Bayly Andrew; Parker DavidANDREW BAYLY (National—Port Waikato): I've got to say I'm very disappointed at the Government members on that side of the House. The only person who's stood up and made a contribution is Dr Deborah Russell. She's done it twice. All the other times we've had the chief whip who's johnny-come-lately come to this debate trying to move motions to close it down. He can only do it once I note.CHAIRPERSON (Adrian Rurawhe): This is a time to speak to Part 2 of the bill. Don't give us a running commentary. It's not relevant as far as I'm concerned.ANDREW BAYLY: Mr Chair I want to say to you very clearly: this bill is a very comprehensive bill and we've got about seven more aspects of this bill yet to cover and we will be intending to speak to them as we work our way through them. So I just want to be on the record that we do not want this debate—because there is a heck of a lot more to go on.CHAIRPERSON (Adrian Rurawhe): I'm fully aware of what's in there. Just come to the bill.ANDREW BAYLY: I want to continue my question last time to the Minister which we haven't yet had a response to. I talked about the purchase price allocation method—how there had to be an agreement around that and they had to be aligned and it was for a small threshold. One of the things that we actually did cover in the Finance and Expenditure Committee was in the event of a vendor making a unilateral allocation there couldn't be an allocation that was below the vendor's tax book value. I was trying to allude to it but it's all a bit pointy headed but this is where you have different treatments between a vendor and a purchaser. A vendor might have a certain tax treatment that they've applied to that asset. The purchaser may have a different and very legitimate approach to the way they wish to account for that asset. However this bill changes that and forces them to come to a conclusion.One of the things that as a committee we talked about is that we were worried about distressed sales. Hey we're in the middle of COVID. The Government has borrowed $40 billion and actually there's a few businesses in distressed sale. And maybe if Mr Nash did something we'd actually talk about tourism businesses who are definitely in distressed point of sale. They are in the process and we know it because our good member from that area has told us. Down the West Coast particularly a number of them will be closing and this is why this part of the bill that the select committee looked into requested that there should be some forgiveness around those in a distressed sale situation—like a tourism operator as I've said. There are many transactions where the actual market value of the taxable property being sold is less than its tax value.Interestingly I'll give you another example: I was talking to a person I've known for many years. They bought printing equipment for $850000. With the decline in the printing industry they ended up selling it to Vietnam for $26000 because effectively the market was in distress and there was no market buyer in New Zealand and they have flogged it offshore for literally $26000—I got told that this morning in the airport. So here is a practical example of people in certain industries right now that are really suffering as a result of COVID and in many cases they will be seeking to make the sale. I know that the Minister also has the hat of reviewing all overseas investment applications and he puts through the emergency 90-day applications. So he is in the position of looking at transactions and approving every transaction during the 90-day period. He actually has to approve every international transaction.Here is something that the committee has requested: basically we recommend amending this rule. Under our amendment any excess of the aggregated tax book value above the purchase price would be applied first to reduce the amount allocated to the non-taxable property and second once the amount is zero to reduce the amount allocated to each class of taxable property pro rata. So I'm just asking about that. That was some specific recommendation that came out of the committee. It would be nice to hear what the Minister says. So if he could answer both those aspects that we covered before.Hon DAVID PARKER (Minister of Revenue): In respect of the second issue the member has put it exactly correctly and that position as he recommends is as the bill sets out and that is being carried forward. In respect of the earlier issue and the criticism of the thresholds the member will be aware that this is an integrity of the tax base - issue where at the moment different sides of the same transaction adopt a different value for or a different allocation of the sale or purchase price across different subsets of assets. The net effect of it is that the vendor does it to maximise their tax position; the purchaser does it to maximise their tax position and never the twain do meet. And who suffers the loss? Actually the revenue because there's this inconsistency of apportionment. So these thresholds have to be determined in a way that balances compliance costs—Andrew Bayly: Why the change?Hon DAVID PARKER: Well the member knows the reason for the change because he's already mentioned the amount of additional revenue that accrues to the Crown if this change is made. Getting the threshold amounts right is a balance between compliance cost and revenue integrity and that's why the Government settled for $1 million on most asset sales but excepted the position that had been recommended by the select committee or by submitters to the select committee that because in the case of residential property there are not the same integrity risks you can have a higher limit of $7.5 million. That's the reason for those different amounts. Without doing this there is an integrity risk with the vendor doing something for their benefit that doesn't accord with what the purchaser does. We think that the parties should be required through the mechanisms in this bill to agree and if there is not agreement there's a mechanism to resolve that dispute.