Taxation (Business Tax, Exchange of Information, and Remedial Matters) Bill

I move, That the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill. It is my great pleasure to bring this bill before the House, which is the second bill containing the Government’s proposed measures to simplify tax administration in New Zealand. The centrepiece of the bill proposes a major shift in the way small businesses currently pay their tax, making these processes simpler and easier. These changes were announced in April by the Government as part of Budget 2016.

Small businesses are the backbone of our economy, and we want the tax system to fit around how businesses operate, not the other way round. The packages of changes included in this—

💬 Fletcher Tabuteau: I raise a point of order, Mr Speaker.

The ASSISTANT SPEAKER (Lindsay Tisch): Order! Sorry to the Minister—before I deal with the point of order, I would like to hear what is being said, and to those who are leaving the Chamber, please do so expeditiously so as to give courtesy to the speaker. Now, there is a point of order from Fletcher Tabuteau.

💬 Fletcher Tabuteau: Mr Assistant Speaker, you have addressed my point of order. Thank you very much.

The package of changes included in this bill will make paying tax easier and more certain, reduce the burden of interest and penalties, and help small businesses tailor payments to their circumstances. Most businesses aim to do the right thing and pay their tax as best they can. For most businesses, that means paying income tax in three instalments of provisional tax throughout the year. Provisional tax was by far the single most commented on aspect by taxpayers in the public consultation on the Government’s green paper on tax administration released in March 2015. Many found it onerous and unfair. In particular, the application of use-of-money interest was a key concern of taxpayers.

The Government agrees that processes can be improved, and feedback from business since that Budget announcement has been overwhelmingly positive. I have had feedback just recently from a caucus colleague who was speaking to a hairdresser, an owner of a hairdressing salon for about 15 years. One would think that a hairdressing salon had a reasonably steady taxable income flow, but this particular owner had a variation in the number of chairs that operated and the number of staff that worked for her of between 10 and 16 at any one time. That created a huge challenge for her in estimating her taxable income and therefore her provisional tax obligations. She fed back to my caucus colleague what an absolutely fantastic initiative this was. Even in hairdressing, we are hearing that. It is not a seasonal occupation or business so much, but many of New Zealand’s tens of thousands of small businesses are seasonal, and they will all benefit from the changes we plan to make.

The bill seeks to remove the application of use-of-money interest to a large number of them. It introduces a new calculation method to better match tax payments with income earning. The proposed new calculation approach, the accounting income method, takes advantage of technological advances to smooth the process. It more closely matches income earning with tax payments and reduces compliance costs for small business. The objective is to simplify tax processes so that, rather than imposing a stand-alone tax process, tax would become a part of the normal, everyday accounting work that businesses already do in managing their finances. Because tax will be paid as income is earned, businesses using the accounting income method will have more certainty that they are paying the right amount of tax.

But this is not a case of throwing the baby out with the bathwater. Although the current calculation methods do not meet everyone’s needs, there are certainly businesses for which the current provisional tax methods work adequately well. There is, therefore, no intention to do away with other methods for calculating provisional tax. The proposal is for the accounting income method to be a fourth option for calculating provisional tax.

The Government appreciates that the current system can be unfair. Even if a business ends up paying the right amount of provisional tax during the year, it can still incur use-of-money interest. So for those taxpayers who use the standard uplift method, the Government is proposing two changes to minimise the impact of use-of-money interest: firstly, to increase the safe harbour as to when use-of-money interest will apply, from $50,000 of residual income tax to $60,000. The bill also proposes extending the safe harbour to non-individuals. Combining these proposals will remove some 67,000 additional taxpayers from the impacts of use-of-money interest.

Secondly, for the standard uplift taxpayers who are outside the new safe harbour rules and who make the required instalments, use-of-money interest will apply only from the last instalment date. This means a taxpayer can pay their entire tax for the year with no use-of-money interest being applied. For those using the new accounting income method and who pay the required instalments, use-of-money interest will also not apply.

The effect of the proposals will be that use-of-money interest will be eliminated or reduced for the vast majority of taxpayers. I believe that the proposed measures will provide greater certainty as well as peace of mind, particularly for smaller businesses. The bill also proposes flexibility for businesses that could trade their way out of debt. It proposes to reform the late payment penalty by no longer imposing the monthly incremental penalty from new GST income tax and overpaid Working for Families tax credits. These and other proposed business tax simplification changes were driven in part by a desire to make it easier for taxpayers to comply.

In fact, the vast majority of people do comply with their tax obligations, but there is a small group of people who seek to evade their tax obligations and hide their taxable assets offshore. This is not a problem confined to New Zealand alone, and it has become the subject of an international effort spearheaded by the OECD. New Zealand works closely with the OECD on a number of matters, and we take our global responsibilities very seriously. That is why the second major component of this bill proposes enabling legislation requiring New Zealand financial institutions—unless exempted—to review their accounts and collect and report information to the Inland Revenue Department (IRD) on accounts held, or, in certain circumstances, controlled, by non-residents. Where necessary, the IRD will then share that information with other tax jurisdictions in specific countries. The objective is to help eradicate tax evasion.

Generally, the legislation aims to allow the reporting financial institutions to take advantage of options outlined by the OECD and to not require reporting financial institutions to collect further information than is required by the OECD standard. This approach should help to minimise the compliance costs for financial institutions. The overriding principle in this proposal is the desire to bring more transparency into international tax matters.

This is true for one other item in this bill: the proposed amendments to our foreign trust rules. Although our tax settings are very sound by international standards, the Government has always been open to making improvements to New Zealand’s already strong tax settings if that was warranted. That is why the Government agreed to act on all of the recommendations from the Shewan inquiry, to ensure our disclosure rules are fit for purpose. The proposed amendments to the foreign trust disclosure rules included in this bill will strengthen our rules and help make sure that we maintain our reputation in the context of best practice of international exchange of information. This includes the proposal to require a register that is searchable by the Department of Internal Affairs and the New Zealand Police, and for annual disclosure requirements.

The remaining changes in the bill are of a practical nature and ensure that the tax rules are applied consistently, that they are clear, and that they achieve their correct policy purpose. Finally, the bill includes a range of other remedial amendments to give greater certainty to taxpayers. Together these measures will help strengthen our tax systems and make it easier for taxpayers to comply with their obligations, and be fairer for taxpayers more generally. These are good proposals for New Zealand and good for the tax system. I commend this bill to the House.

As with every tax bill, Labour will support this bill through to select committee. But, yet again, we have another bill in the House where we are amending the Income Tax Act, the Tax Administration Act, and the Student Loan Scheme Act. This is about the fourth, fifth, or sixth bill this year that we have had on this, and I just would like to request of the Minister of Revenue that perhaps he just get it all right in one bill. Put it together so that we can actually do it at the same time.

We in the Labour Party are all for making tax easier. There is absolutely no doubt about that, but there is a great saying that imitation is the highest form of flattery. This Government has been in power for 7 or 8 long years. It had not even addressed this issue at all, until one pivotal moment. What happened—what that moment was—was Labour introduced a tax policy to make provisional tax easier, or certainly to make it easier for small to medium sized businesses to not have to pay provisional tax. What the Government did was it said: “What a fantastic idea. Let’s adopt that.” I am pleased that it has, from a small to medium sized enterprise’s perspective, because doing business in this country has to be easier. But I just wish that the Minister would give a little bit of credit where credit is due. You are welcome, Minister.

I am sure that what we will do, however, is make this bill just a little bit better through the select committee process. What I do urge is that those who are listening, those who are involved in the tax business—whether you are lawyers, accountants, financial advisers—submit on this bill so that we can actually adopt the best practices out of the Labour policy and put it in this legislation.

There is something called the accounting income method, which is the pay-as-you-go method. The thing about this—and I am not too sure of the extent of this—is that to be able to access this, a business must use accounting software to derive the level of provisional tax required to be paid. I will signal here my slight concern about this, because it appears to me that those good, hard-working Kiwis who sit down at the kitchen table at the end of the day and undertake their tax return in the way it has been done for a long, long time may well be disadvantaged. I am unsure of what the extent of that problem might be. I do not know how many of the small to medium sized businesses that operate in New Zealand are actually on accounting software and how many do it the old-fashioned way, but what we do need to do is understand the extent of that problem, and if there is a solution, then let us see whether we can find it.

The other question for the Minister is why wait until April 2018 to implement this. Why not do this next year? Certainly, it does not take that long to put these provisions in place. I would have thought the vast majority of small to medium sized businesses, and certainly those operating in an environment of uncertainty—we all understand that they find provisional tax a little bit of an imposition, so let us get this sorted sooner rather than later.

The other point that the Minister talked about—and that I would like to set the record a little bit straight on—is the foreign trust disclosure rules. There are a number of information disclosure requirements that this bill puts in place—these are for foreign trusts with New Zealand resident trustees. The trust must register with the Inland Revenue Department (IRD). The trust must file annual returns, pay regulation and filing fees, and share information with certain Government agencies. You would have thought that any trust in New Zealand would have to do this anyway. But no, we are changing the law to make sure this happens.

The interesting thing about this is that the Minister and the Prime Minister said that there was no problem. There was no problem, and then what happened was that Grant Robertson and Andrew Little went on the offensive and explained the injustice about this. And what happened? The media understood it. They understood the issue. The IRD certainly understood the issue, because it had written a paper about 2 years ago outlining the risk of this. But there is one group that understood this issue more than anyone—that is, the small, powerful industry sector, which lobbied, first of all, the Prime Minister, and then the Minister, and, magically, this whole issue disappeared. Maybe it is just a coincidence that when the Prime Minister’s tax accountant lobbies the Minister with an issue that the IRD had highlighted, it disappears. Let us go with the fact that it is a coincidence.

But when the Prime Minister and the Minister both say “There is no issue. Move on.”, and then the Opposition highlights the fact, what do we have next? The Prime Minister says “Well, maybe there is an issue here.”, and he appoints John Shewan. John Shewan comes out and highlights the extent of the issue—and we know it is an issue. The interesting thing is that the Minister said in his speech: “We are doing this to preserve New Zealand’s reputation.” Well, I would argue that by not doing anything we have tarnished New Zealand’s reputation. One of the few things that we have—one of our few global competitive advantages—is our reputation for honesty and integrity. When this incident, this loophole, was reported in the global media, people talked about New Zealand as a tax haven. It did not matter if, by whatever definition, we actually were not a tax haven, the perception globally was that we were, and the perception is all that matters.

So when the Minister says “We are doing this to preserve New Zealand’s reputation.”, I would argue that the damage to New Zealand’s reputation is reasonably significant and we need to act really quickly to address this. But the interesting thing is, if this had been done 2 years ago, if the Minister had followed IRD officials’ advice when they came to him and said: “Minister, we have an issue, but, Minister, we have a solution.”—he did nothing about that. I think that is negligent, I think that is irresponsible, and I think that is playing hard and fast with New Zealand’s global reputation. It is wrong. It is just wrong. I ask the Minister: was it worth it? Was it worth it?

What we have now is a piece of legislation in front of the House that was pushed to the very top of the Order Paper—not under urgency, but as urgent as you can get without operating under urgency—where, originally, the Minister was not even interested. The Prime Minister was not even interested, and he himself said: “There is no issue here.” What has changed? If I was a cynic, I would say that the Prime Minister polled on this. New Zealanders understood the issue better than the Prime Minister because, I think, the Prime Minister, after 8 long years, has actually lost touch with what good, hard-working Kiwis want. He used to have his finger on the pulse. He used to be very, very good at this. For 3 years, you could argue, he was one of the most in-touch Prime Ministers we have had. After 6 years he was beginning to—he was still there, but now he has got “third-term-itis”, where he has lost touch with what New Zealanders want.

The interesting thing about this, I think, is that the Prime Minister and the Minister both thought: “This is about tax and foreign trusts, and New Zealanders don’t care about this—it’s too complicated for New Zealanders.” But the thing is, New Zealanders got it—New Zealanders got it. The thing is that New Zealanders understand when they are being ridden roughshod over by a group of high-powered lobbyists who go to the Minister and say: “Can you make this disappear?”. The reason New Zealanders got it is that we will put up with a lot, but one thing we really do not like in this country is that sort of behaviour, because what it does is it has a slight tinge of—I was going to say “corruption”, but that is the wrong word—let me say, favouritism. That is not how we do politics in this country.

To sum up, Labour is supporting this bill to the select committee. Of course, Labour wants to see the tax system made simpler for small to medium sized businesses. It is about time this bill is here, but we will support it and we will ensure this legislation is better when it comes back to this House than it is going into select committee. The second thing I would say, in summing up, is that after consultation we will support, with reservations, the changes around foreign trust disclosure, but this is too little, too late. This is an issue that could have been headed off at the pass, and I think the Minister has not only dropped the ball but really, really missed the boat here. He played hard and fast with our global reputation, and it is simply not good enough. Thank you very much.

This bill does continue that process of the reform of the tax system that the National Government has been working on. It is important to look at the tax system as something that is an ongoing process. As people become more aware of issues, then they become part of the changes you see to the tax system.

That last speaker, Stuart Nash, spoke about some issues that were quite relevant, actually, in the sense that there had been a lot of public perception. The perception was what he said mattered, but that perception actually led to the Shewan report, which led to this tax bill. So it is a Government that is engaging, listening, and working through and then delivering the right policy for New Zealand going forward that takes into account the issues that are out there.

This bill also has a number of other components to it in regard to some very important legislation that will be of assistance to small businesses, particularly, around provisional tax. I know many small businesses are looking forward to those changes, and they see them as very important.

There are also some changes around GST, Working for Families, and tax credits from 1 April 2017. It is trying to get that balance between penalties and encouraging taxpayers to make timely payments without it becoming too overwhelming on the taxpayer.

This bill also has a number of other requirements in regard to the G20 OECD standards, and so that is something else that is part of the bill as well, as well as a number of other subsidiary issues. But it is a bill that is part of that tax reform. It gives a continual process of tax reform, and this is part of that process of getting the best tax system for New Zealand and to achieve our purposes.

Well, off the back of that incisive contribution from the chair of the Finance and Expenditure Committee, can I reiterate my colleague Stuart Nash’s comments that Labour will support this bill on its first reading, as we do with all taxation legislation that comer before the House.

There is no doubt what this bill is really about. There is the usual attempt to correct the mistakes of the last tax bill that went through, and to tidy up the loose ends in the tax system, but this bill is the swallowing of a very large, dead, Panamanian rat for the Government—because that is what this bill is about. This bill is the Government coming to the House and saying to New Zealanders: “Three years ago when Inland Revenue Department officials told us that we should be doing something to close the loopholes in our foreign trust regime and when we the National Government ignored them, we were wrong and we let New Zealanders down.” It would have been nice to have heard from the Minister of Revenue that he acknowledges his Government got it wrong and that the hard-working officials in the Inland Revenue Department (IRD) were the ones who got it right, and they were ignored by the Government. And they were ignored by the Government with the influence of the foreign trust industry and, in particular, the Prime Minister’s close adviser, Ken Whitney.

Let us take ourselves back to when the Panama Papers first exposed issues around New Zealand’s foreign trust regime. John Key’s first thing to say was that New Zealand has full disclosure of information when it comes to foreign trusts. Well, today this legislation actually tries to get us to full disclosure—or some way down that path—so the Prime Minister was just plain wrong about that. He actually knew, I am sure, that there were things that could be done, and today we have legislation that proves that the Prime Minister was wrong. We do not have today full disclosure of information when it comes to foreign trusts. We should be able to get that in New Zealand. This will take some steps, but there is more that needs to be done, which I will come to shortly.

What was really instructive about the Prime Minister’s first reaction to concerns about loopholes being exploited in our foreign trust regime was that he decided to stand up for the tax evaders and the tax avoiders. He chose his side. He could have chosen New Zealand taxpayers and the reputation of the New Zealand tax system, but he chose the other side. He chose to side with the foreign trust industry and the people around the world, the mega-wealthy, who decide that they should not pay their fair share of tax. Well, on this side of the House we side with New Zealand taxpayers—a fair go and a fair deal for New Zealand taxpayers.

Most New Zealanders are prepared to pay their fair share of tax because they want to fulfil a responsibility to a good society—and good on them for doing that. But those who seek to avoid their obligations and who seek to cheat other taxpayers—we should have no time for them whatsoever, but the first thing the Prime Minister did was to back those people. And I do not care what country they come from—Bill English stood up in the House and said: “We don’t need to care about the Mexican taxpayers.” We do, actually. We actually need to care about the fact that right around the world we have tax systems that support people paying their fair share, because when we go to the OECD and say “We want multinationals to pay their tax.”—which we do—how can we stand up there with any credibility and make that claim and ask for the assistance of the rest of the world when we are the ones with a system that is being exploited? We are the ones with a system where somebody from Mexico named the “Duke of Influence” could park his money, where discredited Brazilian politicians with $150 million worth of money that seems, potentially, to have been corruptly found finds it way to New Zealand, and where corrupt Maltese politicians file their money in New Zealand. That damages our reputation.

So today we have got a piece of legislation that starts to try to deal with that, but—make no mistake—this Government did not come here willingly with this legislation. It was dragged here because it was exposed as being on the side of tax evaders and tax avoiders.

And it was all so unnecessary, because in August 2013 the Inland Revenue Department came to the Government and said: “We need to do something. To protect our international reputation, it may be necessary to strengthen our regulatory framework for disclosure and record-keeping.” In August 2013—on 15 August, which is almost exactly 3 years ago—the Inland Revenue Department said to this Government “You need to close the loopholes.”, and the Government did nothing about it. So the Inland Revenue Department came back to it in August 2014, in November 2014, and in December 2014. By November 2014 the Inland Revenue Department had already put tightening-up disclosure requirements for foreign trusts on its work programme, and that was the signal for those in the foreign trusts industry. Once it made it on to the work programme, they used their insider influence. Ken Whitney, the Prime Minister’s closest adviser, writes to the Minister of Revenue, Todd McClay, and says “I’ve spoken to the Prime Minister. He’s told me to talk to you.”, and then, lo and behold, within a month it is all over. It is off the IRD work programme, and the foreign trusts industry gets to carry on without even having to take a breath.

That is because this Government chose to side with the industry over New Zealand taxpayers and ordinary working people all over the world, and that is a shameful record from this Government. It had the chance to stand up for a fair tax system and it decided against it. It went with the insider influence, which is so typical of this Government, and the Prime Minister said: “Don’t worry about it. Ordinary people approach me all the time with ideas and I refer them to the Ministers.”

💬 Hon Annette King: At the Koru Club.

He said “Ordinary people come up to me every day in the Koru Lounge.”—that is right. Ordinary people roaming freely about the buffet in the Koru Lounge, talking to John Key, who is passing details of Ministers hither and yon—what a load of nonsense. This was the Prime Minister’s personal lawyer and adviser using his influence, and Todd McClay just said: “How much? How high, Prime Minister?”. This is a shameful episode, and this Government needs, today, to acknowledge to New Zealanders that it got it wrong.

The proposals that it is bringing to the House today are inadequate in one specific way, and that is the absence of a publicly available register of foreign trusts. This is because, in the end, if another jurisdiction is looking around the world to see where money might be parked and cannot get easy access to that register, it is not going to be able to find out. It is not so much looking for a needle in a haystack; it is whether there is a needle in a series of haystacks, and it does not have the information to support that.

We have registers of companies in New Zealand. We have publicly available registers of companies; we have publicly available registers of charities. Why are foreign trusts not seen in the same light? So the legislation in front of us today says that it will be the Inland Revenue Department and the police that get to see this. That does not properly advance the interests of transparency, and as a country we need to hold on to that reputation around transparency that has been built up over many decades.

One of the saddest parts of this whole episode was the fact that during it, New Zealand slipped down the Transparency International rankings. I was present when a Government backbencher said: “Well, you know, our aim is to be in the top five for the Transparency International rankings.” Just imagine if Steve Hansen held a press conference and said: “The All Blacks’ aim is to be in the top five of rugby-playing nations.” He would be sacked—he would be sacked straight away—because when we are the best in the world at something, we must stay as the best in the world. We are slipping in Transparency International ratings under this Government, and those members do not care because they are too interested in protecting the mega-rich and those who have close influence on them.

This piece of legislation will get scrutiny at the select committee. It will get many, many submissions, I am sure. I want to assure the public of New Zealand that the Labour Party will look closely at this legislation to ensure that we use it to restore the reputation of New Zealand for transparency, to restore their faith in the tax system of New Zealand, and to give ourselves credibility on the world stage when we ask others to support us when it comes to cracking down on multinational tax avoidance.

That was a speech of fiction. It was just a fantasy from Mr Robertson. But the point he made about the hard work of the Finance and Expenditure Committee (FEC) was accurate and true, because we on FEC are a very hard-working committee. We have had a number of tax bills put before the committee, from the House, in the last 18 months. We will go through this bill with the same care and prudence and diligence that we give to all the tax bills that come before us and all the sensible bills that the Government puts before us. So I am looking forward to examining it. In particular, I am looking forward to looking at the changes for small business because, as the Minister said in his introductory remarks to the House, they are going to be of enormous benefit to a lot of small businesses around New Zealand.

There are a few things in politics, a few policies and big announcements, that get cut-through. People in politics talk about the cut-through—the stuff that really gets out to the public, which they talk about around the dinner table or the water cooler, down at the pub, at the rugby, or wherever. I think we have had another example of a cut-through policy just the other day—that is, the predator-free New Zealand policy. That has been enormously popular. I have had lots of people come up to me and talk about it and say that it is really great to see the National Government backing a blue-green vision for New Zealand, really outselling the Greens and Labour, and putting up that vision of New Zealand being predator-free by 2050. They are surprised the Greens did not have it as a policy themselves. They have been saying to me that it is very surprising that the Greens did not do it, and that they just want to champion it and applaud our vision.

But the other cut-through policy, to return to the theme of the actual bill, is the small business tax changes. I go to a lot of fora with small business, and it has gone down extremely well and people are actually rating it with me proactively. I think that is probably the biggest thing in this bill, along with the changes that have come out of the Shewan trust review.

Grant Robertson left out one very important part of his fantasy time line of what happened around this, and that was the defamation by Andrew Little of John Shewan. It was not mentioned—

💬 Iain Lees-Galloway: That is a fantasy. Now you’re into fantasy.

Iain Lees-Galloway says that it is a fantasy. Why did he accept that he was wrong, then? Come on! He knows that that is wrong. Left out of the time line was the defamation of John Shewan. If Andrew Little wants to come down to the House and say that, we would welcome that.

But, anyway, this is a good bill. We are looking forward to examining it at the FEC.

Tēnā koe. The Green Party is supporting this bill. I think it is useful that aspects of the bill are actually quite aligned with what the Green Party has proposed in the past—notably, the changes to business taxation for small businesses, to make it simpler. That is something the Green Party campaigned on before the 2014 general election. I am surprised it has taken this National Government 8 years to come up with the idea and implement it. It has certainly had plenty of time. But I am glad that it is going to make progress on that, and I look forward to examining the changes in more detail in the select committee process.

The other big change, of course, in this bill is the changes to the disclosure requirements for New Zealand foreign trusts. Although it is very complicated I will try to make it simple for those who are watching at home. I know it seems very, very arcane and boring, but, yeah, well. Back when the Panama Papers came out, the Prime Minister and the National Government said: “We have full disclosure with regard to New Zealand foreign trusts. We already have full disclosure. Nothing to see here. New Zealand is not being used as a tax haven. We don’t need to change anything.” Of course, our co-leader James Shaw, colleagues from the other Opposition parties, and I all pointed out that there were a huge number of professionals in the tax world—tax law academics—who were saying that actually this is not the case. New Zealand does not have anything like near full disclosure.

In fact, there is a huge amount of secrecy around New Zealand foreign trusts, and this needs to be fixed in order to protect our international reputation. Of course, although the Prime Minister and the Minister claimed in the House that that was not the case, they had been told this by their own officials several years previously. I think what New Zealand voters should be very concerned about is the fact that they cannot trust the National Government to do the right thing—to listen to the advice of officials and do the right thing in the world and ensure that our laws are fair and are supporting fairness and transparency in respect of taxation and international tax avoidance. It took the Panama Papers and sustained scrutiny and questioning from journalists and Opposition parties for the National Government to do the right thing and make these changes.

I congratulate those members on doing it, but we have to point out that they denied there was a problem. They chose not to pursue it when nobody knew about it. The Prime Minister’s personal lawyer and other representatives of the foreign trusts industry who are making huge amounts of money off very wealthy foreigners, exploiting the lack of transparency in our foreign trust regime, wanted to keep being able to facilitate that secrecy in order to make money for themselves. The National Government responded to that lobbying and buried the changes. This is why it is so important to have an Opposition and why it is so important to have investigative journalism, because they shine the light on this cosy relationship between the Government of the day and vested interests.

The Green Party wants to stand up for greater transparency, and we are constantly proposing positive, practical solutions. I note that the member’s bill that the Green Party proposed several years ago in 2012, which we reworked and proposed again just a few months ago, is very similar to the changes that are being made in this bill, following the Shewan inquiry. So if we look at clause 10, the changes to sections 59B, 59C, 59D, and 59E are all very, very similar to what the Green Party was proposing to increase transparency around New Zealand foreign trusts. Of course the National members, ever the masters of spin, characterised those proposed changes, when I asked about them in the House, as “barking mad”.

There is one important difference in what is being proposed in this bill from what the Green Party proposed, and that is that what is in this bill does not include a publicly searchable register, which may be necessary for foreign Governments to be able to ascertain whether their taxpayers do have a foreign trust in New Zealand. It is probably quite a critically important aspect of making the regime more transparent and ensuring that we do have compliance. Aside from that, virtually all the recommendations from the Shewan inquiry were in line with the bill that was proposed by the New Zealand Green Party, and which I, on multiple occasions, tried to raise and propose as parts of debates on other taxation bills but, of course, was quickly shut down.

So, yes, the Green Party is happy to support this bill. We want a fairer, simpler tax system for small businesses. We want a fairer and more transparent tax system that does not facilitate tax avoidance by wealthy foreigners, because most New Zealanders, I think, agree—perhaps some of the National members are not in agreement with this, but I think that most New Zealanders agree—that tax avoidance and evasion is not right, it should not be happening here in New Zealand, and we should have maximum disclosure.

But it is simply not possible for the Prime Minister to have been honest and correct when he said that New Zealand had full disclosure, and for us to be debating this bill, which obviously changes, right here—it implements the changes to the disclosure requirements for a foreign trust that were recommended by the Government inquiry into foreign trust disclosure rules. Obviously, we did not have full disclosure. We needed full disclosure, and it took sustained media scrutiny and Opposition scrutiny for this Government to do it. I say to the voters of New Zealand that you do not need to have to rely so much on Opposition parties. Elect us into Government and we will ensure that there is a fairer, simpler tax system for New Zealand.

There are three main policy aims in this bill, and I would like to focus on the last one—that is, the elements related to the foreign trusts and tax jurisdiction.

But first—and it is unusual with the new Minister of Revenue, but I would like to concur with some of the statements he made in his address to the House, and I am well pleased to see he is pleased about it—I would like to support what the Government is saying with regard to the provisional tax system. I have only just realised that Labour called for it, the Greens called for it—well, New Zealand First called for it years ago as well. So there is a lot of common sense—

💬 Hon Clayton Cosgrove: We wrote a policy on it.

—yeah—running through the House, and the Government picked up on it. It is a great thing, and we do support that. The support is somewhat tempered by the obscene sums of money that the Government is having to spend in terms of the Inland Revenue Department upgrades, the ICT capabilities. We are talking sums in the billions of dollars. As to how often the case is that these omnibus bills come up, especially with regard to tax, it is a great frustration—of mine, in particular, but for New Zealand First, of course—that these omnibus bills cover such distinct and varied pieces of policy.

So although I would love to stand up and support the Government with this bill with regard to streamlining business operations in terms of their tax obligations—helping them with provisional tax obligations, because I think that is sensible—the third part of this bill is an abomination. It is an abomination to this House and it is an insult to the people of New Zealand.

So, of course, this is where I would like to spend my time. I apologise for this long quote from a business magazine from overseas, but if you would give me some leeway, Mr Assistant Speaker: “When New Zealand Prime Minister John Key flew into Malta for the Commonwealth Heads of Government Meeting in November 2015, he already knew he shared some important views with his host, Malta’s Prime Minister Joseph Muscat, about the importance of keeping the tax secrets of foreign investors. Both countries are quiet achievers in the ranks of global tax havens, and both are determined to keep it that way. While Malta has been fiercely resisting pressure to close tax avoidance loopholes used by foreign companies, including Australian firms, to move profits out of the European Union, New Zealand has fought just as hard to protect its laws that make foreign profits tax-free and invisible for beneficiaries of its offshore trusts.” This is not a perception around the world; this is the reality as the world sees it. We are a haven and we are being abused. It is described by many as an opportunity for corrupt politicians, organised criminals, fraudsters, bribe payers, arms dealers, and terrorists to use New Zealand’s loose regulatory framework.

New Zealand’s 12,000-plus offshore trusts pay no New Zealand tax on foreign earnings. Their beneficiaries are not registered and their accounts are not filed with any public body. New Zealand regulators may demand this information if so requested, but it is not disclosed to foreign Governments. Yet, Mr Woodhouse, the Prime Minister rejects claims that New Zealand is a tax haven. To quote the Prime Minister: “our tax settings are relatively robust by international standards, but we’re always open to considering changes if they’re warranted.” The release of tax haven records underline the ease with which corporates and individuals can use New Zealand to hide their wealth. Even Mr Shewan in his report said: “it is reasonable to conclude that illicit funds are being hidden in New Zealand foreign trusts.” That is a direct quote. Mr Shewan would not state it outright, but given that his terms of reference did not include actually looking at the Panama Papers, he could only make that assumption. He may have described the terms of reference in his preface to the report as broad and comprehensive, but New Zealand First said at the time that they were not broad enough. What we are seeing here today bears that out, although, actually, to be fair, Mr Shewan did come down quite hard on the Government’s lack of action in terms of transparency.

So there were a few statements there made by Mr Shewan that were embarrassing to the Government. This is a quote from Mr English: “Mr Shewan’s inquiry noted that foreign trusts are legitimate vehicles and that New Zealand’s tax treatment of foreign trusts is appropriate.” That is what Mr English got from the inquiry—that was it—and yet the inquiry concludes that the existing foreign trust disclosure rules are inadequate. Then he goes on to say that the rules are not enough to protect New Zealand’s international reputation.

Let us be clear for the members of the House: New Zealand First is dead tired, so tired, of this National Government’s half measures when it comes to legislation—half measures on the housing crisis, half measures on regional development, half measures on transport infrastructure, half measures on our social infrastructure, and half measures on just looking after small New Zealand businesses in terms of the uneven playing field they have to play on with regard to their GST and tax obligations when compared with their overseas competitors. It is all about half measures and spin, and it is beyond frustrating.

This bill, with regard to foreign trusts, is yet another half measure. It does not even go halfway, I put it to you. Let us be absolutely clear: the response in this legislation is completely inadequate, and I use the European Union to measure how inadequate this response is. New Zealand’s tax regime will come under investigation as Europe prepares a “black list” of global tax havens, and guess what? New Zealand and that National Government will be on that list. It is looking all over the world and it has confirmed that New Zealand will be investigated.

💬 Hon Michael Woodhouse: He’s retracted that. He’s corrected that. He said that was misreported.

They will investigate us, Mr Woodhouse. Let us be realistic. The Prime Minister’s pet industry has been put under the spotlight. Mr Woodhouse has said the formal investigation may not take place, but we know that the EU is now looking at us very, very closely, and it has put us under a microscope. Right now, without a free-trade agreement—right now, without those magic free-trade agreements that this Government likes to make up—the EU is our third-largest trading partner, so it is pretty critical that our relationship with the EU is on the up and up.

Here is the kicker: New Zealand does not comply, even with the recommendations made by Shewan, even if those are implemented—and not even all of those are implemented in this bill. For example, “no tax exemption of foreign income”—New Zealand will not meet this standard. It wants an automatic exchange of information with foreign tax authorities, and the jurisdictions where the settlors and beneficiaries are resident to be reported—New Zealand will not meet this standard. It wants a public register of trust ownership and details—New Zealand will not meet this standard, even after this legislation is enacted. We are facing scrutiny, at the very least, from those that we would like to sign a free-trade deal with.

New Zealand First would like to be able to support parts of this bill, as I said. There are good aspects to it that we think the select committee should investigate and expand on further. But because this is less than a half measure in protecting our reputation and ensuring that this country does not support thieves and robbers from around the world, New Zealand First cannot endorse this piece of legislation, even at this stage. It is not an honest attempt, and I suggest to the Minister that he come back with a full, comprehensive, and honest go at solving our problem with tax havens.

This is a great tax bill, but before I speak about that I would like to actually respond to some of the pious drivel that we have heard on the Panama Papers. As a conspiracy theory coming from New Zealand First—well, there are no surprises there, I expect, to anyone. But, from the Greens? Their mother party, or their mother organisation, Greenpeace, was actually implicated in the Panama Papers. It is a bit rich for those members to come into this House and then act piously—

💬 Eugenie Sage: I raise a point of order, Mr Speaker.

The ASSISTANT SPEAKER (Lindsay Tisch): There is a point of order—[Interruption] Hang on—we will not have that, either.

💬 Eugenie Sage: The member has made a totally inaccurate statement. Greenpeace is not the mother organisation for the Green Party.

The ASSISTANT SPEAKER (Lindsay Tisch): I take that point, and ask the member to focus just on facts.

💬 Hon Michael Woodhouse: I raise a point of order, Mr Speaker. You are well aware of the Standing Orders and Speakers’ rulings around debating points. I would suggest that in the context of the comments that the member has made, that is indeed a debating point.

The ASSISTANT SPEAKER (Lindsay Tisch): No. [Interruption] Order! We will not have any interjections when I am on my feet. [Interruption] The member will withdraw that comment and apologise for it.

💬 Hon Clayton Cosgrove: I apologise and withdraw.

The ASSISTANT SPEAKER (Lindsay Tisch): My ruling was not to do with the point that Stuart Smith made regarding the points in relation to Greenpeace; it was to do with the point about it being the mother, or the sister, or the overriding—I do not know what the word was—of the Green Party. I did say to the member to stick to the facts. I did not rule it out of order. I did not ask him to withdraw and apologise. I am asking him to continue.

Thank you, Mr Assistant Speaker. I think I will move on to the bill itself. One of the key things about the National Government’s management of the economy is how it has made businesses’ lives a lot easier with the way Government regulations, and the interface between Government and business, occur.

This is a fantastic bill—particularly, I think, with the accounting income method coming in, which will make things much easier for small businesses. Also, the use-of-money interest not being required on the first two instalments of provisional tax will be a great boon for businesses and enable them to manage their accounts much better. We all know that small business is the backbone of New Zealand’s economy, and anything we can do to enable that is fantastic. I must say, I did quite enjoy the first minute of my speech, but thank you.

Tēnā koe, Mr Assistant Speaker. E ngā mema o Te Whare nei, tēnā tātou katoa. I am happy to take a call on this, the first reading of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Bill. Just by observation, I say that when this bill is introduced, it will, no doubt, have amendments or impacts on the Income Tax Act 2007, the Tax Administration Act 1994, and the Student Loan Scheme Act 2011. As previous speakers have made mention of in this House, there are three main policy proposals in this bill: firstly, changes to business taxation to make tax simpler; secondly, it implements the G20 OECD standard for automatic exchange of financial account information tax matters; and thirdly, it makes changes to implement the disclosure requirements for foreign trusts recommended by the Government inquiry into foreign trust disclosure rules.

The aim of the bill is to amend several tax statutes for various purposes, including to simplify processes, to reduce compliance costs for smaller businesses, and to tighten foreign trust disclosure rules. Labour stands for a simpler, fair, and transparent tax system in our country, and therefore we are supporting this bill. The Minister mentioned that included in this bill are what he has termed business-friendly measures, which are about simplifying the provisional tax rules by providing a new pay-as-you-go option for small businesses to pay their provisional taxes by 1 April 2018, and that needs to be commended.

But in terms of simplifying tax, the particular part of this policy that I want to particularly make mention of in my contribution is the removal of the 1 percent monthly incremental late-payment penalty on new GST, income tax, and the Working for Families tax credit debts from 1 April 2017. As we know, many families out there are struggling. The wages do not meet up with the costs of living, and so any removal of penalties, particularly in the family tax credit, must be commended.

For the time that I have left in this contribution I want to talk about the third policy proposal in this bill, which has come about as a result of the government inquiry into foreign trust disclosure rules. The previous speaker, Stuart Smith, made mention of so-called scaremongering. I just want to draw the House’s attention to the Panama Papers. It was the largest data leak in history, released by journalists back in April. The largest cross-border journalism collaboration ever uncovered a giant leak of documents from Mossack Fonseca, the global law firm based in Panama. It consisted of more than 11.5 million files. You cannot call that scaremongering—11.5 million files, showing the practices of the wealthy and powerful around the world and their use of tax havens.

It was reported that New Zealand’s involvement in the scandal—we were mentioned in 60,000 of those documents. I would challenge the member who said that the whole Panama Papers scandal and what it caused this Government to do was scaremongering, because clearly that type of leak and the implication of us being one of the many countries that are supposedly tax havens for those wealthy people definitely challenged our reputation internationally.

When this bill is put to the Finance and Expenditure Committee, of course we would get people delving into and probably examining aspects of the bill to ensure that we are going to end up with a simpler and transparent and just tax system, particularly for the small businesses, but also, as others have mentioned, for the international reputation of our nation—our great nation—that we are not the haven for people to park in. I want to also hope that the select committee that is examining this bill, and those submitters out there who may be submitting, do ask the select committee to look at making the registration more publicly available and not just available to the Inland Revenue Department and the New Zealand Police, so that the scrutiny to ensure that we have a fair and transparent tax system is actually scrutinised by all the public.

Like I said, this bill is something that Labour will be supporting and we will, no doubt with vigour, look forward to those who submit, so that we can make sure it is robust and it meets the intention that both the Minister and the Government have said it has, and so that we do have a simple tax system in this country that is fair and we clearly refute the slight on our reputation that we are a tax haven. Therefore, I commend this bill to the House.

It is a pleasure to talk just briefly on this new bill that has been introduced to the House today. This is in a long line of taxation bills before the Finance and Expenditure Committee. We are a hard-working committee and we are looking forward to looking at all aspects of this bill.

I just want to highlight that it has got four very important points. First of all, it does deal with the issues that John Shewan referred to in his report. We are addressing them, and I cannot wait to have a proper debate about that; not some of the rubbish I have been hearing this afternoon. Secondly, it deals with the Inland Revenue Department’s Business Transformation programme, and introduces three aspects related to that. Thirdly, it implements the G20 OECD automatic exchange of information—again, a very important part of continuing the transparency that New Zealand is well regarded for. And, lastly, it introduces 16 measures relating to allowing businesses to pay their tax in a much more easy way, doing away with many of the use-of-money provisions, and also introducing this pay-as-you-go scheme.

This is a great bill and I am looking forward it.

Debate interrupted.