Edmonds Barbara; Russell Deborah; O'Connor Greg; Watts SimonHon BARBARA EDMONDS (Labour—Mana): Thank you Mr Chair. It is a quick supplementary based off the Minister's response. I do think it's important that the Minister—the Minister referred to some Department of Internal Affairs (DIA) public consultation that helped to inform these policy proposals. But my specific question was for this particular new part this new tax who was consulted? Who were the firms? Did they speak to gaming providers who are based here in New Zealand? Did they speak to any of the Problem Gambling Foundation or any of the harm minimisation sectors within New Zealand? So I appreciate the Minister has clarified that these reforms have been a small part of a previous reform or consultation part of DIA but for this particular part as we have not had a public select committee process and we have not been able to call for submissions who was actually consulted? So name who they are and when they were consulted because I think that's an incredibly important part of this process to be transparent since we've had no public submissions on this particular element of the bill.Hon Dr DEBORAH RUSSELL (Labour): Thank you Mr Chair. I wish to ask some questions of the Minister around how we're going to ensure that this tax is actually paid—this new tax is paid. I just want to clarify a little bit as to why this question is important. One of the things that—if people look through the Income Tax Act in terms of who the New Zealand Government imposes tax on it is people who are in New Zealand or entities that have a business in New Zealand. Back when I was lecturing in tax law I used to say to my students Well that was that was the people we imposed tax on because we could." And it applies to a lot of laws actually. We oppose it because they are the people who are caught within it.But one of the things about these offshore gambling providers is that they are by definition offshore right? So the people aren't physically in New Zealand and the business is not in any sense in New Zealand. Now of course in the olden days this didn't matter. It was pre-internet; a business would have a physical structure in New Zealand but now it doesn't have a physical structure in New Zealand.And also thinking about the these offshore gambling operators they're operating through the internet. So in any sense they could be anywhere in the world. So the question is: how are we going to detect where these entities are operating from and how are we going to get them to actually register? How are we going to get them to actually pay the relevant gambling duties?Now looking at the legislation as it's drafted the entities that are required to pay this offshore gambling tax are GST registered persons that are located outside New Zealand to the extent that they make supplies of remote gambling services to New Zealand residents. But if the answer to my question is just that it applies to GST registered persons all that does is shift the problem one level out. So we still need to know who is supplying GST registered services. What I have in mind is it's perfectly possible for some offshore gambling operator to operate entirely outside of our tax rules as it were to sneak in via the internet to sell services to New Zealand—these gambling services to people resident in New Zealand. But how are we going to detect that that is exactly what they are doing? So I'm assuming that this problem has been solved to a certain extent by the requirement for these offshore gambling operators to be GST registered. But as I said it's not so much the people who are already registered; it is the people who are not registered.And I want to know as the first part of this question as to how we know that these people are operating. And it's not the ones we know about; it's the ones we don't know about. But in addition to that even with the ones that we know are registered here they are GST registered so we know they're operating and selling services to people in New Zealand. They're charging and collecting GST and paying it over to Inland Revenue Department. But how do we know that the amount that they are returning in their GST returns and in the future under these rules in their gambling levy returns—how do we know that the numbers in their returns are actually accurate? It just strikes me that because they are offshore operators because they're operating entirely through the internet because there are no physical goods coming into New Zealand and because gambling is in many instances quite a secretive industry and people who participate in it want to be a little bit secretive about it how do we know that the figures they are putting in their returns are correct?Now of course there's a very strong capacity to check what is being returned as a gambling levy against what is returned for GST purposes. So you get a little bit of cross verification there. But as I said it still just pushes the question out one as to whether those GST numbers are correct in the first place.So there are a couple of sets of unknowns there and what I want to understand from the Minister is how Inland Revenue and the Department of Internal Affairs propose to deal with those unknowns.CHAIRPERSON (Greg O'Connor): Ingrid Leary.Ingrid Leary: Thank you Mr Chair.CHAIRPERSON (Greg O'Connor): Oh sorry. Minister you can have the call. I'll rescind.Hon SIMON WATTS (Minister of Revenue): No problem. Just in regards to some of those questions the whole statement in terms of how do we know what we don't know—I mean how long have we got? And I don't think that's in the Act is it? But it's one of those marvels of life. That is a reasonably nice question but the reality is I'm not going to look to cover that here. What I can say is that in regards to the way in which we have come up with how this gaming duty will operate it has been built and predicated on the GST model and the way in which that model operates for remote services and services therefore outside of the of New Zealand. Now that proxy is as good a proxy as we have in order to in effect model through what we expect will happen in this space. As an example the GST that has been collected from those offshore gambling entities is in the region of $43 million in the year ending 30 June 2023. So there is a proxy in terms of (1) who they are (2) their ability to pay and compliance on the GST. And simply using that as a proxy for the gambling duty was the best estimate.There is a reality—and going back to the member's question "How do we know what we don't know?"—well what we do know is we have no regulation and no rules currently today in place and therefore we are not collecting that leakage of revenue for this country. So what we're taking I think is quite a sensible and pragmatic policy. It's actually saying there is a loophole where offshore operators are operating outside of an inconsistent playing field to New Zealand operators. That's not appropriate. There aren't harm minimisation aspects applying to them. Let's level the playing field and let's align ourselves up with other OECD countries. And so we can look to other OECD countries for proxies around the scale of intake around that. And this will be a process that we'll continually look at and reassess. You know we can go on and on about this duty but we've got to compare it to the status quo in doing nothing and that is no regulation that is an unregulated and a significant loophole for the revenue of this country and this coalition Government are looking to close it."