Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill

Given that we are proceeding with a reasonable amount of haste through this—

The CHAIRPERSON (Lindsay Tisch): I am sorry to interrupt the honourable member. The time has come, at a reasonable pace, for me to leave the Chair.

Sitting suspended from 6 p.m. to 7.30 p.m.

Members, the Committee resumes its consideration of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill. Before the dinner break we were debating Part 3, and the Hon Clayton Cosgrove has the call. He has used 8 seconds of his 5 minutes, so he has 4 minutes and 52 seconds remaining.

💬 Hon CLAYTON COSGROVE: Thank you, Mr Chair. Indeed it was—

💬 Chris Hipkins: I move an extension of time!

💬 Hon CLAYTON COSGROVE: Indeed, it was a short call before dinner—even shorter, I think, than your colleague, the other Chairperson who was in the Chair at the time, in metaphorical terms, in good humour.

I want to address a number of clauses in Part 3. I know that the Minister in the chair, the Minister for the Environment, will be ably prepared to answer some questions. Specifically, in clauses 104 to 106 there are a number of provisions that deal with the electronic and otherwise filing of forms, and the aim, I am advised, is that, as is the case with many tax bills that flow through the Finance and Expenditure Committee, it is an attempt to reduce compliance costs for taxpayers and to make the Inland Revenue Department more efficient by moving from paper to electronic services.

I would note, though—and it would be interesting if the Minister could provide some background to this—that there is still a gap in the Inland Revenue Department system, in that when you get a personal tax statement it will allude to salary and wages, but it does not take account of interest paid on bank accounts. Some years ago I inquired of officials why that was, and it was because of the archaic computer system that we still have at the Inland Revenue Department.

So we have this bizarre situation, as this bill tries to gain some efficiencies within the department, where if you request your personal tax statement and you align that with your resident withholding tax certificate, you will find that the two do not match up, even though the bank has transferred—if you are on the right tax code, which most people are—your resident withholding tax from your account to the Inland Revenue Department, and for some reason relating to the archaic computer system, the department cannot then reproduce that as part of your personal tax statement.

So what you are required to do, I am advised, is either assume the Inland Revenue Department has got it right and that there has not been a mistake, which is probably in about 90 percent of cases, if you have the right tax code, or, if you want to be safe, ring up your bank, get your tax certificate, and advise the Inland Revenue Department in writing. The Inland Revenue Department then both reconciles on paper and produces another tax statement with the correct amount on it, even though the Inland Revenue Department has got the money.

I said to an Inland Revenue Department official that given that the banks are compelled to transfer the funds, the resident withholding tax, from a person’s account to the Inland Revenue Department, surely, there is a more efficient way, given that the Inland Revenue Department has got the money, for the department then to produce a piece of paper that says: “Here is your wages and salary, and anything else. Here is your personal tax statement. And it will include the money that we, the Inland Revenue Department, have already received from the bank.” But, apparently, this is a sheer impossibility. It cannot happen because there needs to be some reform or some change to the Inland Revenue Department computer system.

So I ask the Minister, given the wonderful things that are contained in clauses 104, 105, 105B, 105C, 105D, and 106, whether there are any moves afoot to deal with the basic, basic anomaly whereby the Inland Revenue Department receives the money but cannot actually reconcile the amount it receives from an individual’s bank account and have it reflected in the individual’s personal tax summary without that person, or business, having to go back with their certificate from the bank and go through the motions again.

Can I also ask the Minister a question in respect of clause 104, which one could, nominally perhaps, refer to as the “John Banks clause”. Clause 104(1) states the following: “Where information contained in a taxpayer’s return has been transmitted by electronic means in the prescribed electronic format in accordance with”—I am sure the Minister is familiar with this—“section 36, the taxpayer shall retain or cause to be retained—(a) the return in the form of—(i) a signed hard-copy transcript of the information transmitted:”. Given that there has been some controversy in recent days—and I can see the National Party members have sort of perked up and are taking this very seriously—over whether people who sign forms read them, retain the notion in their brain that they have signed them, and have a memory of signing them, and given that that is a normal, human, biological, and mental practice for 99.9 percent of the populace, apart from one person from Epsom, what would be the penalty regime if somebody acted in a fraudulent way?

What would be the penalty regime—I see Mr Goldsmith, the chief biographer of Mr Banks, is drafting his obituary as we speak; volume 2—if somebody acted in a fraudulent way? What, I ask the Minister, if a person did not retain the correct documentation, or did sign that documentation, and could not remember the name they used in signing that documentation—which is very The Day of the Jackal, is it not—or could not remember or did not read the documentation they signed? Would that absolve them? I am sure the officials will be poring over the statute book as we speak—

💬 Hon David Parker: What about David Garrett?

💬 Hon CLAYTON COSGROVE: I will come to him in a minute. What would be the penalty regime? I am not a lawyer, but Mr Parker and others around the place are eminent lawyers. I would have thought that that was fraud in its simplest definition. I would have thought—

💬 Michael Woodhouse: Careful.

💬 Hon CLAYTON COSGROVE: No, I am talking about if a taxpayer—

💬 Michael Woodhouse: Is this a hypothetical situation?

💬 Hon CLAYTON COSGROVE: Absolutely. It is very hypothetical, very hypothetical. I would have thought that that is fraud. If one signs a document or signs it negligently, or falsifies documentation, or maybe has a bout of amnesia and cannot remember their own name, or perhaps signs somebody else’s—who knows—but cannot remember doing it, would that absolve them of their tax obligations under new section 23(1)(a)(i) of the Tax Administration Act, set out in clause 104? Then we come to new subparagraph (ii) whereby the taxpayer must retain “an electronic form meeting the requirements of section 25 of the Electronic Transactions Act 2002; and”—it goes on—“(b) for a period of—(i) 7 years after the end of the income year to which the return relates;”.

Then we turn to clause 105B, clause 105C, and clause 106. Clause 106 inserts new section 33AA, which relates to “Exceptions to requirement for return of income”, and it says: “(1) A natural person is not required to furnish a return of income for the tax year if, for the corresponding income year, the person—(a) derives no assessable income other than—(i) income of a type referred to in subsection (2), including a total of $200 …”, blah-blah-blah.

So there is a whole series of requirements here that require a high requirement from the individual taxpayer: first, that they do not have amnesia; second, that they are being honest and not fraudulent; third, that they actually read the documentation unless they have entrusted it to a trusted adviser; fourth, that they sign their name to it; and, fifth, that they retain it. Presumably, the Minister can advise us that the law would state that assuming you have signed it yourself, you are aware of its contents, and therefore you are responsible for the veracity and accuracy of those contents. I know that the Chairman is taking great interest in this; I can see the look on his face. I think he is an alumni of the Finance and Expenditure Committee, possibly.

We could call this the “John Banks series of clauses”, and I think it is important, given the environment in which we find ourselves floating around in this Chamber, that we get squarely on the record whether this would be considered fraud, whether a person in that situation would be seen to have lied to the Inland Revenue Department, to have falsified documents, or to have falsified the position, and, that being the case, I ask what penalties or remedies the Inland Revenue Department would have through our judicial system. It is a worry.

The other point is that I presume that under the mental health legislation some power of attorney would be required if somebody did not have the mental capacity to sign—I am being very serious—their own name because they had, for instance, amnesia.

💬 Michael Woodhouse: There is a scope issue here, surely.

💬 Hon CLAYTON COSGROVE: No, no. It is in scope, because in order to comply with clause 104, presumably you would have to delegate power of attorney to somebody of sound mind who could sign on your behalf. But, presumably, a court would hold that the court would have to determine whether you indeed did perhaps have amnesia, were incapable of remembering your own name, or were acting as a responsible citizen and therefore requiring power of attorney to be delegated to a third party. That might happen, and if that was the case, presumably you would comply with the law.

But if you falsified the documentation, there is a question of penalties—and I know that the Minister in the chair is a lawyer, a very senior lawyer, I am told, so she will be able to snap her fingers and gain the answer for us. What are the penalties? What are the remedies that Inland Revenue Department would have under that theoretical case if the documents were not retained under clause 104 and they were not signed appropriately?

I know that Mr Bridges is a former chair of the Finance and Expenditure Committee and this is an issue that is very close to his heart—that and wheel clamping, as he is the Associate Minister of Transport. He asked me whether I would mention him in the speech tonight. We call him Jed Clampett for obvious reasons. He is famous for his role as Associate Minister of Transport.

Thank you. It is a privilege to rise and take a call on this Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill, and to talk about clause 103 in Part 3. I know that the Hon Simon Bridges is particularly interested in this part and so he will be following my comments particularly closely. This particular clause is permissive in the sense that it now enables—

💬 Hon Simon Bridges: That’s like half the Labour caucus, Rajen.

I beg your pardon, Mr Bridges?

💬 Hon Simon Bridges: That’s like half the Labour caucus—permissive.

I do not know what that member knows about the Labour caucus, but what he knows about the Labour caucus will not fit on the back of a small stamp.

💬 Chris Hipkins: I don’t know whether to be offended or flattered.

Yes, yes, yes. But we know much more about that member’s caucus. I am happy to elucidate on that if the member is particularly interested, but I am sure he is not and it will be outside of scope.

The CHAIRPERSON (Eric Roy): Part 3. Part 3.

Thank you, Part 3. Thank you, Mr Chairman, for bringing Mr Bridges back to the point that I am trying to make. So here is a permissive provision for the keeping of records when tax returns are submitted.

💬 Maggie Barry: Take your time.

What clause 103 does is it actually enables records to be kept in a particular way. I notice Maggie Barry is particularly interested in keeping it narrow, because that fits within the ambit—

💬 Maggie Barry: Get to the point. Get to the point.

—of that member’s understanding of this. If the member will allow me, it is about where the records are going to be kept, and what kinds of records. Ms Barry, as a member in an electorate with a whole lot of Korean members, would be interested in how the system is going to work when the language now is permissive. Records do not have to be in English. Also, what this clause does is enable these records to be kept anywhere. So the Minister in the chair, Amy Adams, might want to tell us what kinds of provisions the Inland Revenue Department will make to make sure that there is an ability to access those records and translate them in a way that would make sense within the New Zealand tax system. I have some experience with this, I would want to tell both Maggie Barry and Simon Bridges, because when I was a member who heard immigration appeals on the Residence Review Board I had to deal with a lot of records in banks about what banking records—

💬 Hon Clayton Cosgrove: Banks? John Banks?

—in business—Banks again. No, no, different kind of banks. This is a good bank; that is a bad bank. This is a good bank, a straight-up bank. Banks that can be trusted. Banks that do not forget what they are telling you about. Banks with good records, Mr Bridges—those kinds of banks. Here, Mr Bridges, one had to really do a lot of work to understand the investment records of those who were applying to come to New Zealand on business migration visas. That required all of the skill I have, and I know, Mr Bridges, it is not that great, but it is enough. It is enough. It has got me this far, and I am sure it will see me through my time.

What are the provisions by which the Inland Revenue Department is going to access these records? They could be in Swahili. A record could be in Ethiopia. It could be in the Middle East. It could be in Korea, in India, or wherever. So here we have a set of permissive provisions. That—

💬 Todd McClay: If it was in Swahili, it would make more sense.

The member does not know Swahili? We will send him to East Africa—we will send him there. The member might want to know that it is a language. Mr Todd, it is a language and it is used for trade in that particular region as well. Here are provisions in this bill that say records can be kept in any language and in a number of different places. So where are the checks and balances, I ask the Minister in the chair? The Minister might want to take a call to explain to us where those particular records will be kept and how might they come to be utilised by our tax authorities here.

Of course, clause 104 also enables this information to be transferred electronically, so it makes it even more important that we have those checks and balances. I just assumed that the Finance and Expenditure Committee and the Minister of Revenue have thought about these provisions, and I am sure they have. I would just like to know what they are, because there are so many languages of trade internationally now, yet this is permissive.

💬 Todd McClay: No, they’re in favour.

It is permissive. Well, Mr Todd, this says it does not have to be in the English language.

Thank you very much. I just want to clarify an issue for the last speaker, Mr Rajen Prasad. It was not that I did not know what Swahili was—of course it is a language. I had suggested to the Committee by way of interjection that if the member was speaking in Swahili his speech would be much more enjoyable, because the poor people at home would not understand the rubbish he was talking about. If ever there was a reason for the taxpayer to deserve a refund on an MP’s salary it was that last speech from Mr Prasad.

So what I would like to say very clearly is that in the Finance and Expenditure Committee, when we focused on Part 3, we gave a large amount of time to consider these issues. There were very few submissions on them, but we did question our advisers at great length about language, what it meant, how we needed to use it, how the Inland Revenue Department would deal with it, and so on and so forth. Actually, our advisers showed so much more common sense than has been apparent in the part of the debate that I have been listening to since I got here that I am thankful that we now get to move on. I do note that I think the parties in Parliament are supporting this legislation. It is good that we get to talk this Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill out, I suppose, but let us make some progress. Thank you.

I want to ask the Minister of Revenue about clause 106 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill, which, as I understand it, is part of the provisions of the Budget that picked the pockets of paper boys. Remember that line that we had? This is the provision that, rather than exempting a certain level of income that could be derived by paper boys and paper girls, by babysitters, and the like, the Government came along and said: “We are so broke as a country we are going to disincentivise young people getting part-time work by taxing them more.” My understanding, if I am correct, is that clause 106 of the bill is the clause that gives effect to that by saying that, instead of the previous exemption, there is a limited exemption of up to $200 of income per annum.

💬 Hon Clayton Cosgrove: The Uncle Scrooge clause.

The Uncle Scrooge clause, as Mr Cosgrove describes it.

I would be interested if the Minister could take a call and explain the justification for this, and explain why we have become so miserable in New Zealand that the only level of exempt income is limited to $200 per annum. This is in stark contrast to Australia, where the first so many thousand dollars of income is not taxable, whoever earns it, rather than the miserable $200 per annum limit that we have under this bill. We had this Government come into power on the slogan: “Wave goodbye to higher taxes. Not your loved ones.” It was going to close the wage gap with Australia and decrease the number of people moving from New Zealand to Australia. In part, that was because it said it was going to reduce the tax burden in New Zealand, whereas this bill, and this provision in this bill, does exactly the opposite. It increases the tax burden on people who are already earning very small amounts of money. I would be pleased if the Minister took the next call and, indeed, told the Committee that the Government is not going to proceed with that change to the income tax law that effectively increases the taxation of young people who have got their small amounts of earnings, often irregular amounts of earnings, and who often do not have security of income from week to week, because their hours can change, and the—

💬 Hon Clayton Cosgrove: The big tax reform.

—big tax reform is going to take more money off them.

I would also ask another question following up from what the Hon Clayton Cosgrove asked in respect of when you file returns. My understanding of the provisions in this part of the bill is that you are obliged to disclose if you have received income. If you have not received income, then you are not doing anything wrong to say that you have not received income. But if you file a tax return that says that you have not received income when you have, that would be an offence against the tax legislation. [Interruption]

One of my colleagues interrupts me and says: “What if you cannot remember?”. Well, that would be a matter for the court, as to whether it believed you. It would not be for the Minister or for the Prime Minister to pretend to judge a claim by someone as to not being able to remember whether they had received income or not. That would not be a decision for the Inland Revenue Department. It would not accept my word if I pretended that I had not received income even though I had received cheques in an envelope. I do not think I would be believed, particularly if I had asked for them, or if I had asked for the income to be split into more than one payment. I would think that it would be very unlikely for the Inland Revenue Department to believe me when I said that I had not received income. If I filed a declaration to that effect, I think I would be held to account for my declaration.

💬 Hon Clayton Cosgrove: And signed it.

If I had signed a declaration to that effect, I would be held to account for it. If I later denied that I was liable for the truthfulness in my declaration because I could not remember, I would be doubted. I think that if that were any normal person, the Inland Revenue Department would not give them the benefit of the doubt, and it would say that that is a question that should be put to a jury rather than the Inland Revenue Department, the police, or whoever it is that prosecutes these things—rather than them taking the decision as to whether it believes the unbelievable story.

💬 Dr David Clark: What if there were sworn affidavits?

Well, if there were sworn affidavits from people who were involved in the payment of those amounts to me, and they said I knew I received them, then I would expect that that would make it even less likely that I would be believed if I denied that I had received that income. That seems to me to be so obvious that I am surprised to be asked the question. But I can understand why there is a level of doubt about that, because that, of course, is exactly the standard that John Banks and the Prime Minister are expecting us to believe in respect of other aspects of the conduct of affairs in this country. That level of double standard is—

💬 Hon Clayton Cosgrove: Despicable.

—despicable. It is despicable that someone can stand up in this House in respect of other legislation and say that they have no responsibility for a lapse of memory. They do not have to account to Parliament or to others for the lack of credibility. They do not have to respond to the statements by other people that cast into doubt the unbelievable statements that they are making anyway.

I would ask the Minister to take a call and explain the point of principle that is different in respect of taxation legislation, and explain why, if I received income and failed to properly declare it for income tax purposes, there should be a different standard in respect of income tax from that which is applied to political donations in other parts of the law. We know that different standards are being applied in respect of different areas of the law, because we have seen it in respect of the investigations into the Hon John Banks in respect of campaign donations that he received, and that the evidence shows pretty clearly he knew he received, yet he claimed they were anonymous. If that is permissible in respect of donations for political parties that are meant to be subject to a limit, or even when they are not within the limit they are meant to be publicly disclosed, why is it that we have a different standard in taxation legislation, where people are held to account for the honesty or otherwise of the statements they make as to the receipt of income?

This is relevant to Part 3, because it is Part 3 that imposes obligations on people to return their levels of income, and, as Clayton Cosgrove said earlier, to keep copies of these documents. If they are submitting them electronically, they still have to keep an original copy that bears their signature. Why is that? Because they are held to account for what goes in under their signature. If that is good enough for taxation, and if that is good enough for the tax system, why is it not good enough for rules that are meant to keep New Zealand free of corruption, to keep political operators from being unduly influenced by donations, and to keep a level playing field between candidates, so that one person cannot cheat on the system by spending more in their election campaign than the nominal limit, while someone else complies with the rules?

One of the ways you do that, of course, is by having proper disclosure as to the amount of donations. In terms of avoiding corruption and avoiding the allegation that people are effectively selling policy for money, they are meant to disclose whether they know who the money is coming from. In respect of the tax system, it is clear that you have to make those disclosures. The sorts of excuses that are being used by the Prime Minister, John Key, and by John Banks in respect of political party donations would not stand the tests in respect of this tax legislation. I ask the Minister to take a call and to explain what is the point of principle that says we should be stricter in respect of our tax rules in the enforcement of electoral declarations. In fact, in some ways the declarations are not quite as clear, because all you are doing is saying “This is my income.”

The other declaration that Mr Banks swore—

I am very pleased to take a call at this point, as I had the opportunity in the previous debate, but I think it is important to come back to the context, for starters, because we are talking here about a Government that is failing. It is failing in respect of having the worst economic growth record of any Government in 50 years. There are 50,000 New Zealanders leaving annually for Australia, there has been a 50 percent increase in unemployment, and there are now nearly 50,000 more people on benefits. That is because this Government will not tackle the big issues, and Part 3 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill is another illustration of that. This part of the bill has more tinkering.

We have here some positive streamlining. That is the best thing we can find in this bill. We can find no pro-growth tax policy, we can find no research and development policy, we can find no savings policy in this part of the bill, and there are no changes to monetary policy, of course. This is a Government that is failing.

I want to question whether the Government can actually implement the changes. I would be interested if the Minister in the chair, the Minister for the Environment, would like to take a call on this and say whether the Government can actually implement the changes that it is proposing here in respect of electronic transactions. I raise the question because it was not so long ago—well, it is actually over 6 months ago now—that John Key made his Valentine’s promise. John Key’s Valentine’s promise on 14 February of this year was to address the problems with the Inland Revenue Department’s computing system. The Inland Revenue Department’s computing system is not up to scratch. We know that. The Inland Revenue Department has been saying it for a very long time. And we know that tax policy is being held up because the computer systems—and I am quoting the Prime Minister here—cannot actually support radical changes from the Government. The Prime Minister, on Valentine’s Day, said: “You don’t want to be in a position where Parliament is held hostage to a lack of technology.” That is what the Prime Minister said. He told reporters that he did not want to be held hostage to a lack of technology.

Well, he is held hostage at this stage because this Government has not addressed the Inland Revenue Department computer system—a computer system that was designed in 1992 and apparently would cost somewhere between $1 billion and $1.5 billion to replace. I find that number implausible in and of itself. It is hard to believe that our computer system would cost that much to replace. We are not the only country in the Western World that has a tax system.

We have not seen a plan yet from this Government as to how it is going to address these problems, so how on earth can it convincingly say that it is going to implement even something like electronic filing? The electronic filing provision here listed retains, I notice, paper copies as well. I think that is probably because the Government is a bit nervous about whether these electronic transactions will really work. So I would be interested if the Minister in the chair could express some confidence in the ability of the Inland Revenue Department to deliver these changes.

The other thing that is happening, of course, as this computer system struggles through, is that the Inland Revenue Department is preparing for this new world, but customer satisfaction levels are dropping. It is laying off staff around the country—42 people in the last 4 years down my way. It continues to have dropping customer satisfaction, because everything is going on the phone. If you have a tax issue, it is actually hard to find somebody these days who will service your needs. We all as taxpayers pay for the system but our need for service is not being met.

There are advantages in having electronic returns, so I congratulate the Government on recognising this at last. I guess one of the advantages of being able to put in electronic returns is that you can put them in more immediately. You can write them up straight away. If you are carrying around an iPhone or an iPad, I assume you can write up your electronic returns straight away, or that will be a provision, I hope. The Minister might like to explain that as well, and how immediate that is. I assume those forms will be online. You will be able to start filling them out. If you are somebody who perhaps suffers from memory loss, if that is an issue that somebody struggles with, you could—

💬 Dr Rajen Prasad: You can’t bank on it.

You could not bank on it, my colleague says, but I hope that it is true that this will facilitate an easier filing of returns for people who struggle with a variety of issues, not just memory loss. I was thinking about this as I flew up from Dunedin North, the fine electorate that I represent—[Interruption] In an aeroplane. Yes, that is right. It was not a helicopter, and I do remember that very, very well. I was thinking about the advantages of electronic returns.

The other thing that we are seeing, as these computer systems struggle, is that a range of other problems are starting to impact on the department. We had 70,000 calls not answered in the lead-up to the last filing date. We have hundreds—

💬 Dr Rajen Prasad: How many?

Seventy thousand calls unanswered—70,000 calls.

💬 Kris Faafoi: Are you sure it wasn’t 50,000?

I am sure it was not 50,000, Mr Faafoi. It was 70,000 calls, and I do remember. I do remember. We have hundreds of thousands of unprocessed returns—hundreds of thousands of unprocessed returns—in that department. I am sure we will hear more from my colleagues about returns. We have a system that falls over at crucial times, and was declared by the Inland Revenue Department in many of its past briefings to incoming Ministers to be on its last legs. We have no plan but only talk of a $1 billion rebuild. We are not, as I say, the only country in the Western World with a tax system.

The other point that I would like the Minister to perhaps address is the rumours that are swirling around about the rebuild of this computer system—presumably, the computer system that files these electronic returns. There is a rumour floating around that there is a 1,700-page draft report—a 1,700-page draft report—on repairing this computer system. We have seen no action from the Government. There has certainly been no public announcement of a plan.

💬 Hon Clayton Cosgrove: It’s called a manual.

It is called a manual—yes, it is. But we have seen no public announcement. We have seen no commitment, and I wonder whether even this 1,700-page draft report—if it exists—will suggest what the next steps might be. Perhaps there will be another draft report. There are some consultants doing very well out of this. My colleague Mr Chris Hipkins pointed out, not so long ago, just how well the consultants there are doing. After pointing out that a million clients hung up before their calls were answered last year, Mr Hipkins drew attention to the more than $125 million that has been spent in the Inland Revenue Department on consultants and contractors. That is unbelievable for a falling level of service, which the public of New Zealand are getting sick of, and which is simply not able to make the big tax changes that we would like to see: the capital gains tax, the research and development tax credits—the things that would actually make our economy work, rather than these smoothing gestures—

💬 Dr Rajen Prasad: Rats and mice.

—the rats and mice that we find in Part 3 of this bill. I notice also that clause 131 notes that a taxpayer may apply for financial relief. That financial relief, in the face of hardship in paying tax, is another sensible clause in this bill.

So the kind of tinkering that is in here, most of it we do not object to. We just think that the really big changes could be addressed. Who knows, the financial relief might be useful for somebody who has filed a false tax return, who is then forced to repay some money and then whilst paying their debt to society is scratching around for some extra dough. So the clauses that are in this bill do seem sensible. Unfortunately, they are only tinkering and they do not get to the heart of the issue. They do not address the real problems in our economy—the big problems—which the National Government will not address, because it does not seem to have the wherewithal to address those things that would make our economy function properly. Thank you.

I think in order to understand the importance of Part 3 of this bill, the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill, I actually want to get members of the public to just rewind a bit, back to Budget 2012. I think that will help them to understand the importance of Part 3 of this bill.

Remember Budget time 2012—unemployment soaring, economy flat-lining, trouble everywhere in New Zealand, families under huge pressure and stress, and what was the big idea that this Government rolled out? It was taxing paper boys and paper girls up and down the country. That was the big fix and the big idea the Government had, back in Budget 2012. That was going to deliver the brighter future, according to John Key. People—I am sure when the parents of these paper boys and paper girls saw the Government promise them a brighter future—they never imagined in their wildest dreams that what this Government was up to was to tax their children who were doing jobs after school, trying to get just a little bit of pocket money for themselves.

I do not think that any parent in this country believed that that was what John Key meant when he promised them a brighter future. But here it is in clause 106 of this bill that we are debating here this evening. This is the part of the bill that actually brings in the big idea from this Government. It actually taxes paper boys and paper girls and all of our adolescent children who do a bit of work here and there to get a bit of pocket money. Apparently, clause 106 is the provision that brings this in. It is the big idea from National that was going to change the direction and deliver this brighter future that it promised at the last election.

Of course, what we know is that it is a complete and utter joke, and that even though this will be passed into law, this clause 106 in Part 3 is not going to deliver a brighter future. That is just tinkering around the edges. That is what the Budget was known for. It was known for clause 106 of this bill tinkering around the edges, trying to imagine that we would somehow get ourselves a brighter future by taxing adolescents who are doing a bit of work for a bit of extra pocket money going into their families. That is what clause 106 is about.

But I cannot let the irony of tonight’s debate go by without understanding the irony of debating part by part what the obligations are of ordinary New Zealanders to make sure that when they sign documents they are actually making honest declarations and spelling out, as in this part of this bill, what they are doing and what they are required to do in order to make sure that they are putting forward information on taxation issues in the appropriate manner.

How ironic that we are debating the detail of what ordinary New Zealanders are required to do and the implications of when they put their signature to documents what that actually means, because that is what is covered in Part 3, and how ironic on the same day that the Prime Minister seems to have a completely different standard for his Ministers. He seems to believe that a signature from someone who is now a Minister in his Government can be put on a document and that that person cannot be held to account for it. Yet here we are, in Part 3 of this bill, spelling out all the measures by which ordinary New Zealanders are going to be held to account for signatures that they put to documents with regard to their taxation income.

I thought that, actually, clause 130 was going to be the one that would ensure that the John Banks fiasco would be uncovered and discovered. It is called “Knowledge offences”. I thought that was going to be the part of this bill that was going to make the Prime Minister see sense over his ducking and diving today over John Banks’ affairs. But, no, it seems that it is not about actual knowledge offences over the type of return that John Banks signed his name to. It is actually about employers’ superannuation contributions. What it does is it just makes it a bit more explicit that the knowledge offences under the taxation bill—

I am very happy to take a call on Part 3 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill. This is the part of the bill that is about the electronic filing of tax returns or the electronic filing of information. I think that that is a great thing. I file my tax return electronically each year. My accountant prepares it for me, but I have to sign it. Before he files it electronically for me, I have to sign it, and I can tell every member in this House that I actually read it before I sign it. So the accountant may prepare it for me, and put all the information together about my income and expenditure and so on, but before I sign it, and before it is submitted by him electronically, I read it and I make sure that all the information in it is absolutely correct.

I think that it is no unreasonable thing for the Inland Revenue Department to ask New Zealanders to read their tax returns before they are filed electronically. I think that is very reasonable. New Zealanders know that if they provide wrong information deliberately to the Inland Revenue Department, the department will come and find them. I tell you that if there is one agency of Government that somebody does not want to be investigated by, it is the Inland Revenue Department. Anybody who has been investigated by the Inland Revenue Department—I have the pleasure of saying I have not been one of them—will say that it is a most unpleasant experience to have the department investigating—

💬 Maggie Barry: That’s the whole idea.

“That’s the whole idea.”, says Maggie Barry. I agree, because people, when they are filling out forms and signing them, should make sure they are correct, except this Government thinks that that rule applies to everyone else but not to it. The Prime Minister this week has said that it is OK for a Minister to sign a return without reading it and knowing that the information in it is false. If somebody did that with their tax return, and knowingly filed it electronically and according to the provisions of this piece of legislation, the Inland Revenue Department would be all over them. The Inland Revenue Department would not let go. The Inland Revenue Department quite rightly would be all over them. It would go through all of their financial affairs, because it can do that. But the Government’s message to New Zealanders is that “That is the standard we expect you to adhere to, but we have got a different one for ourselves.” That is the rule according to this National Government. It is absolutely and fundamentally wrong.

Let us talk through what that means. If somebody is earning, for example, money in cash, and somebody gives them an envelope, a brown envelope, at a meeting over lunch, with a cheque in it for, let us say, 15,000 bucks—so somebody gets 15,000 bucks—are they obliged to declare that as their income when they file their tax return? Actually, yes, I suspect they would be required to declare that when they file their tax return. If they knowingly filed a return that contained false information about the $15,000 they received in an envelope while they were having their lunch, they would be done for. The Inland Revenue Department would be all over them. But, actually, the Government—John Key—says that is OK, providing nobody prosecutes anybody. Well, actually, if New Zealanders took $15,000 in income and knowingly filed incorrectly with the Inland Revenue Department about that income, the Government would be all over them. The Inland Revenue Department, the Government’s agent, would be all over them. What this Government is saying is that that is the rule for everybody else, but not for it.

The point that my colleague David Clark raised earlier on about the electronic filing system is a very legitimate one. If the Government is going to implement an electronic filing system, we need to make sure that it is going to work and that it is going to be robust, but also that people who are using it will get the support they need to get. Electronic filing systems do not always work. There can be difficulties with an internet-based system, and somebody, when they are doing these electronic returns, needs to be able to pick up the phone now and then and talk to somebody, particularly given that the penalties for getting it wrong are quite high. For somebody filing information with the Inland Revenue Department that is wrong, the penalties are quite high. They need to be able to pick up the phone, talk to somebody, and make sure that they can get it right. If there are a million calls a year where people give up before they even get through to somebody at the Inland Revenue Department, that would suggest that the system is not working well.

Transferring a whole lot of the administrative burden from a call centre to an internet-based system does not necessarily resolve the problem. You still have to have the backup of the call centre if somebody needs to get hold of someone and talk to them and ask them questions. If we think about the massive amount of productive time that is being lost every year by people who are trying to get hold of the Inland Revenue Department and are not able to get through, the cost is quite significant. So I think that is something that the department really does need to give some thought to.

I know that the Inland Revenue Department is going through an upgrade of its computing systems. I am interested—and I am sure we will deal with it when we get to Part 5—in the fact that one of the things this bill does is allow the capital costs of unsuccessful software development to be tax deductible. I am sure that that will not apply to the Inland Revenue Department’s development of its own software if that turns out to be unsuccessful! Given the huge amount of cost that seems to be involved and some of the stories associated with this development of new software for the Inland Revenue Department, perhaps it should make it tax deductible, although—

💬 Hon Clayton Cosgrove: Would Dotcom software be tax deductible?

Would Kim Dotcom software be tax deductible? Well, that is something that I am sure we will talk about when we get to Part 5. I can feel another speech coming on when we get that to part of the legislation.

To summarise the contribution I want to make to this bill, I think electronic filing is a great thing. I think that New Zealanders will welcome the opportunity to file more information with the Inland Revenue Department—

💬 Hon Clayton Cosgrove: If the computer works.

—if the computer works—electronically. I think that is good. It potentially is a great productivity-enhancing measure, but the message to all New Zealanders—and we live in the electronic age where New Zealanders do so many things online—is that this is one of the more serious things they will do online, so they need to make sure they get it right. This is not just updating your Facebook status or sending a tweet. Filing something electronically with the Inland Revenue Department has quite severe consequences if it is wrong. One or two colleagues have discovered that filing an unwise Facebook status update can get them into hot water as well, but it is nothing compared with the hot water they would be in if they filed something incorrectly with the Inland Revenue Department. The department would be all over them.

Just as the heavy hand of the law should deal with people who knowingly file incorrect returns in other areas, so too should that be the case with the Inland Revenue Department. I think it is very concerning that according to this Government, according to our own Prime Minister, it is OK for people to knowingly file information that is incorrect, and to state things in a return that they sign that they know are not true, and to then try to claim ignorance when challenged on that. A person filing an incorrect tax return could not claim ignorance. They could not claim that they simply did not know about it. They could not claim that they had not read the return that they signed. That simply would not be an acceptable defence to the Inland Revenue Department, and nor should it be. Nor should it be an acceptable defence for elected officials to high public office to try to claim that about the forms they fill in, either. The New Zealand public should not be held to a separate standard from that to which we hold the people in the highest office in the land. They should be held to the same standard as every other New Zealander, and filing a false return while knowing it is incorrect is unacceptable for anybody in New Zealand to do.

I want to return to clause 106 of this bill, the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill. I do not want to reiterate what other colleagues have said in respect of this clause—the “Uncle Scrooge” clause. It is the big tax reform this Government has come up with, apart from giving the top 10 percent the vast majority of the tax cuts and the lowest on the rung virtually nothing, at a cost of 300 million bucks a week in net borrowings, which, of course, it then blames on the global financial crisis but does not admit that it is in direct relation to the tax cut. In the Budget this clause was effectively signalled and is now replicated to be actioned in legislation. The big reform that the Government came up with in tax policy was to flog a few hundred bucks off paper boys and paper girls. Those young people are in jobs that we probably all had. Gerry Brownlee may have been a pizza delivery boy when he was a young fella; I do not know. Simon Bridges, I am told, had a milk round. But this is the big reform. New Zealanders, in the middle of a global economic meltdown, placed their confidence in this Government at the last election on the slogan of a brighter future, encouraging entrepreneurship, and people getting ahead. Then we get to the Budget and we come up with this clause, which we are now actioning tonight.

We had the cycleway. That was going to be a silver bullet. It was a fizzer. There were two jobs, according to Chris Tremain—a fish and chip shop and a bike shop in Napier. He could not tell us how many permanent jobs came out of that. That was a fizzer. Then we had the great international financial hub that New Zealand was going to be. That lasted 5 minutes. Then we had mining in national parks, and Gerry, of course, like the earthquake, blew apart on that. That lasted 5 minutes. And now we are down to this.

We have got 120-point plans, and more task forces than we have had hot dinners, coming out of this Government. But when you drill down with tax legislation, what is the big reform in terms of cutting compliance costs or reforming the tax system? What is the big reform, the big revenue generator, other than flogging off assets to Kiwis, who already own them, and those overseas interests? They tried that in the 1990s but it did not work. That is the history, but they are trying it again. The big reform is to take a couple of hundred bucks off paper boys and paper girls and those in small jobs.

I have got to say that this is groundbreaking financial and taxation reform from the National Government—groundbreaking thinking! I would like to know—

💬 Michael Woodhouse: I raise a point of order, Mr Chairperson. I would just like to point out that the policy that is being described by the member has already been passed into law and is not within the scope of this bill.

The CHAIRPERSON (Eric Roy): I will take the member’s word for that.

No, you will not, because he is a whip. What does he know?

The CHAIRPERSON (Eric Roy): Order! I am on my feet. The member should not be engaging in some kind of interjection with me. If the member is speaking about clause 106, he should address himself to that, or to some part of Part 3, and while he is doing that I shall have a look at the clause that he is talking about.

With respect, I advise you that it is not appropriate to take the word of any member. I could make something up on clause—

The CHAIRPERSON (Eric Roy): Order! I have ruled. The member should speak about Part 3.

And I am speaking about Part 3, clause 106.

💬 Hon Member: He makes something up all the time.

Well, you would know.

💬 Michael Woodhouse: I raise a point of order, Mr Chairperson. It may assist the Committee if the member could point out which part of clause 106 refers to the taxation of paper boys.

Speaking to the point of order, Mr Chairperson, is that a debating point? If it is, you should rule on it. I am waiting for you to rule on it.

The CHAIRPERSON (Eric Roy): Yes, I guess that is a debating point. That really was not a point of order, so thank you.

We will carry on where we left off. I appreciate the lack of assistance from the senior whip.

💬 Michael Woodhouse: I raise a point of order, Mr Chairperson. Perhaps if you could just assist me. Does this mean that any item that is arguably outside the scope of the bill becomes a debating point; if so, what does the Standing Order mean when it talks about speaking to the bill?

Speaking to the point of order, what the member is doing is expressing an opinion about my speech and the content of the bill. He is not the Minister. In fact, the Minister of Revenue will be here somewhere, but he is not in the chair.

The CHAIRPERSON (Eric Roy): Order!

It is for the Minister to make statements on that. Unless the member is taking advice from officials and is going to table some advice, it is a debating set of issues that he has raised. We should get on with the debate.

The CHAIRPERSON (Eric Roy): Look, the member justifiably raised a point of order and said the member was outside the scope of the bill. I invited the member to continue while I read the particular point that he was at, and that is what I have done. I have actually now read clause 106 and I think the member might be referring to new section 33AA(1)(c), inserted by clause 106, which states: “has total income of $200 or less or derives no schedular payment other than an amount or proportion of an amount for which the Commissioner …”. Is that the section the member was referring to?

I am reading from a number of them, including that one.

The CHAIRPERSON (Eric Roy): OK, so I think he is drawing a wide bow, but in the context of the debate thus far he is probably no further away than some other members were.

I raise a point of order, Mr Chairperson. [Interruption] This is a point of order. This issue was raised, I think, prior to the dinner break and post the dinner break for about an hour and a half. No Chair has ruled that it is out of scope. The Minister in the chair has not challenged any speaker, except a member decides to have an interpretation of legislation and has interrupted the debate a number of times. That is trifling with the Chair and interrupting speeches, and you should deal with it. It is a debating point.

The CHAIRPERSON (Eric Roy): I will choose whom I deal with. I have told the member that he is inside the scope with regard to everybody else, and it is out of order for him to raise the matter in the way he has just done. I ask him to continue with his speech.

Thank you, and can I thank the senior whip for exposing his lack of skill and knowledge about this bill and also thank Maggie Barry. If anybody can talk about grace, of course, Maggie Barry can. But we will not talk about putting the old tumbleweed back at the back of the garden.

So where, colleagues, did we leave off? Where did we leave off? We were talking about the great reform within this bill as reflected in the Budget. What we have seen over the last couple of minutes is that it is the old sort of Captain Mainwaring. Remember the Home Guard, the old cold steel? They do not like it up ’em over there. They do not like it highlighted, because they are embarrassed about it. But the facts are that that is what they did. That was the sort of big-hit reform that they tried to cover up.

Where is the reduction in compliance costs plan in this legislation? We have heard about the computer system, and all sorts of reforms that are dependent on electronic media within the Inland Revenue Department, but there is no money to actually action it, is there? No. Oh, they are all very silent now. Even the tumbleweed is quite silent. They are all very silent now.

💬 Hon David Carter: They’re bored.

Well, people are not bored with Mr Carter—not down my way. We are looking forward to doing him slowly. This is what the big reform was in this legislation. It is mean-spirited and it actually does not contribute to New Zealand’s economic growth one iota, but simply highlights the lack of ideas. They have got lots of plans and no implementation, lots of task forces but no implementation, and they are out of ideas. The only idea they have got for generating a bit of money in the economy is to flog off the family silver—and once it has gone it has gone—and take a few dollars, under clause 106, from the odd paper boy. So the economic integrity is in tatters. When we talk about Mr Banks and signatures, if we refer to clause 104, as we have done, their political and moral integrity is in tatters. They have no ideas and they have no plan, apart from the little 200 bucks paper boy tax.

I move, That the question be now put.

Motion agreed to.

The question was put that the amendments set out on Supplementary Order Paper 98 in the name of the Hon Peter Dunne to Part 3 be agreed to.

Amendments agreed to.

Part 3 as amended agreed to.

Part 4 Amendments to Goods and Services Tax Act 1985