Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Bill

Members, we come now to Part 4. This is debate on clauses 78 to 92—“Amendments to other enactments and revocations”—and Schedule 2. The question is that Part 4 stand part.

Thank you very much, Mr Chair. Just in terms of a little bit of the context for this part, it does include a number of key amendments and changes, and we’ll just work our way through some of those of context before we get into some questions. Obviously, the changes in regards to closing the loophole of an offshore gambling duty are included with this in this provision. The coalition Government has been very clear that there is a loophole in which offshore gambling entities gain benefit, and we’re looking to close that to level the playing field through this aspect of the legislation. There are also some changes that are carried forward in regards to the provision of paid parental leave in regards to the KiwiSaver Act. There is a significant benefit for those on parental leave and their ability to be able to get the provision of that KiwiSaver aspect. Particularly, we’re conscious of the retirement gap, and this will, no doubt, support closing some of that. There are a number of other aspects and changes, including the platform economy and GST components on that—again, all sensible aspects of policy that were clearly articulated leading into the election process.

Thank you very much, Mr Chair. I have a series of questions relating to the proposed offshore gambling duty. I have a potential amendment that I am considering tabling, but it is dependent on the responses that I get from the Minister of Revenue. Just so I understand what the intention is and where we are, I won’t pad this out, but I’ll just ask some pretty straightforward questions. What advice has he received in regard to the level of offshore gambling that is occurring? What is the projected revenue that he expects to receive as a result of this proposed duty?

There’s been some talk in previous parts around online casinos, so I’m particularly interested in how this relates to them, as well as sports and racing gambling occurring online from offshore operators. And if the intention is to include sports and racing, how does the proposed offshore gambling duty affect the point of consumption charge currently in existence?

Well, I’m happy to answer a few of those questions and engage in a little bit of to and fro as required. The implementation of the gambling duty, as I said, is to level the playing field between those operators that are outside of New Zealand that aren’t subject to the same taxes as domestic providers. The question around what advice I have received in regard to the scale of that offshore—you know, the size of that market and the implications around that, there’s a couple of components around that. One, it is difficult, because of the complexity and the element of hidden economy that exists within that, to fully scope the entirety of the size of that offshore market. However, in the calculation of the revenue assessments that IRD have done in regard to this duty, they have used a proxy of the overseas gambling operators that currently do pay GST. Now, that is a proxy and that is the best information available, but we do know that there will potentially be providers within the hidden economy that are not currently complying with that aspect.

What we do expect in the second key element of this legislation, around the licensing regime and the regulatory regime—again, bringing us in line with other OECD countries that have similar models in place—is when that regulation is put in place then, in effect, that net will get wider and will be able to ensure that we capture more entities and players in terms of that.

In terms of the revenue assumptions, I’m happy to provide the exact figure: I think it was around $143 million or $153 million in regard to the overall gaming duty component, and there is an additional component in terms of what is forecasted around the introduction of the licensing regime. As I say, I’ll just caveat out that in terms of how potentially big that broader hidden economy is. So that revenue will be subject to reassessment as and when that comes in, and we’re wanting to make sure that is implemented in a stable manner.

In regard to the conversation and questions that I think the member noted around sports and racing and the other aspects, at this stage that is not something that is in scope. However, we are continuing to monitor and assess that aspect in terms of the overall market, but it’s not something that’s on the table at the moment.

I thank the Minister of Revenue for that response. I’m interested, in particular, in the forecast revenue that’s stated by the Minister, given that when this policy was announced prior to the election—and that is relevant to point out given that in numerous responses to Part 1, 2, and 3 during this committee stage last night, the Minister pointed to the fact that these elements were campaigned on as justification for not having a select committee process—the figures used pre-election were $180 million. So it’s interesting to note that the forecast revenue had reduced.

But my question, following on from those responses, is: where is it outlined in here that it is casinos only? I know that that is what the Minister has referred to in his responses, briefly, in other parts, but this is talking about offshore gambling. If there is a distinction between casinos, sports, and racing, it’ll be useful for him to outline to the committee how that is. There is a legitimate concern around revenue lost to offshore operators around sports and racing.

I assure him that these are genuine questions. This is an area of interest of mine. When I was racing Minister, we put a lot of work into this; there is work sitting there ready to go. I’m just understanding, given his comment that it is out of scope—I’m not convinced that’s the case, but it might be useful to the committee if he can just explain how that is the case.

Thank you, Mr Chair. I too want to speak to new Part 2C on the offshore gambling duty, inserted by clause 89G in Amendment Paper 20, for this part of my contribution, and there’ll be other questions in relation to the new parts that have been inserted. It’s quite important, I think, that Parliament be given the opportunity to really debate this part of the bill. The reason being, that it is part of the Minister’s Amendment Paper, but it has not been subject to any public submission process. So, yes, we’re under extended sitting, but, actually, time and time again, when the committee of the whole House was meeting yesterday, or the day before, members had been asking why Ministers couldn’t split off the annual rates part of the bill in order to allow a public submissions process for this particular element of the bill and for the other elements of the bill which are more complex, which haven’t actually gone through the select committee process.

So I just wanted to make that point quite clear: this particular offshore gambling duty has not been subject to public submissions, and my concerns about that—I raise them, perhaps, on behalf of the Problem Gambling Foundation, who I’m sure would have probably had some very thoughtful submissions as part of this offshore gambling duty, because, obviously, what’s not quite clear within this part is around gambling harm minimisation. But, nevertheless, I do want to ask the Minister of Revenue, given there’s been no select committee process as part of this bill, whether there’s been, actually, anything around the generic tax policy process, which is the general sort of consultation process that Inland Revenue goes through. Sometimes they issue an officials’ issues paper, or the Government will release a discussion document, and then they will call for submissions. Submissions will come in, then the Minister will agree to changes, and then it’ll come through the House, through Parliament. So my question is: was there no opportunity for a generic tax policy process in the development of this offshore gambling duty? Who did the Minister consult with, or who did officials consult with in the formulation of this policy?

Now, I know that the Minister will, quite clearly, say, “We took this to the election. We have the mandate to be able to do it.”, but, as members of the House quite clearly said a number of times yesterday, in order to make sure that you’ve covered all the bases, that you don’t have any unintended consequences, the public submissions process is quite important. So I want to know who did officials speak to to test this policy; name who. I know that during the election campaign, it was revealed that part of this was part of a SkyCity briefing to different members of Parliament. I mean, even I received that briefing from SkyCity—you know, that we should tighten up this offshore gambling.

So I just want to know, specifically, who was consulted, when were they consulted, were other members of the harm minimisation community consulted, and was their advice proactively sought; if so, what was their advice, or what was their response back to that request from officials or the Minister? And I just want to really make the point clearly: there has been no select committee process. This is the only time we get to scrutinise this brand new tax—it is a brand new tax, and this is the only time that the Parliament will be able to scrutinise it. Thank you, Mr Chair.

Thank you very much, Mr Chair. Just in response to a few of those questions. To the Hon Kieran McAnulty, in terms of the comments around sports and other aspects: the current policy that we’re working through here does exclude those betting on sports and racing, as there actually is an existing requirement for those entities to pay a 10 percent point of consumption charge to the Department of Internal Affairs (DIA), and that consumption charge is built into the model. It is important to know, and I think the member does raise some aspects in terms of the consistency, but we are considering and working through the details of the implications on both the racing sector and the sports aspect to ensure consistency. But the purposes of this bill, and where we are at this point, noting the time line, is very much focusing on the offshore gambling operators, in the first instance.

There were some other questions in regards to harm minimisation, and I think one of the members was referencing that. Quite a lot of conversation was had in regards to the importance of ensuring that harm minimisation that is available domestically through the provision of onshore gambling entities is afforded to those that are in the offshore aspect. And that’s quite challenging, obviously, in terms of practical implementation, but from a pure consumer point of view, you know, they’re reasonably agnostic on whether, online, that is a New Zealand domestic entity or an offshore one. So the licensing regime is a key element in terms of ensuring that we do have the appropriate wraparound and regulatory model around that—primarily, not only to capture those players on a consistent playing field but also to ensure that their provision of harm minimisation is consistent, irrespective of jurisdiction and where that comes from.

I noted before, just in regards to the revenue, and I provided a range, the actual aspect is $149 million, without regulation, over the forecast period—I think that was the mid-point of the range that I quoted—and the overall forecast period of the revenue, including regulation, is $193 million. So just carrying that.

I think, just in regards to the other questions around consultation that the Hon Barbara Edmonds was referring to, there was consultation, and, you know, the previous Government will be aware that these are issues that were considered—this issue, in particular, more broadly, was considered, so DIA did consultation in 2019. The actual element in regards to the gaming duty wasn’t formally consulted on, but was included, as I noted before, in the National Party’s pre-election materials and published tax plan.

Thank you, Mr Chair. It is a quick supplementary based off the Minister of Revenue’s response. 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.

Thank you, Mr Chair. I wish to ask some questions of the Minister of Revenue 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 the people we imposed tax on because we could.” And that applies to a lot of laws, actually. We impose 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 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 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 the 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.

Ingrid Leary.

💬 Ingrid Leary: Thank you, Mr Chair.

CHAIRPERSON (Greg O’Connor): Oh, sorry. Minister, you can have the call. I’ll rescind.

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 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 around $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.

Thank you, Mr Chair. I too want to talk about the offshore gambling duty, and I want to talk about this in relationship to the regulatory framework, because, while I take the Minister of Revenue’s point around the fact that this went to the election, this is a huge change for this country. It is a very big change in this gambling area and the take.

What didn’t go to the election was the regulatory framework, and the two go hand in hand. The fact that this is where it becomes really problematic is that the Minister has talked about other OECD countries and their regulatory frameworks. Well, Minister, I’ve done some research in this area and I’m quite passionate about it, and I know that not all of those OECD countries and their frameworks are equal. In some of them, where they have put a regulatory framework in, offshore gambling has increased, and it has caused many societal problems and an increase in that. Is that what the focus is here? Is it a complete increase in tax take that is going to take more societal problems overall or is there a focus on harm minimisation?

I’m really struggling because we haven’t taken this part to a public consultation to know what the intent is here and to know and to be able to decide whether we are looking at how we’re going to support that harm minimisation in this country. I know that there was work that was done around the tax take in looking at building this regulatory framework back when you talked about the 2019 era and you talked about the consultation then. There was work that was done to look at most of that tax take going back into harm minimisation because the aim at the time was actually to reduce the amount of offshore gambling that was happening in this country.

I’m really concerned because I don’t think we know the absolute crux of this problem here in this country. I believe that if what you’re talking about here, Minister, in this particular piece in the legislation, is around solely the tax take without having it in hand with the regulatory framework, then there is a massive concern to what the ongoing issues might be and the consequences of that to this country. So I’m really wondering when we’re going to see that work, what is happening with that work, and how long that’s going to be. You’re talking about this happening after 1 July this year. Can you absolutely guarantee that we will have a regulatory framework in place that will have harm minimisation at the core of it—that won’t have an unintended consequence of further harm in this country? This is where I have a real issue. We have got this here, you’ve said you’ve taken it to the election, but we haven’t seen the consequences that go along with it.

Look, I take and hear the member’s concerns, but I go back to the point that I noted previously: the current state, the status quo, is that there is no regulation for these entities. There is a significant loophole. And the risks which the member has outlined have no ability to be mitigated by the way in which the jurisdiction deals with that currently.

So what this Government is doing is taking steps to address the exact points that the member is raising. And the member will be aware that this is a complex area and prior Governments have looked at this issue. The difference is that this Government is actually taking steps to take some action to actually do something about it. We’re going to do that in a careful and phased manner in regards to the implanting of a gaming duty, then implementation of a licensing regime. We have provided additional funding to IRD in regards to their ability to be able to administer this new gaming duty. That will include the Inland Revenue working with other countries and jurisdictions in regards to tax treaties around information sharing, which will enable IRD to get a better understanding in terms of the broader players and scope that should be captured by this.

What we do know from other OECD countries is they are already currently collecting gaming duties, or whatever they refer to in their overseas jurisdictions, from a number of these entities that aren’t captured within the New Zealand net. So the information conversations between jurisdictions, which are very well in place, will allow us to formulate that, and the additional funding from IRD will be able to ensure that we do follow up and enforce the gaming duty on those players. And we will continue to be relentlessly focused on ensuring that everyone pays their fair share and ensuring that that revenue flows back.

And to the member’s point around harm minimisation, which I think many in this committee would agree is a critical element in regards to the negative aspects of gambling and the ability to deal with those consequences, then we will have a better model overall.

Just before I take the next call: now, I’m aware that members on my right are seeking the call. I’m assuming that most of those calls are closure motions; however, assumption can be a falsehood. So if anyone did want a call for the debate, it may be useful if you just slipped a note to me and I’ll make sure. Otherwise, I’ll assume that most of those calls on my right are actually closure motions.

Thank you, Mr Chair. I’d like to raise an issue—“Amendments to Child Support Act 1991”, clauses 88 and 89, and also Schedule 2—and this relates to a new power: the ability to grant and/or overturn a temporary exemption in a period that would otherwise be barred. I will provide some context to the Minister of Revenue, but I’m going to ask about retrospectivity, which is a really serious thing to be doing in a taxation bill. So I’m wanting to understand some of the processes around that: how this will be administered by the IRD—how they will have the information that they need.

What will happen if a child’s situation changes? Because the Act speaks to the change of circumstances of a liable parent, but it is silent on changed circumstances of children. What happens in the case of chronic illness where it may be patchy periods of inability to pay? Because the Act speaks to 13-week periods as “blocks”, but we know that, often, inability to pay is not quite as clean and neat as that. And also, it is silent to the situation of the victims of sexual offenders, which the original Act very specifically said was not subject to these exemptions. Does that mean that sexual offenders and the victims of sexual offenders who receive payment are now suddenly caught unintentionally?

So, just to contextualise this, what this section does is speak to the Child Support Amendment Act 2021, which gave a four-year time frame in which to assess child support, and it was designed to provide more certainty, so parents knew that child support would be needed from them or payable to them for four years. It was designed to reduce administration, and it was also considered the right amount of time to balance equity considerations. So one or two years may be too much of a burden on compliance; more than four years is probably an overreach in terms of the assumptions around what the family situation was and what was happening to the liable parent. If we look at the situations where this could apply, it can apply to people in prison, for example. I know this from my electorate in Taieri. I have the Milton correctional institution, where a number of these types of family situations do affect my constituents, and they are often subject to liabilities and to rules that they really have very little agency over. So that would certainly apply there.

But it could also be to people who are in hospital for 13 weeks or more, perhaps in a rehabilitation treatment centre for addiction services—perhaps somebody with an injury where they haven’t been able to work for 13 weeks. And, again, I do raise that situation: what if they find they can go back to work and it proves to be untenable and then they are required to take time out again? What is going to happen in that situation? But also, there will be some young people caught—young fathers, in particular, under the age of 16. My sister teaches at the teen parent unit in Auckland, at a very good school, and a lot of the young women at that school have babies—as young as 12—and some of the fathers are very, very young. So these exemptions can apply to those young people where it’s just not really plausible for them to be able to take on some of these financial liabilities.

So the questions that I have around that amendment are: if somebody is serving, say, a prison sentence, for example, longer than four years, can the commissioner apply that exemption, and can they also, then, perhaps reverse the exemption? The date in mind is 26 October 2021—so it goes all the way back to 26 October 2021. Now, in the event they were going to apply the exemption, that would seem fair in the interests of natural justice—that there are situations where there’s a bit of discretion; the exemption could be applied. Somebody may have, for example, spent a longer time in prison or felt that they could get back into work, had a short stay, and then maybe been able to work again.

But what really concerns me is the commissioner’s ability to cancel that exemption retrospectively. And this is where it gets really tricky, because we know that in tax law, or indeed any law, it’s really important to be able to have certainty. We’re speaking about people’s liabilities here, and to apply a retrospective liability by removing an exemption is worrying because, for a start, it is retrospective—and so we all know the perils about that—but equally it goes back to a fairly considerable amount of time, 2021. What if this was to apply, say, in 2026—the commissioner takes it right back to that 2021 period? That is a very big leap backwards in retrospective application of the law, and it seems to be at the behest of the Commissioner of Inland Revenue. So I don’t see checks and balances as to the powers that the commissioner may be able to use to apply that retrospectivity.

Again, the questions that I had at the beginning: what about if the situation of the child changes? For example, what if the child turns 18 or perhaps is taken overseas by a parent—they might be a younger child, but they’ve been taken offshore, and perhaps there is something in the agreement between the parents where a change of location in geography and jurisdiction means that that agreement no longer applies—what is that going to do to this ability for the commissioner to play around with the exemptions?

Probably the most important question I have, really, is that the sexual offenders and the victims of sexual offenders were originally carved out of the original amendments to the Child Support Act. There was an assumption that there would not be able to be an exemption in relation to those cases. Now there seems to be this carve-out and this ability to act retrospectively and to apply discretion, but there is no mention at all of the victims of sexual offenders. My concern is that one of the unintended consequences of this will be that they lose their rights—they lose their right to be exempt or to have the law exempt from applying an exemption in their case. And that would be something perhaps the Finance and Expenditure Committee didn’t get to consider. I haven’t been able to see any submissions on that, but I wonder if the Minister has turned his mind to that, and can he give us an opinion about whether he thinks that those victims should remain exempt from this legislative power? And has he taken any advice on any of these matters?

I would really, really like the Minister to give us his views about retrospectivity when it comes to tax law and when it is and isn’t acceptable, and certainly whether he can see the problem that we have with a retrospectivity that isn’t just time bound—it doesn’t say one or two years; 26 October 2021 goes in the statue. So, if this is going to apply for the next decade, the next eight years, the next five years, those are long periods of time to be applying retrospective law, particularly when there is a power to amend or cancel a temporary exemption. I’m thinking here about the people affected by it. It’s different when it’s going to be one that’s prolonged or it’s given—I understand that was the intention of this—but what about when those rights are taken away from people who might not even know that they carry this liability in law? I’m keen to get your answers, Minister.

Thank you very much. Look, this is an important aspect of the legislation. It obviously has wide-ranging implications and consequences and I’ll want to use the time to walk through a couple of the aspects.

The first aspect which is important to note is that the Finance and Expenditure Committee did not recommend any changes in regards to this amendment. They did consider this as part of their due process. And so while I acknowledge the member wasn’t on that committee, other members in this Chamber were, and that was considered. So the current position in regards to the ability to have an exemption basically is not allowed. There is a four year - time barred period around reassessment and outside of that there is inability to be able to grant an exemption in regards to liable parents for this period.

The amendment that is being proposed here is to ensure that there is ability to get an exemption outside of that four year - time barred period, and this is consistent with what the member was referring to with the victims of sexual offences exemption as well. This is an amendment which is taxpayer-friendly. This drives a degree of consistency. The member is right to highlight the retrospective element of this, but, in this area and in these circumstances, we’re comfortable that the balance is in the right space in regards to providing the exemptions that are necessary for people to be able to ensure that they meet their obligations under the law.

I just will indicate to members, though, that the question of offshore gambling—any more speakers on that should really point out to any new material without bringing up in relation to that, and of course there is other new material to be considered.

Thank you very much, Mr Chair. In fact, the offshore gambling duty is my primary focus during this debate, and there are many aspects of that that still need to be considered, particularly when we consider that this is a new tax that has not had a select committee process.

There is one area that I am particularly focused on at this moment, and that is the proposed 12 percent charge. The Minister of Revenue has said that this is “to level the playing field”. Presumably, what he means by that is that onshore casinos pay a duty, but offshore casinos do not, and also it is not just casinos. So if we want to level the playing field, we also need to take into consideration that there are class 4 operators across the country, pretty much in every community in the country, who offer pokie machines, and what stands them out against others, including casinos, is that class 4 operators are required to redistribute a significant proportion of turnover back to the community. Now, there wouldn’t be an MP in this House who isn’t representing or resident in a community that has community groups, sports groups, and other groups that are wholly reliant on this funding that comes from class 4 operators. The reason I raise that is because it has to be acknowledged that offshore operators have been taking turnover and revenue that would have otherwise gone through class 4 operators if it were not for the expansion of the online providers.

Now, the Minister has touched on some of the queries around harm minimisation, but what this committee has not considered is the impact on community funding, and what I hope to have the opportunity to engage with the Minister on over, hopefully, a few occasions is the consideration that’s being given to the impact on community providers due to the loss of turnover from class 4 providers. If the Minister accepts that online casinos would have, to some degree, attracted some turnover that would have otherwise gone through class 4 operators, the Minister must also, therefore, acknowledge that, in making this change at the proposed 12 percent, without accounting for the turnover that would have otherwise gone to class 4 operators, there is actually a change in the intent that has been set by this Parliament as to what to do with the revenue that is extracted from that activity. If the Minister does accept that, I think the committee deserves a response as to why the proposal is that there be a 12 percent duty imposed on this without any consideration as to the level of redistribution back to the community’s organisations, like there is through the Lottery Commission and other operators of this nature, to then distribute back to community groups.

I won’t go on about that, because I’d like the opportunity to explore this further. But, initially, I’d like the Minister to respond to those.

Thank you very much, Madam Chair. The elements which we’re discussing here in terms of Part 4 relate to the offshore gambling duty which we are going to be implementing. The broader points that are raised by the member are part of the broader gambling system, and I think what I can say is that the introduction of this gambling duty component to those offshore gambling operators will potentially look to increase the amount of gambling activity from offshore back through to those domestic providers, whether they’re gambling operators in pubs or clubs, Lotto, the TAB in New Zealand, or other aspects such as that. So I think that with the increase in the amount of regulation and licensing in the offshore domain, the proxy in terms of whether that will flow through to domestic aspects is probable, but in terms of the exact elements around that, it’s a highly complex area in terms of that.

But I think that the point that the member is noting in regards to what would be the implication is one which we have considered and would be reasonably aligned in terms of the way in which we expect some of those flows to occur. Obviously, the proof will be in the pudding in terms of the flow-through around that once that licensing regime is in play, but I don’t see it as being a negative implication on domestic providers.

Thank you very much, and I appreciate the opportunity to have a back and forth. It’s not that common, but I think it does help the House in understanding the bill at the committee stage here. I am after a clarification from the Minister of Revenue there. He indicated that, at some point, there’s a potential for turnover to go from offshore to onshore operators. Could the Minister please clarify what he meant by that? Does he mean the proposed duty, or does he mean a possible regulatory framework that has been alluded to but not been put in place? Is it the duty or the possible framework that would lead, potentially, to onshore operators increasing turnover?

Yeah, the point of clarification to the member is that the introduction of the increased taxes on the offshore gambling operators will, in effect, potentially, make the New Zealand operators more competitive in regards to levelling of that playing field. As a result of that, we may expect to see some movement of gambling activity from those individuals that deal with offshore entities to domestic entities, because of that levelling up and the fact that the implication of the gaming duty on offshore operators, in effect, will, in part, allow domestic operators to be more competitive.

Thank you very much, and thank you to the Minister of Revenue for that response. Could he please indicate to the committee how that response then correlates with the advice through the regulatory impact statement, which actually suggests that the duty being placed on some operators may actually lead to turnover being transferred from those registered operators that would be hit by the duty on to operators that are unlikely to comply?

Thank you, Madam Chair. Just as a brief break from gambling—I know that my colleagues have a lot more to ask about this new tax, but I want to direct the Minister of Revenue’s attention to something that is sitting in the original bill. But if we’re looking at the bill as reported back by the Finance and Expenditure Committee, I want to direct the Minister’s attention to clause 86—oh, it’s clause 86 on page 86, which is a happy coincidence. What it relates to is the KiwiSaver Act, and the particular new clause is about information sharing. Now, it’s pretty important, these information-sharing permissions that are given to the Commissioner of Inland Revenue and to KiwiSaver providers. The Commissioner of Inland Revenue knows a whole lot of information about each of us, and KiwiSaver providers know a whole lot of information about each of us, and, ideally, they need to be able to communicate with each other in order to ensure that KiwiSaver deductions are properly directed to where they ought to go, that the savings are attached to the person’s name, and all those sorts of things. So there’s some pretty important administrative stuff there which creates good reason for providers and the Commissioner of Inland Revenue to be able to talk to each other.

So what this clause does is, in the midst of all the—there’s a set of information which the commissioner is enabled to share with KiwiSaver providers, and vice versa. It’s in section 220B of the KiwiSaver Act, and it says that “The Commissioner and a provider may … communicate to each other by electronic means” standard information: person’s name, date of birth, tax file number, contact information, transfers from one scheme to another. But this clause in the tax bill inserts a new situation in which the commissioner and providers may share information, which is, it says, “information relating to the administration of the estate of a person who is a deceased member of a scheme.” So that’s a pretty important thing to be able to do.

The curious thing is, and which is something for the Minister to address, that when I looked at the commentary on the bill—so this is the bill as introduced, and, of course, the commentary is a pretty important guide for select committee members, for members of the public who are trying to understand what a bill does, and for the people in the tax and KiwiSaver communities that we rely on to help us get our tax law right. But if I look at the commentary on the bill, it says, in terms of the summary of the proposed amendment, that it would allow the Commissioner of Inland Revenue to communicate information about deceased KiwiSaver members’ estates to KiwiSaver providers. That’s what we’re told the amendment is supposed to do, but, in actual fact, the amendment does something a little bit wider than that. So the commentary directs us in that particular way, and that’s pretty useful for the commissioner to be able to do that, but, of course, the amendment as put in place right through this doesn’t allow just the commissioner to communicate to KiwiSaver providers; the effect of the amendment is to allow KiwiSaver providers to communicate back to the commissioner as well. So, in actual fact, the effect of the amendment is wider than what was put in the commentary to the bill. So that just means that people may not have been aware of what the actual amendment did, and perhaps, you know, would’ve looked at the commentary and thought, “Well, this is a pretty benign amendment.”—and, indeed, it is a benign amendment, but it’s not the amendment that is described in the commentary to the bill.

So I think it is benign, but I would just like to hear from officials as to if I’ve got that right, and from the Minister if I’ve got that right, and, I guess, just a confirmation from the Minister that this is indeed a pretty benign amendment and, indeed, a good one.

Thank you, Madam Chair, for the call. I want to take the Minister of Revenue back to the offshore gambling proposal, because there’s a couple of new questions that I want to ask the Minister in relation to (1) harm minimisation; but then, actually, (2) around the definition of an offshore gambling operator. When I had a look at the regulatory impact statement that IRD drafted for this particular proposal, IRD officials suggested there were four particular options in how you can capture the tax from offshore casino websites. Of the different options, option 1 was in relation to status quo, which is, basically, allowing them to tax just with GST; option 2 was to tax consistently with New Zealand casinos, and that’s because for casinos based in New Zealand their tax is GST, they have a 4 percent casino duty on gross betting revenue, and 28 percent on income tax profits; then option 3 was taxing consistently with gaming machines, which the Hon Kieran McAnulty has touched upon; and then option 4 was to align with tax rates imposed in other countries.

Now, if I remember correctly, the Hon Nicola Willis, during the campaign, said that she would be looking at income tax on the profits of these offshore gaming providers. So it’s quite clear, because the Minister has gone with option 4, that it means that this particular option which the Minister has brought to the House is not consistent with previous statements made by members of Parliament.

But if I go to option 4—and this is where my question to the Minister lies in relation to the offshore gambling operator definition—at paragraph 48, officials go through what the disadvantages are of that option 4 to align with the tax rates imposed in other countries. It talks about how the disadvantage of option 4 is that it may be perceived as “less fair” by some gambling stakeholders, compared to options 2 and 3: “This is because 12 percent would be less than the 20 percent gaming machine duty which applies to gaming machines in pubs or clubs.” Again, I’m not going to touch on that, because the Hon Kieran McAnulty briefly spoke about that, but it’s actually a couple of lines down where it says, “Also, as the proposed 12 percent gaming duty would be more than the 4 percent casino duty, New Zealand casinos may seek policy changes to apply a lower 4 percent duty on gaming conducted through their offshore websites on the basis that they see this as being part of their casino, rather than a separate type of gambling activity.” So that’s a really key point. So if they’re based in New Zealand but they operate an offshore gambling website, a casino has a 4 percent duty on their gaming conducted through their offshore website. This new tax brings in a 12 percent tax.

So then I look to the definition of what is an “offshore gambling operator” for the purposes of these new provisions. If we look to the definition, it says an “offshore gambling operator means—(a) a registered person located outside New Zealand who conducts any offshore gambling; and (b) for any return period” under which the liabilities, basically, fall. So my question to the Minister is just to make really clear, for a casino operator that has a physical presence in New Zealand—and we have a couple of them—if they have an offshore gaming website, how do these new rules apply to them? Are they taxed at the 4 percent or are they considered an offshore gambling operator, so therefore they’re taxed at the 12 percent?

I think that’s just an important point to clarify with the Minister. I just want to know because it’s quite clear that they’re disadvantaged because they’d have to pay more tax. But, actually, is that not the purpose of, basically, charging the offshore providers? Are you treating them the same as these offshore providers who have got no presence in New Zealand or are you treating them as if they’re present in New Zealand, so therefore they are outside the scope of these new rules and therefore not an offshore gambling operator?

Madam Speaker, if I can, I’ll provide the next lot of questions to the Minister as part of this. So the other part of the question that I had for the Minister is around officials in their regulatory impact statement, which I’ve asked previously, and who they consulted with, and the Minister confirmed it was with the Department of Internal Affairs. So I actually want to ask the Minister: has he spoken to, or consulted with, anyone, by himself or with his staff, that are separate to officials, in relation to these particular changes? And really quickly, the reason being is that the only provider that is actually named—

CHAIRPERSON (Barbara Kuriger): I just want to note that some of the questions that are now being asked—I’ve got a note here, and, having watched from previous speakers, we’ve just got to be careful that we’re not going over some old ground. So I’ll call the Hon Barbara Edmonds on that basis. Thank you.

So the thing for me is the question is to the Minister—not officials who they consulted; it’s to the Minister. Has he consulted with anyone personally, by himself? Has he spoken to any operators, any of the Problem Gambling Foundation? Has he met with them? And then the last bit of that particular question is—and the reason being is—in this regulatory impact statement only one operator is named, and I think it’s quite public who that is, and because they were referenced in this paper. So I’d find it interesting to know whether anyone else spoke to that operator.

Thank you, Madam Chair. I’d like to pick up where my colleague Dr Deborah Russell left off, on section 220B of the KiwiSaver Act, “Information sharing”, because I have new questions on that. Actually, I don’t take the situation as being quite as benign as perhaps my colleague does, because this is about information sharing and personal information. My colleague has talked about how this new information-sharing clause opens up the commissioner to be able to access information of a deceased estate, and it talks specifically about administration of the deceased estate. I want to know what information the commissioner is able to get. Is it just the names of the administrator of the estate, or will the commissioner have access to the actual will of that deceased estate? Will the commissioner be able to access the bank accounts of that deceased estate? And has the Minister of Revenue had any advice from the Privacy Commissioner about the ramifications of this? Because, while Dr Deborah Russell says that there’s an intention that is mentioned in the report and that it seems to be going in a particular direction, we cannot rely on the application of this to be done in the way the report provides; it needs to be applied in the way that the words of the legislation allow.

The second element I have on this is really just a technical one, because it talks about this relating to a deceased member of such a scheme. Now, there will be some schemes where membership of that scheme automatically expires when the person deceases. We know that because, for many intents and purposes, people are no longer legal people once they have died. And, certainly, privacy laws would impact that as well, because we know that the privacy of deceased people changes significantly, as does reputation of deceased people. There is a lot of statute law in New Zealand that says that. So that may have a bearing on the advice that the Privacy Commissioner, hopefully, has given to the Minister. But I’d like to just ask the Minister if, when he responds to my colleague’s questions about the extension of those powers—she has suggested it’s benign; I’m suggesting that perhaps this is a bit of an overreach and that it definitely needs some kind of New Zealand Bill of Rights Act or privacy input into it. Has he had that advice, has he considered the impact of the change of legal status that could be potentially had by somebody who was a member of that scheme who then changes to become a deceased member, and has the Privacy Commissioner actually given him advice about that? Because, if we don’t get advice, this could be quite a dangerous overreach around information sharing. So the other part of that is: did he consider doing a New Zealand Bill of Rights Act assessment on it?

And my third question is also on the amendments to the Child Support Act. What I didn’t get to ask in my contribution was whether he had considered New Zealand Bill of Rights Act advice—and had he asked for a New Zealand Bill of Rights Act assessment on that as well, given the retrospective nature? Three questions there.

Thank you very much, Madam Chair. Just in response to a number of questions, both in regards to information sharing but also the gambling duty. The members Ingrid Leary and the Hon Barbara Edmonds, I think, referred to the information-sharing components. The reality of this clause is primarily one around efficiency. The amendment allows Inland Revenue to communicate about deceased persons with KiwiSaver providers, and they may not otherwise have been made aware of. I don’t think anyone thinks that that isn’t a sensible thing. This was discussed by the select committee. The select committee didn’t propose any amendments in that regard. In regards to this, again, I’m not going to go over ground that has already been gone over, but we are comfortable with where that has landed. In particular, when the Finance and Expenditure Committee did look at this, they also acknowledged that the ability for Inland Revenue to be able to get the information back from KiwiSaver providers was also an important aspect in ensuring efficiency within the broader system.

The gambling duty questions are—I think I’ve said this a number of times in regards to my responses already; I’ll say it again. The regulatory impact statement—sections 45 and 47, as have been highlighted by members—provides the overview and explanation in regards to the questions that have been raised. There’s probably nothing further that I’m going to say without repeating myself.

I move, That debate on this question now close.

I will take a call from the Hon Kieran McAnulty but I’m looking for new things now because the Minister seems to be getting in a space where he is repeating some of the answers. Thank you.

OK, no problem. Well, the good news is I haven’t repeated myself and no one else is focusing on what I’m focusing on, so that’ll come as a great relief to the committee.

CHAIRPERSON (Barbara Kuriger): That’s why I’m taking your call. I’m trusting you.

Thank you very much. There is an outstanding question with the Minister of Revenue, in regards to the rate proposed and its correlation with potential loss of revenue for class 4 providers, and the flow-on impact to local communities, but perhaps he’s asked advice from officials on that.

But I do have additional points on a similar area. We haven’t actually heard from the Minister around why we landed on 12 percent as the proposed rate for the duty. It was earlier referred to the Minister—to another question related but different—that we wanted to level the playing field and keep things consistent. The concern that I have around that is that this area is anything but consistent. If you look at the duty that is applied to profit on casinos, it’s 4 percent—that’s onshore, of course. If you look at the duty that’s applied to onshore pokie machines or gaming machines, that’s 20 percent. And so the proposed rate of 12 percent is inconsistent with either of the two online gambling areas that this proposed duty would cover. There’s also the question around the consumption charge, which I accept is a different area because that covers sports and racing, although given that that consumption charge is at 10 percent, we have another rate across four areas, split between onshore and offshore, and I’m keen to understand why they landed on 12.

The other area, of course, is that the Minister himself has said that the issue around regulation, particularly around harm minimisation—but there is a need in general for regulating of online gambling in particular—whether 12 percent in itself, if it was at a higher rate, could actually perform the role of reducing harm and channelling turnover back onshore if it was set at the right rate. And so that is an area in particular that I’d like to get into, hopefully, with the back and forth of the Minister. But I’ve asked a few questions here; before we get into that, it’d be good to hear a response.

The setting of the 12 percent rate was taken on the basis that the 12 percent in addition to the 15 percent GST takes us into the region of 25 percent and that 25 percent is assessed as the mid-point of what other like-minded countries in the OECD do in this similar area. And so the specific examples of that, as I highlighted in my response to the prior question, in sections 45 and 47 of the regulatory impact statement outlines some of that. Section 44 actually provides a list of all of the countries and all of the rates. And as the member would have seen when he reviewed the regulatory impact statement for this bill, that 25 percent in New Zealand is higher than Italy at 20 percent, Belgium at 11, UK at 21, Sweden at 22, and I could go on. That is the basis of why we’ve landed on there. I think that is a pragmatic position in terms of the rate that has been set and we will monitor that in conjunction with other overseas jurisdictions.

I move, That debate on this question now close.

The question is that the Minister’s amendments to Part 4 set out on Amendment Paper 20 be agreed to.