Taxation (Annual Rates, Maori Organisations, Taxpayer Compliance and Miscellaneous Provisions) Bill

Here we are again, under a Labour-led Government—and it is a good thing that the Minister of Māori Affairs is in the Chamber—debating legislation that adds more costs to business in this country. We have been told: “We’re going to look after small business. We’re going to look after entrepreneurs. We’re going to help people out, and we’re going to help Māori in particular.” But despite that rhetoric, which we have heard up and down the country, here we are passing legislation that does exactly the opposite of the stated objective.

My colleague the very good member Pansy Wong wondered whether she could carry out this debate in Chinese. I told her I could see no reason for her not being able to do that. The Minister of Māori Affairs answers most of his questions in Chinese, so I can see no reason for that not being permissible. But here we are again adding costs, under a Labour-led Government, to the very people who provide it with the wherewithal that it desperately needs to spend on its social agenda. And there is no better clause to demonstrate that than clause 146(1). Under that clause the definition of “PAYE intermediary” means that somebody else can pay the tax on behalf of another person. That seems fair enough, on the surface. I cannot see anything wrong with it. But when we look at the clause in Part 3, which states that taxpayers can be penalised up to 100 percent of the tax outstanding—unless, in cases where it is wrong, they prove they are innocent—and pay interest on that, as well, at whatever rate is set by the Inland Revenue Department at the time, and then look at what happens in Part 4, clause 146(1), we find that if a person who is making the payment on the taxpayer’s behalf goes broke in the process, thereby losing the taxpayer’s money, then it is still the taxpayer who is still liable.

I wonder whether the Māori corporations—and I can see the Minister is listening very carefully now—that presented submissions on this bill to the Finance and Expenditure Committee said they were happy with the notion that if they enter into a new business venture, they will be liable for 100 percent of the tax outstanding, plus interest on that at whatever rate is set by the Inland Revenue Department, and that they will still be liable for that amount even if the person who is paying the Inland Revenue Department on their behalf goes broke in the process. I wonder whether they raised that issue with the select committee. I wonder whether the Minister of Māori Affairs was made aware of that. Obviously, the Hon John Tamihere was not made aware of it, otherwise he would have spoken about it in his speech earlier. He never mentioned it. However, it is an issue.

I would like the Minister in the chair, the Hon Dr Michael Cullen, to get some advice from his officials and take a call to clear this up for the Committee and for those who are listening tonight. That is the way it looks to me, and I know there were submissions to the select committee by senior accountancy firms in this country that also pointed that out.

I see that the honourable United Future member Gordon Copeland is listening. I know he has some knowledge in this area, so perhaps he will take another call and clear this up. One of the things I know for sure is that people who voted for United Future never realised that party would load all those costs on to them. I am sure that if voters had realised that, then United Future would not have got the amount of votes it did. Its leader said the party stands for common sense, but this bill absolutely flies in the face of common sense.

Clause 146(1) has the ability to add a huge cost in litigation, extra tax, and losses, because if an agent who is paying the tax on behalf of a business fails to meet the obligations set down by the Inland Revenue Department, it could potentially result in the failure of a few businesses. If that happens, the taxpayer who authorised the agent to act on behalf of his or her business will be liable for substantial amounts of funds—and we could be talking about amounts of up to $100,000 or maybe $200,000—which they may potentially have to pay twice. That will be the case in most Māori corporations, because they will be employing an accountant to do this work for them. I wonder whether the Minister has considered that.

In talking to Part 4 of the Taxation (Annual Rates, Maori Organisations, Taxpayer Compliance and Miscellaneous Provisions) Bill, I want to refer in particular to the amendment to the Student Loan Scheme Act. I see that the amendment is to take in the other changes in this bill whereby there can be a PAYE intermediary. The Student Loan Scheme Act that was brought in was good legislation. This Government, instead of just amending the Act to allow the inclusion of a PAYE intermediary, has used its powers to change the purpose of that Act totally in terms of getting rid of the interest on student loans when students are still qualifying. That is putting a burden on all taxpayers in New Zealand. I say if it is not fair for students to pay the interest on their loans, why is it fair for all the other taxpayers to pay that interest? Allowing students not to pay interest while they are studying is just deferring that payment further down the track, although probably not for them but for their children and their grandchildren.

This Government, in getting rid of interest on student loans while people are studying, was just trying to get the student vote. I have been visiting universities in the last couple of weeks, during enrolment, and I have been talking to students. Most of the students in this country who attend universities and tertiary institutions—that is, Government institutions, not private ones—come from middle to upper class families. These students are not stupid. They realise this is just income churning, because the Government is taking money from the middle and upper class families, in the form of income tax and corporate tax, in the first place and then paying it out to them in terms of interest-free student loans, while they are studying. The students are aware of that. They know it is just cynical vote-buying. They also know that capping tertiary fees is just a return to the Muldoonism of price controls, and it is reducing the flexibility of universities to increase their income in terms of setting their own fees. I condemn this Government for its cynical ploy to try to buy the votes of students. It might well work with a few of them but there is no way that students are not aware of what is going on.

The other thing I would like to talk about is clause 148, “Employer to make repayment deductions”, or, as provided by this bill, the PAYE intermediary. Why should this burden be put on to employers? Why should the employer be the tax revenue gatherer for students who have taken out loans? Again, it is just more income churning that this Government indulges in—taking from the corporate owners on the one hand and trying to give it back to the children of the corporate owners, on the other. This just adds more compliance costs on to employers.

Employers are the ones who are in the gun if they do not, firstly, gather it properly and, secondly, pass it on, in the manner that is required by law. In fact, there is no reason that employers should have to gather in this repayment of the student loans, make the repayment deductions, on behalf of the Government. Employers are not required to make repayment reductions for people who take out mortgages. When people take out a mortgage their employer does not take the loan reductions out of their pay packet.

💬 Hon John Tamihere: This is not about mortgages.

That member is very lucky if he does not have a mortgage. Many of us are not in such a fortunate position as to be mortgage free. I suppose if people have been living off the taxpayer for most of their lives, they would not be mortgage free.

I am so glad that the Hon Paul Swain is in the chair during this debate, because that Minister has been holding out to be the champion of reduction in compliance costs, on behalf of the Labour Party. We now come to Part 4 of this taxation legislation, and I cannot find the compliance cost impact statement that this Minister insists any other piece of legislation should have. This Minister was in charge of the Ministry of Commerce, which has the obligation to ensure that every department has a compliance cost statement. This is very relevant to Part 4, because this single piece of legislation for a discriminatory separate tax system for Māori organisations creates a whole lot of compliance costs through various legislative changes in Part 4. I think the public has the right to listen to the Minister, the Hon Paul Swain, who used to champion the reduction of compliance costs, telling us why we have this legislation and what sorts of compliance costs will be imposed under the various changes in Part 4.

But there is a much more significant issue in this part. So apart from wanting the Minister to take a call to explain the compliance costs, or the absence of the compliance cost impact statement, we also want the Minister to take a call to give an explanation to the taxpayers who have been told by the Government, through this legislation, that they can appoint an intermediary, particularly in the area of PAYE and other deductions. They were told they could appoint an agent, an intermediate party, to pay that tax. But what happens when that intermediate party collects the tax amount from the taxpayer and disappears or faces liquidation, or the company becomes insolvent? What happens if the agent simply disappears with the money? Whose obligation is it to make good to the tax department?

Part 4 enables taxpayers to appoint an intermediate party to pay tax on their behalf, and the Minister should take a call and say what happens if, after they hand over this tax payment, the intermediate party gets caught in his or her own business situation and the tax money does not reach the Inland Revenue Department. Who can the taxpayer have recourse to? More than that, we want to know what happens if, through these unforeseeable circumstances, and circumstances beyond the control of these taxpayers, the Inland Revenue Department also imposes penalties. We have just learnt from Part 3 that the commissioner has a lot of discretion in terms of imposing penalties. Would taxpayers have relief when faced with the situation of being caught in circumstances beyond their control?

These are very fair and important questions that the Minister should answer. The Government, through this legislation, will empower taxpayers to appoint an intermediate party to pay their tax, and the Minister should take a call to explain their obligations and liabilities, and what penalties they face if the intermediate party has difficulties and the money from the taxpayers never reaches the Inland Revenue Department.

It is incredible that, just because of the single action of being able to appoint an intermediate party to pay tax, we have about four pages of legislation amending various sections.

I want to make a couple of very quick comments. Firstly, Pansy Wong asked what happened to the compliance cost statement. As the member may know, it was attached to the bill as introduced. It goes to the select committee and then gets incorporated into this, and therefore it drops off when the bill is reported back. That is just the way it is. We would not want to have a compliance cost statement following all the way through. It is for the select committee’s use. That was the purpose and the objective. So that is another promise honoured and kept.

The second point the member raised, which is quite a good point, is what would happen if an intermediary were to go into liquidation, or something like that. If the member were to look back to clause 45—she will remember this from when she read the bill very thoroughly—she would see that anyone who wants to be an intermediary and work in this way needs to set up a trust account, and there are quite a lot of provisions about the sorts of criteria. For example, someone who has been a discharged or undischarged bankrupt cannot be an intermediary, etc. So there are certain provisions in the bill that an intermediary established under this bill has to abide by. They are on page 64 of the bill, for the member’s interest.

I rise to speak to Part 4 of the Taxation (Annual Rates, Maori Organisations, Taxpayer Compliance and Miscellaneous Provisions) Bill. I thought I would follow on from Deborah Coddington and repeat the title of the bill in its entirety.

💬 Rodney Hide: What was in it again?

I will let the members read it for themselves.

I want to talk quickly about the PAYE intermediary part of this legislation, and also about the whole issue of compliance costs, which we are all getting down to once again. Compliance costs are obviously a real concern to New Zealand First. We need to do many things to promote growth within New Zealand, and to do that we need to reduce compliance costs. New Zealand First believes that we need a Government that will provide the right conditions for activities such as exporting, for example, and an environment that innovators can flourish in.

But I wish to talk about Part 4. It is my understanding that this bill contains rules in relation to the accreditation of PAYE intermediaries by the Inland Revenue Department; requirements on employers who want to transfer their PAYE obligations to intermediaries; requirements also on PAYE intermediaries; and regulations about the trust account in which wages and deductions are held by intermediaries before being paid to employees and the Inland Revenue Department respectively. There are also rules for the termination of the arrangement between employers and intermediaries.

It is really good that the Minister of Revenue is in the chair. I seek clarification from him about how the Inland Revenue Department intends to administer access rights to PAYE information for intermediaries. I also feel that a question needs to be asked about the equivalent of tax agents’ linking rights for the PAYE accounts they manage. I am sure the Minister is very knowledgable on that subject.

Getting back to the whole issue of compliance, I also want to bring out the point about organisations that are not Māori organisations, and therefore do not enjoy the benefit of a preferred tax rate. New Zealand First has said that it is very concerned about that provision. Part 4 of the Taxation (Annual Rates, Maori Organisations and Taxpayer Compliance and Miscellaneous Provisions) Bill includes compliance costs, and that is what we are talking about.

💬 Hon Dr Michael Cullen: Oh! Aagh!

The Minister knows what I am talking about. When businesses or authorities have a slightly competitive advantage over others, that will obviously cause a bit of havoc. As we were going through the select committee process in the Finance and Expenditure Committee, which I am on, we asked the submitters questions about a whole range of issues. I want to talk specifically about issues that pertain to Part 4—such as asking the submitters whether their clients were worried about any of the elements of that part.

I want to deal with clause 146, which deals with PAYE intermediaries. Other members have picked up that clause, as well. In particular I want start by turning to the commentary, which goes along these lines: “The bill contains provisions allowing employers to engage an accredited intermediary to assume the employer’s PAYE obligations.” That appeals as a good idea, although a number of submitters were concerned about the viability of some of those intermediaries. What happens—because I do not see anything in the bill that covers it—if one of those intermediaries goes belly up? In particular, I want to know—and maybe the Minister in the chair, the Hon Dr Michael Cullen, can tell us—who would be responsible. Can members imagine the grief and the finger-pointing that would go on if that event were to take place.

I suppose the Minister might be able to tell us, as well, what the compliance impact statement is. The Minister who was in the chair just prior to this Minister, the Hon Paul Swain, said it was attached to the bill, but we cannot find it. I am asking the Minister in the chair to educate the Committee by taking a call and telling us exactly what it is. What protection would the employee, or the person who owed the tax obligation, have if that person had paid it to the intermediary, and the intermediary went belly up? Would there be sufficient funds in the trust account to cover that liability and the penalty, as well? Maybe the Minister could also take a call on that.

The downside of this legislation, of course, is that it will introduce a new layer of compliance. Others have touched on that issue, as well. I turn to a compliance statement that I have picked up. It is an analysis undertaken by Business New Zealand. It is quite independent, and it tells us that a medium-sized business in this country will face an extra $43,000 in compliance costs. That business has had those costs foisted on it by this Government in the last 12 months. That is a staggering amount of money, and, when one understands the expense-to-income ratio of about 1:7, it is enough to send most small businesses under. If this Government could do something about reducing compliance costs, it might not have to put in place this type of racist tax regime.

The CHAIRPERSON (H V Ross Robertson): Order!

💬 Rodney Hide: I raise a point of order, Mr Chairperson. I think the Chair is ruling that to call a tax regime racist is somehow out of order. It certainly is not. One is not allowed to accuse another member of being racist, but one can certainly call a policy racist.

The CHAIRPERSON (H V Ross Robertson): That is not what I was doing, Mr Hide. I refer the member to Speaker’s ruling 7/1 in the Supplement to Speakers’ Rulings, which refers to judging whether a word is appropriate in terms of whether it might lead to disorder. I was just cautioning the member to be careful.

💬 Rodney Hide: The member said it, and people were accepting it. It has been said all the way throughout this debate, and there has been no disorder. I think that the member’s point has been accepted as fact. I do not see how the Chair can rule that word out when it has been said in a way that has not caused any disorder.

The CHAIRPERSON (H V Ross Robertson): I thank the honourable member. I have been listening to the debate, and I am concerned about the context in which the word was used. The member should not question the ruling. The ruling has been made.

I was making the point that this bureaucracy and those compliance costs have been foisted upon small businesses because of the introduction of this racist tax. It is something that will do immense damage to our international reputation. If we want to grow our economy—as we do—we need to attract foreign capital, and we need to embrace those hard-working Kiwis who are prepared to invest their life savings in starting a business. I expect, and I think they would expect, to be treated exactly the same way as all other New Zealanders.

Part 4 deals with the amendments to other Acts. I understand that some of those amendments are necessary, but I submit that if it were not for the Government’s intention to introduce this type of legislation, they would not be necessary. The select committee was given good advice. Maybe the Minister could take a call to explain why he rejected the advice the select committee was given that this legislation was discriminatory and against the New Zealand Bill of Rights Act. Surely the Minister is not going to shake his head and say that people such as Geoffrey Palmer—a former Labour Prime Minister, funnily enough—do not know what they are talking about. Geoffrey Palmer is revered as one of our most special constitutional lawyers.

The question we have to ask ourselves is how much governance we want in our lives.

I move, That the question be now put.