders are now paying record prices for their homes. In terms of context it is from the previous two bits of legislation which are supposedly the panacea to this problem that we come to this third bit. But from the two pieces of legislation that have already been implemented—because this one only seeks to establish how those payments are to be calculated and paid on the part of those overseas speculators—we have already seen that the brightline legislation does not work. How do I know that? Because over the months leading up to Christmas and to the New Year we saw the legislation implemented and actually we saw a slight downturn in terms of purchases of Auckland homes from overseas speculators. We saw that. What we saw though was overseas speculators actually just trying to figure out what the legislation meant to them.Basically what they saw was that they only need to get an IRD number and that is it and they can still carry on with that speculation and profit out of the Auckland housing market because the requirements on them are minimal and make no substantive changes to what they are trying to do which is use Kiwis’ homes as a profit mechanism. That is the gist of it. Kiwi homes are being used by overseas speculators for them to make money. New Zealand First insists that it is not fair and it is not acceptable and we have also consistently said that this legislation will not work.Here for example is this bill the Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill. We actually support two-thirds of this legislation and we voted for the first part accordingly but the reality is that the opportunity is here and now for the Committee and for Minister Woodhouse to perhaps break up this legislation—break it up so that New Zealand First can vote for common-sense parts of the legislation. For instance we acknowledge that we do need to hold student debtors accountable. I think that in contrast to topical issues around tax and trusts at the moment it is harsh and heavy-handed—but here we are. It is a solution and what we hold for one student we must hold for another; it does not matter where they are residing.I turn specifically to the amendments to the Income Tax Act which outline the grounds on which payment should be made. Generally speaking even after all the law changes to supposedly slow speculation in Auckland recent statistics—I say again—have proven that there has been a minimal effect or actually no effect on that speculation.What I want to point out at this stage—it is very general I acknowledge and I will come to the specifics of the legislation—in this opportunity to speak to the Committee is that tax experts came back to the select committee after the alterations and amendments and basically said to the committee—well not basically; they said it outright—that this part of the legislation this residential land withholding tax will not work. They said it to our faces and basically they said it in several ways. They said that those who wish to speculate on New Zealand property and profit from it will adjust their behaviour ever so slightly—in that they referred to the 2-year time period. They will just wait—they will wait and they will make more money on it if that is their wont and they will adjust their behaviour.The other part is that if you look at the statistics and the money generated from this legislation—and here is the rub—this tax revenue legislation bill will in fact according to KPMG and others accrue a negative net revenue to the Government. It will be a negative tax take—that is what this tax legislation will achieve upon its implementation once we establish who is liable and how they are going to pay. There are a whole lot of issues in how we determine who is liable and how they are going to pay but we will come to those later.The tax experts gave numbers in line with the Inland Revenue Department’s own analysis which suggested anywhere between $1 million and $5 million in terms of revenue-gathering from this legislation. Five million dollars sounds like a lot but we know that in terms of—I mean that is one house in Auckland at the moment is it not? It is next to nothing; it is ludicrous. Then they put the obvious to us and said that there is a cost in gathering this revenue. What you will find when you juxtapose cost to revenue as a good accountant is wont to do is that the actual return to the Government coffers will be negative—for a piece of legislation that we have been told will not work because behaviour from speculators will change. New Zealand First cannot and will not support absolutely farcical measures—if you do not mind the language—in terms of a Government standing up and essentially saying it will do something about this and in fact it knows full well it will not achieve any of the stated objectives that it has set out before us today. Thank you.STUART NASH (Labour—Napier): There are a couple of things that I would like to elaborate on. Just to go back to a clause that I was talking about before—this is under the subheading “Liability of conveyancers: reasonable reliance”. We are talking about Part 2 clause 44 new section RL 2(6B): “A paying agent is not liable for a penalty under Part 9 of the Tax Administration Act 1994 for a failure described in subsection (6)(b) …”. What we are basically saying here is that even though the lawyer or the conveyancing agent is in fact responsible for paying the tax they are not liable if their client has not given them the information required to make the payment of that tax.I suppose what I am saying here is that what we are requiring overseas investors to do is to provide their conveyancing agent with the correct information that allows the collection of this tax. There was a little bit of concern in the select committee about how this would play out and what would happen if an overseas investor knowingly or negligently gave false information because it is quite hard tracking down people who live overseas who are not part of this jurisdiction and who are often part of a jurisdiction that is completely foreign to the vast majority of New Zealanders—and some of them we do not even have tax agreements with. So we are relying in fact on the honesty of the overseas investor.One thing that I would like to talk about is that we should actually I suppose understand when the residential land withholding tax will apply. It is quite an important part of the bill. It will apply when the property being sold is residential land. Again we talked about what constitutes residential land but the definitions are in the legislation and it is defined for the purposes of the brightline test—and this is one of the bills we talked about earlier. This is the tax bill that gives effect to the brightline test. This is when the vendor or the seller acquired the property—now this is the important thing—on or after 1 October 2015. Any land bought before 1 October 2015 is actually not subject to this so if an overseas speculator has bought something on 29 September 2015 they can hold that for a year or they can hold it for any amount of time and avoid paying this tax at all. And of course the vendor is an offshore person.The other thing that is quite important I suppose is: how much does the person have to pay? Well what will be required to be withheld—and there is a difference between what is withheld and what is paid—is 33 percent or 28 percent if the vendor is a company times the current purchase price minus the vendor’s acquisition cost. So a stock standard example is if an offshore person buys a house for $100000 and they sell it a year later for $150000 then that is a $50000 profit. If they are a company then they have to pay $14000 in residential land withholding tax but they still bank $36000. There is still quite a lot of money there that is in the account or I should say it is the lower of 33 percent or 28 percent if it is a company and 10 percent times the current purchase price. So there are two equations in there that need to be met to ensure that it is very difficult to avoid paying your full amount but let us go back to the amount of money that speculators can still make here. If a speculator buys a house for $100000 and sells it for $150000 within that 2-year period or if it is a company or a trust it pays $14000 in tax they still bank $36000. If they are an individual on the top tax rate and then they withhold $16500 they still bank $33000.It is still quite a lot of money but the interesting thing is that there is a clause in the bill that says that the residential land withholding tax will be paid before other disbursements are made at the time of settlement. There was a concern by real estate agents that perhaps they would not get their commission. We assured them that in fact no they would get their commission—that was sacrosanct—so the real estate agents were quite happy about that. But if the vendor’s conveyancing agent is required to pay the residential land withholding tax this will be paid after the amount required to discharge the vendor’s New Zealand mortgage has been paid. But the interesting thing is that if this would result in insufficient funds being available to pay the mortgage then the amount of residential land withholding tax would be restricted to the difference between the current purchase price and the amount required to discharge the New Zealand mortgage.JAMI-LEE ROSS (National—Botany): I appreciate the opportunity to answer a few of the points made by our colleagues on the other side of the Chamber. I just want to say at the outset that the Finance and Expenditure Committee worked pretty well together on this bill and we came to a few conclusions that were cross-party and I think were good for the overall legislation and the point that we landed in.I do want to answer a few things that some of our colleagues have raised though. I always enjoy following Fletcher Tabuteau and being able to answer some of the points that he has raised. He basically said that (1) the brightline test is not working—well it only came in late last year. And (2) this tax is not sensible or practical—I think that might have been the word that he used. Well apparently not taxing people is what they would prefer; I do not know that that is really a position the New Zealand public would agree with. And (3) he spoke about the amount of money that it would bring in and he was saying that it was not going to be a high amount of money. Well quite frankly it does not matter how much money comes in; it is about ensuring that overseas purchasers of property and offshore persons are paying their tax appropriately.That is what this is all about. It is not about making huge amounts of money for the Government; it is about ensuring that overseas purchasers of property are paying their fair share. The easiest way that we feel we can target those people who are offshore persons and who could find it easier to avoid paying tax because they are offshore is to tax them by way of a residential land withholding tax. That is what this is all about. It is not about making huge amounts of money. So a residential land withholding tax will ensure that there is greater compliance with the tax obligations that those offshore people have.In terms of the brightline test it was put in specifically to ensure that those who are speculating on property are taxed appropriately. There is already the intentions-based test that has always been there and so I reject the claim that Mr Nash made that if someone purchased a property prior to October 2015 they would not be subject to tax if they speculate on it and sell the property. That is not true because they will still be subject to tax if they have speculated and their intention was to make a capital gain on that property. The date used here is simply to ensure that we have a line in the sand. Whether that line in the sand was October 2015 1 January 2015 or whatever date you put in there there is always going to be a point at which you could say: “Well if somebody purchased a property before that date then they won’t be subject to x y z.” The reality is that the intentions-based test has always been there is still there still applies and always will still apply and that this is separate from that.Stuart Nash: But if it works why are we doing this?JAMI-LEE ROSS: Well if it works—the reality is that the Government took some action because there were claims by the media claims by the public and concern by the public that offshore people speculating on property were not being taxed appropriately. So we changed the law and put in place the brightline test to ensure greater compliance. But the intentions-based test has always been there will still be there and does still apply to a purchase made in September or prior to October—so Mr Nash’s claim is incorrect there.Mr Tabuteau’s claims that the brightline test does not work—he had some interesting claims around that because he said that the number of offshore people buying property declined after the brightline test came in. I would have thought that actually means it had some impact and it actually was working. So Mr Tabuteau I do not think we can make that claim.Finally I just want to touch on the point that Mr Nash made around the liability of conveyancers and them having to rely on the information provided to them by the individuals whom they are tasked to work with and act on behalf of. I guess we always have to come to the point where we consider complexity and how difficult we made it in ensuring that there was compliance. We could have made the tax agents and the conveyancers liable for ensuring the information was correct but that would have added a huge amount of complexity that quite frankly would be unnecessary for most of the people who are involved in this. By ensuring that the liability did not lie with the conveyancers and that they could rely on the information that they were given by their clients it reduces some of the complexity but those people are still subject to other aspects of the Income Tax Act around providing documents fraudulently. So if there was evidence of that happening no the conveyancers would not be liable but the Inland Revenue Department would still have the ability to go after the people providing fraudulent information. I think the provisions that are in Part 2 that the committee arrived at where we made some changes around the definition of “offshore person” and landed in that space where 25 percent meant an individual or a company or group of people were not considered offshore but over—[Bell rung] Mr Chair.The CHAIRPERSON (Hon Trevor Mallard): Jami-Lee Ross.JAMI-LEE ROSS: I just want to finish off this point: that we arrived at the 25:75 split where 25 percent meant that they were not considered offshore but 75 percent or over and above 25 percent meant they were considered offshore which I think was a good space that the committee landed at. I think it has improved this bill considerably.GRANT ROBERTSON (Labour—Wellington Central): Thank you very much Mr Chair—[Interruption] A silent colleague to my left there but I am sure—[Interruption] Thank you. I am sure Jacinda Ardern will take a call shortly. I want to pick up Jami-Lee Ross’s observation about the purpose of Part 2 being about the tax obligations of offshore people and those people paying their fair share. It is a noble goal and one that the Finance and Expenditure Committee had in its mind as we worked our way through the Government’s policy to introduce a residential land withholding tax for offshore persons.If only such noble goals were part of the Government’s overall tax policy and offshore people paid their fair share for instance through trusts. Then we would actually have a tax system that New Zealanders could look at and as my colleague Jami-Lee has just said see that everybody pays their fair share. But there was a complete failure by the Government to have that kind of consistency as we have seen in the last few days and it all gets murkier. We now see that the Prime Minister has got deposits in companies that specialise in offshore trusts.David Bennett: Oh come on. Get on the bill.GRANT ROBERTSON: It gets murkier by the moment Mr Bennett. That is what happens when you do not front up and go to New Zealanders with information about your tax affairs. Mr Bennett might not care about that but other New Zealanders do. They want to see fairness in the tax system—just as Jami-Lee Ross said he thought this part of the bill was aimed at.It was disturbing in the select committee as we worked through the residential land withholding tax issue that we were correcting mistakes made in legislation passed only a matter of months earlier. We did that twice once when covering Part 2 and once when covering Part 4. Essentially that came down to the fact that the various new definitions that the Government had come up with to put in both the Income Tax Act and the Tax Administration Act did not fit when it came to a residential land withholding tax issue.In this part of the bill we are looking at the definition of “offshore person”. I do support what Jami-Lee Ross said which is that the committee did come to the conclusion that the definition was far too broad when it came to being able to implement a residential withholding tax in a meaningful and sensible way. The officials from the Inland Revenue Department came to the committee and said that if we kept the same definition for “offshore person” as we passed in the previous piece of legislation we would find that almost impossible to implement. They gave us an example of a trust or a partnership where the partner with a 1 percent share could make the entire partnership into an offshore person and that would then put in place a set of obligations that would have been difficult both for that entity and for the Inland Revenue Department to follow up.So we on this side of the House accepted that change and agreed to it on the grounds that what we are trying to do is create a basis by which those who do invest in New Zealand from offshore have an understanding of what the requirements on them are. That should not be read as members on this side of the House believing that we do not think those who are offshore persons have obligations because we do. They should have obligations that make them part of a globally transparent system.Although in this particular aspect of the definition of “offshore person” we can see sense the Minister in the chair might want to take a call here and talk about the consistency now of the obligations of offshore people across the Income Tax Act. What we are setting up I believe as a result of the changes that we are making here is a system where we are putting certain obligations on offshore persons with regard to the residential land withholding tax and then completely ignoring making those obligations tighter for instance around foreign trusts. The Minister might want to stand up and let us know whether he thinks we are being consistent. Yes we are changing and amending the legislation to make it different from the two previous pieces of legislation that we passed but is that consistent across all of the tax legislation that we have?The other point that I want to pick up here is whether or not we can use the term “offshore person” at all. That was an amendment that we made again in the committee. So we now have in the Act an “offshore person” and now under clause 45(8) an “offshore RLWT person”. The Government has got itself in a position where it is trying so finely to define within this part exactly who will be covered by the new residential withholding tax that it has had to create a new class of person within the Act. [Bell rung] Mr Chair—The CHAIRPERSON (Hon Trevor Mallard): Grant Robertson.GRANT ROBERTSON: I will not take a full second call on this but I just want to make the point that this level of complexity around what the Government thinks it is trying to achieve with the brightline test highlights to me the fact that it did not think through all of these particular policies together. This is the third bill in a series of three.At each part of the select committee process the large accounting firms in New Zealand have come to the committee and said “The Government’s policy position is confusing us because we have now had a series of changes”—I am using clause 45(8) to highlight this—“where we have different definitions and different meanings.” The accountancy profession which for various reasons is getting a bit of a hauling over the coals at the moment was telling the select committee and telling New Zealanders that it does not believe that the Government has consistent policy here or policy that is easy to follow.My fear is that this will not be the last time possibly even this year that we end up amending legislation we have only just passed. That really comes down to poor work by the Minister in my view in not having a decent and consistent plan for how we are going to be able to do this. So we now have an offshore residential land withholding tax person alongside an offshore person and a definition of “offshore person” that we have changed as well. We are making those three changes all in one go because the Government basically could not get its act together.I just wanted to make those points on Part 2. I am going to returnshortly in a later call to the other change that we have made around bank account requirements for offshore persons. This is largely dealt with under the Tax Administration Act provisions that fall under Part 4 but it does bear mentioning that these clauses within Part 2 also indicate where the Government has not been able to get its act together and have a coherent policy.JACINDA ARDERN (Labour): I would like to base my contribution on Part 2 around some of the discussion contained in the regulatory impact statement because that canvasses the degree to which the Inland Revenue Department (IRD) under the direction of Ministers explores alternatives to the tool that was eventually settled on to underpin the brightline test which is the residential land withholding tax that is set out in Part 2. I think that what is interesting is in the setting out of the problem definition before the officials went out and consulted on the options that are then contained in Part 2—the problem definition that we see the Government has used in that consultation document and in the subsequent regulatory impact statement is obviously quite broad. It says: “The Government is concerned with high house prices”—something we can all agree is of major concern—“particularly in the Auckland area. … Other possible causes both on the supply and demand sides are being separately considered.”—we wait with bated breath but—“Property speculation is seen as one of a number of causes of the current prices.”So there is obviously up front some acknowledgment of the issues but there are some limitations to our ability to use an evidence-based approach in dealing with some of those issues and those limitations are included in the regulatory impact statement. It does set out that one of those limitations is of course the lack of information that we have on the exact breadth of the offshore speculator issue. We see that on page 1 of the regulatory impact statement it states: “The exact fiscal and compliance cost figures for the proposed bright-line test are not available because Inland Revenue does not currently have accurate data on the types and levels of land sales occurring or how much is collected under the current land sale rules.” So we have had to make some assumptions but I think it is fair to assume—as Labour obviously has—that the issue of overseas-based foreign speculators is significant in terms of the impact it is having which is essentially what Part 2 speaks to.The other limitation is also set out in the regulatory impact statement. It states that “The analysis in this RIS needs to be considered in light of the additional constraint faced by Inland Revenue at the present time”—which is not just a lack of data—“which is its inability to make significant systems changes in advance of the relevant stage of development of its Business Transformation programme.”So I guess my question to Minister Michael Woodhouse is on the consideration of the various mechanisms in order to underpin the brightline test which include: “Option 1:Relying on existing compliance measures … Option 2: Status quo but provide more guidance on tax obligations;”—a bit of an education programme—“Option 3: Status quo but review effectiveness of bright-line test in three to four years;”—so have a punt and see whether or not it is working—“Option 4: Introduce a withholding tax on sales of residential property made within the two-year bright-line [test].” In amongst all of those options what options were not canvassed as a result of the constraints that the IRD has articulated are as a result of the significant systems changes it is experiencing as part of its Business Transformation programme? Was there anything that was not considered because of those constraints? I am interested to know. There may not have been—we may have canvassed everything in the submission process that we are now debating in Part 2 but I doubt that would be the case because we have heard of instances before where the IRD has expressed concerns over those limitations and its ability to alter the rules under which it operates.But I do want to come to the question of compliance because the reason that we have fallen on the residential withholding tax option is that obviously the IRD has determined that other forms of compliance would be less effective. As I mentioned previously option 1 is to rely on what is existing—so the status quo—and having more guidance around obligations was dismissed. Why was that option dismissed?Well the reason that the withholding tax option in Part 2 was chosen is set out in the regulatory impact statement which says: “7. New Zealand taxes its tax residents on their worldwide income. New Zealand also taxes foreign investors on income that is sourced in New Zealand. When a foreign investor has a branch or controls a subsidiary in New Zealand tax can be imposed on the New Zealand-sourced income of that branch or subsidiary in the same way as it would be on New Zealanders. However when the foreign investor does not have a New Zealand presence it is more difficult for New Zealand to collect tax from them. 8. New Zealand’s tax system operates on the principle of voluntary compliance which relies on taxpayers understanding their tax obligations and how the wider tax system works.”—keeping in mind that we do operate somewhat of a “don’t ask don’t tell” operation here as well—“9. Foreign investors may not always have the same level of understanding as taxpayers based in New Zealand and they do not have the same level of connection to New Zealand that would otherwise create an intrinsic incentive to voluntarily comply with their New Zealand tax obligations.”I think that last statement is quite interesting—“they do not have the same level of connection to New Zealand that would otherwise create an intrinsic incentive to voluntarily comply with the New Zealand tax obligations.” I think you could apply the same rule of thumb generally where one who might use New Zealand for instance as a tax haven might also not have concern for perceptions and the reputational risk for New Zealand around their use of a New Zealand- based tax haven as well.I guess that what the IRD is pointing out there is that unless you have a domestic connection to New Zealand your sense of obligation to us—be it in your literal tax obligations or even in the reputational risk you may pose by the way that you conduct your affairs—is not top of mind.It is a reason perhaps for us to be somewhat more concerned about compliance by those who should be covered not only by the brightline test but also probably more broadly within our tax system. I hope I am not being too subtle in drawing that comparison there.I think it is a point well made in the regulatory impact statement. Actually it is canvassed in option 2 of the regulatory impact statement as well. Option 2 of course was simply maintaining the status quo but providing more information and guidance on tax obligations in relation to residential property. I am glad that option 2 was not opted for. From my perspective the idea that with a bit of a pamphlet we could assume that tax obligations would be fulfilled would I think be a bit naive. In fact that is expanded on in paragraph 42 of the regulatory impact statement. It says that “the success of this option is dependent on another major assumption—that non-compliance with the proposed bright-line test will arise from a lack of information and knowledge about the tax implications of sales of residential land.” Saying “I’m sorry I didn’t pay. I just didn’t know.”—if only that were a basis for not complying with one’s obligations I am sure many will think.It goes on to say “There will be instances where an improved understanding of the tax rules and one’s tax obligations in relation to a particular transaction may lead to higher levels of compliance.”—if only that were the case—“However there will be taxpayers who regardless of their level of knowledge will not voluntarily comply with their tax obligations.” Sadly the IRD is articulating here what many of us will know which is that just because people know about their tax obligations it will not mean that they will merrily skip to their IRD office in order to fulfil them forthwith.So there are a lot of interesting issues playing out in this paper where the IRD is freely acknowledging that knowledge is not enough and that connection to a country is not enough; in fact if anything it probably undermines our system. It has built in assumptions in this case that non-compliance is often deliberate. I am glad that the officials have done that because it is a realistic take on people’s approach to taxation in New Zealand let alone the approach of those who do not have a connection to New Zealand. So although I think that probably the option that officials opted for was the right one we would do well to reflect on the rationale for why it is that we opted for something more proactive. But I would like to highlight again that I would be very interested in having the Minister expand on whether other options were canvassed.BARBARA KURIGER (National—Taranaki - King Country): I move That the question be now put.STUART NASH (Labour—Napier): I would like to just finish elaborating on the example that I gave earlier. There is a clause in the bill that basically says that first and foremost resident withholding tax must be paid after the New Zealand mortgage is paid off. However the commentary on the bill says: “If this would result in sufficient funds being available to pay [residential land withholding tax] the amount of [residential land withholding tax] payable will be restricted to the difference between the current purchase price and the amount required to discharge the … mortgage.” In the Finance and Expenditure Committee the thing that we talked about was how that sort of situation would arise.Let me give you an example: an investor buys a property for $1 million sells it 18 months later for $1.5 million—not unheard of in any way shape or form—so they have made a profit of $500000. If it is a company there is a $140000 tax liability there. But the interesting thing about this is for this clause to come into play there would have to be a New Zealand mortgage above $1.36 million. I am not too sure how that could arise unless there was some sort of negative gearing going on. Negative gearing in the property market—it could never happen could it? I remember trying to buy a house in Auckland at one point in time and I thought that I had put in a very good price. The house had a valuation of about $700000—it was a long time ago—and I was told that the guy had a $1.5 million mortgage against it. It was a well-known property developer who had just geared this up. So we just have to be a little bit careful about the games that people play. I suppose as Jacinda Ardern has just outlined there are those who will seek to game the system no matter what.I think it is probably worth looking at the definition of “residential land” in New Zealand because we probably all have a reasonable person’s definition of “residential land” but it is slightly more complicated than that. In the commentary on the bill the definition of “residential land” is “land that has a dwelling on it;”—well that makes sense; I suppose that is what we would automatically assume—but it is also “land for which the owner has an arrangement that relates to erecting a dwelling;”.For instance an investor has bought a bare piece of land upon which there are plans and consents to put a dwelling; the dwelling perhaps does not go up and the investor sells that bare piece of land within 18 months—well that is still classed as residential land. The definition in the commentary on the bill continues: “bare land that may be used for erecting a dwelling under the rules and the relevant operative district plan;”—so again this relates to a circumstance where perhaps an overseas investor has bought a chunk of land upon which they were planning to put six units. If that does not go ahead and the land is sold—the units are not erected—it is still classed as residential land and an investor still has to pay residential land withholding tax for that. The other thing is that residential land “does not include land that is farm land or used predominantly as business premises.” Again we saw clarification around what business premises predominantly are and I think we came to an elegant solution but by and large those other three definitions will preclude farmland and commercial property.One thing I note in the commentary is that “this reference to income under the bright-line test means that there will not need to be a land title transfer”. Ordinarily with the sale and purchase of a house there is a transfer and that triggers the sale but “there will only need to be a residential land purchase amount.” There is a little bit of nuance there but it is important I suppose that we understand this—and certainly conveyancers are undertaking this if in fact they believe that it does not kick in because there has not been a land transfer—it still triggers. “This means that off-the-plan sales for example will still be subject to [residential land withholding tax] if other conditions are also met.”The other thing and it has been brought up before is that the brightline test does contain an exception if the residential land that is being disposed of is the vendor’s main home. There is of course no main home exemption in this bill because we are talking about only overseas investors. By any definition an overseas investor buying a New Zealand property could not claim that that is their main home because they do not live in it. It makes sense.The other thing in the commentary is that “there will be an exemption or rollover relief from [residential land withholding tax] for inherited property and for transfers of relationship property … under the brightline test.” Again keep in mind that we are talking about only a 2-year window here—so I suppose that if someone dies within 2 years of buying a property and their estate or the beneficiaries of their will inherit that property there is no liability triggered. However there is still the 2-year—The CHAIRPERSON (Hon Trevor Mallard): The member has had four calls. He does not get any more.PHIL TWYFORD (Labour—Te Atatū): You have had quite enough Mr Nash. I want to come back to some of the comments that were made by Jami-Lee Ross earlier in the debate when he talked about the rationale for this bill and the argument that we have touched on today about whether in fact the associated legislation—the brightline test and the requirement for non-resident foreign buyers of residential property to register with the Inland Revenue Department which Part 2 is enabling—has had any effect or not.We have data right now actually—a right-up-to-the-minute release by the Real Estate Institute of New Zealand—that shows that in fact in the last month the median house price in Auckland which is the market most affected by the problems that this bill is purportedly trying to address has gone up by $70000. That is 1½ times the median income and I think it really undermines any kind of optimism that we have been hearing from members on the Government benches that the brightline test the residential land withholding tax and the requirement for non-resident foreign buyers to register with the Inland Revenue Department has had any kind of sustained impact on the speculative pressures that have been overheating the Auckland housing market.Jami-Lee Ross mounted a great spirited defence of the intention test as if this was enough and as if this was working but he is completely stymied by the fact that the Government introduced this legislation and these measures presumably to tackle some kind of real problem—or was it an imagined problem? It was not clear from what Jami-Lee Ross was saying. The residential land withholding tax is in place there in Part 2 of this bill to ensure that the brightline test applies to non-resident foreign buyers. As Jacinda Ardern pointed out the Inland Revenue Department in its advice on this bill raised the point that we do not have the data—that we do not know what the scale of non-resident foreign buyers in the Auckland market is.When the policy announcement was made that led to this bill and others I think it was the Hon Steven Joyce who said that the Government would release the data that it would be gathering on non-resident foreign buyers by way of the requirement that they open a bank account and register with the Inland Revenue Department and that it would make this data available by 16 April. We are getting very near to 16 April and yet there has been nary a whimper from the Government on the question of this data and what it shows.But interestingly Shamubeel Eaqub the independent economist said a couple of weeks ago in the media that—and it appeared that he has some kind of access to the data that has been gathered—330 properties per month on average have been bought by non-resident foreign buyers over the last 6 months. That is 330 properties per month since the law came into force requiring foreign buyers to register with the Inland Revenue Department. That volume of sales—330 on average per month over 6 months—would account for 5 percent of all house sales across New Zealand which is significant I think. But as Shamubeel Eaqub said at the time it is probably more likely to be 18 percent of all sales in the Auckland market because the presence of non-resident foreign buyers has been so heavily concentrated in Auckland. If it is anything like 18 percent of sales in the Auckland market it is no wonder that the Government has not made any kind of move so far to release that data and I would guess that it will not.Colleen Milne of the Real Estate Institute also said recently that these new tax rules seem to be having limited impact and she predicted that the decline in sales that has been seen—I think over November December and January when there was no doubt that there had been a sort of softening in the Auckland market—would be transitory.ALASTAIR SCOTT (National—Wairarapa): I move That the question be now put.GRANT ROBERTSON (Labour—Wellington Central): I think my colleague Phil Twyford was making some very good points there. The Finance and Expenditure Committee was told when considering the bill that the quantum that the Inland Revenue Department thought it would be able to gain from the brightline test had not changed from what we had initially been told which was the whopping sum of $5 million a year. It also concluded in its assessment to us that it was going to cost about $2 million to set the whole thing up so things are not looking good in terms of the scale of income from such a weak instrument as this.I want to return to the definitional issues around “offshore person”—or in fact an offshore residential land withholding tax person or “offshore RLWT person”—as is now included in clause 45(8). There are two reasons why I want to do that. The first of those is that I am not sure that everybody listening to this debate will fully understand the definition and who is captured by this. Then once we have clarified what that definition is I want to raise a couple of questions for the Minister in the chair the Hon Michael Woodhouse around who is considered a person in terms of a trust.The definition in clause 45(8) would tell you that for the purposes of this bill a residential land withholding tax offshore person is a person who “is a New Zealand citizen who is outside New Zealand and they have not been in New Zealand within the last 3 years:” or “the person holds a residence class visa … and they are outside New Zealand and have not been in New Zealand within the last 12 months”. That is actually a very important point in the context of who is considered by the Inland Revenue Department at any given moment not to be a New Zealander for tax purposes—to be an “offshore person” for tax purposes. The idea that those who hold residence visas—and there are many New Zealanders who have lived here for a very long time but do not have citizenship—you have to have not been here for only 12 months. It is actually a very tight provision. I wonder whether the Minister wants to let us know whether that reflects other parts of tax law in terms of that. Then you have 3 years for a citizen and the third class is a person who is obviously not a New Zealand citizen and does not have a residence class visa.So we have set up there who the offshore person is—and as I say I think a lot of New Zealanders would perhaps be surprised to learn that if they have a residence class visa but they have been away for 12 months they are no longer considered to be this and they then fall under the provisions within the bill here. But then if we go further into the definition we see that “a person that is a trustee of a trust if—(i) more than 25% of the trustees of the trust are offshore RLWT persons:”—and then—“(ii) more than 25% of the people that have the power to appoint or remove a trustee of the trust or to amend the trust deed are offshore RLWT persons:”.Here we get into the inconsistencies that are now emerging in our income tax law about exactly what is considered here to be an offshore trust. When we have got under the foreign trust rules that you can establish yourself and claim to be an offshore person or be an offshore person and simply have a trustee who is set up to run the trust for you as a means of avoiding tax—Mr Bennett is poised because he wants to get up and talk about people who avoid tax—that is the danger in having a range of definitions about who an offshore person is across different parts of our legislation and that is now effectively created here in the definition in clause 45(8).But then we move further down in clause 45(8) and we get into what I think is perhaps an even murkier area and one that the Minister in the chair might want to take a call on. We see that we are talking now about people who are offshore residential land withholding tax or RLWT persons. The select committee has inserted the words “the person is a partner in a limited partnership or an owner of an effective look-through interest in a look-through company (LTC) and more than 25% of the partnership’s partnership shares”are effectively held by offshore residential land withholding tax persons.The rules around look-through companies were changed in this House in 2011. They were changed by the Government in such a way that those look-through companies could be zero-rated for tax purposes. That is the heart of the concern that a lot of New Zealanders now have about the massive growth in foreign trusts because those look-through companies sitting alongside foreign trusts are part of the combo pack that Mossack Fonseca has been selling to its investors.David Bennett: He’s not even on the bill.GRANT ROBERTSON: It is the great combo pack where you can get away without paying any tax whatsoever and one of those parts Mr Bennett I say for your benefit is a look-through company that is now zero-rated for tax purposes. In this clause if more than 25 percent of the people who have an interest in one of those look-through companies is an offshore person for residential land withholding tax purposes then that look-through company is considered to be a person under this bill. That is setting up yet another situation in which look-through companies could potentially be exploited.Given what has been happening in terms of the release of the Panama Papers and given what has been happening here I think the Minister in the chair might want to get up and tell us whether he is confident that we have the arrangements around look-through companies and that he is confident in terms of putting them within this definition of who an offshore residential land withholding tax person is.We did not discuss I have to say in the committee whether or not that was a sufficiently tight definition or whether there are sufficient safeguards when it comes to look-through companies but I do know that that change has been critical in the growth of foreign trusts that are being used for tax evasion purposes in New Zealand. There is absolutely no doubt because when you put foreign trusts alongside look-through companies which can be zero-rated in New Zealand for tax purposes that we—I am sure Mr Chair the frown on your face might indicate that there is a point at which I am going a little beyond the bill here but I think it is a relevant consideration because the rules around look-through companies are now the subject of international attention and here we are making a change to how they will be used in terms of defining offshore persons for residential land withholding tax. I think it is a legitimate question to be asked. Clearly the fact that property is owned in New Zealand by one of these look-through companies may mean that that is less of an issue but that is something that the Minister might choose to have something to say about in a moment.As I still have the call the other point that I will make at the moment is around the question of the information requirements. This is clauses 44 and 45 again. It is important to note that when we considered these matters in the select committee there was a belief that the information requirements for New Zealand taxpayers were clearly stated and understood but not necessarily by those who were offshore persons. A series of changes has now been made to ensure that we do have that level of information.Again this is an issue of consistency for the Government—consistency around whether or not information requirements across the Income Tax Act and the Tax Administration Act for offshore persons are consistent. It is quite clear to me that because the Government has relooked at these particular provisions around residential land withholding tax it has created a series of information requirements in terms of what information must be provided to the Commissioner of Inland Revenue. There is now new section 54C in the Tax Administration Act inserted by clause 72 and subsection (4) will require vendors to provide at the very least their full name address and IRD number and to state whether or not they are an offshore person. If they are an offshore person the vendor must also state whether they are associated with the purchaser and whether the disposal of the residential land is or would be considered income under the brightline test—ignoring the brightline test’s home exemption.There again you have now a series of things that an offshore person must do under this piece of legislation that we are passing right now tonight. But those offshore persons have a completely different set of requirements and disclosures under other parts of our tax law particularly those around foreign trusts. So once again although this might be the right thing to do to enable the implementation of this residential land withholding tax it sets up in my mind a series of inconsistencies in the law about disclosure and information that I think New Zealanders would want to see ironed out. As other colleagues have stated the heart of our tax system is that it is fair that it is easy and simple to understand and that people are treated fairly. I think we run the risk with clauses like this that we highlight a particular type of offshore person—DAVID BENNETT (National—Hamilton East): I move That the question be now put.A party vote was called for on the question That the question be now put.Ayes 63New Zealand National 59; Māori Party 2; ACT New Zealand 1; United Future 1.Noes 58New Zealand Labour 32; Green Party 14; New Zealand First 12.Motion agreed to.A party vote was called for on the question That Part 2 be agreed to.Ayes 109New Zealand National 59; New Zealand Labour 32; Green Party 14; Māori Party 2; ACT New Zealand 1; United Future 1.Noes 12New Zealand First 12.Part 2 agreed to.Part 3 Amendments to Goods and Services Tax Act 1985STUART NASH (Labour—Napier): This is the part that there was quite a bit debate on in the Finance and Expenditure Committee. We just do not think it went far enough at all. The principal Act the Goods and Services Tax Act applies to all consumption that occurs in New Zealand. The reason for that is that it is fair it is efficient it is simple it is easy to understand and there are no complications. But the thing about this is that when GST was introduced in 1986 I do not think anyone had ever heard of the internet let alone the online purchasing of goods and services.GST was set at around 10 percent it then went up to 12.5 percent and now it sits at around 15 percent after this Government said that it would not increase GST but it did. But that is the way it is I suppose. The concern we have is that this is about putting a goods and services tax on intangibles. This is online services—cross-border supplies of remote services. So it is targeting a certain area. It was colloquially called the net services tax. If a company generates New Zealand receipts exceeding $60000 over a 12-month period then it has to pay GST. That is consistent with a New Zealand company.But the thing with this bill is we think it should have gone a whole lot further. What this is in effect doing is providing a 15 percent competitive advantage to all goods purchased offshore and not just electronic goods. I mean it is good that we are levelling the playing field in terms of electronic goods and services. We agree with that and that is why we are supporting this part of the bill. But here was an opportunity to go even further. I come from a provincial city where a lot of our retailers are struggling at the moment. Part of that is because there is not that much money in the economy because things are a bit rough in provincial New Zealand but also part of that is due to the massive explosion in online shopping.You can go online these days and buy a pair of jeans anywhere in the world and they can be delivered within a week and do you know what? You get an automatic 15 percent discount on those because there is no GST and yet those retailers down on Main Street New Zealand have still got to pay GST. We think that this part of the bill should have gone a hell of a lot further than it has. It is a start. It is a start—we recognise that.There has always been this argument that “Oh well. It costs more money to police the compliance than what you would collect in revenue.” I do not agree with that in this case. Sure we are only doing this on online goods so it is easier. It does not place an impost on the Customs Service to handle physical goods in any way shape or form. But what it is in effect doing is burying our heads in the sand and saying that this is too difficult or we don’t really care about middle New Zealanders who own the retail shops who are competing with these offshore multinationals.It was a classic case. Part 3 of the bill provided the Government with the perfect opportunity to actually level the playing field and that is all—not tilt the playing field in terms of New Zealand suppliers or retailers but just level the playing field for New Zealand retailers. Instead what I believe it does is it actually tilts the playing field towards the large multinationals as opposed to the good hard-working middle New Zealand families who own the retail stores and who are missing out on these things.We hear time and time again how people have bought a fantastic book on Amazon or they have bought something from Abercrombie and Fitch or any nature of goods over the internet. It is becoming part and parcel of the way we shop. One of the reasons why New Zealanders have embraced this form of retail therapy is that it is cheaper—it is cheaper. What we are talking about here is not tangible goods and services that cannot be bought in New Zealand. If that were the case you could sort of understand that. You know—“I can’t buy this down here. The only place I can buy it is overseas. Therefore I’ve got to.” Well that sort of makes sense. But when the same goods and services that you can buy downtown you can also buy on the internet for a 15 percent discount first and foremost because there is no GST then that is plain wrong.The Inland Revenue Department admits as does everyone—and I suppose this is a common theme throughout the speeches today—that a tax system has got to be fair it has got to be efficient and it is got to be simple. This part of the bill misses a great opportunity to address a real problem we have got in retail New Zealand—that is GST should be charged on online tangibles.GRANT ROBERTSON (Labour—Wellington Central): I want to talk first about the good bits of Part 3 of the Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill and then about the bits that have not been dealt with. The thing that is good is that we are taking a step forward here in understanding the new way that commerce is done. You know it has taken us a little while as a Parliament to catch up with that but the truth is that there will be very few parliamentarians and very few people listening to or watching the debate tonight who have not bought something online in the last year or so. It is now a very core part of how we do shopping. Everything from booking holidays to downloading your favourite tunes on to your iPod to use when you go out for your walks—all of those things are now part and parcel of daily life and so it is important that if we are to create a fair tax system that we begin to look at that.What this piece of legislation does as my colleague Stuart Nash has said is deal with what are called remote services or intangibles which are essentially e-books music videos and software that we purchase from offshore websites. So it is an important thing and there were certainly strong submissions made to the Finance and Expenditure Committee from people who do provide in that area. The easy one is to think about the difference between Netflix and Lightbox with Netflix being the international offshore provider of streaming television services and Lightbox being the one provided ultimately by Spark a New Zealand - based company. Those two companies will now be treated fairly under this piece of law and that is good for GST purposes. That is an important step forward for us and one that the Labour Party does strongly support.Where our concern arises is that the opportunity has been missed to then take that to the next logical step and that is around tangible goods. The reason why it should have been taken now is that we are now setting up a very very unfair situation. If I want to go out and buy a birthday present and buy a book and I go on Amazon—I personally do not own an e-reader but I prefer hard-copy books; I prefer to hold on to books and read them—and order online a hard-copy book and it comes into New Zealand for me that is not going to create a GST obligation. But if I download it as an e-book to an e-reader—if I did have one—then it would. That is the unfairness that retailers in particular across New Zealand have rightly come to the committee on and said: “Good on you for taking one step forward.” But if we really wanted to support New Zealand businesses and if we really wanted to support those main street retailers as Stuart Nash called them then we would have taken that extra step.The arguments that were raised when we raised this in the select committee were largely around compliance and around the cost of that at the border. But I actually think the wherewithal is there for us to step beyond that if we are serious about having a fair tax system. It was disappointing to us that some of the very very good submissions that came through to the committee particularly from the retailers were ignored by the Government. It is this part of the bill where we feel that the missed opportunity is the greatest because this was the chance to create that truly fair base to our tax system.There are rules that have been put in place. My colleague Stuart Nash mentioned before that the supplier of remote services to New Zealand consumers has to exceed $60000 worth of services in a 12-month period. That will capture those larger providers but the truth is that in terms of the ones that could really be effective for New Zealand we are not going to be reaching those because the system does not go beyond the intangibles. The suppliers of remote services by non-resident suppliers to New Zealand will not be subject to GST unless the supplier and recipient agree otherwise in which case the supplier will be zero rated. The supplier will then be able to claim back any New Zealand GST costs in making zero-rated supplies.Another change that has been made is that offshore suppliers will be required to determine whether a customer is a New Zealand resident on the basis of two non-conflicting pieces of commercially available evidence of residence. So we have to prove here that someone actually is in New Zealand for GST purposes. Those sorts of rules are useful.The Commissioner of Inland Revenue has got some discretion when working out whether someone is genuinely in New Zealand. I do know from some of the work that was put in front of us at the select committee and from the reading that I have done that those suppliers at the other end of the chain—the Amazons the Apples and so on—feel that sometimes with some jurisdictions it is quite hard to establish exactly where somebody is particularly now around the way in which telephone numbers can transfer across borders. So the idea that a billing address and a country code of a mobile phone SIM card are required to be able to establish whether or not somebody is actually resident in New Zealand is important. It is less of a problem in New Zealand I suspect. I do not think New Zealand phone numbers are used in quite the way that some other phone numbers are but that is an important aspect of deciding whether or not somebody falls under the provisions here.If a GST-registered business is inadvertently charged GST it will have to seek a refund from the non-resident supplier. However if the payment for the supply is $1000 or less the non-resident supplier will have the option to provide a tax invoice to the purchaser to allow them to claim a reduction rather than to refund the GST charged. This was raised in the committee by some submitters as effectively being a base threshold for involvement within this regime and again we were happy to accept that as providing the appropriate level of compliance burden.As I said the Commissioner of Inland Revenue does have the discretion to require a person to register and pay GST in cases where the person provides false or misleading information about themselves in order to avoid GST if the GST amount involved is substantial or the behaviour is repeated. There have been concerns again about where people appear to have a company that is based in New Zealand but actually they do not. This has not yet become a major issue but it could if somebody was genuinely working very very hard to avoid their GST obligations. We need to find a way and the committee felt that the Commissioner of Inland Revenue deserved a level of discretion to be able to deal with that.There are a series of things in here that are useful and that will make the system work for tangibles but I just return to the point that that is only half the story—in fact it is less than half the story because it is the movement of tangible goods that has the biggest impact on New Zealand businesses. There are good solid retailers across New Zealand that are struggling to compete with people because they are not being treated the same way. To me that is a fairly basic principle of what our job in Parliament is: to set the rules so that there is as level a playing field as there possibly can be.The Government is right in bringing forward a bill that makes that playing field level for those who supply intangible goods—digital goods. It is right to do that. But it has completely let down those who work hard every single day in the retail sector of New Zealand by not doing the same thing for tangible assets. It is not as hard as the Government is making out. This can be done with the appropriate thresholds. We always accept that there will be a threshold below which you do not go because compliance costs are too difficult but at the appropriate thresholds we could be supporting New Zealand small businesses today through having a piece of legislation that gives them the same GST treatment as their counterparts overseas. Government members might want to stand up take a call and tell us why they have not done that because in the absence of someone explaining it we have a piece of legislation here that is letting down a group of New Zealanders.FLETCHER TABUTEAU (NZ First): It is a pleasure to rise actually in support of this part of the Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill. As I have said before there are good parts to this bill and this is one of them. Part 3 “Amendments to Goods and Services Tax Act 1985”—we absolutely support its intent but as noted by several speakers on this side of the Chamber it does not go far enough.Why do we say that? New Zealand First and I acknowledge that peers all across the Committee will have been consulting with businesses. We know that businesses have been waitingfor a long time—probably 9 years to be fair—for this Government to actually act to level the playing field to ensure that small to medium sized enterprises in New Zealand in particular are able to compete with big business from overseas. That is essentially the summation of the competition game we are talking about here. We are talking about small to medium sized enterprises that are suffering based on the fact that they must comply with their GST obligations whilst those predominantly large overseas international corporates sell their goods into New Zealand and for the last 9 years—as a random selection of time—those corporates have not been required to pay their GST obligations.The submissions to the Finance and Expenditure Committee were very clear and consistent. Each and every submitter who spoke on this part of the legislation said that “It was past the time to do something. We are grateful for what you have started to do for small to medium sized businesses in New Zealand.”So New Zealand First could not agree more with what I would class as kind of like the first step in part of a solution because as has been noted before—and I cannot say it emphatically enough—this is not the whole solution.It does not go far enough andthe arguments as to why we should not implement GST on all goods and services from merchandise traders and tangible goods as well as these intangible or—what is it called—“cross-border ‘remote services’ provided to New Zealand-resident consumers.” are half-hearted.A classic example is when I go and download a CD from some online music store. [Interruption] Download an album—thank you everyone. There we go. This is remote services—Kris Faafoi: I thought you were old school.FLETCHER TABUTEAU: —I am old school—to New Zealand residents and we are obliged to pay the GST. But if you buy the CD and get it mailed to you for some reason you are not obliged to pay the GST on it. It is nonsensical. It makes no sense and so—David Bennett: Get a gold card and you won’t have to pay anything.FLETCHER TABUTEAU: Good idea—get a SuperGold card and you might get a discount on it. Thank you Mr Bennett. We need to apply GST to all goods and/or services—intangible or tangible merchandise—that come into the country.The Government for some reason has put up an argument around insufficient funding for the Customs Service or it not being geared up adequately to address the issue but we were told by Retail New Zealand for example—it was only one group that put the numbers in front of us—that the top 20 online providers in terms of online stalls around the world offshore international corporates account for 86 percent of New Zealand activity in terms of purchasing online. What we were further told is that those companies are required to comply with GST or VAT obligations in many diverse parts of the world so they have point-of-sale software systems geared up ready to go to implement GST on intangible and tangible goods. They literally have to click a button and that practice of applying GST to the sale of goods to be shipped to New Zealand is enacted. At the point of purchase a New Zealander will pay the GST component. The offshore entity will account for that in its accounts and make its GST obligations paid because all of them as all in the room will know are above that $60000 threshold. So companies are there they are ready to do it and the arguments against it are not sound.ALASTAIR SCOTT (National—Wairarapa): This is a short call on Part 3 of this bill which refers to GST. GST is a very good way of collecting tax for the Government because it is broad-based there are no exemptions and it is a disincentive to consume. It taxes those who consume for goods and services so it encourages in other words people to save and invest which is of course why GST was increased from 12.5 percent to 15 percent at the time. Of course it enables the Government to reduce direct taxes which is essential if you want people to work harder earn more and become more productive.So I just wonder what might happen once we see the universal benefit that is proposed by the Opposition. I wonder where GST might go to if we all got paid $11000 on the day.I would like to come to the bill which talks about the goods and services tax relating to cross-border services and intangibles with the refinement in the Finance and Expenditure Committee to make it a little bit easier in regard to people who provide services on a collective basis. I am talking about insurance where you might have a group of people in a country or around the world supplying insurance to a base of people in New Zealand. Prior to the select committee process every one of those suppliers would have had to register for GST and collect and pay GST. It has been a positive improvement in the select committee where those offshore people can use an agent and be represented by one entity so enabling the tax to be collected by one agent and returned to the New Zealand Government. That is a very positive improvement.The other positive improvement through the select committee that I would like to mention is around the choice of zero rating for those offshore companies that are dealing with New Zealand companies that are GST-registered obviously in New Zealand. That offshore company can automatically say “We are to be zero rated and therefore there’s no need to collect any tax.” because there is no tax on a GST-registered business in New Zealand. We are aiming only to collect tax that would otherwise be paid by consumers. This is very much focused on the New Zealand consumer who purchases these intangible goods and services from offshore suppliers.The Opposition talked about some discussion around tangible goods. It is not true that tangible goods are exempt. There is GST taxed and collected at the border. I think the Opposition is referring to the threshold that applies to tangible goods so there is discussion. Of course if you had a zero threshold or a very low threshold that would be a loss-making venture for the Government because of the transaction costs that are involved in that work.Of course there is work to be done on the tangibles but that is not part of this bill. This bill focuses on the intangible services and that is only going to be growing as we purchase more and more Netflix online films and data. More and more data is going to be travelling this way and this is a very simple way of collecting what is quite rightly GST that is paid by the New Zealand consumer and is currently not being collected. As a result of this bill it will be collected. This is a positive approach to GST legislation. Thank you.KRIS FAAFOI (Labour—Mana): I rise to take a call on Part 3 of this piece of legislation the Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill. Before I look towards a specific clause I do want to just point out one thing that the previous speaker Alastair Scott said. I am going to have to look back at some of the media reports at the time when the National Government increased GST from 12.5 percent to 15 percent because I did not see it pushing very hard that GST had to go up to incentivise savings. I do not remember that being one of the John Key lines—“We need to increase GST so more Kiwis will save.” I will come back to the Committee and see how that Google search goes for how many times the Prime Minister or the Minister of Finance said that GST had to go up so Kiwis could save more. “We do not want people to spend so much”—God forbid we go out there and buy food—“so GST has to go up from 12.5 to 15 percent.” That was what the member who just resumed his seat said.The CHAIRPERSON (Lindsay Tisch): Yes well come back to the bill now.KRIS FAAFOI: I do want to go to clause 48 of the bill—it is something that no one else has raised—and subclause (1) which inserts a new section 5(10B) in the Goods and Services Tax Act. I think the Minister in the chair may take some interest in this. For the benefit of the Committee that says: “For the purposes of this Act when a person who is resident in New Zealand pays an amount of money to participate in gambling or in a prize competition through a supply of remote services”—which have already been described in this debate—“that are physically performed outside New Zealand the payment is treated as a payment for a supply of services by the person who conducts the gambling or prize competition as applicable.”In English that means that if someone resident in New Zealand were to go and gamble on a race on an online betting site based in Australia or in the UK currently my understanding is there is no GST charged on that bet. If they were to use their phone and place a similar bet on a race here in New Zealand they are charged GST. So there is a disparity between the experience with the New Zealand TAB which we all know as a place to go and put a bet on and overseas betting websites that take bets from New Zealand.There was a submission from the New Zealand Racing Board—and I think this is a good part of the legislation—where it talked about the imbalance there and some revenue that the Racing Board could be missing out on. If I can turn to the submission from the Racing Board because I think it is a good one point 4.1 said that the Racing Board estimated that New Zealanders are betting $58 million annually—and that is 15 percent of the total betting expenditure by New Zealand—on overseas websites. It went on to say that “The New Zealand community receives no benefit from this activity”—because all that money goes overseas there is no GST so none of it comes back to New Zealand—“but does incur any costs associated with problem gambling.” It went on to say that it has calculated that the loss of GST revenue on that $58 million could be close to $8 million. So the forgone revenue from not charging GST on bets placed on overseas gambling websites could be close to $8 million which the Government would miss out on.The Racing Board believes that if that money went back to New Zealand then not only would there be obviously that $8 million for the Government in revenue but also sports—the likes of rugby rugby league basketball and cricket which do allow sports betting on their events—would get an additional $5 million of that $58 million because the Racing Board pays them a fee on those events. The racing industry itself would get close to $40 million more if that revenue was staying here in New Zealand which I think within this piece of legislation is a good thing. It is my understanding that GST will now be charged on betting on overseas websites. The Racing Board went on to say later on in its submission that GST was a factor in this differential in competitiveness and that “In this respect NZRB is no different to any other retailer in suffering a competitive disadvantage in being required to charge GST while offshore providers do not.”I think that this is a good addition and a good change to the piece of legislation because it does give that New Zealand entity—the TAB or the New Zealand Racing Board—the ability to take away that competitive disadvantage that it is experiencing with the leakage of the betting money going overseas. It is not just an issue around GST. I think they are now predicting that it is somewhere around $500 million that we could lose over the next 5 or 6 years from the sports betting industry itself—and a big chunk of that obviously is in the racing industry—if we do not attend to the issue of leakage from New Zealanders betting on overseas websites.Can I turn now to the other issue around retail in general that has been raised by other members on this side of the Chamber. I am a bit of a laggard. I like to see and feel things when I buy them from the shop. I do not buy a lot online unlike Fletcher Tabuteau who I believe downloads his CDs online. I do not know how that happens—maybe he has got one of those 3D printers and that is how he does it. I do not do a lot of online shopping. I like to support local business and make sure that I can see things and that they fit. Or books—like my colleague Grant Robertson here I like to hold the book. I do not like to have a tablet or something to read the book.I think that this piece of legislation that we see here today is a start but it misses a trick because it has not gone far enough. I think Retail New Zealand in its submission made that point strongly in that yes we have made a start with these intangible goods or intangible services—the likes of Netflix. I think that the likes of Spark will be happy because its alternative Lightbox was charging GST and again like the TAB example—that puts it at a competitive disadvantage to the likes of Netflix not only with its content—which has arguably a bigger range so there is a competitive advantage there but also with its pricing. It is having to price with a GST component worked into its pricing which was not so for the likes of Netflix.My mother always was a good gardener. She said that if you start a job do it properly. That is why she never let me do the garden because I would never do it properly. I think that we have got another example of this here in this piece of legislation. It is a good start but we have not gone far enough to make sure that we are looking seriously at the issue around the tangible goods that could be picked up from online purchasing.I pick up on the point that many other people on this side of the Chamber have made which is that online purchasing has worked to the detriment of retail—certainly in my area of Mana where I think we have seen some retailers really struggling on the street now because people are looking offshore because the range and the price may be better. Retailers may have to deal with that and look at how they compete product to product but when you are looking at a 15 percent price differential that is hard to go up against. I think that is probably why you will see an increase in the number of people like me—I might have to start looking at shopping online as a more serious option.But I think that we need to cut those small to medium retailers a break as was submitted by Retail New Zealand and say that if we are going to start this process let us do it properly and not just take the low-hanging fruit of the intangible services which is contained in this piece of legislation. Let us do it properly and look at how we deal with this issue to make sure that small businesses that do want to set up in our cities and in our towns do not have a massive disadvantage there. I would like to maybe ask a question of the Minister in the chair Nikki Kaye about what work has been done and how much priority this Government will put on that continuing work—which I think is the hard stuff instead of just concentrating on the easy stuff here which is the intangibles—to make life better or easier for those retailers in our small towns and in our cities.STUART NASH (Labour—Napier): I just want to build a little bit on what Mr Faafoi said in his first contribution. It is generally recognised that GST should apply evenly across all consumption. GST is what they call basically a tax on domestic consumption. There is a destination principle which means that you tax the good or the service in the country within which it is consumed. It makes sense; we all understand that. That is why this tax has been brought in and this is why we do have such a problem with the non-taxing of tangibles when we think we could have gone a lot further.One of the interesting things that the Inland Revenue Department (IRD) commented on—it said: “The proposals could impact on the level of competition by discouraging offshore suppliers from entering or continuing to supply to the New Zealand market. However this impact may depend on the extent to which compliance costs are imposed on offshore suppliers and the extent to which consumers alter their purchasing behaviour in response to the change.”I do not know whether that has been put in as an advantage or as a disadvantage. I would say that if this sort of law encourages New Zealanders to actually purchase domestic intangibles which is what we are taxing here then surely that is not necessarily a bad thing. What we absolutely want to do I would have thought is to encourage New Zealanders to purchase domestically. In fact as mentioned one of the principles about this is fairness and equity. The IRD talks about fairness and equity a lot.One of the things that came up a lot in the Finance and Expenditure Committee was the effectiveness and fairness of this option. We talked long and hard about this. One of the big questions I suppose is: would offshore companies actually pay this? How could we be sure that a Netflix or an Apple or any other large supplier—officials reckon it is about a hundred companies—would actually comply? The interesting thing is that when we looked at overseas examples we were told that particularly large international suppliers account for the majority of these cross-border services. I think that if we think of Apple and downloading iTunes etc. that is probably right.We were told they have a willingness to comply and we were told that for these suppliers failure to comply with their obligations would pose a significant risk to their reputation which I suppose could be right. But it is an interesting comment when you consider that the Googles of this world—and Facebook and Apple—do not pay any tax anyway. They do not seem to care that their reputation may be sullied because they do not pay tax in a country because they live on the strength of their brand. They have all got massively valuable brands and it is why they can get away with paying no tax.Where this sort of fell over was Starbucks in the UK when it was actually shamed into voluntarily paying more tax because there was a consumer boycott of its stores. That is the power I suppose of consumer action. But I doubt—and I could be wrong here—that companies like Apple like Facebook and like Google really care about their international reputation in New Zealand on whether they pay tax or not. That may change when a lot of the OECD work on base erosion and profit shifting comes to fruition but at this point in time I think what they care about is the goods and sales that they can sell into the country.I would like to talk about the impact of this and some of the underlying data around it. There is an acknowledgment—and I think it is fair enough—that because of data limitations it is not possible to accurately determine how many offshore suppliers may be required to register and return GST but from experience in similar countries the IRD has calculated it is probably around about a hundred offshore suppliers that may register for GST. Again owing to the data limitations we just do not know the value of offshore purchases and how much money this will bring in or how much we are missing out on. Again the best estimate of the IRD officials is around about $270 million of purchases. It is quite a lot when we think about it. Those are purchases of services and intangibles. We are not talking about tangibles here; just online stuff. The estimate means that there is around about $40 million of GST that is forgone in these purchases and again there is an estimate that online purchases have grown by about 10 percent. Is it not interesting? We think that there is $40 million in forgone GST and this is only on intangibles. Imagine what it would be if we charged GST on tangibles. I think you would find it would be at least double that.JOANNE HAYES (Third Whip—National): I move That the question be now put.GRANT ROBERTSON (Labour—Wellington Central): In many ways my contribution picks up from where Stuart Nash left off. It is perhaps a little unusual what I am going to do but I am going to focus this contribution on one particular submission because I think it is important that it is on the record of the House and the Minister in the chair Michael Woodhouse may have something to say about this.Three options were considered of how to implement the GST on intangibles and the one that was the officials’ option which is what we have now got in the legislation is what they call offshore supplier registration. So this is effectively that the companies we are talking about are registered for GST and it puts the onus in a sense on them. It deals with them by means that are appropriate and are used by other countries. In the regulatory impact statement it talks about the European Union Norway South Korea Switzerland Japan and South Africa which adopted this kind of option. They register and they return GST if their suppliers are over the $60000 mark and it is endorsed by the OECD guidelines. But other options were considered and in particular the one I want to refer to was what was option three in the regulatory impact statement—that is the question of whether there could be a payment-based GST collection system.I want to say at the outset that I am not necessarily advocating for this but I do think it is an option worthy of some consideration. Essentially what is proposed there is that under a payment-based GST collection regime when remote services are supplied the supplier does not actually necessarily have to be involved in the collection of the GST on behalf of New Zealand in this case. Instead you could actually use the bank or the payment supplier if it was not a bank—if it was a sort of a PayPal or something like that—in the country where the person is resident and it would add the GST to the value of the incoming transaction. How that would effectively work is it would debit the GST amount from the person’s bank or credit card and retain the GST information with the transaction for future reference. Pretty much all of these purchases are now made using a credit card online and obviously as the GST is collected it would be forwarded on to the Inland Revenue Department (IRD) using the existing mechanisms that the bank and IRD have for working together. This submission was put to the Finance and Expenditure Committee by Miles and Associates Ltd and I just want to mention in the interests of transparency that it was the organisation that came to us and put forward this idea.There are some immediate benefits that are easy to think about which are that it is a simplified design it does not require reregistration all the time it uses the mechanism that we all know is used in the way that purchases are made it simplifies the overall approach that is being taken and it probably captures an increased amount of revenue potentially because the registration process does mean that some suppliers will not be registered. In my earlier contribution I talked through the fact that there are fines involved for people who do not register and that the Commissioner of Inland Revenue can chase that up. But again you do not know what you do not know and it may well be that some people will slip through the cracks. So having a payment-based approach for implementing the provisions in Part 3 would potentially add to the amount of revenue that people could get.There are no additional costs to New Zealand businesses that are exporting goods and services going the other way if you adopted this regime across the board and the seamless handling of goods—you can expand this out to the tangible sector more easily as well which is another point that many people would like to see happen. It creates a neutral set of relationships between businesses if businesses are importing goods by putting it only in the hands of the payment providers.I am not saying it is simple and I am not saying that it has even really been tried anywhere else but it is the kind of option that as we look to the future of how we are going to create the level fair playing field for taxation in New Zealand we should be considering. It was a little bit unfortunate to my mind that the submitters had in fact already submitted when the IRD’s discussion document came forward. The committee did not consider that submission in detail and I just want to put on the record that I think it still deserves consideration.BARBARA KURIGER (National—Taranaki - King Country): I move That the question be now put.A party vote was called for on the question That the question be now put.Ayes 63New Zealand National 59; Māori Party 2; ACT New Zealand 1; United Future 1.Noes 58New Zealand Labour 32; Green Party 14; New Zealand First 12.Motion agreed to.Part 3 agreed to.Part 4 Amendments to Tax Administration Act 1994STUART NASH (Labour—Napier): I stand to talk to Part 4. It is largely technical in nature. It is the amendments to the Tax Administration Act 1994. Whenever we have a tax bill through the Finance and Expenditure Committee and it passes through the House there are always amendments to the Tax Administration Act because as the title suggests it is the Act that governs the administration of the tax system. It just makes sense that when the tax system changes then so does the administration of that system.There was not that much that was contentious under this part. I suppose that one clause there was a number of submissions on was clause 71 “Section 24B amended (Offshore persons’ bank accounts and tax file numbers)”. There were a number of submitters including Chartered Accountants Australia and New Zealand New Zealand Racing Board PwC—Dr David Clark: PwC?STUART NASH: Well good point. I wonder why it submitted. We could take a deeper look at that one.In a similar vein in clause 71 is the requirement for an offshore person to have a New Zealand bank account number in order to apply for an IRD number. Again there were submissions from Chartered Accountants Australia and New Zealand Corporate Taxpayers Group KPMG and OliverShaw Ltd. I must admit—and I do not mean to curry favour with anyone—whenever I see a submission from OliverShaw it tends to be the first one that I read because those two gentlemen who are the partners in OliverShaw know a little bit about the tax system. I think Robin Oliver is—is there such a thing as a master taxation expert? If there is then Robin is one of those people. He is that rare individual who takes absolute joy in poring through tax bills in minute detail and finding the errors and places where things can be changed and all power to him. Without someone like Robin I think a lot of things that are not that pragmatic would disappear but he is very much a pragmatist as well and he understands the role of tax legislation.What this clause is about is that from 1 October 2015 which is when the brightline test came in a person who is an offshore person or a resident withholding tax person must have a functioning New Zealand bank account in order to apply for an IRD number. The requirement to have a New Zealand bank account is part of our anti - money-laundering identification verification requirements that apply only to offshore persons and it was introduced in Budget 2015 in the suite of changes to tighten up our anti - money-laundering rules. Unfortunately in that Budget it did not have anything about offshore trusts or anything like that. I suspect we know the reason why but that is beside the point.Hon Michael Woodhouse: Why is that Stuart?STUART NASH: Well because it was unknown Minister and the interesting thing is—now that the Minister has asked that question I feel bound to respond because the Minister actually said in the media that New Zealand does not have a problem with multinational companies not paying tax. The interesting thing about that is the Obama administration the Cameron Government and nearly every single OECD country has identified the fact that there actually is a problem; it is the solution they are grappling with. We know the problem but apparently our Minister of Revenue believes that we are the only country in the OECD without a problem.Dr David Clark: It doesn’t mean the Government doesn’t have a problem; it means the National Party doesn’t have a problem.STUART NASH: Oh maybe that is what it is Mr Clark. But we do have a problem and unfortunately what has been shown in recent days is that our tax system has come under increasing pressure—The CHAIRPERSON (Lindsay Tisch): Order! Come back to the bill.STUART NASH: Sorry Mr Chair I was just responding to the Minister—The CHAIRPERSON (Lindsay Tisch): No no.STUART NASH: Oh OK.The CHAIRPERSON (Lindsay Tisch): Come back to the bill.STUART NASH: Yes sure. What I was saying is that this comes into—any more comments Minister you would like me to answer on? An offshore person—this is basically for anti - money-laundering rules which are incredibly important for the integrity of our tax system. We talked about the fact that an individual will be an offshore person for the purposes of a bank account requirement if they are not a New Zealand citizen and they do not have a residence class visa. We talked quite a bit about this because there are certain residents like Recognised Seasonal Employer scheme workers who come into the country and are here for about 3 months. They earn very little in the scheme of things to be honest and we asked whether they needed to have a bank account. I think in the end we did not require that they had to have a bank account.Hon Michael Woodhouse: No they do.STUART NASH: They do?Hon Michael Woodhouse: Of course they do.STUART NASH: Well hmm. We talked long and hard about this and there was a very good discussion between the expert advisers. But anyway a New Zealand citizen will be considered an offshore person—we have discussed this—if they are not present in New Zealand and have not visited in the past 3 years. But as has been out outlined in another part of the bill all a New Zealand resident has to do is enter the country on holiday show their passport and out they go again and that is scrubbed. It is very easy to get around this if you are a New Zealand passport holder.Dr DAVID CLARK (Labour—Dunedin North): I have been waiting for a while so I appreciate getting the call. This part of the bill of course tidies things up as my colleague Stuart Nash has pointed to and I want to speak specifically to new section 24BA(1C) in clause 71 which relates to when there is no requirement for the normal procedures to apply in respect of due diligence in terms of anti - money-laundering. I will read it out for those who are following this outside the House: “Subsection (1) does not apply to a person for whom a reporting entity under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 has conducted the customer due diligence procedures required for customer due diligence under that Act and regulations made under that Act.”So this is an exemption we are talking about in the law for people who have already complied with anti - money-laundering and countering of financing of terrorism procedures. We would understand that often these kinds of exemptions are in place to avoid duplication. That is why these kinds of exemptions are in the law. But I raised this in an earlier stage of the bill and I want to raise it here again because again we have a similar instance where we have a piece of law in place designed to make sure that there is not duplication of a service and I would like to ask the Minister what checks and balances are in place.On the one hand there is the juggling of the intention to make sure that we have people paying their fair share of tax so we want to make sure that the rules are fair and persistent and catch out those who would wish to do wrong. On the other hand there is the balancing act where we do not put undue compliance burdens on people who would want to trade and do business with New Zealand. The question that is raised here as in the previous part of the bill is whether we have got that balance right. That is all drawn into particularly sharp focus today as we have just learnt that the Prime Minister has some tax interests that we previously did not know he had or that he uses a vehicle—and I am only just catching up on the detail of what was declared in his—Kris Faafoi: So is he.Dr DAVID CLARK: —register of pecuniary interests and so is he by the sound of it. His tax affairs seem to be more complicated than even he realises and I am sure we will hear more to come on that. But over recent days and probably more pertinently we have seen the Panama Papers come out and they raise serious questions about New Zealand’s integrity and the integrity of our tax system and our reputation more than anything else. We heard the Prime Minister of course say immediately that $24 million—The CHAIRPERSON (Lindsay Tisch): Order!Dr DAVID CLARK: —was raised. I will come to the point—The CHAIRPERSON (Lindsay Tisch): Yes back to the bill.Dr DAVID CLARK: —which is about whether we have the correct measures in place in new subsection (1C) of section 24BA whether the tests in place are stringent enough whether they are avoiding unnecessary duplication or whether they in fact too lax because we are finding that New Zealand’s reputation is under threat. If New Zealand’s laws are too lax we risk having people come through New Zealand’s system who are participating in money-laundering and the financing of terrorism and that is terrible for our reputation. We have heard that in these Panama Papers there are 60000 instances—The CHAIRPERSON (Lindsay Tisch): Order!Dr DAVID CLARK: —where New Zealand is mentioned.The CHAIRPERSON (Lindsay Tisch): No no.Dr DAVID CLARK: In this bill here—The CHAIRPERSON (Lindsay Tisch): Order! I have ruled previously. I ask the member to come back and focus on what the bill is about. You can mention those things in passing but do not spend the whole speech on examples that are outside the scope of the bill.Dr DAVID CLARK: I will bring it back because the point of those references is to ask whether here in this bill we are creating more loopholes. If people have complied with the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 requirements once are they exempt for ever? For how long are they exempt? If somebody has proven themselves in one jurisdiction or in New Zealand to have complied with the law in that respect are they for ever protected? If they have arranged their affairs in such a way that it is not detected on the first time through are they protected for ever?If the Prime Minister—to use a hypothetical—denies having any of this kind of involvement in one instance and it later transpires that he has arranged his affairs differently and he is captured by this does that have an effect? Is that something that is protected by this bill? Does it have tests that can be applied again and again or are we saying here—and the Minister will I am sure be able to direct us—in new subsection (1C) that this is a once-and-for-all test? Is this a test that applies for ever into the future or is this test is a one-off? I think that burden of proof is something we need to look at again.GRANT ROBERTSON (Labour—Wellington Central): I want to look specifically at clause 71 which contains as I foreshadowed in an earlier contribution the amendments that have been included to look again at offshore persons’ bank accounts in so far as that requirement was put in place in the Tax Administration Amendment Act 2015 which for those who have been following closely was an earlier piece of legislation as part of the suite of legislation that the Government has put in place to establish its new rules around resident—The CHAIRPERSON (Lindsay Tisch): I am sorry to interrupt the honourable member. The time has come for me to leave the Chair for the dinner break.Sitting suspended from 6 p.m. to 7.30 p.m.GRANT ROBERTSON: I will try to make it as interesting and stimulating for the Chair as I possibly can. Part 4 of this bill however is about the Tax Administration Act so we have got only limited material to work with here. But the contribution I was making before the break was around the fact that this is the clause—I am referring here to clause 71 of the bill—where again we are amending a piece of legislation that the House passed only months ago and that was the Tax Administration Amendment Act 2015.What that Act did was create a requirement for offshore persons to have a New Zealand bank account in order to apply for an IRD number. In part this was to ensure that the anti - money-laundering identity verification requirements that New Zealand has signed up to apply to offshore persons. I am sure everyone in the Committee would agree that New Zealand’s being party to all of the anti - money-laundering requirements that have been internationally agreed is important because we do not want to see New Zealand out there as an outlier in the world in terms of providing good standards of probity in our taxation and financial arrangements. That would be a terrible thing and one that we on this side do not think should have any place whatsoever in the way that New Zealand presents itself to the world.However after that piece of legislation was passed it became clear that some of the compliance costs involved in everybody getting a bank account in order to get an IRD number were a little high. Officials went away and came up with some solutions. Some of them are non-legislative and are not covered in here but they were described to the select committee in some detail. However some of them are legislative and they are the ones contained in clause 71. In particular there was one that was a pretty obvious one which was around seasonal workers employed under the Recognised Seasonal Employer scheme. Clearly it would be quite difficult in some instances to immediately get bank accounts—things like identification and all of those sorts of things are a little hard at times to get—so non-resident seasonal workers under the Recognised Seasonal Employer scheme are going to be allowed a grace period of 1 month after arriving to get a New Zealand bank account and inform the Inland Revenue Department before the higher withholding tax would apply. All members of the select committee supported this as being a practical way of dealing with that.The other category of person is a person who has already had anti - money-laundering verification undertaken by a New Zealand reporting entity and would not need to obtain a bank account to avoid duplication of that process. So in law what that equates to is “a person for whom a reporting entity under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 has conducted the customer due diligence procedures required for customer due diligence under that Act”. There were some questions asked at the committee as to whether that would provide exactly the same level of assurance as somebody who had a bank account but apparently it is a consideration within all of the provisions of that 2009 Act I mentioned and therefore those people are exempt as well. Then the bill already exempts non-resident suppliers of remote services from the requirement to have a bank account and the committee has recommended that other non-resident suppliers also be exempt as long as the IRD number was being supplied solely because they were a non-resident supplier of services.So this all came about because the Government—Hon Ruth Dyson: How do you know that?GRANT ROBERTSON: Well it is amazing that I know all of that is it not?Hon Ruth Dyson: No but how do you know why they supplied it?GRANT ROBERTSON: No well the thing is they supplied it—the only reason a non-resident supplier would supply that would be because they were a supplier of remote services to New Zealand because otherwise they will not have a New Zealand bank account. There is no reason for them to have a New Zealand bank account. They are not an entity operating in New Zealand.Alastair Scott: But you are amazing to know all that.GRANT ROBERTSON: I know. It is—well exactly. Alastair Scott could potentially have taken a very similar call to mine had he chosen to do so. He has not and I am sure he is grateful that we have now traversed that material. [Bell rung]The CHAIRPERSON (Hon Chester Borrows): Grant Robertson.GRANT ROBERTSON: It will be only a brief addition—The CHAIRPERSON (Hon Chester Borrows): Do not apologise. Just get on with it.GRANT ROBERTSON: —to that statement which is really just to sum up my contribution here.So I think this clause 71 is useful but it does highlight the shortcomings with the way the Government has gone about this. We are nearly at the end of the Committee stage of the third bill of three. It is a pretty poor trifecta if you ask me because in those three bills the Government has set up the brightline test that has not really worked it has created a series of obligations that it has had to come back to the House and correct and in the end I do not thinkNew Zealanders are particularly better off for these changes. We are supporting them because they are minute steps in the right direction but actually the Government when it looks back on how it has gone about these three pieces of legislation will probably want to have a pretty serious rethink about whether it has got it right. We do not think it has in terms of the issues that are meant to be being managed by the brightline test but on top of that if you are making law and then correcting it months later there is a problem with how that law is being made and we need to do better than that.STUART NASH (Labour—Napier): Just talking to Part 4 I am going to have a look at clause 72 here. This is talking about residential land withholding tax certificates of exemption. Again this was an area where we discussed in some detail at the Finance and Expenditure Committee why people would get certificates and what the reasons and the rationale would be and basically there are three of them. What I am talking about of course is residential land withholding tax. This is by and large covered in Part 2 of the bill but because this is amendments to the Tax Administration Act it this falls just under the purview of this part.So there are three requirements for people who may apply for an exemption to residential withholding tax under this Act and this includes in new section 54E(3) in clause 72 “a person who carries on a business of developing land or dividing land into lots or erecting buildings;”. The reason we did this is that we did not want to how should I say it dissuade anyone—an overseas investor—from coming over here and erecting residential dwellings especially in a place like Auckland where there is a need for residential dwellings. Perhaps we will reach a stage where it is hard to get domestic funding and therefore overseas funding will be a requirement to allow any sort of development to occur and under this sort of circumstance we thought that the odds of them—well it would be easy for the Inland Revenue Department (IRD) to track them down and have them pay their required amount of tax anyway. As we talked about in the purpose of this we thought that the residential withholding tax is really there to stop people from avoiding their tax obligations so this would make it—well we think it would be very hard to avoid your tax obligations if you were undertaking this sort of work.The second area is where they have already “had tax obligations under the Inland Revenue Acts before when applying for a certificate;”—i.e. this is an overseas investor of good character they have a track record with the IRD and there is no reason whatsoever for the IRD to suspect that they might skip the country or not honour their tax obligations. So it is the good track record—it is the good character test in essence. The good character test is around in a lot of legislation so we thought that that was appropriate.The third one is “has complied with all tax obligations for the 2 years before they apply for the certificate and the Commissioner is satisfied that the person will continue to so comply.” Again this goes back to what I was talking about—the good character test. There is no reasonable belief to think that this person or this investor—whether that be a person a company a trust or whatever sort of entity—will welsh on their New Zealand tax obligations.We did think that those three categories were deserving of the ability to apply for an exemption to the residential land withholding tax. Of course it is not guaranteed. There is a process that has to be gone through but if an investor fits one of those categories then the odds are pretty good that they will get one.There is clause 73 “Section 81 amended (Officers to maintain secrecy)” as well. Actually secrecy was talked about a lot in the select committee in a number of instances and we have alluded to this before in a speech today. It is my understanding and it was certainly reinforced by the IRD that there are a number of checks and balances in place in the contracts of IRD employees to make it very very clear that they do operate under—well I was going to say “a veil of secrecy”. What I mean is that the integrity of the tax system and the integrity of the IRD is completely reliant on the fact that an individual’s tax business will be kept absolutely secret. I have absolutely no reason to suspect that that is ever going to be compromised.In fact I was talking to a very long-serving and just recently retired senior IRD employee. I asked him whether he thought this was an issue in the IRD at all and whether we needed to be a little bit tougher on this to be a bit more transparent or to put better rules in place and he said: “No. Everyone knows that if they break the secrecy clause in their contract then they are gone before lunchtime.” So there is a pretty good culture in the IRD for this.The rest of Part 4—as Mr Robertson and I think every speaker has alluded to—is administration. It is the nuts and the bolts. It is pretty boring to be fair. Not that tax is boring—how could I even suggest that. What I mean is that compared with the student loan stuff or the land withholding tax—Part 4 agreed to.Clauses 1 and 2The CHAIRPERSON (Hon Chester Borrows): We come now to clauses 1 and 2.Hon Ruth Dyson: Go on let him take a call.The CHAIRPERSON (Hon Chester Borrows): Oh Grant Robertson.GRANT ROBERTSON (Labour—Wellington Central): Actually you normally say—anyway. I do want to take a call on clauses 1 and 2 the title and commencement clauses. Firstly to deal with the commencement issues—as is fairly typical in taxation legislation there are a number of commencement dates. I think it is important for the Committee whenever it is debating these clauses that it does take note of retrospective commencement dates because they are not the best things to have. It is not really the way Parliament should behave. I could now do Chris Hipkins’ speech on retrospectivity which he often gives when there are commencement clauses but suffice it to say that the idea that Parliament has the power to be able to retrospectively change people’s obligations and the rules under which we operate in the taxation system is one to be judiciously put in place.I do want to point out clause 6 of the bill which has a retrospective element in terms of the right to cancel a loan contract. That is in fact an empowering part of the bill in that it allows an action by a borrower to be able to do that and so I do not think anyone here in the Committee would have any particular problem with that.Clause 6 relates to an issue that is going to come up in another taxation bill which is the great debate about the difference between notifying and formally notifying which the Finance and Expenditure Committee somehow managed to spend a significant amount of time discussing. Is there in fact a difference between notifying somebody of something and formally notifying them of something? Once upon a time formal notification would come from writing—putting something in a letter and sending a letter. But is an email formal notification? Because it is like a letter—[Interruption] Yes but is it seen to be a formal communication? I think the general consensus was that that needed to be clarified and that actually is where clause 6 came from which actually changes the words from “formally notifying the loan manager” to “notifying the loan manager in writing”. So now we are absolutely clear: it is in writing and that can also be an email as well for those who are following along at home.The other retrospective clause is a very minor one which I have now completely forgotten—clause 37B that is right. That is not a major issue but it relates to the question around when someone has acquired land under the residential land withholding tax issue. The other clauses are largely coming in in the future. There are clauses 37 and 37C which again are around the issues of definitions of residential land and disposal within the 2 years of the brightline test—changing the phrase “in land” to “in residential land”. My colleague Stuart Nash earlier identified why that was changed.This of course is another example of us having to tidy up legislation. The reason it has a retrospective commencement date is that we are having to tidy up the law that was passed in 2015—that is clause 37 which is dealt with in the commencement clause at clause 2(4). Otherwise the majority of the clauses come into force later this year or in 2017.In the remainder of this contribution I do just want to refer to the title because as I have mentioned in previous tax bill debates often quite innocuous or very general words are used. In this bill’s title we have some specific ones here: “Residential Land Withholding Tax”—good; a new thing being introduced—the “GST on Online Services” and the randomly stated “Student Loans”. I am a fan of perhaps more specific wording in these types of bills so that people have a better idea of what we are debating.But more to the point there is clearly for me some words missing from this title. It would be remiss of me given the contributions I have made on this bill thus far to not say that the words “Missed Opportunity” should be in the title because actually that is what this bill is about. It is about the fact that the Government yet again has a tax bill it could have brought to the House to make some real and significant changes.The biggest missed opportunity of all is in the GST on online services aspect of this bill because this was the bit where the Government could have stood alongside small businesses in New Zealand and said: “We get it that you’re doing it tough. We’re going to level out the playing field in GST. There will be a process and a pathway towards GST being charged at a decent rate in terms of tangible goods brought in from overseas.” But that did not happen and that is a missed opportunity in this bill.There are other missed opportunities—STUART NASH (Labour—Napier): There is one thing I would like to talk about—well a couple of things. But first of all as Mr Robertson alluded to clause 54(2) comes into force on 1 April 2017. This actually relates—and again it was talked about at great length in the Finance and Expenditure Committee—to when in fact the GST regime on online services comes into play. The reason this was—not debated; that is the wrong term—discussed at great length is that the issue was around how long it takes a foreign jurisdiction to gear up for the New Zealand tax system. We had some submissions that suggested it would take 9 months. Others suggested it would take 6 months. It is hard to believe that in this day and age of high-level computer programs—which of course all these suppliers are on—it would take any more than just a simple fix of a database. But apparently it does take a little longer than anyone would imagine. In Australia I think they have allowed 9 months—am I right Mr Robertson? You might remember.Grant Robertson: Yes.STUART NASH: They have allowed 9 months. This is why we have said that this does not come into force until 1 April 2017. It is not some way to avoid paying tax before then. I doubt we are going to see a massive download of iTunes songs on 31 March but you never know. But that is the reason why that clause is coming into play in a year’s time or just under a year’s time—we do have to allow these online suppliers enough time and the Inland Revenue Department (IRD) believes there are going to be about a hundred of them. As mentioned it believes it is going to raise about $40 million—or no not “raise”. We are missing out on about $40 million. The IRD is unsure of the impact that this sort of tax will have and whether it will change behaviours. I suspect it will not but let us see.The other thing as Mr Robertson alluded to is that the title is a little misleading. Let me explain why. The title includes the words “Taxation Residential Land Withholding Tax”. This is a capital gains tax; let us make no bones about that. The Government said it would not put in a capital gains tax but there is a capital gains tax and this is what it is. This taxes the capital gain on properties bought by overseas investors who buy and sell a property within a 2-year period. It is interesting that the IRD actually recommended a 5-year period because it thought that a 2-year period would be too easy to avoid and that it would allow a lot of gaming behaviour and aggressive tax planning to take place which we have seen in recent days and which is going on I think in a way that not many of us ever realised or contemplated or could imagine.This bill should probably be called the “Taxation (Capital Gains Tax GST on Online Services and Student Loans) Bill”. As Mr Robertson alluded to this is a missed opportunity in terms of online services. There are a number of reasons why the Government and the IRD say we should not be collecting tax on tangibles. Personally I do not think that many of them stack up. The reason I say that is what this does is it provides an immediate competitive advantage to online overseas suppliers as opposed to New Zealand ones. As well the argument is that we live a long way away and that with shipping costs of more than 15 percent it is more than easily made up. But that is simply not true in this day and age.I think that the Government has really missed a trick here. It could have gone all the way. It would have pleased the Retailers Association—of that there is absolutely no doubt. When we read in the paper that the IRD is concerned that in fact putting GST on online services might change the behaviour of New Zealanders—i.e. they may in fact now buy products from New Zealand suppliers as opposed to overseas ones or they may be put off buying products or intangibles from overseas because of price increases—well imagine what that would do to our retail sector. Imagine if the impact on our retail sector was that people would now go down to their local store and buy New Zealand - made products as opposed to going online. So this is a missed opportunity.This bill is a capital gains tax and it is a missed opportunity in respect of GST and student loans. The student loan stuff is reasonably pragmatic. I would like to see the sort of arrangement that we have got with Australia expanded. The reason I say that is as mentioned earlier when a student enters into a contract with the Government to undertake that student loan there are a whole lot of terms and conditions that I think are pretty clear—you start earning money and you start paying your loan back. If you live overseas again the IRD is very clear on that and I would like to see these sorts of agreements instigated with other countries around the world. Thank you very much.Clause 1 agreed to.Clause 2 agreed to.Bill reported without amendment.Report adopted.Taxation (Transformation: First Phase Simplification and Other Measures) BillSecond ReadingDebate resumed from 31 March.GRANT ROBERTSON (Labour—Wellington Central): It is a pleasure to take a call on the Taxation (Transformation: First Phase Simplification and Other Measures) Bill and let us start out at the beginning. There is a problem with this bill in that the word “Transformation” is having the loosest ever possible meaning given to it in the history of the English language because there is very little about this bill that could be described as transformative.If one were introducing a transformative taxation bill it would rebalance taxation between hard-working PAYE earners and those who speculate in the property market. Or you would be transforming our taxation to create New Zealand as the taxation regime that the rest of the world looks at and says: “That is the highest standard of ethics right there and then—no loopholes for foreign trusts.” That would be transformative for the taxation system. Or it would be a taxation bill that finally said that we will ensure that multinational companies pay their fair share of tax in New Zealand and that hard-working wage and salary earners can rest assured that they are doing their bit and so are the other taxpayers. That would a transformative taxation bill. But that is not what is in front of us here today.This bill is utterly misnamed and once again the Government has complacently brought forward a piece of tax legislation without actually taking the time to think about what it could do right now today to help New Zealand grow a productive economy to ensure that people paid their fair share and to ensure that people are given a fair go. That is what tax legislation should be about when it comes to this House but unfortunately that is not what is in front of us.What is in front of us is a series of minor amendments to a range of bills: the Income Tax Act the Tax Administration Act the Goods and Services Tax Act the KiwiSaver Act the Child Support Act the Student Loan Scheme Act—which we amended just a moment ago—the Gaming Duties Act and the Accident Compensation Act. Some of the changes here are linked to the new and improved forms of communication of the Inland Revenue Department (IRD). That occupied a lot of the time of the Finance and Expenditure Committee—discussing the way in which technology could now be used for the IRD to communicate with taxpayers.As a general rule those of us on the Labour Party side of the House want to see that technology used and used efficiently and effectively. Although there will always be a need for rules around that it did become a little frustratingfor me in the select committee as we got into the real nitty-gritty of electronic signatures—were they safe and could we actually make use of email as a formal means of communication? Of course we can. As I said although we have to step our way through that appropriately it is important. And fair dos to the IRD. That was what it brought the bill to the committee to do—to move away from paper-based services and towards more digital services.As I said there were references in legislation to things being sent by post and at the risk of upsetting my former colleague Sir Michael Cullen not that many people are doing that any longer. So—Hon Ruth Dyson: I think he knows that.GRANT ROBERTSON: He has worked it out? Yes. So therefore the phrase “by post” has been replaced with phrases like “by writing”.This will appeal to some of my colleagues—particularly actually I am thinking here of my former colleague Maryan Street. We debated a three-tiered approach to the way in which the IRD seeks communications out from taxpayers. There were three tiers of verbs and we did have quite some debate in the select committee about the hierarchy of verbs. I can see that Mr Deputy Speaker knows that he missed out here—he missed out on this conversation. We do have a three-tiered approach with the use of verbs: to ask request or inform; to apply or notify; and to formally notify. So when the IRD is asking for things we now have a tiered approach to the way in which it asks requests or informs; applies or notifies; and then formally notifies. So these changes are big news in the world of taxation. We now have some clear and perhaps more modern language involved in that.As I said earlier electronic signatures were a particular topic of debate. We have now provided for documents such as tax returns to be filed under an electronic signature so it is easy for—I do not know—busy people like the Prime Minister. When the Prime Minister is doing a tax return the Prime Minister could apply an electronic signature to that. I think that on this side of the House we would be more than happy to take his tax returns with an electronic signature you know because we are not fussy about the form in which the Prime Minister’s tax returns find their way into the public arena. If he wants to be transparent and if he wants to be open to this then we would be more than happy to see an electronic signature - based return and that is now possible under this piece of legislation.I do want to spend a couple of minutes talking about an issue that I did not think would take the select committee very much time but amazingly enough it did—that is the question of secrecy in a co-location environment. The IRD is now co-located in a number of centres in New Zealand with other Government agencies and when they are together there are all kinds of efficiencies for the consumers and for citizens to be able to visit and work with Government agencies. We had a long discussion about whether there were adequate secrecy provisions in place for both IRD employees and employees of other Government agencies that were working in a co-located environment.In the end I was sounding a little bit cynical when I introduced this part of my speech but actually this is a serious matter. The IRD deals with the sensitive information of all New Zealand taxpayers and in a co-located environment it is possible that someone takes something to the photocopier they put it on the photocopier they get interrupted something happens and they leave a page behind. Under the secrecy requirements that are currently placed on IRD staff if another IRD staff member was to walk up and pick up the piece of paper they would be covered by the same rules. If you then look into having a co-located environment you might have as an example a staff member from the Ministry of Social Development or ACC or something like that who is co-located but is not governed by the same secrecy provisions as the IRD staff member.We had a long discussion in the committee about how we would deal with this. In the end we upped the requirement on IRD staff to be aware of their own secrecy provisions. They have to have a higher duty of care essentially when they are working in that co-located environment and there are some amendments that have been made by the committee to enable that.There were some good discussions—and this is a good element of the bill—around how we can help support employees who have the possibility of share purchasing within the firms that they work for. The benefits to employees under share purchasing agreements have not always been clear to people and have not always been easily identified and as part of an IRD discussion process on this the amendments in the bill allow the treatment of the amount of benefit from a share purchase agreement as extra pay and allow employers to choose to withhold tax on the value and would require the employer—whether choosing to withhold or not—to disclose the value received via a monthly schedule. So it is just making more transparent and more open the way in which employee share schemes operate. They are now a much more common part of people’s remuneration and it is important for the IRD’s processes and policies to keep up with that.More broadly there was a range of changes around information sharing which continues to be a very important part of what the IRD does. Also around KiwiSaver there are a series of changes there to ensure that the rules are clear for everyone. One that again attracted a lot of attention was around minors—that is minors with an “o” Mr Deputy Speaker not miners with an “e”—who join KiwiSaver when they are signed up by their parents and perhaps they have been incorrectly enrolled in a scheme. They have until their 19th birthday to opt out. Members who choose to opt out would receive their employee contributions but not their member tax credits kick-start contribution or their employer’s compulsory contributions.We did ask officials whether this was a major problem in that there were armies of young people being signed up to KiwiSaver unwillingly and then being desperate to get themselves out. There are not but obviously where the situation exists that people when they turn 18 want to remove themselves from KiwiSaver—we hope that they do not but should they choose to—that provision is being put in place.It is a bill that completely fails on its own title—it is not transformative at all. It could have just been called the “Taxation and Other Measures Bill” and you would be accurate. But I think what the events of the last couple of weeks have highlighted on this side of the House is that legislation like this is missing the point when it comes to taxation. We need a tax system in New Zealand that the average working person can be confident in and when they make their contributions and do their fair share they know that others are doing the same. We do not have that in New Zealand at the moment. We have a system where large multinational companies are not paying their fair—Mr DEPUTY SPEAKER: Sorry to interrupt the member but his time expired some time ago.ALASTAIR SCOTT (National—Wairarapa): Mr Deputy Speaker I was hoping you would give Mr Robertson a little extra time because I was just waiting for him to explain his proposed transformative policy—Grant Robertson: Oh!ALASTAIR SCOTT: With what? Well with this $11000 that we are giving every person over the age of 18—how he was going to fund the $11000 that apparently everyone is going to receive. Because—Hon Ruth Dyson: That’s nonsense.ALASTAIR SCOTT: It is not nonsense; it is absolutely a brain explosion from the Labour Party leader that would be transformative. It would totally be transformative because it would have to be funded in some way. I understand that the proposed method of funding the transformative idea is just to wipe out benefits—wipe out benefits.The universal benefit that has been proposed would be very transformative but I would also like to hear from the Labour Opposition how on earth that would be funded—this transformative idea from the Labour Party. How would that $11000 handout—which is all it is—be funded? You talk about a simplification and that brings into the discussion the other word “simplification”. If it is so simple then let us hear where tax rates and GST rates would be if everyone was given a handout of $11000 per annum.Mr Robertson also commented on creating and legislating fair honest—making sure people pay their fair share of tax. That is exactly what we discussed in the last bill just a few minutes ago where the Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill was discussed in Committee. That is exactly what we are passing in this House: taxation legislation that is fair and ensures that people pay their fair share.Mr Robertson I would invite you to take a call and explain how the transformative idea of the Labour Party which is to give out $11000 which will solve everyone’s problems somehow—forgetting the people who are most in need. It comes back again to the tax system that we have which supports those who are most in need; not just giving them all the same. You do not give an 18-year-old single male the same benefit as a single mum with four kids. That is just an absurd idea and one that should be totally discounted by the sensible people who are in the Labour Party when they hear such a ridiculous suggestion from their leader. I suggest that those members continue to talk about simplification and transformation. I look forward to hearing more from the Opposition.STUART NASH (Labour—Napier): The last member who spoke on the Taxation (Transformation: First Phase Simplification and Other Measures) Bill Alastair Scott asked some very interesting questions and I have some answers for him. His first question was how we are going to fund what we want to do—keeping in mind that the universal benefit is something that we have discounted. But let me give the member one idea. This is transformative. It may be quite hard for the member to get his head around but how about this one: everyone pays their fair share of tax. How about that? Pay your fair share—imagine that.We have the New Zealand Herald journalist—I am not dismissing the journalist. Matt Nippert is a very good journalist but he is a journalist. He is not a member of the Inland Revenue Department (IRD) and not a tax expert but a journalist who has uncovered tax rorts to the tune of about $500 million. This is just the top 20 companies—uncovered by a journalist. But wait there is more. Down the other end of the scale the real experts say that we could be missing out on $7.1 billion a year for our tax base due to these large multinationals avoiding and evading tax. That is a transformative idea: everyone pays their fair share.The good thing about the New Zealand tax system is that we do not want people to pay more than their fair share. We are not asking them to hand over all of their profits; all we are asking them to do is pay their fair share and if it is company tax it is only 28 percent. It is not a whole lot of money. They are still left with a whole lot of money in their back pocket that they can repatriate back to the States. But the interesting thing is that National’s Minister of Revenue has come out and said there is no problem here—we have not got a problem in New Zealand.The amazing thing about this is that the Obama Administration tax officials who know a little bit about tax—“Trust me I am from the IRS.”—say there is a big problem. In fact President Obama himself called these companies traitors. David Cameron has come out and said: “We are going to change the law because this is wrong.” Even the New Zealand Prime Minister has come out and said: “This is morally wrong.” But the revenue Minister has said: “There’s no problem. Don’t worry about it. Nothing to see here.” Well I do not know what planet the revenue Minister is on when we are $7.1 billion down on what we should be because companies are engaged in aggressive tax planning that sees them transfer all their profits offshore and not pay any tax in New Zealand. Mr Scott I think everyone paying their fair share is pretty transformative. I think it is a pretty good idea too.The thing that gets to me is when National Ministers and National members stand up and defend these large multinationals at the expense of hard-working middle New Zealanders who actually pay their tax. You know something is wrong. You know they are a little bit out of touch. I would guess but I am not going to put my house on it that if I went into Mr Scott’s electorate and I walked down the main street of Masterton and I asked these middle New Zealand families “Did you pay your tax?” they would say: “Absolutely.” In fact they would be affronted at any suggestion that they did not pay their tax. If I said to them “Do you think it’s right that these large multinationals are paying no tax?” I guarantee 95 percent of people whom I interviewed on the main street of Masterton would say that it is about fairness. What I argue is that what the multinationals are doing at this point in time to the New Zealand tax base simply is not fair.Yes Mr Woodhouse we do have a problem. It is recognised by every single OECD country that we have a problem. Where the difficulty lies is in the solution. But what we think we must do is at least quantify the problem. At least get a panel of experts in. Not just one—Mr Shewan—but let us get a panel of experts in to understand the extent of the problem. Then we will know how much we should be investing in this. I can vouch that the IRD has a number of incredibly capable people in its ranks. It has some of the finest tax experts I believe in the world. In fact I know that the IRD is co-opting some of its staff to help the OECD.I will tell you what I know about the IRD officials who appear in front of our Finance and Expenditure Committee. They are passionate about what they do but they are also passionate about New Zealand. They also understand that the integrity of the tax system is fundamental to a sound economy. I believe that if the Minister said to his officials in a public way “We have a problem here.” they would say: “Yes Minister. We know that. We’ve been telling you this for a while.” If he said to them “Can you go away and quantify the value or the extent of the problem we have here?” they would take to it to like—I was going to say “a robber’s dog” but that is probably not the right description for the IRD. But what I am saying is that everyone recognises this is a problem except the revenue Minister.Then within about 2 weeks we have this overseas trust issue. I believe that a country’s brand—in fact any brand—is based around how people perceive that brand. Mr Key and Mr Woodhouse may say “It’s not a tax haven. We’re not operating any sort of tax schemes.” but the international press come out and say that if it smells like a rat if it looks like a rat and if it tastes like a rat then it probably is a rat. I think that the way the Prime Minister should have handled this—if he did not know already and there is a suggestion that he had been warned because articles were published in the National Business Review detailing exactly how this worked—is that the Prime Minister should have come out and said: “Wow we did not understand the extent of this problem. I am going to work day and night to close this down because for me the integrity of our country the integrity of our brand and the integrity of our tax system is paramount.”But instead what the Prime Minister did was try to defend multinational organisations and those who are attempting to avoid tax. The thing about that is the vast majority of New Zealanders—middle New Zealand—pay their tax. In fact if any part of middle New Zealand works to avoid their tax the IRD comes down on those people like a ton of bricks yet when a multinational organisation avoids—I am not saying evades; I am saying avoids paying its tax or when overseas dictators or arms’ dealers or oligarchs or whoever because we do not know seek to avoid paying tax the Prime Minister defends them.My personal view is that the Prime Minister has lost touch with what middle New Zealand cares about. Middle New Zealand cares about fairness.The interesting thing—I have got four children—is that almost the first concept that children learn is fairness. Those of you with children will know where I am coming from. When my little son is aggrieved by his sister he comes up and says: “Dad this isn’t fair. It’s just not fair.” Fairness is the first concept that children learn. I think it is what makes New Zealand such an egalitarian society or it used to be. It is because we value fairness.We expect everyone to do their fair share and pay their fair share. When the Prime Minister and his Ministers stand up and put the interests of multinational companies and overseas oligarchs before the interests of middle New Zealand then I think we have a problem. I think we have a Government that has turned arrogant and I think we have a Prime Minister who has lost touch with what New Zealanders really value and that—Mr DEPUTY SPEAKER: Anyway back to the bill.STUART NASH: —is fairness. Thank you very much.BRETT HUDSON (National): For the edification of the member Mr Nash who has just resumed his seat I might get on to a bit of the English language and some comprehension which might help him. But before I do that I would just like to note that that member levied a pretty serious accusation against some foreign companies. I believe he used the term “tax evasion”. I would encourage him to leave this House—Stuart Nash: I said “avoidance”.BRETT HUDSON: He said “evasion”. Check the Hansard. The member said “evasion”. I would encourage him to leave this House and to levy that accusation out in public. He might just find that his personal tax structure gets put to the use that he actually claimed in the media he set it up for. It is a very very dangerous statement to make and one that should be made only with some real evidence.We will move instead on to one of the hardest tasks that you could possibly have with Opposition members in this Parliament which is helping them to understand English. The bill is called the Taxation (Transformation: First Phase Simplification and Other Measures) Bill. When you have a title that says “First Phase” it would automatically suggest that there are further phases to come. Therefore you probably would not read the bill and say: “This is the entirety of the inland revenue transformation programme.” In fact the natural response would be that this is not the entirety of the inland revenue and tax transformation programme.The title also says “Simplification”. Therefore looking at the measures of the bill one would expect one of many phases or one of several phases to be about simplification which in itself is a positive thing but not necessarily wholly transformative. That is precisely what the bill is seeking to do such as helping people to get their tax refunds a little sooner and adjusting thresholds so that things can happen automatically and it will help to reduce time and costs for both small businesses and salary and wage earners.This bill is a step—a step on the transformation journey. We know as the Inland Revenue Department has told us and as the Minister has told us that the transformation project with the department is a business-driven tax transformation. It will take some years and some effort. I look forward to this bill passing through the House and I look forward to the subsequent phases of the taxation transformation. Thank you.JULIE ANNE GENTER (Green): I rise to take a call on the Taxation (Transformation: First Phase Simplification and Other Measures) Bill. The Green Party of course supports this bill. It is largely non-controversial. It is certainly nothing earth-shattering. It makes a number of small administrative changes to the tax system that will hopefully result in it being a bit simpler and will enable Government departments to work more effectively through sharing information.I have to say that I really agree with what my colleague Grant Robertson said earlier tonight though. The name of the bill suggests that it could be doing quite a bit more. Obviously transformation and simplification would be quite welcome I think by many members of this House when it comes to the tax system. I can speak on behalf of the Green Party and say that a simpler fairer tax system is one way that we can address the two major challenges that are facing us: growing inequality in this country and climate change. Changing the tax system making it simpler and fairer is one way that we can reduce the growth in the gap between the very rich and everyone else but especially those who are doing it incredibly tough right now.It is another way that we can send signals to business and consumers and transition to a cleaner smarter economy—one that is not going to leave us susceptible to the challenges of climate change. We can reduce fossil fuel use we can reduce pollution—all of that can be done through the tax system and of course that is a challenge that unfortunately our National Government has completely failed to take up in its nearly 8 years in Government. All it has done with the tax system is tinker around the edges. I have to say that the work on this bill was done by officials—it is good work; nothing to criticise other than that there are some omissions—but ultimately the officials’ priorities are determined by the Government of the day.It is interesting because last week we heard from the Prime Minister that the Inland Revenue Department (IRD) had not been able to progress changes to the rules around New Zealand foreign trusts to avoid the use of New Zealand as a tax shelter by individuals who live overseas because the IRD had other priorities. But I think that is really shifting blame because it is the Government of the day that directs the officials in what their programme of work should be. It determines their priorities and gives them the resource to be able to undertake that work. So I would say that certainly something that is missing from this bill—which would be very appropriate given all of the news around the Panama Papers in the last week and a half—would be amendments that would simplify the work that the IRD would have to do and does have to undertake if and when other countries request information from us about New Zealand foreign trusts.At the moment the situation is this: we have got these New Zealand foreign trusts and somebody who does not live in New Zealand and does not earn money in New Zealand can set up a foreign trust which they can use to hide assets and avoid paying tax or even worse hide criminal activities. Of course there are legitimate purposes for these trusts as well but because of the secrecy around them it is inherently attractive to those who would want to hide criminal activity or avoid paying tax in their home country.Last week the Prime Minister claimed that there was full disclosure there was no problem to change it and the IRD was collecting or requiring the trusts to keep all of this information. What he did not say was that unless the other country is Australia if any country in the world was to ask us for information about foreign trusts that have been set up in which the settlor is resident in their home country the IRD would not be able to give them that information because the IRD does not collect the information. It would have to go through the 12000 New Zealand foreign trusts that are registered here. You can imagine that huge burden of bureaucracy. It would actually be impossible for us to effectively share information with other countries even those that have a double tax agreement with us. Of course there are about 40 countries that have a double tax agreement with New Zealand and another 12 that have some information-sharing arrangements with us but fundamentally because of the nature of the New Zealand foreign trusts and the information collected by IRD at the point at which they are set up the only information that needs to be given to the IRD is the name of the trust—Mr DEPUTY SPEAKER: Come back to the bill.JULIE ANNE GENTER: —which may have no bearing whatsoever on who the settlor is or what the activity is or even the date that it has been settled.Mr DEPUTY SPEAKER: Back to the bill.JULIE ANNE GENTER: So one way that this bill could be improved—because it is about transformation first phase simplification and other measures—would be to have provisions in it that set up more complete disclosure and a registry so that when the IRD collects that information it would then be much easier for it to share information with other countries and prevent tax avoidance and other criminal activities. I am sure that is something that New Zealand would want to be doing.The Prime Minister himself said that we are working with the OECD and that we are trying to crack down on people who are avoiding paying tax here in New Zealand—although unfortunately of course we have heard just in the last few weeks as well that the Government has no idea whatsoever about how much tax it is missing out on from multinational companies that avoid paying tax in New Zealand. We have had estimates anywhere from half a billion dollars a year to a billion dollars a year—potentially more. This is a lot of revenue that this National Government has simply failed to prioritise while just earlier today we were going through the Committee stage of a bill that is setting up a regime amending the student loan scheme so that we can get more information about people who have outstanding student loans who are living overseas and chase down the money that they owe the Government—those students—rather than chase down the revenue that is owed by big multinational corporates that earn huge profits.So I think that what is missing in this legislation and what has been talked about in the House earlier in another bill that we heard at the same time really demonstrates the priorities of this National Government. Ultimately it is protecting the status quo. It is tinkering around the edges but fundamentally is committed to an economy that is unfair and unsustainable.Mr DEPUTY SPEAKER: Order! I will just remind the member—she will be seated while I am speaking—that this is not a general debate speech. It is specifically about this bill in relation to taxation. The fact that she spent some time talking about what it is not does not actually address the bill. So I invite her to come back to the bill please.JULIE ANNE GENTER: I raise a point of order Mr Speaker. I think that of all the speeches that we have heard tonight on this bill mine is straying no more from the bill than any other speech.Mr DEPUTY SPEAKER: Well that is not the point. The point is that I have asked you to come back to the bill. The fact that you are saying that you are sinning to a lesser degree than other speakers does not bring your speech into order. The fact that I may have gone to sleep while somebody else was giving their contribution does not necessarily allow you to have a similar amount of lack of attention from me. So please come back to the bill.JULIE ANNE GENTER: As I said the Green Party will be supporting this bill. It does not make any radical changes to our unfair tax system which the National Government is continuing to support. With all the different issues that have been in the news in the last few weeks I do think that the National Government should be rethinking its priorities and looking out for average New Zealanders and looking to making changes to the tax system that are actually going to deliver a fairer greener society here in New Zealand.RIA BOND (NZ First): It is a pleasure to stand and speak to the Taxation (Transformation: First Phase Simplification and Other Measures) Bill on behalf of my colleague Fletcher Tabuteau tonight.I wish to begin by commending the Finance and Expenditure Committee for a detailed and comprehensive analysis and commentary on another Government taxation bill which amends a total of eight Acts. It is extremely important that an omnibus bill passing through this House contains no errors oversights or unintended consequences. This bill aims to transform simplify and improve the administration of our taxation system and how the Inland Revenue Department (IRD) engages and interacts with taxpayers. The main policy measures in this bill provide for easier communication with and by the IRD simplified tax rules and the sharing of information.During the second reading I would like to address a number of those policy measures on behalf of New Zealand First. During the first reading New Zealand First expressed concerns about how the co-location of IRD staff with other Government departments might impact on the security of personal information and data. The select committee’s report identifies a number of options that were considered by the committee to ensure the secrecy and safety of taxpayer information. It noted that clause 117 in the bill as drafted might have incentivised reckless or negligent behaviour. We would support the select committee’s recommendation that this clause be amended to specify that among other conditions an IRD employee does not breach secrecy conditions if they do not intend the breach and took reasonable care in respect of the place and conditions to prevent it. But this should not preclude court action for flagrant or deliberate breaches either.A core part of this bill deals with a range of provisions to facilitate and formally recognise digital and electronic communication between the IRD and taxpayers as the department moves away from paper towards digital services. This bill also sets out a three-tiered approach to communication and changes to the language used that are proposed in this bill. Information sharing using accepted business software as a means of communication must not breach the secrecy provisions in section 81 of the Tax Administration Act. New Zealand First notes the recommendations from the Finance and Expenditure Committee that this bill be amended so that a new subsection is inserted into the Tax Administration Act to ensure that transmitting information in this way does not constitute a breach of privacy.This bill also deals with the use of taxpayer voice biometric information. The bill as written specifies that the data could be released only with the taxpayer’s consent and only for the purpose of verifying the client’s identity. New Zealand First supports the select committee’s recommendation that an additional safeguard be included whereby the Minister of Revenue should be notified when biometric information is shared.When discussing communication within the context of this bill the select committee reviewed the use of common verbs within legislation. Given the intent of this bill it is simply about how Kiwis interact with the tax department. New Zealand First shares the select committee’s concerns that the use of common verbs to signal specific methods of communication has the potential to confuse taxpayers defeating the whole purpose of simplification. We would support the select committee’s recommendations that common verbs be added to the defined terms list in every section of the Income Tax Act that contains them. Taxpayers must have absolute confidence as to what words like “notify” actually look like in reality. Vocabulary is again an issue with the potential to create an unintended consequence in section 91EE of the Tax Administration Act amended by clause 140. Replacing the word “requested” with “required” suggests that an offence could be committed if that instruction is not followed. This was not the intention of the bill as it was introduced. We would support the Finance and Expenditure Committee’s recommendation to amend the affected clauses.When addressing special tax codes the bill as introduced made several amendments. The select committee has identified legislative error regarding “no notification” tax codes. That needs to be corrected. It also identified a legislative oversight concerning special tax code certificates. New Zealand First strongly endorses making these corrections and amendments.A drafting weakness was also identified by the select committee when reviewing the legislation as it applied to automatic enrolment criteria under provisions relating to KiwiSaver. The wording of the bill as introduced appears to treat an automatic enrolment as a mistake only if there is a failure to meet all criteria. Clause 207 needs to be more specific because the bill’s original intention was that the automatic enrolment “would be treated as a ‘mistaken’ enrolment if one or more of these criteria was not met.” Other provisions in the bill relating to KiwiSaver refer to the opt-out criteria for minors who have been incorrectly enrolled before their 19th birthdays. New Zealand First agrees with the select committee that minors should be protected from being automatically enrolled. We also agree with the select committee recommendation to amend clause 210 to specify that the bill’s opt-out provisions would not apply when a person has contracted directly with a provider and they are still a minor. This change to the relevant section of the KiwiSaver Act 2006 is common sense.New Zealand First supports legislation that is robust well supported by empirical evidence fit for purpose and achieves its intended aim. New Zealand First is happy to support this legislation with the changes as recommended by the select committee. Thank you.Mr DEPUTY SPEAKER: The question is that the motion be agreed to. Those of that opinion will say Aye—[Interruption] I am sorry. I have put the question. [Interruption] I am sorry I have put the question.Bill read a second time.New Zealand Business Number BillThird ReadingHon JUDITH COLLINS (Minister of Corrections) on behalf of theMinister for Economic Development: I move That the New Zealand Business Number Bill be now read a third time. It gives me great satisfaction to support this legislation at the third reading. The New Zealand Business Number is an important part of Result 9 of the Government’s Better Public Services programme which aims to reform the public sector to provide high-quality flexible and cost-effective public services in New Zealand.I would once again like to thank the Commerce Committee and the submitters for their work on and contribution to the changes made to the bill. They will make the bill more effective and ensure that Parliament’s intention is clear. I would also like to express my appreciation for the support received in the House for this legislation.The purpose of the New Zealand Business Number is to enable easier and more efficient interactions for business in New Zealand. The bill will enable the allocation of the New Zealand business numbers to eligible businesses corporate and public entities and to eligible individuals in business unincorporated entities such as sole traders partnerships and trustees of trusts. It will establish the statutory position of Registrar of New Zealand Business Numbers and establish a New Zealand Business Number Register. It establishes rules to enable the access to and use of the 23 pieces of primary business data about each entity that will be held in the New Zealand Business Number Register taking into consideration privacy issues.The combination of a unique number a data set and access to that data results in a New Zealand Business Number ecosystem that will provide savings to businesses savings to Government and e-commerce opportunities. Early adopters in the private sector are already finding uses for the New Zealand Business Number in areas such as export documentation invoicing. Some public sector agencies are also adopting the New Zealand Business Number under the current regulatory framework. The full benefits of the New Zealand Business Number will be realised with wide uptake by the public sector.The more businesses who choose to use the New Zealand Business Number the more value it will have for other businesses already using it. Similarly a whole-of-Government approach to using this number is also important. I would like to assure the business community members that there is a plan to implement this legislation. The previous requirement in the consultation draft of the bill for eight business-facing Government agencies to recognise the New Zealand Business Number was removed prior to the bill being introduced and will be replaced with a set of whole-of-Government directions.Whole-of-Government directions provide more flexibility to be able to adapt to a rapidly changing environment and will also provide agencies with more detailed implementation instructions. The proposed directions are more ambitious in both scope and breadth than what was originally proposed in the draft legislation. Consultation with 185 agencies—that is 32 Government departments and 153 Crown entities—took place from July to October 2015 and analysis was undertaken to ensure a fit for purpose implementation plan.The House will have the opportunity to scrutinise the Government’s plan for the implementation of the New Zealand Business Number across the public sector in the coming months. I commend this bill to the House.Dr DAVID CLARK (Labour—Dunedin North): We will be supporting this bill but we do it with significant reservation. In the Committee stage I moved an amendment to an amendment put forward by Ria Bond from New Zealand First which was an excellent amendment to ensure that this bill actually delivered on what it promised. It was a sensible amendment and I believe that my amendment to the amendment made it even more sensible.Put in plain language it was a small change to the legislation that would have ensured that the Government does implement this bill as the language in the bill suggests: that the Government makes sure that there is a single number for businesses to deal with Government so that when businesses come to deal with Government whether it be with the Immigration Service or with ACC or with the Inland Revenue Department (IRD) or with whoever they want to have to deal with—or might not want to have to deal with but do—they would have a single number that they could put forward and say: “Look in my dealings with Government you will find all of my information under this number. Here is the number. Now can we talk?”.That is what this bill purports to want to do. Unfortunately from the very start there have been doubts about whether the Government can deliver on this. In the Committee stage that amendment was put forward to test the Government’s mettle—to say: is the Government really committed to achieving this outcome of having a single number for business to deal with the Government? The amendment said that the Government will put this into play in 2 years’ time.The opportunity of course was there for the Government to say: “Look Mr Clark. You’re being a little unrealistic. Let’s make it 3 years’ time. Or let’s make it 4 years’ time.” But no the Government rejected it outright. It did not want a time frame around ensuring that this policy was in place. And so what we learnt from that is that a lot of this is window dressing.The intention is good—the intention is good—that there should be a single number for business to have to deal with the Government. There is a lot of red tape for business and it does not take a member very long in this Parliament or very many visits to business to discover that there is a lot of frustration in dealing with the Government.The Government talks a big game but frequently it is inflexible and it introduces red tape. Under this Government we have seen changes around child support legislation that have put additional burdens on employers. We have seen it trying to introduce tax for car-parks and other measures. We know that putting burdens on business is easy; taking it off is hard in the modern world. We agree with the intention but we share the doubts of the likes of Federated Farmers. Federated Farmers said they were concerned that the list of agencies involved initially did not include WorkSafe with which of course they deal. The list does not include Immigration New Zealand with which of course they deal. They were concerned equally that local government may be considered to be brought in under the business number too. But no moves have been made in that regard.So we are disappointed on this side of the House that the Government has not fully committed to this ideal. We understand that behind the scenes yes there are some tensions with the IRD because the IRD is concerned about data security and the failures of the Government in terms of privacy and information that is important to business and to individuals. We understand that and yet it is the Government’s problem to solve. It is solely responsible for running Government. Its members are the people who can commit resource and who can commit to talking with the officials to make sure that these problems are ironed out to make sure that the system is simple and to make sure that businesses do not have to get tied up in red tape every time they come to Government. But it does not seem willing to do it. And you have to ask why. You have to ask why ultimately.It boils down in my view to the fact that this Government is more concerned with tilting the playing field towards big business. It does not care about small business. We have seen year after year fewer small businesses created under this Government than were created under the last Labour Government. It seems pretty evident from the statistics that the Government is not concerned about the majority of business owners in New Zealand. It talks the talk but it will not walk it. It will not pass legislation that actually delivers on the promise in this bill. The Government will not even set a time frame. It will not even say: “In 5 years’ time there will be a single number that you have to deal with. We will commit to getting our software upgraded or whatever it takes to make sure that businesses have a simple straightforward way into Government.” Instead it says: “We like the idea. We will put it on the never-never.” That is what this bill achieves.It will probably take a Labour Government to come in and sort this out dare I say because I think it will still be a problem in a few years’ time. What is worse is that this will be an additional cost on the Government in the short term. That is something that business will be prepared to wear if we get to a single number in a reasonable period of time. But in the interim businesses will be forced to take on yet another number. And this is something that was warned about in the regulatory impact statement that was put out by Treasury which the Ministry of Business Innovation and Employment worked on which was put out before the bill even got into the House. The officials knew the problem was there but perhaps Steven Joyce’s ears were blocked—I do not know. I do not know why he did not hear this advice. I do not know why the Government did not move behind the scenes to ensure that the processes would be in place to implement this legislation to make sure that the Government could deliver on its promise to business to make it easier to deal with the Government. This is a lost opportunity and we still hope that Government members will find it within themselves to get there to make sure that there is a single business number within a reasonable frame of time.Chartered Accountants Australia and New Zealand told us in its submission “that the benefits for businesses may be overstated … [without] prompt and broad integration by government agencies”. What “prompt and broad” means I do not know. I put forward 2 years; the Government could have said 3 years. But prompt I think means getting this done within 5 years certainly. I would be interested in whether other Government members can outline a time frame in which they expect this business number to come into effect—one that cannot be laughed down in the House. In the meantime businesses must collect another number—yet another number—to deal with the Government.So slow implementation across the Government will carry this cost to business. There is no way to avoid that. What could be avoided is this being put on the never-never. The Government can plan towards that. It can plan towards investing in its own infrastructure to make sure that it has the capacity to deliver on the promise of this bill eventually. I look forward I hope in a future bill that comes to this House to some kind of an indication as to how that is going to be achieved. It may be through the Budget process—all may be revealed. There may be a secret plan going on behind the scenes. There may be hamsters running in the wheels of power generating a plan to deliver on this bill. I surely hope so because right now it comes nowhere near. It is only a promise at this stage.And the problem too is if businesses lose faith in the ability of the Government ever to deliver on this they will hold off on getting that extra number. Businesses will wait and critical mass will be hard to achieve within the government system also. Officials will be doing two tasks: dealing with the existing business number and with the new business number. So if businesses hold off because they do not have faith that the Government can deliver on this we have our greatest problem still. So I am hopeful that the Government is working on this behind the scenes to deliver in the Budget a solution to the problem of the business number that it is creatinghere.This is a Government that is failing on every front with business. Let us face it: it set itself in its glorious Business Growth Agenda a target of getting exports to 40 percent of GDP. It has not come close. It had it at 30 percent—it is going down. It is going down and it is projected to go down further. This is a Government that is failing on every front. It tried to negotiate the Trans-Pacific Partnership—it went off course. It failed to even ask for protections for our housing so that we could protect our economic sovereignty to make decisions in the national interest.This is a Government that is off beam on economic issues. It is failing businesses and here in the short term at least it is adding more red tape to businesses with the promise that it will go in the longer term. I challenge this Government opposite to put down a time frame in which this will be achieved and to stump up with the resources to achieve it. Without that all we are doing here is putting an additional impost on business.It should be easy for business to deal with the Government. There is no excuse for this dilly-dallying for this window dressing. The intention is good. We will support the bill but for goodness’ sake we would like to see from the Government resource and a plan to get us to the single number that is promised in this legislation.MELISSA LEE (National): I would like to thank the member who just sat down David Clark for supporting this bill. But before I move on to talking about the bill I would just like to comment on a couple of things. Dr David Clark talked about how he actually supports businesses and how he wants the economy to grow and I would say one thing to him: support the Trans-Pacific Partnership.It is great today to see the final passage of this New Zealand Business Number Bill. The New Zealand Business Number simplifies how business can work with Government in an effective and productive way. The New Zealand Business Number is an excellent initiative supporting better business access to Government and the wider agencies. It was a privilege to be part of the consultation process that happened. As chairperson of the Commerce Committee I say we have had submissions and actually heard submissions as well. We worked collaboratively with the members opposite as well during the select committee process.The Commerce Committee considered 14 written submissions and heard only five but the committee did not recommend any fundamental changes to the policy of making the cost of doing business easier. New Zealand businesses are growing—whether they are in fact small or larger businesses they are increasing in size as well as in vigour. We are working to lift our long-term growth rate and we will help to do this by continuing to diversify and build productivity in the economy.This House knows that our Government has been working really hard for business as well as supporting the development of high-quality public services. Our public services must be able to give support to both commercial and sole trading needs. We know that businesses have been asking for an easier way to deal with Government agencies and this New Zealand Business Number will be providing that. It will be delivering that for businesses.It is really a pleasure to be able to offer the opportunity to small businesses. Small businesses across New Zealand are the ones with the most to gain from the New Zealand Business Number. Taking up time with bureaucracy is in fact a waste of skills as well as resources for hard-working New Zealanders and this will be reduced through the adoption of the New Zealand Business Number. It will also save businesses about $60 million a year which will naturally help New Zealand to get rid of some debt and support our local economies creating more jobs and opportunities for Kiwi families.A majority of businesses in New Zealand are mum and dad family owned businesses. I mean a big chunk of the New Zealand economy is actually run by small business operators and ease of business is something that this Government wants to promote. Ease of business is something that we are delivering for these businesses through the New Zealand Business Number.I know that members opposite have sort of suggested that this is just another number; it is not so. It is in fact a number that will help to transform our economy. The New Zealand Business Number is a unique identifier provided by the GS1 global standards organisation which supports wider portability across different agencies and sectors and will also allow greater access to e-commerce. It is also able to recognise Australian business numbers. So we will be able to do business with much more ease and hopefully better produce greater profits for these businesses.Businesses are keen and willing to sign up to the New Zealand Business Number and our Government has acquired 10 million unique identifiers to provide to those businesses. I know that there were concerns raised in regard to Government departments taking and using the New Zealand Business Number and that is my hope as well. Implementation is something that needs to happen fairly quickly and I believe that it will. I think the New Zealand Business Number is part of a greater programme of this Government delivering business growth to New Zealand.The Business Growth Agenda is focused on lifting business confidence and on building strong export markets building investments and building innovation. The Business Growth Agenda is a plan from our Government to lift economic performance and support better economic management in this country. The New Zealand Business Number is a great thing for New Zealand and New Zealand businesses. I commend this bill to the House.CLARE CURRAN (Labour—Dunedin South): You know when the Minister Judith Collins gets up and reads a third reading speech in a very quiet monotone voice that there is a problem with the bill and there certainly are some real problems with the New Zealand Business Number Bill. This is a bill that when it came before the Commerce Committee had general support across the House. And the more that we teased into it the more that the submitters came and spoke to us about it the more we realised how unprepared this Government was and how it had not done the work that needed to be done before a bill such as this was introduced and the more we realised how deeply flawed it was.Labour is supporting this bill tonight with very strong reservations. We support it in this third reading because of the intent and because ultimately we all agreed in the first reading and at the select committee in the process and that this was actually a good idea. We had no idea though that this Government had not done the work that it needed to do. And if you want the proof of that pudding the proof was that in her third reading speech the Minister Judith Collins said that 183 I think Government agencies were being consulted with around whether or not they would implement the New Zealand Business Number that that was yet to be determined and that there was “hope” that would happen in the near future. We heard that word used several times by the member Melissa Lee who was the chair of the select committee. We heard that word used several times in her speech—around how “hopefully” this New Zealand Business Number will be implemented across the public sector. Well quite frankly it is not good enough to bring a bill to the House and say: “Hopefully the public sector will actually implement it.”This leads to the main flaws in this bill—the two main flaws that were attempted to be dealt with during the Committee stage by my New Zealand First colleague on the select committee Ria Bond and my colleague from the Labour Party David Clark with the two amendments that were put forward in the Committee stage and were voted down by this Government which would have dealt with the two issues around the time line and the intention of this bill actually being realised. Unfortunately sense did not prevail and I think that is a deep shame because there were opportunities in this bill to make some real change for the business community for the private sector and also across the public sector across Government agencies. There have been words used around transforming the economy. Well there is no evidence that this bill will in the short to medium term transform the economy. I think it is going to take another Government being voted in to actually see the realisation of the true intent behind this bill and I think that is a deep shame because—Brett Hudson: I think it’d be a deep shame if Labour were voted in absolutely.CLARE CURRAN: It is a deep shame and we were told this by numerous submitters. We were told this by the Chartered Accountants we were told this by Federated Farmers we were told this by other submitters—that if this bill did not get implemented across the public sector then it was a sham. And the outcome through this whole process was that the Government could not deliver. I think that is a testament to a Government that really has lost its way a Government that is not doing the work that it should do before it brings a bill of this substance to a select committee and a Government that really is not as my colleague David Clark said looking out for the interests of small business across New Zealand is not paying attention and is trying to introduce something that is actually not going to work in the short term.We are deeply concerned that the Government has not outlined a clear plan or committed the necessary funds for the bill’s stated purpose to be achieved. I think the Opposition in good faith did its best through this process to say that actually this is what the Government needs to do and that we need to have these things in place. But the Government was not listening and is just as it does with all pieces of legislation—or you know 99.9 percent of legislation—railroading it through because it has the numbers on the floor of the House even though some of the most significant submitters coming before the select committee really had severe concerns.One of our concerns in the short to medium term is that this is just another number. We heard no convincing reason through this whole process why the IRD number should or could not be adapted to achieve one universal number for interaction with the Government. I do not know whether we have an actual number for how many actual Government departments have committed to the initial roll-out of the New Zealand Business Number but we heard through the third reading speech from the Minister that there is going to be a plan to implement the legislation through whole-of-Government directions. That is just Government-speak for saying “We did not do the work. We did not do the work and we have to go back and actually consult properly with those different agencies to try to come back with some kind of figure.”These 183 agencies—surely there should be some direction to those agencies around whether or not they are going to commit to this legislation. This is legislation being presumably passed in this House tonight. Why are those Government agencies not being required to commit to that tonight? Why is it going to take an unspecified amount of time for that to happen? What kind of signal does that send to the private sector and to small businesses across New Zealand about whether or not adopting yet another number is going to be effective? What kind of signal does this send to New Zealand about the economy and the transformation of the economy that this bill is supposed to have the effect of? This bill is a shambles. It should not have been a shambles. It should have gone smoothly through all of its stages but it did not. It has had stiff opposition from across the House around the substance of the bill and the deep flaws within it and that is a significant issue.Labour recognises—absolutely recognises—the need to support businesses by cutting red tape where possible to reduce the cost of business transactions for small businesses whether they are sole traders partnerships trusts or whatever. But we believe absolutely that this Government has put itself in the position where it cannot deliver on the promise that lies behind this bill which is why we are giving it only qualified support.The bill hoped to enable Government to provide more consistent and joined-up services saving businesses time and enabling greater e-commerce between businesses and we believe that this bill falls disappointingly short in the short to medium term because the Government has provided no evidence—no evidence—that this will be anything other in the short to medium term than just another number. It has sold itself short and it sold New Zealand short by not providing a credible time line by not putting the resources in place and by not requiring the public sector and all those Government agencies to adhere to what it says is going to transform the economy. This is a disappointing bill.BRETT HUDSON (National): It is a pleasure to rise in support of the New Zealand Business Number Bill in its third reading. A previous speaker Dr Clark showed—it is actually pleasing to see—a very strong interest in small and medium sized business. But actually the New Zealand public were asked very recently about what they thought of the Opposition and its plans and I think the public showed very strongly that they seemed to believe that the quickest and easiest way to massively grow the number of small businesses in New Zealand would be to put Labour in charge of the large ones.Clare Curran: I raise a point of order Mr Speaker. This is a third reading speech and this is a speech about a Government bill and not about the Labour Party.The ASSISTANT SPEAKER (Lindsay Tisch): I am listening carefully to the content and any relevance is a matter for me to rule on. I am asking Brett Hudson to continue.BRETT HUDSON: Thank you Mr Assistant Speaker. I think that was well borne out in the contribution that Dr Clark had to make. Sitting on the select committee we have seen this bill go through each of the stages and go through the submissions process and advice from officials. When we had the Committee of the whole House what we saw was quite frankly a reckless amendment suggested on the floor one that would force agencies to have to set aside other business—other technology business; other business work—simply to meet an arbitrary deadline that the Opposition might have liked to place. When I spoke on that and when I reflected after the Committee of the whole House as we headed into this reading I first thought: “Is this merely an illustration that the Opposition members do not understand technology?”. It could well be that but then on further reflection I was worried that perhaps it is more symbolic of their not understanding business—that they did not actually grasp what they would be asking public sector agencies to set aside in order that they might meet some arbitrary deadline set by the Opposition.Just earlier this evening we were debating the Taxation (Transformation: First Phase Simplification and Other Measures) Bill. This is a tax transformation programme that is going to last for a number of years at the Inland Revenue Department (IRD). The Opposition members would—The ASSISTANT SPEAKER (Lindsay Tisch): Order!BRETT HUDSON: —have the IRD set that aside—The ASSISTANT SPEAKER (Lindsay Tisch): That is not part of this debate.BRETT HUDSON: —simply to meet the requirements of the amendment that they supported in the Committee of the whole House. So I wondered whether perhaps they simply had not grasped the business and then it occurred to me that it could be worse. It could actually be the case that because they realised that Parliament being sovereign has the right to impose any conditions it chooses upon society upon individuals and upon public sector agencies that just because it could it would—and it would do so without giving any consideration as to the other business or the other activities that those agencies are obliged to be delivering over the next 1 2 or even more years. Quite frankly the amendment and Labour’s amendment to the amendment were not only reckless they were feckless.The ASSISTANT SPEAKER (Lindsay Tisch): Order! There is Speaker’s ruling 137/4. You can mention in passing amendments that have been defeated in the Committee of the whole House but you cannot dwell on them at length. So I will ask the member to come back to the content of the third reading speech.BRETT HUDSON: Thank you Mr Assistant Speaker. So what we do have in the House at the third reading is the bill unamended which will provide a mechanism for small and medium sized businesses in particular to be able to undertake their interactions with the Government in a much more cost and time-effective manner; one that will help them to avoid the troubling and quite frankly wasteful exercise of doing things like repeating such basic public information as the nature of your business and the address—that public register of information—not having to repeat that with every agency you deal with if any of that should change even such as an address if you relocate and not having to provide that update to every single agency.This is a very effective and pragmatic bill. I have enjoyed working on it through each of the stages. It does appear as if it will pass in the House tonight and I commend this bill to the House.JAMES SHAW (Co-Leader—Green): It is my pleasure to rise on behalf of the Green Party in support of the New Zealand Business Number Bill. I would like to acknowledge the work of the Commerce Committee and the officials in getting the bill to this stage and in particular I would like to acknowledge the chair of the select committee Melissa Lee.It is nice to be able to see the passage of this bill at last. It is obviously not the longest bill to wend its way through the House but it has taken over a year now to get to this stage. One of my questions which I have always held about this is why it requires an Act of Parliament to be able to issue numbers to trading entities and businesses in New Zealand. It does seem to me quite strange that it actually requires an Act of Parliament for us to pass a law for the Government to say “Here you are. Here’s a number.” but apparently it does and so there you have it—we are committed to this course of action. But it does raise a question to me about the extent to which legislation is required to do what seems to be a fairly basic function.I want to acknowledge that there are a number of concerns that have been raised at all stages of the process that have not been answered entirely adequately by the Government as the bill has wound its way through the process. One of those is the fairly well-worn concern which previous speakers tonight have spoken on in relation to the ability of the Government to actually deliver the New Zealand Business Number project to the people whom it is supposed to benefit and to do so in a manner that is efficient and effective. There is what appears to be a lack of resources that are being provided in order to be able to deliver once the legislation is passed. So I think that that is a concern that does still need answering.One of the things that I think we need to do is ensure that when we have passed this bill and the roll-out starts going we actually have good methods of monitoring the effectiveness because often when it comes to these kinds of programmes these kinds of services they can end up being of more benefit to the Government than they are to the people whom they are supposed to benefit. So they become a tool of the Government making things more efficient and effective for the Government that actually make things in many cases more difficult for the communities that they are supposed to serve. So I would like to know what kind of monitoring is going to be set up as a result of this to see whether this programme is actually delivering what it is supposed to do.One of the other concerns that was raised at a number of stages was around privacy and data security. There have been a number of reasonably high-profile cases in recent times where the Government has lost data or data has become exposed and in order to have a business number obviously users of it need to provide a reasonable amount of personal information. Again we would need to know what kind of monitoring systems are in place to ensure not only that the system is being delivered effectively but also that users’ data is safe and provided for.Having said that there are a number of benefits here—they have been fairly well trotted out in terms of the cost of doing business of interacting with Government services and having to reregister and have different registration processes with different agencies and so on. So that set of benefits is obviously why the Green Party is supporting this bill—because it will make business interactions with the Government more efficient and fast or it is certainly intended to. It does provide the opportunity to harmonise more effectively with Australia which is obviously very important to us and very important to businesses that trade with Australia.But I just wanted to focus for a minute on some of the opportunities—some of things that actually have not been spoken about either in the regulatory impact statement or in the business case that the Government put forward when it tabled the bill in the first place. These are things I think that would be well worth exploring. The first is the opportunity to use this to assist with the Government’s big data set about trading enterprises and businesses in New Zealand. So having set up a unique identifying number and developed a trading relationship with not just limited liability companies but also trading entities of all sorts across the country we should be able to get a much better picture than we currently do—and I say we should be able to get a much better picture than we already have—of the size and nature of New Zealand businesses and trading organisations. That in itself will become incredibly valuable in terms of the Government’s ability to shape services to those different sectors.I just wanted to use the example of that little Wellington-based company Xero which is currently doing the accounts for most of the planet and its ability from that position to be able to aggregate data to build up a very sophisticated picture about the nature of business and of trade in New Zealand and around the world. It actually has better data than the Government does because of course it is doing the books for most of these organisations or a very large number of these organisations. I know that the business number programme is not designed specifically to do that but it does create the mechanism to enable that kind of big data collection and analysis later on. So I think that is an opportunity that we want to explore here.The second which I have mentioned before is the opportunity to try to use this to cut down on fraud and zombie companies which is a large and growing problem—the idea that people in many cases small trades organisations will simply shut down their business rather than pay the bills and then reopen under another name in order to get out of paying bills and they will do this repeatedly. I get this a lot as I travel around the country that people in business are constantly frustrated by this phenomenon and there is not an easy way of dealing with it. One of the opportunities—again not explicitly provided for in the legislation—that this may enable is the opportunity for us to have that one-to-one relationship with these trading enterprises and to use that to be able to cut down on instances of fraud and zombie companies which are operators that are shutting down and then starting up without paying the bills from their previous entity. That is a second opportunity that I think we want to explore having set up this programme.The third opportunity that I think this provides is the ability to create aggregate services. In New Zealand large companies will have access to things like deals on cheaper petrol for company cars; they will have insurance deals health insurance; they will be able to get bulk discounts on materials; and so on and so forth. Actually the vast majority of enterprises in New Zealand which are very small operators do not have the scale to be able to tap into these kinds of deals. So the companies that are least able and most vulnerable actually are the ones that end up paying the higher prices and it is the larger companies that have got the resources that pay the lower prices. I think being able to form this one-to-one relationship with all of these enterprises and trading organisations around the country does provide the opportunity to create aggregate services for very small micro-enterprises and so on which otherwise would not be able to have access to them.Finally I think one of the obvious things here is that we already have business numbers in place for most of our companies in New Zealand or many companies in New Zealand—limited liability companies and so on—and all this really does is simply extend the same service in many ways to other organisations like social enterprises State sector organisations like schools and district health boards non-profits charity shops and so on freelancers and sole traders who are not covered by the other programme and so the idea that actually everyone no matter their trading form will be able to interact with the Government in the same way and on an equal footing is a good one.In conclusion it is odd that it needs legislation to issue a number. There are some concerns that I do not think were addressed adequately as the bill passed its passage through the House. I do think that the bill does have the promise of many benefits and some unexplored opportunities and so the Green Party is pleased to be able to support this bill in its final reading. Thank you.RIA BOND (NZ First): I rise on behalf of New Zealand First to take this third call in the House tonight on the New Zealand Business Number Bill which is for the National-led Government a very important piece of legislation that seeks to promote innovation and business. New Zealand First supports the intent of this bill which is primarily to enhance the Government’s initiatives aimed at achieving Better Public Services result No. 9: to achieve better business commitment by reducing the business costs from effort in dealing with Government by 25 percent by 2017. It aims to reduce the businesses’ red tape for eligible entities and it also aims to increase or lift the productivity of businesses so therefore there is less time stuck on the phone trying to make contact with Government agencies and more time spent working in their businesses especially for sole traders who work not only in their business but also on their businesses as often they are the only ones who are actually within their business. And it also ultimately aims to increase the cost savings to businesses.I am disappointed in the National Government members across the House who took calls in the Committee of the whole House on this bill because a good amount of content on talking to this bill was merely—well it was simply a mechanical delivery with very few impressive details coming out of the calls. That showed that those members did not fully understand the total effects of this bill and did not understand why my amendment would have helped to assist the Government to incorporate those Government agencies to adopt the New Zealand Business Number Bill. That showed the lack of care for ensuring that legislation set down in this House is fit for purpose and the intent of this bill particularly could have been achieved with my amendment.I want to say that I noted that in her opening statement tonight Minister Judith Collins mentioned the fact that the Government does not have complete buy-in from the nine agencies that are required to actually adopt the process to interact with the aim and intent of this bill. I just want to add that that is still putting the cart before the horse because what the Minister failed to give this House and New Zealanders who are actually in business in this country was a time frame by which the agencies would be required to come into line and adopt the system so it can be interactive and it can actually aim to complete the intent of this bill and not just become another wasted resource.What this Government failed to do in all of its members’ calls taken in this House was to back itself. It also failed to back small to medium sized enterprises. It failed to back sole traders. It failed to back trusts and incorporated societies. And that in itself showed the absolute failure to back its very own Government agencies and to say that this was indeed a good sound bill that would achieve its intent and purpose. It was simply a farce.Let us remember that during my Committee call—and I do understand Mr Assistant Speaker that you have given a ruling to remind us that we cannot dwell too much on what is lost—I provided the Government support for this bill from my amendment. It amended clause 28 which reads: “Government agencies may use NZBN”. For me it was quite simple to change that clause to “Government agencies must use NZBN”. I knew when I introduced that amendment to the Committee that not all 880 agencies would be able to pick that up. I knew that and I understood that. The rationale for my amendment was to help assist the Government and Government agencies to become part of the single portal system if that use is in accordance with the purposes of this legislation. Dr David Clark amended my amendment to provide the grace of time to allow the Government agencies to become part of the successful implementation of this bill.Let us remember that when the Government originally presented this bill to the House the intent of this Government was to have all of the Government agencies included in this business number roll-out—it would be mandatory. New Zealand First asks why this was removed from this bill. The only answer that I can see clearly is that this bill was poorly drafted and glaringly the Government did not understand the financial risk to its own Government agencies. The reason that fundamentally the Government has failed to ensure its own agencies are kept up to speed at the administration and IT level is it has continually underfunded core expenditure to ensure robust clean efficient systems are regularly maintained. That should have been a strong focus and that really is the fundamental reason why all of a sudden clause 34 was stripped from this bill.Mandatory participation by the Government agencies should be required to ensure that the New Zealand Business Number does not become just another number another business overhead from another bill that has unintended consequences in inequality to entities and not Government agencies. Secondly it makes me question whether the Government was muscled by its own agencies to pull them out of the business number process. Did it bow to pressure? Was that why clause 34 was actually stripped from this bill? I say that that is embarrassing. I say that that is actually really embarrassing for this Government if that was the case. There is a formidable saying in the business world: “The devil is in the detail”. I can assure you that from this side of the House we are getting used to this National-led Government doing the exact opposite—the exact opposite—and not understanding just how devilish the detail is like in this poorly constructed bill.We heard from various submitters one of them being Chartered Accountants Australia and New Zealand which opposed the clause being removed for the very reasons that I have already alluded to in both my second reading speech and the Committee of the whole House stage. It said that the benefits for businesses may be overstated. As a former businesswoman myself I speak first-hand of the neglect this National-led Government has inflicted on small to medium sized businesses and sole traders which make a significant contribution to our economy. That is no secret and members of this House know this too.We have heard in this House that for a period of time businesses have been asking for a more streamlined secure easier process with which to interact with Government agencies and this bill goes part-way to allowing that. This bill is widening up the scope of catchment by including small to medium sized enterprises sole traders incorporated societies and trusts. I go back to the fact that New Zealand First supports the intent of this bill but without mandatory participation by Government agencies this bill will become another problematic one and we may be here again in a year’s time amending this bill again.I would also like to say that during the Minister’s speech earlier she mentioned that the agencies will be required within a length of time to hook into the system again. New Zealand First wants an answer: when will that be? Because a piece of string is quite long. How many times are we to see in the 51st Parliament or have we seen already unintended consequences like zero-hour contracts retrospective discoveries like paying back beneficiaries increased red tape—The ASSISTANT SPEAKER (Lindsay Tisch): Order! Come back to the bill.RIA BOND: OK Mr Assistant Speaker. Too many times we have seen the 51st Parliament amend Acts that have not been fit for purpose. This National-led Government has had so many instances of poor administration that I have actually lost count of how many times we have had to do this. Just take the news this morning of confidential medical records being found scattered across a Christchurch street. That is more embarrassment—The ASSISTANT SPEAKER (Lindsay Tisch): Order! That is not part of the bill.RIA BOND: OK. On one hand this Government expects thousands of owner-operator businesses—in places like Invercargill where I come from—to upgrade their administration and IT systems to fit in with the New Zealand Business Number. The Government itself on the other hand has removed clause 34 which ensured that all Government agencies participated in the New Zealand Business Number process. I speak to constituents in Southland on a daily basis who are fed up with this Government’s neglect and I wholeheartedly agree with those constituents who tell me that this Government has an inability to really listen and to ensure that legislation that we progress in this House is fit for purpose and not a cost to businesses.I know it is simply not achievable as I said earlier to have all 880 Government agencies participate and adopt the New Zealand Business Number and to hook up into the online system. I know that and I knew that through the Committee of the whole House stage. The riddle in this particular bill for me is that when the Government introduced the New Zealand Business Number Bill to the House it actually had clause 34 inside of it. Those provisions meant that it would be mandatory for all Government agencies to participate in this bill.If Government agencies are so ill-prepared for the New Zealand Business Number that they are granted voluntary participation as the Minister clearly spoke to earlier with unplanned time frames I ask how it is fair to small and mediumsized enterprises that they are being forced into mandatory compliance within 28 days of the Royal assent. Enterprises like taxi operators like dairy owners like sharemilkers like hairdressers and like independent midwives—how is this bill fair for those sectors?In closing New Zealand First will not be supporting this bill for of all the reasons I have stated here tonight. It is not going to reduce red tape. It will delay significant recognition of the benefits to businesses using this bill. Thank you.SIMON O’CONNOR (National—Tāmaki): I am actually very pleased to take a call on the New Zealand Business Number Bill. I want to stress that because actually the speech we have just heard was all about a failed amendment that did not come to pass which has nothing to do of course with the third reading. I also take a little bit of umbrage at the member who has just been speaking Ria Bond in saying that the National Party has been taking rather short calls that are not very good at all. That is quite ironic seeing that I am not reading from prepared speech notes but am actually just prepared to speak on the bill; nor am I launching into major ad hominem attacks on the Government.This is actually a remarkably simple bill which is why from this side we are not taking an egregious amount of time to discuss it. Ultimately it is about making business interaction with Government easier. We have heard a lot of talk about Government agencies trying to deal with Government agencies. This is fundamentally one of the points of the Business Growth Agenda which the Government has clearly outlined and is now clearly delivering and that will make it easier for businesses to—Todd Barclay: Fundamental.SIMON O’CONNOR: Yes fundamental actually as one of my colleagues—in fact the fine member for Clutha-Southland Todd Barclay—is saying. It is actually fundamental to good business—that is easy engagement through the New Zealand Business Number particularly with Government agencies but of course business to business. As we have heard from some people it is also for New Zealand businesses to link in with Australian businesses.It is a simple bill. It has been very well accorded and very well looked after in the Commerce Committee under the leadership of Melissa Lee. I was going to say that I was pleased it had the support of the whole House—we even had the Greens on board and actually I do thank James Shaw for his contribution; I thought that was worthwhile. I am disappointed but not surprised in New Zealand First. But good things take time—they will come on board.Again it is a simple bill. I commend it to the House but also importantly I commend it to New Zealand businesses to sign up. Thank you very much.STUART NASH (Labour—Napier): It is with a sense of irony that I note that the member Simon O’Connor stood up and criticised the New Zealand First member Ria Bond for an excellent speech that she gave because she read a prepared statement but spoke for 10 minutes—I think it was a very enlightening speech—when the member himself stands up says absolutely nothing and sits down after 3 minutes.Kris Faafoi: Was it 3?STUART NASH: Was it 3 or was it 2½? There is a word beginning with “h” that we are not allowed to use in this House but I think that everyone knows what it is.There is absolutely no doubt that making it easier for businesses to deal with Government departments and Government agencies etc. is a very admirable outcome. It is a very admirable outcome and if we can achieve that it would be fantastic but one thing that I would say is that simply saying it will happen does not mean that it will happen. Simply putting a piece of flawed legislation in does not mean it will happen. The thing about this Government that I am increasingly seeing is that it does not walk the walk. It talks the talk: those members come in here and say “We’re business-friendly we want to cut red tape we want to make things easier for businesses to get on with Government and we want to make the interaction easier.” But it is just not happening.We had a bill here that was supported by every political party but there was a problem in that bill. The problem in that bill was that companies were required to do something but Government departments were not. When that happens the trust that needs to be built up between business and Government will just not happen. Ria Bond and Dr David Clark put forward a very helpful suggestion that said “Hey do you know what we understand what this bill is trying to achieve; we understand the necessity actually of making it easier for businesses to deal with Government” because in this day and age things move at such a pace that if the information flow is in real time then I believe it will make it easier.The tax department is right—the Inland Revenue Department is spending $1.3 billion on something called business transformation. It is a system that is going to make it—I hope and I believe—a lot easier for taxpayers to fill in tax returns and interact with the Inland Revenue Department. It is what we need in the 21st century. But if a bill like this is put in place and there is no time frame or there is no requirement for Government agencies to aptly implement this then why would business do it? Why would business say: “OK I can see a benefit here but the Government cannot see a benefit.”? It has got to be a two-way process. One of the absolute privileges of being in this House is passing legislation that can make things easier for everyone. This bill could have done this—it could have done it. It is a real missed opportunity and it is such a shame.In my experience there are three variables that businesses like to operate with whether it is supply whether it is in the private sector whether it is the Government sector whether it is domestically or whether it is overseas. One of these variables is that they have got to build up trust. That is the supplier or the customer or the client has got to do what they say they are going to do. The second thing is integrity. This comes down to the honesty of process. Trust is a subset of integrity but it means slightly different things. It is slightly more than “I say what I am going to do”; it is: “You can trust my people you can trust the processes I am a good taxpayer I do what I say I am going to do but also I get things done and let’s work together in a constructive way.” The third one is transparency.There is no point in introducing a bill like this and taking up the time of the House—I hope that we are not boring you Mr Barclay; I see you yawning in the back there but as a young pup you could actually learn some stuff about this. I would suggest that when that member goes and talks to the businesses in his electorate—because he cannot talk to them out of experience because he has none—he actually asks businessmen and businesswomen what they want from Government. As opposed to saying “We know what you want.” how about you ask them: “What would you like?”. I will tell you what those businesses would like—because I have worked in a number of businesses large and small—they will say: “Let us have a two-way relationship.”This is what businesses actually want: they actually do want to interact with Government. Believe it or not they want their tax to be easy they want red tape cut and they do not want to be sitting at the dining room table at 10.30 at night angsting over GST. If we can make it easier for businesses—and we have the potential to do this—then it will deliver the $60 million worth of savings or reductions in compliance costs. But when we put out this sort of bill which says “Businesses you have got to do this.” but there is no time frame for the Government to do it then all businesses do is go: “This is just another number. This is just another piece of compliance. This is just something else that the Government is throwing at me.”So instead of having the desired effect of reducing compliance what it actually does is it increases compliance. Instead of having the effect of saying “Wow the Government has come out with something that I get; this is 21st century engagement.” all it does is makes them say: “Oh goodness me—more information that the Government is going to collect about my business; more information that I am going to have to duplicate.” So it actually has the opposite effect of what the intention is. And that is a real shame—it is a real shame because this is the third bill that I have spoken on tonight where the Government had the opportunity to actually get it right and in three out of three bills it has missed it.I will tell you why I think this is the case: I think after 8 years it has sort of lost touch. It has become arrogant and has lost touch with what middle New Zealand wants. It has lost touch with what really drives business. It happens. Do not worry about it it happens after 8 years. It happened to the Clark Government it happened to the Bolger Government and it is happening to the Key Government. After 8 years you forget to go to business you forget to go to your key stakeholders and actually ask them what they would like to see and you believe that you have got all the answers—you believe that as a Government you know the answers and you can go to business and say: “See this is what you want.” Well I can tell you Government you have actually got it wrong. All you have done is create compliance for businesses when you had the opportunity to reduce compliance.When I look at the risk profile in the—Kris Faafoi: The regulatory impact statement.STUART NASH: —the regulatory impact statement the RIS—thank you Mr Faafoi—it talks about reducing compliance costs. That is the aim: “reduces costs to business government by enabling fewer more accurate business-to-business and business to Government transactions.” I do not think that there would be anyone in this House who would disagree with that aim. It is fabulous it needs to happen and it is what 21st century information technology should be able to deliver. What the regulatory impact statement does say which is quite surprising is: “However these benefits are not quantifiable as the NZBN is an enabler of opportunities it does not deliver these opportunities.”So what this basically says is that before any business is going to take this up they have got to see value. They have got to be able to see value and say: “OK I am going to go through this process proactively”—because it will take a bit of time and they are going to need to access websites and put in information—“because I see a significant amount of value.” But what I can say and what I would like to reiterate is that if the Government departments that a business liaises with are not part of this then the business will not see value. If a business has to have duplicate communications with different Government agencies then this is defeating the point of what this bill is trying to achieve. I guarantee that within the first 12 months of a Labour-led Government we will be going out to business and saying: “Hey you know what? The intent of this bill was right; let us put it right in legislation.”This bill came to the House with good intentions. It came to the select committee with good intentions. New Zealand First and Labour were trying to work with the Government with good intentions to get this right but because the Government knows best because it has become arrogant and it has lost touch with what the market actually wants we are now delivering a product that I very much doubt will get much uptake from business at all. This is another missed opportunity by a Government that is now out of touch and has forgotten how to ask the question: “How can we help you?”. Instead what it is doing now is saying: “We know best; this is what you want.” That is the wrong approach to legislation. I think this is a missed opportunity and that is a real shame. Thank you very much.KANWALJIT SINGH BAKSHI (National): I stand in support of the New Zealand Business Number Bill in its third reading. The previous speaker Stuart Nash was just mentioning that this Government is out of touch. I can assure you that this Government is working at ground level and we are listening to businesses and that is why we brought this legislation in. I think that member for whom I have got a bit of respect should go out and talk to the people. That party has been totally out of touch for a long time and I do not see any light—where the Labour Party will be in power—for a long time. And looking at the recent polls I think you are dreaming.Darroch Ball: Arrogance—arrogance!KANWALJIT SINGH BAKSHI: Yes I am coming to that side. It is not arrogance New Zealand First. Your leader is better than their leader so you can have some credit for it I think. This bill—Carmel Sepuloni: We thought you were better than that Bakshi.KANWALJIT SINGH BAKSHI: Sorry? [Interruption]The ASSISTANT SPEAKER (Lindsay Tisch): Order!Hon Members: Nasty. Nasty member.KANWALJIT SINGH BAKSHI: Who is a nasty—The ASSISTANT SPEAKER (Lindsay Tisch): Order! I want to hear what the member is saying. There is too much barracking across the benches.KANWALJIT SINGH BAKSHI: Thank you Mr Assistant Speaker. As has been mentioned earlier this bill will help businesses to cut red-tapeism. They have to give their details once and then if they have to change it is only once that they have to do it. But all other agencies can access those details for the business. With these words I support this bill.KRIS FAAFOI (Labour—Mana): It is an absolute pleasure to take the final call for Labour on the New Zealand Business Number Bill and to bring together some of the arguments that my colleagues have made during this final reading.I do want to address some of the comments made by the previous speaker Kanwaljit Singh Bakshi and the fact that he believes his side of the House is not out of touch. Well I think that if you put this piece of legislation together with an earlier piece of legislation that we were debating around GST you will find that this Government is increasingly out of touch with the likes of small to medium sized businesses. If you were a small business and you wanted the full effect of this piece of legislation then you would want to see the kinds of changes that were proffered by Dr David Clark and by Ria Bond from the New Zealand First Party put into this piece of legislation at the Committee stage. They were not. If you were watching earlier from home about the GST taxation bill you would want to make sure that the tangible products that are being bought overseas were tackled by this Government and GST put on that. But this Government is not willing to do that. It is not willing to support small businesses and put GST on those products. So this Government is becoming increasingly out of touch with the likes of small to medium sized businesses.I think that the legislative process that we have in this House is a good one. We start with a first reading and then through those various stages a piece of legislation is meant to get better. It is meant to get better at the select committee because the public and businesses and organisations and political parties can have input into that process to make changes that hopefully all parties in this House can agree to. So we get through the select committee process into the second reading stage and the Committee of the whole House where different parties and individual members can put forward changes amendments SOPs—a Supplementary Order Paper in parliamentary language—to make things better. But what we have here is a piece of legislation that started out with great promise but has actually got worse during the parliamentary process.The big question I want to ask is: what happened to clause 34? What happened to clause 34? It was there in the first reading and it gave a mandate for all Government departments to use and prioritise the New Zealand Business Number but somewhere along the process clause 34 went missing. The Government bottled out. It said: “We want to back this New Zealand Business Number so we are going to make all Government departments use it.” That was the essence of clause 34 but that went mysteriously missing after the select committee process quite simply because the Government said “We want to do this.” and then it realised “Actually we can’t do this. We can’t do it because actually we’re not ready for this.”So we are going to get ourselves into a farcical situation where the Government has introduced this New Zealand Business Number to make things more efficient for businesses out there but we may have some businesses actually having to have two numbers making things tougher and creating more red tape for businesses. Not only will they probably have to have an Inland Revenue Department (IRD) number with which they will deal with the IRD as per usual but they may also have to have a New Zealand Business Number. So the whole premise of this piece of legislation to have one individual identifying number for businesses could be out the door because this Government is not backing itself is not backing those Government departments and is not properly resourcing those Government departments to make sure that this business number can be rolled out around all the relevant departments and so it can actually be of use to small and medium sized businesses.Of course I would say that because I am biased. I am on this side of the House. But hold on. The Government was warned about this by the officials at the very beginning of the process. But do not take my word for it. I will read from the last paragraph of the opening page of the regulatory impact statement: “A second issue for the success of the NZBN”—we all want that; you want that; we want that; we’re going to vote for it; but I do not think it is going to happen—“is ensuring that there is an efficient and rapid uptake of the number by businesses and state sector agencies.” That sounds pretty common-sense. If you are going to introduce a number make sure that Government departments use it and businesses use it. “This is needed to build momentum for infrastructure development and private investment in commercial opportunities.” And here we go: “A potential conundrum arises if agencies ‘wait’ for all businesses and conversely if businesses ‘wait’ for the agencies. Without significant uptake there is a risk that the identifier is not integrated and utilised widely and just becomes another number rather than a replacement for the many current identifiers—as is intended.” That is official-speak. That is from the advisers to the bill. In English that is saying that if we do not get the Government departments ready to use the number in an effective and broad enough manner so that sufficient businesses pick up the New Zealand Business Number we think the New Zealand Business Number could be a waste of time ineffective and make things harder for the very people whom we want to help.Hon Dr Jonathan Coleman: Sounds like a Labour Party meeting.KRIS FAAFOI: Ha ha! You just keep eating your slops. Ha ha! It reminds me of the kind of legislation you support and the answers you give at question time. He is still smiling from the slops. You just keep eating your slops. Ineffective just like that Minister; hopeless just like that Minister; and not willing to be rolled out—we wish he was rolled out.This piece of legislation started with good intentions. Labour supported this legislation and thought it would get better during the process. But it has actually got worse. So a big message to those out there those small business owners and medium business owners whom this Government says it is working for—well it started but did not finish the job. So all that hard work the Government said it was going to do for you—to make your life easier to save you money—could be absolutely ineffectual because this Government bottled out. Again where is clause 34—the very important clause 34?The ASSISTANT SPEAKER (Lindsay Tisch): It is not in the bill. We can only talk about those things—KRIS FAAFOI: Well it is not there because they took it out.The ASSISTANT SPEAKER (Lindsay Tisch): Order! We are on a third reading debate. I have mentioned this previously. We are talking about what has been reported back from the Committee of the whole House back to the third reading. I would ask members to concentrate on the content of a third reading debate and what has been reported back from the Committee of the whole House. And that also refers to amendments; I gave a ruling on that earlier.KRIS FAAFOI: Thank you very much Mr Assistant Speaker.This bill could have been better if the Government had taken on amendments from Ria Bond and David Clark that would have essentially reinserted a clause that was there at the beginning of the process but is not there now. It would have put pressure on Government departments to take up this business number to make sure that they were offering it to as many of the people as possible who interact with those Government departments so that they could get the benefits of the number. The legislation that we have got now does not have that in it. And I think it is weaker for it because now there is no mandate no pressure on those Government departments to say: “Look the Government has introduced this number. The pressure is on us to get people out there signed up so we can get the benefits of this.” And quite good benefits were offered up at the very beginning of this legislative process. I think there was around a $60 million benefit to people—individuals and businesses out there—which is not an insignificant amount of money that could have been redirected into giving people pay rises because they have not seen one of those for a while or into creating some jobs because that has not happened for a while. But no—we do not think that entire $60 million is going to be realised because the Government has bottled out.So let me put this in very plain English for those people who are listening. This could have been better. It started off very well. But the Government did not back itself and therefore has not supported those small and medium sized businesses to make sure that this piece of legislation which at the very beginning of the process had wide and broad support could be effective. The Government will congratulate itself on passing this piece of legislation but it is only any good if it is effective—and it is not. It could have been better. This Government says that it backs small and medium sized businesses but in this case it has not.I think that is another example of how this Government has got out of touch with the very people whom it says it supports.PAUL FOSTER-BELL (National): E Te Mana Whakawā Tuarua tēnā koe tēnā koutou katoa e ngā mema o Te Whare.[Acknowledgments to you Mr Deputy Speaker and to all you members of the House.]In speaking in this third reading debate on the New Zealand Business Number Bill I want to say that it is a very fine bill—contrary to what the member who has just resumed his seat Kris Faafoi has said. The New Zealand Business Number Bill will save New Zealand businesses—small medium and large enterprises—up to $60 million. That is a significant saving to those businesses and one that only a National-led Government could deliver as we know from the turpitudes they suffered at the hands of the Labour regime in years gone by.A significant part of this bill is giving interoperability with our trans-Tasman trading partners so a New Zealand business number will be able to operate in Australia and an Australian business number will be recognised here. There will be mutual recognition. This is very important in the modern economy where we have disruptive technology and small start-ups taking advantage of the ability to operate across borders particularly in the electronic commerce space.It is a fine bill. It has been well considered by the Committee of the whole House as well as the Commerce Committee. I want to commend the members of the select committee; the chair Melissa Lee; the deputy chairman Brett Hudson—the very fine member from Ōhāriu—and also the Minister for Economic Development the Hon Steven Joyce who introduced the bill. I commend the bill to the House.A party vote was called for on the question That the New Zealand Business Number Bill be now read a third time.Ayes 109New Zealand National 59; New Zealand Labour 32; Green Party 14; Māori Party 2; ACT New Zealand 1; United Future 1.Noes 12New Zealand First 12.Bill read a third time.Building (Earthquake-prone Buildings) Amendment BillThird ReadingHon Dr NICK SMITH (Minister for Building and Housing): I move That the Building (Earthquake-prone Buildings) Amendment Bill be now read a third time. This bill was first introduced in December 2013. Since that time it has been through a rigorous select committee process which has resulted in several important changes. I want to thank both the Committee of the whole House and the Local Government and Environment Committee for their diligence in what is a pretty complex public policy issue.The Canterbury earthquakes highlighted the vulnerability of some of our older buildings to earthquakes and the fatal consequences of that vulnerability: 185 people lost their lives and many more people were injured in the 22 February 2011 earthquake which I think will be etched in the minds of all parliamentarians and New Zealanders for many days hence. Major earthquakes stand out from other hazards. As a single event earthquakes can have a very large impact—and 22 February 2011 provided such a dramatic example. I also note that prior to the Canterbury earthquakes Christchurch was not considered to be an area of high seismic risk and it is a reminder that all of New Zealand carries some level of seismic hazard.The Canterbury Earthquakes Royal Commission and the Government reviewed our current system for managing earthquake-prone buildings after the Canterbury earthquakes. Both reviews found that many earthquake-prone buildings in New Zealand were not being managed in a consistent timely and cost-effective way. Problems identified included too much variability in local practice poor-quality information about the location of earthquake-prone buildings across the country and local government on its own not having the capacity to be able to deal with this challenging issue. It requires a balance to be struck between the risk posed by these earthquake-prone buildings and the cost of upgrading and the impacts on heritage. If we are too soft we may risk the lives of hundreds of our fellow citizens whenever the next major quake occurs. If we go too hard the impacts of costs on communities—particularly rural and provincial New Zealand as well as our heritage buildings—would be too great. This bill avoids a one-size-fits-all approach prioritising those geographic areas buildings and parts of buildings that pose the greatest risk. This ensures that our response is proportionate to those risks that costs are minimised and that we retain as much of New Zealand’s built heritage as possible.Given the nature and impact of this bill the bill has rightly been subject to a thorough and rigorous examination by the Local Government and Environment Committee and I have also worked hard to refine the proposals to make them as practical as possible. A key change is that the bill now varies the time frames for earthquake-prone building identification and strengthening relative to seismic risk. New Zealand will be categorised into areas of low medium and high seismic risk and time frames for identification will be 5 10 and 15 years and time frames for strengthening of 15 25 and 35 years.A second major change is the bill now prioritises the identification and strengthening of earthquake-prone education and emergency buildings. Schools universities and hospitals in high and medium seismic risk areas will need to be identified and upgraded within half the time frames of other buildings. Following strong submissions to the Local Government and Environment Committee particularly from Canterbury in high and medium seismic risk areas the bill prioritises those parts of an unreinforced masonry building like a parapet a facade or a verandah that could fall on to a public road or footpath or other thoroughfare that a council has identified as having sufficient vehicle or pedestrian traffic to warrant prioritisation. I acknowledge the points made by Ann Brower that highlighted the need for this particular change to the bill.The third significant change is that the bill now excludes buildings like farm sheds retaining walls fences monuments wharves bridges tunnels and storage tanks from the earthquake building provisions. Applying the provisions to these structures would in many cases be impractical and in others be unnecessary because of other legislative requirements. Most residential buildings will continue to be excluded as they are now. The methodology for identifying earthquake-prone buildings is to be set down in regulations once the bill has been passed.The bill also adds new measures to encourage timely upgrades. If a building is to be engaged in significant alteration earthquake strengthening will need to be done at that time. The bill seeks to incentivise building owners to strengthen buildings in a timely manner through enhanced information and disclosure requirements: there will be a publicly available register listing all earthquake-prone buildings; and owners will be required to attach notices in a prominent place stating the degree to which the buildings go below the minimum standard. These changes are intended to help tenants and the public better differentiate between earthquake-prone buildings and to encourage and motivate building owners to strengthen those buildings in a timely way.The bill clarifies the current definition of an earthquake-prone building—in practice often referred to as 34 percent of the new building standard—including that it applies to parts of buildings. I note that seismic risk around New Zealand explicitly takes into account that earthquake building threshold.The bill continues to provide for an extension of up to 10 years to remediate category 1 listed heritage buildings and exemptions from strengthening of some buildings. Exemptions from strengthening are intended to apply where the consequence of failure is low. Regulations will be made under the bill to clarify the granting of those exemptions.I want to conclude by saying that no building Minister will be able to give an absolute assurance of total safety of all buildings and structures to withstand the ferocious forces of nature that come from living in a seismically active country like New Zealand. I would put this bill in this context: in 1931 in Napier 256 people were killed from a population of 26000—that is 1 in 100 people; in Christchurch 185 people were killed from a population of 370000—or 1 in 2000. This difference of 95 percent improvement in survivability can largely be put down to the—The ASSISTANT SPEAKER (Lindsay Tisch): I am sorry to interrupt the honourable Minister. The time has come for me to leave the Chair.Debate interrupted.The House adjourned at 10 p.m.