Mallard Trevor; Dyson RuthThe CHAIRPERSON (Hon Trevor Mallard): Ruth Dyson.Hon RUTH DYSON (Labour—Port Hills): I was not quite sure I heard that right. Thank you very much Mr Chairman. It comes as a big surprise that you chose to call me for a contribution in this debate.The CHAIRPERSON (Hon Trevor Mallard): Well I looked at the member and the member is a senior member of the House and lives in an earthquake area.Hon RUTH DYSON: That is right. It just was not noticed earlier in the five attempts that I made to get a call. I guess that is why it came to me as a surprise. Can I begin my contribution on Part 2 of this bill also in the way that James Shaw did by acknowledging the Minister on her elevation to this position and by saying that I am particularly pleased that a woman is in one of these financial roles. It has not happened very often with some of the predecessors that we might have looked to. You might not want to be compared to previous Ministers of Finance but I like seeing women in the economic space rather than in just the social portfolios. This reminds me how disappointed I am that we do not seem to have any women represented on the Finance and Expenditure Committee that considered the submissions on this bill.The CHAIRPERSON (Hon Trevor Mallard): Not relevant to this part thank you.Hon RUTH DYSON: Well actually it is relevant because those were the very members who considered the submissions on the part that I am going to speak to now. Part 2 covers clauses 4 to 272 so a huge number of clauses. I want to make my initial contribution in relation to the tax rule changes in regard to look-through (LTC) companies which are primarily around clause 262 but they do cover others. There is a package of amendments and I guess rather than just make a contribution about their merits or not I am really interested in asking for the Minister to continue what I think has been a very good practice of responding to the questions that are raised.The reason that I want to ask them—and it often happens in tax legislation particularly in areas like this where we are looking at changes that are recommended for closely held companies and look-through companies—is that we get people who are tax experts coming to the committee and making their submissions and then the Government says no and it just completely disagrees and ignores them. I guess that is the question: what is the reason that some of these—what I think to be substantial—contributions that have been made have been turned down by the Government?Firstly—and these are as I said at the beginning all in relation to clause 262—there were submissions from KPMG from the Law Society and from OliverShaw relating to the proposed restrictions on the amount of foreign income that an LTC can earn when controlled by foreign owners. They made substantial submissions—these are not fly-by-nighters; this is the New Zealand Law Society which I think Minister Judith Collins is quite familiar with and KPMG and OliverShaw—and those were just rejected by the Government.What I want to know is: does the Minister believe that their submissions were an error? Did they misunderstand the proposals in clause 262 in Part 2 of this legislation? Did they misunderstand them? Were they trying to get something that was not intended by the policy frame in which this bill was designed? Or did the Minister just disagree with their point for whatever other reasons? I would like to ask that question about that specific proposal—the amount of foreign income that an LTC can earn when controlled by foreign owners.Then along a similar line—if I can just find the other one that I was really interested in. This is a proposed amendment to how trustees and beneficiaries are counted and again it is that same clause—clause 262. Chartered Accountants Australia and New Zealand and again KPMG and again the New Zealand Law Society and also PricewaterhouseCoopers made substantial submissions again on that narrow point—the proposed amendments to how trustees and beneficiaries are counted. Those submissions were heard by the members of the Finance and Expenditure Committee and the Government just said no.There are a few more that have different considerations but the theme is quite strong and consistent throughout these submissions. It causes me as a member of Parliament who was not on the Finance and Expenditure Committee some concern that we have not had any explanation from the committee members either in the second reading or during this debate to my recollection so I am asking the Minister on those two points—and I will go over some more as well—whether she can clarify why these substantial and considered submissions just got ruled out by the Government. I want to go on to a couple of others that are along a similar line but all of them are in clause 262 and all of them were made to the select committee. Mr Chairman the bell should have gone then. Should I wait?The CHAIRPERSON (Hon Trevor Mallard): The Hon Ruth Dyson.Hon RUTH DYSON: Thank you. I am still hanging out for that bell to be rung.The CHAIRPERSON (Hon Trevor Mallard): Given the alternative.Hon RUTH DYSON: I did not see the opposition. The one I just talked about was the trustees and beneficiaries. The next one that I want to ask about—exactly the same. Chartered Accountants Australia and New Zealand is a group of people whom we would have some trust in to understand tax law—their job is in part deciphering it understanding it explaining it to people and in their business making sure that the tax rules are complied with. They put in a substantial submission about the simplification of the transitional role for trust fees. Again the Finance and Expenditure Committee heard it—talking about the transitional roles for the phasing in of the new requirements: how long they are going to be backdated for and how many years it will take to implement it. I think on the face of it—on reading their submission and looking at the issues that they raised—that they made some valid points and again those were just absolutely declined.The extension of the calculation period people receiving LTC and the beneficiaries receiving their LTC income being rotated—one solution would be to remove the 4-year time limit so the beneficiary would be counted if they had a distribution of LTC as beneficiary income in any income year. That was the point that was being made again by PricewaterhouseCoopers. It is an organisation that does this work all the time. They made a submission on quite a detailed part of clause 262 and again it was just thrown out. I have been on the Finance and Expenditure Committee in the past and I understand that quite often in tax legislation—as it might be in these provisions in clause 262 that I have alluded to—it may be that the submitters misunderstood the point of the legislation; they might have got clause 262 wrong. They might be trying to develop a little loophole that could be to their clients' advantage in the future—that would be a pretty cynical view. Or it is possible that the officials and the Minister—I guess it was the previous Minister—made an error in their determination that these should be rejected.But when you get organisations that are credible and do this work as part of their job—I want to understand why those submissions were declined. They are all under the loosely held companies review all in relation to clause 262. But if you look at the analysis of the submissions and the report back from officials this has been a piece of legislation that has had high quality and substantial input into it. I hope that we can feel as we go through the Committee stage that we can enhance the consideration that the select committee gave but we cannot do this adequately unless there is an explanation to the Committee of the whole House of the questions such as those I have raised in relation to the submissions the points they raised and why they would not be accepted.Likewise in relation to Ron Mark's Supplementary Order Paper (SOP) 260—I heard Mr Mark's contribution to it and I thought it was a very good one a very helpful one. I heard the Minister's response and I thought it was a little bit short cut in relation to the substance of the issues. So I hope we can have a further look at that SOP before the Committee stage is through.I suppose the advantage of the Committee of the whole House is that this is the opportunity for us to have members of the select committee—in this case the Finance and Expenditure Committee—share with us all the debate that they went through. We can share their knowledge and get some better understanding of what they considered and how they did it. I hope that some of the Government members of that select committee are able to share their wisdom. It may not take all that long but it would be really helpful I think to the quality of the debate. We are doing weird things in this bill as we did in the last part which we have already moved on from—setting tax rates for a year that has nearly concluded. In this part that we are debating now Part 2 we are making major changes to a wide range of current tax rules—268 clauses of amendments to tax rules some of them as a result of a review; some of them as a result of concerns that the officials have which have been accepted by the Minister. I hope that we have a better contribution from Government members and again I want to acknowledge the responses from the Minister.