Taxation (Neutralising Base Erosion and Profit Shifting) Bill

This gives us an opportunity to talk about the title of the bill and the commencement date of the bill, if I’m not incorrect. I’d like to suggest—and I am a little bit disturbed about the title, actually. I think it’s inappropriately—or it could be better—titled, in my view. Taxation (Neutralising Base Erosion and Profit Sharing) Bill: well, we know that we can’t completely stop people from avoiding or evading tax, so neutralising, I think, is an inappropriate word. I think it should be “minimising” or, I prefer, “shrinking”—shrinking base erosion and profit shifting—or, two words, “making smaller”—making smaller base erosion. Then we could even extend it to “putting cold water on” or even “neuting”, but even those are a little bit weak. Maybe the goal, if we’re aspirational, should be talking about “eliminating”—eliminating base erosion and profit shifting—“eradicating”, or even “wiping out” base erosion and profit shifting.

Now, the next two words “Base Erosion”, they’re not very clear. It’s not clear to me what that means—or the man on the street certainly would not be clear about what base erosion means. Is it tax minimising, because tax minimising is perfectly legal. Tax avoidance: illegal. Minimising—perfectly within a taxpayer’s right to minimise their tax liability. So base erosion seems—to me, at least—to mean that one should be able to minimise the tax liability that one could be obliged to pay. So base erosion is quite an ambiguous phrase.

Then, of course, “Profit Shifting”: profit shifting is also ambiguous, because profit shifting could be, on the one hand, avoidance, which is illegal, and then, of course, as I said earlier, minimising or moving your profit from one entity to another—through, obviously, legal means—is a minimising exercise, which is absolutely fine as well. So I’m thinking, instead of profit shifting, it should be tax avoidance or offshore tax avoidance.

So we’re getting to a situation where we could say, “Taxation (Putting Cold Water on Tax Minimising and Eliminating Tax Avoidance where it’s to do with Overseas Businesses) Bill”. So that’s my proposed title to the bill. I think it’s a far more eloquent, far more descriptive title than the current bill is named, and I’d be interested to hear what the Minister in the chair, Stuart Nash, says about my very positive and constructive comments.

I don’t think in my time in the committee a Minister has stood up and talked to the title and commencement, but, after that, I really can’t help myself. What we’ve got here is a—[Interruption] Ha, ha! In a way, the bill should describe exactly what it is, and the thing that I can see that the member Alastair Scott couldn’t is the former Minister of Revenue and the former supporter of this bill, sitting down here and going, “Oh, goodness me! It doesn’t get any better than this.” There is a technical term, and it is called base erosion and profit shifting. It’s used throughout the world. It’s used throughout the OECD. It’s shortened to BEPS. There is no other way to describe it, because this is how everyone describes it.

This bill is about neutralising—we have a lot more aspiration. When the member said it should be “minimising”—no, we want to get rid of it. We want to ensure that multinational organisations do not rip off our tax base, and we also want to make sure that we maintain and enhance the integrity of our tax system. This is exactly what this bill is about, and I think the title epitomises exactly what the bill does. “Taxation”—it’s about taxation. “Base Erosion and Profit Shifting”—that is the globally accepted term for this.

This is a complex piece of legislation—I acknowledge this; everyone acknowledges this. If you went down to—quote unquote—“the man in the street” and said, “What’s base erosion and profit shifting?”, no one knows. But I’ll tell you what, though: if you went down there and said, “Do you think that”—well, not you, Madam Chair; “Do we think that multinationals should pay their fair share?”, everyone gets that. Everyone believes that everyone, whether you’re a large multinational operating in New Zealand or just a stock standard taxpayer—everyone believes we should pay our fair share of tax. What this bill does—it is ensuring that we are neutralising base erosion and profit shifting, i.e., eliminating the ability of multinationals to rip off our tax system. It is hugely important in terms of the integrity of our tax system.

In terms of the date, it comes into force on 1 July. I mean, I think I’ve spoken two or three times on why that date is important. We all know why it’s important. But there is nothing you can say about this headline that doesn’t describe exactly what the bill does and give it its technical term. I’ve nothing more to say.

It’s with some trepidation that I offer some comments further to the Minister’s response to Alastair Scott’s comments on the title of the bill. Mostly by way of acknowledgment, there is a certain rationale. I think, however, it’s somewhat idealistic to think that we can completely eliminate all aspects and attempts to engage in such activities, so perhaps reduction or mitigation might be more realistic and less idealistic, but, none the less, congratulations to all those who have been involved in producing this bill, from the previous Minister, the Hon Judith Collins, to the current Minister—now in the chair, of course—the Hon Stuart Nash, for having such lofty ideals. I wish them and all those involved in the administration of tax all the very best in meeting those goals.

One other aspect of the title I thought might be worth mentioning, quite briefly, was the phrase “Base Erosion”, because I wonder if there might be some confusion because it sounds either a bit electoral or environmental. Base erosion might refer to the normal reaction of traditional Labour Party supporters in relation to legislation, whereby their base might be eroded. In this case, however, because we have a sensible piece of legislation, as originally proposed by the previous Government, I suspect that won’t necessarily be the case. Or it might be a bit environmental, being base erosion and perhaps invoking shorelines and shifting sands, other than in the metaphorical sense, as it applies to tax. But I think, perhaps, those are not particularly worthwhile dwelling on any further.

So, finally, in relation to the commencement date, I would comment that it’s slightly unusual for sections to come into force prior to the date on which the bill receives Royal assent. I refer specifically to clauses 4, subclauses (1) and (3), and clause 42, which we learn come into force on 1 April 2008—not an April Fools’ gag, I am sure, but the Minister might have some comment there. The retrospectivity is justified somewhat by reference to the meaning and effect of those provisions, such that “Interest paid by non-resident companies to non-residents” and also the application by a person for the 2008 and subsequent years does indeed need to be contemplated by this. So it’s somewhat backward-looking in that regard.

So that was the comment that I wanted to make, just to place on record that it’s somewhat unusual in our constitutional framework to have legislation that, in effect, has some manner of application prior to it having been passed by the House. Thank you, Madam Chair.

Thank you, Madam Chair. Look, I just wanted to say a few parting thoughts on this legislation as it works its way through. I think you could potentially use the words “Counteracting Base Erosion and Profit Shifting”. It might be more, I think, accurate than “Neutralising”, but we could reflect on that over time.

I was thinking, particularly, in terms of the commencement date being 1 July, and I’m sure all members of the House will be aware that today is actually 21 June, which is not far away from 1 July. We’re on the committee stage of the bill. We have the third reading still to go, and then the Royal assent, so the only conclusion one can draw is that this Government is cutting it a bit fine. It points to a certain lack of skill in managing the work of the House that they’ve got themselves into this state, which was indeed the point of the discussion in the debates that we had last night around the road taxing bill, as well, because it’s all being done at a mad rush.

So there is a theme emerging, I think, that we see reflected in the title and the commencement date of this bill that it’s a Government that is a bit shambolic and just scrambling to get things done in the nick of time, just before the legislation is meant to take effect. So we’re seeing all of the other manifestations of that shambolicness this week. We’ve got Ministers not sure whether they’re talking in private capacities or as Ministers, we’ve got the Government making big decisions such as on oil and gas with no Cabinet process, and—

CHAIRPERSON (Poto Williams): Order! Order! Just a matter of relevance.

Well, the relevance is that it’s a reflection on a Government that has been very ill-disciplined and shambolic in its nature. That is reflected in the fact that this bill is coming into the House and it is to take effect on 1 July, as we see, and we are here debating it on, indeed, 21 June. There’s very little time, and it just reflects on the fact that there’s a lot of work to be done in terms of establishing good quality systems of Government.

Now, when you look at this bill, this is a bill that is part of one of the most effective mechanisms of Government policy in this country in terms of the development of tax policy. It goes through a whole lot of hoops, and this started a long time ago in the previous Government. It has been shepherded through by this current Minister of Revenue, Stuart Nash, who’s done a good job, and that is the way that policy should be developed.

So the only point I would make is that it is a complex bill. It is going to be taking effect on 1 July. In every aspect of tax legislation, it is complex, and I’ve no doubt we will be revisiting aspects of this in time to come because we won’t get it all perfectly right. I just hope, as a parting thought, that the Minister will, after 1 July, maintain his eagle eye on this area and be open to respond and adapt as the time comes. On that basis, I just want to commend this bill.

Clause 1 agreed to.

Clause 2 agreed to.

House resumed.

Bill reported with amendment.

Report adopted.