Penk ChrisCHRIS PENK (National—Helensville): Thank you Madam Chair. Thank you very much indeed. I'm grateful to have the chance to speak on Part 3 particularly because there's a really interesting provision concerned with the arrangements involving tax credits for charitable or other public benefit gifts. The reason that this is really interesting is that in the whole area of charities and institutions that provide what's known as a public benefit we've decided specifically by designating them as such that they provide a benefit to society that we don't want to minimise and we don't want to limit their effectiveness by way of taxation. So there is some significance to society as a whole and of course there is a significance to those organisations themselves in the way that they operate and in the way that they structure themselves. Accordingly what we have here is a provision which understandably seeks to limit the ability of such organisations to structure their affairs in a way that would unreasonably get around the taxation laws.So within Part 3 I draw your attention to section GB—that's golf bravo—55 in clause 157 headed Arrangements involving tax credits for charitable or other public benefit gifts". So the first thing to note is that the section will apply when a person enters into an arrangement that has the purpose or effect of defeating the intent and application of section LD 1 which is to do with tax credits for charitable or other public benefit gifts. I'd like to draw the attention of the committee to the phrase "purpose or effect" because I wonder if this is exactly what the Minister and his Government is intending by adding this. What we have is a situation where by saying that it would be the purpose or effect of defeating essentially the tax credit law that would be captured. Now if you have a purpose but without an effect then what we have is a charitable entity that is trying to get around the law but unsuccessfully so. That makes a nonsense of the next provision which sets out the consequence of such an attempt—or indeed a successful attempt—to defeat the tax laws. So we'll jump ahead to that before we come back to the purpose or effect provision. The effect the outcome and the consequence would be that the credit would be reduced. So the tax credit under section LD 1 elsewhere in the law would be reduced to the amount that the commissioner considers would have arisen but for the arrangement described above. So we've potentially got a situation—that I would seek ministerial clarification on—whereby someone might intend to get around the law and might intend to gain for themselves a tax credit to which they're not entitled and be unsuccessful with it and yet the commissioner would then somehow attempt I suppose to reduce the credit to an amount that they would say would apply if the thing that hasn't occurred had not occurred. And of course the reduction would be zero in that case. So I think that's a slight logical absurdity. It may be a relatively small one but seeing we are in the business of considering the tidying-up exercise that the committee of the whole House stage represents I think it's worth the Minister turning his mind to if I may say so. There's another question regarding purpose which is of course: who gets to decide that such an arrangement has that purpose? Given that elsewhere within that same section it will be the commissioner who will be making a determination I would guess—but again I welcome clarification and confirmation—that it would be the commissioner himself or herself that would make a decision that the purpose or effect of the charitable entity was as described.I suppose for the sake of completeness we should consider that the fact that the defeating of the intent is described as either being in relation to purpose or effect might mean that someone a charitable organisation does something that has the effect of defeating the intent but didn't have that purpose. Well that seems to me pretty reasonable for the legislation to deal with such an organisation in that way because really what would be happening under the following provision is that simply the credit would be reduced to what it would be but for that accidental case.With the reduction of a tax credit I suppose it's a double negative whereby of course the tax would go up because the credit would go down. But what we're saying of course is really that's the default arrangement which is that legal persons who are resident and so forth must pay tax unless they've got some particular reason not to do so. One item I would like to bring to the attention of the Minister before I conclude my remarks—and I think I'll be able to do that easily within the time that's accorded to me; I say in case any colleagues should wish to accept the baton at that point—is that what we've got with the credit reduction that the commissioner is invited to undertake given such an arrangement is that we're simply told that the commissioner considers such a situation in relation to what the taxation situation would have been had the arrangement not occurred. So what we don't have is that the commissioner must in his or her reasonable discretion make such a determination nor were we told that such a consideration would be based on generally accepted accounting principles for example or in accordance with Inland Revenue Department Acts a phrase that's defined elsewhere in the legislation. So I wonder if the Minister could provide some advice about whether there could be a bit of clarity around that given how significant the powers of the commissioner would be in that situation. If we are going to say to him or her that they have the ability to undo the damage that they've identified and turn back the tide then I think it's probably pretty fair that we ask him or her to do so in a way that is consistent with some sort of external or objective standard by which that can be calculated measured and of course if not reasonable in its application then be challenged. I won't belabour that point any further and I simply observe that these matters are pretty important in a way that charitable and public benefit entities do have certain rights. But with those rights come responsibility and the relationship between society and the State in that way is worth us considering clearly in this legislation and if we're going to consider it we might as well make it as clear as possible and as straightforward as possible.Tim van de Molen: Does it impact on the surf lifesaving?CHRIS PENK: I'm sorry Madam Chair. I've been asked the relationship between this and some other matters that I've recently been speaking about in another forum and I have to advise Mr van de Molen that in fact this has very little to do with those. So moving on and I'll conclude my contribution at that point but with the hope and expectation that the Minister will address those points."