The Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill is a very big bill, and it took many months of consideration. When Mr Foss rose to speak on the bill last night, the first thing he did was acknowledge the work of the officials. I also acknowledge their work, in particular that of the deputy commissioner of policy advice of the Inland Revenue Department, Robin Oliver.
Mr Cunliffe referred to the taxation of petroleum companies and raised the concern that, in respect of petroleum companies in particular, some unintended consequences may arise out of pre-existing contracts. I put on record a circumstance relating to one particular taxpayer, which has been the subject of discussions of members of the Finance and Expenditure Committee over the last couple of weeks, and in particular the last 2 or 3 days.
A New Zealand taxpayer called Greymouth Petroleum had been looking to explore for oil for the benefit of its own shareholders and for New Zealanders generally. In October 2007 it lodged a bid with the Government of Chile. It bid for five petroleum exploration blocks and put up five bonds of US$100,000 each. Five weeks later, on 16 November, having lodged the tender on 10 October, Greymouth Petroleum was advised by the Chilean Government that it had been successful in respect of four of those blocks. At that time the Chilean Government released it from its tender in respect of the fifth block but retained the four bonds of US$100,000.
On the basis of those bonds, Greymouth Petroleum was obliged to complete the formal contract with the Chilean Government, which it did on 30 April 2008. The key thing is that as at 16 November there was an absolute commitment on behalf of Greymouth Petroleum to complete the contract. Had the company not done so, the most immediate consequences would have been that it would have forfeited those four US$100,000 bonds, it would have exposed itself to being sued for breach of contract, and, of course, it would have suffered a massive lost of reputation, both for itself and for New Zealand generally.
The concern amongst members of the select committee has been that between 16 November, when the company was advised that it had been successful in its tender, and 30 April, when the company formally signed the contract, the New Zealand Government announced on 4 March that the law was to change. Although the contract had not been officially signed, the key point is that, without doubt, there was a binding commitment from Greymouth Petroleum to enter into the contract. Members of the committee, and certainly members of the ACT Party, have been particularly concerned that if we were to pass the bill in its current form, an element of retrospective tax liability may have accrued to Greymouth Petroleum—as Mr Cunliffe said, there would be unintended consequences.
I have been working on a Supplementary Order Paper over the last 3 or 4 days. I discussed it with various members of the select committee, and it had been my intention to put forward that Supplementary Order Paper. I sought support from all members of the House, including the Minister of Revenue. But I understand that in recent days there have been discussions between representatives of Greymouth Petroleum and the officials of the Inland Revenue Department, and I understand that the department is now satisfied that there was a binding commitment from Greymouth Petroleum. Although the contract had not actually been signed when the law changed, without doubt there was a liability on Greymouth Petroleum, having been advised that its tender had been accepted, to complete the contract. Certainly, I know that the Inland Revenue Department is absolutely satisfied that had Greymouth Petroleum not done so, then it would have lost its US$400,000 in bonds. There would have been a huge cost to Greymouth Petroleum if it had not completed the contract it is bound to.
I understand, as I said, from Greymouth Petroleum officials that the Inland Revenue Department has given some comfort in this regard, so I do not intend now to put forward my Supplementary Order Paper. I am optimistic that the matter will be resolved to the satisfaction of both Greymouth Petroleum and the Inland Revenue Department. That is all I have to say at this stage. Thank you Mr. Chair.