Taxation (Transformation: First Phase Simplification and Other Measures) Bill

on behalf of the Minister of Revenue: I move, That the Taxation (Transformation: First Phase Simplification and Other Measures) Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill. This bill is part of a staged roll-out of the Inland Revenue Department’s Business Transformation programme, an ambitious programme that, over time, will reform the department’s business practices and modernise our tax system. The proposed approach of stages to delivering the reforms were clearly outlined in the Government’s consultation paper Making tax simple: A Government green paper on tax administration, which was introduced for public feedback earlier this year. That paper sets out a number of steps that would be necessary to realise the fullest potential of the proposed reforms and the importance of public consultation along the way. The first of these consultation papers Better Digital Services was released in March and more will follow later this year. This bill is part of that process.

As the name suggests, this first-phase bill deals with some of the more immediate legislative obstacles to making the tax administration system simpler and more certain for taxpayers. It begins our simplification of tax legislation by proposing to remove references to outdated means of communication and allows for future developments in communication technology without the need to revisit individual provisions in the principal tax legislation. That means, for example, removing outdated requirements for certain communications with taxpayers to be in writing or delivered by post. The purpose of the proposed change is to begin the process of providing modern and relevant rules that will ensure modern electronic technologies can be used in the same way as current paper communications and make it easier for people to manage their tax affairs.

With that in mind, the bill also contains proposals that will allow for documents such as tax returns to be filed under electronic signature. This will allow tax agents and, ultimately, taxpayers to submit electronically signed documents to the Inland Revenue Department under circumstances prescribed by the Commissioner of Inland Revenue. Other measures in the bill are part of the process of simplifying current tax rules and making taxpayers’ lives easier. Measures aimed at simplifying the current tax rules for employee share schemes, for example, follow feedback received earlier this year on proposals to make the rules less onerous for employees participating in these schemes.

Employee share schemes are arrangements where employers offer shares in the company to employees and are often used to encourage staff retention and motivation. The value of shares from these schemes is treated as an income substitute under the current tax rules but, unlike most employment income, is not subject to PAYE. Instead, employees who receive share scheme benefits must file a tax return and account for the tax on the value of the shares themselves.

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

Prior to the dinner adjournment I was espousing the virtues of the excellent changes that this bill will make to employee share schemes. Just to recap, these arrangements are subject to taxation but not subject to PAYE, so those employees who receive these benefits need to file tax returns and account for the tax on the value of the shares themselves. That can be a deterrent to participation in the scheme. So to simplify these rules, the proposal that this bill makes will allow employers to choose to withhold tax on the employees’ behalf as part of their PAYE return.

Other provisions are intended to refine certain interactions between taxpayers and the Inland Revenue Department and to make them more efficient. One such proposal will halve the time that taxpayers with personal tax summaries that meet the automatic refund threshold will have to wait for their refund. A further amendment proposes to increase the current threshold for automatic refunds from $200 to $600, which will benefit approximately 400,000 more taxpayers.

Other proposals in the bill will allow the Inland Revenue Department to share certain information in the interests of efficiency and to provide better services to taxpayers. They include allowing the Inland Revenue Department to supply a KiwiSaver scheme provider with the names and details of members who have transferred out of their schemes and the names of the members’ new providers, and providing special tax codes directly to the Ministry of Social Development to help people who receive a New Zealand superannuation or a veterans pension to meet their income tax obligations.

These and other measures proposed in this bill have been developed to open the way for a modern tax administration system that will make it easier for people to get their tax right and to receive the social policy payments that they are entitled to. For that reason, I commend this bill to the House.

Firstly, can I thank the Minister of Immigration for his clear description of the facets and the technical nature of this piece of legislation. The Labour Party will be supporting the legislation to the select committee. Obviously, we want to have a look and see whether the Minister’s eloquence is borne out by fact in submission.

I know the Minister is an enthusiast when it comes to the tax system, he was telling us that before the dinner break. There are a number—and I will not reiterate what the Minister said—of practical measures that will simplify the tax system and make it more efficient for New Zealanders who have to meet their tax obligations, especially those who are in business.

I suppose I want to also just widen the discussion slightly and say that though this is a worthy piece of legislation, I do hope, and I have some confidence having listened to the acting Minister, that this piece of legislation is in far better shape—and not only in far better shape but that it actually does what it says it will do—than the rather bizarre piece of legislation we dealt with, which was the land registry legislation through the Inland Revenue Department, and what comes post that, which is the brightline test. Having worked through the submissions again, where every submitter on the brightline test opposed it and almost every submitter agreed that it, basically, would not achieve the policy objectives, then I do hope that this is a quality piece of legislation.

I do not mean any detriment to the officials, but I hope that this is a quality piece of legislation, and at its basis and on the surface it seems to have some very positive and practical effects for taxpayers. They are not earth-shattering by the way—electronic signatures, sharing information, and the share technicalities in KiwiSaver. These are, on the face of it, pretty practical and efficient measures, but they are not earth-shattering.

I think there needs to be a philosophy change within the Inland Revenue Department. The Inland Revenue Department, at its core function, is to preserve the integrity of New Zealand’s fiscal position and ensure that we as taxpayers pay our fair share. That is critical. It is critical to our economy. It is critical to the running of a Government and of a country, and that goes without saying. However, the Inland Revenue Department, I think, in recent years has had a philosophy. Its philosophy is that we are going after the cash. We are going to go after the cash, and we are going to go after as much cash as we can. As I have just said, it has an obligation to do that but I think there needs to be a shift in focus also—and you do not have to have one without the other—to flexibility. If you are a small-business person, basically, the tax system is not designed for you. It is not flexible for you. The tax system runs you. You do not have a lot of options within the tax system.

Andrew Little put out a discussion document—a very detailed discussion document, vetted by one Robin Oliver. For those who do not know who Robin Oliver is, he was a longstanding former deputy commissioner of the Inland Revenue Department—an eminent person. I would say that even if I had had no involvement with him in respect of the discussion document, but I would say that, regardless, he is an eminent person. He is a person who has, probably, the best mind in New Zealand, I would argue, in respect of the mechanics and technicalities of our tax system. I suspect that members on both sides of the House who have dealt with Robin—those of us who have dealt with him over the years—would agree on that.

We put together a provisional tax policy and we asked Robin—he is now a professional financial accounting adviser to businesses around the country—whether he would look at our ideas, would vet them, and would he go through and tell us whether they work, because we do not have access to officials. Essentially, our proposal, in terms of provisional tax, gives businesses of any shape or form and of any volume the ability to align their tax payments with their cash flow, setting their own rates and still having to meet the tax obligations, of course. They do not pay any less tax, but they can align their cash-flow arrangements and their tax payments with their cash-flow arrangements. I will not bore the House with that. But that is out there in the ether and has received very positive comments.

My only question is why it is that the Inland Revenue Department—under the stewardship of Peter Dunne originally, the longest-standing revenue Minister, I think, in the history of the Commonwealth Parliaments; I have checked the record, and that portfolio was inherited by Todd McClay—has not been mandated to get stuck into some of those gritty issues and things that would really help small business.

If you were a motelier, come summer the rooms are full and the money is coming in, but you are taxed the same way. Come winter, the rooms are empty, the cash flow is down, and you are still taxed in the same way, and you are subject to that evil that is provisional tax, which has often been the death knell of many businesses—not big businesses—not because the business person is incompetent, not because they are a crook, just because of the total inflexibility of the provisional tax system.

I remember when I had a business—I was lucky enough that I had made enough money so that I could hire an accountant—handing over a suitcase full of the documentation and the receipts and saying: “Sort it out for me, please.” For most of our small businesses, the partner—the husband, the wife, the kids, or whoever—under dark light in the evening, is doing the books, or the proprietor themselves is doing the books and trying to wade through and make ends meet and make the system work for them to meet their Inland Revenue Department tax obligations.

We would argue that this is, on the surface, a pretty practical piece of legislation, but we hope it is better than the land registry, which is a farce. We hope it is better than the brightline test, which is an equal farce—that is what every submitter who opposed it said. Even the National Party’s mates opposed it. We would hope and we pray that this piece of legislation will be far more practical and will have a positive effect and will actually meet the policy obligations, unlike those other two farcical pieces of legislation, one of which, I think, we deal with this week.

As I say, I think the Inland Revenue Department needs to broaden its focus. We are not saying the Inland Revenue Department should slack off in going after taxpayers and ensuring it meets its obligations, but it should be also looking very, very clearly at the spend—what, $130 million and counting—on a business transformation project where I do not think we have struck a keystroke on a computer yet. We have got a few reports, but it ought to be looking at how it can be more flexible and how the functionality of that tax system can work for businesses.

I am sure colleagues over there—I know one in the corner is a vintner who runs a very successful business. That gentleman—whose name, forgive me, I cannot recall—will have a large amount of experience, I suspect, in dealing with the Inland Revenue Department, and will be able to explain to us tonight, I am sure, the strictures and the mind-bending problems that you have unless you are a large business with an accounting department or access to top-class accountants and, if you are a small entity, the real challenges and difficulties you have with a rigid and inflexible tax system.

So my plea to the Government is to put up these pieces of legislation. We will support it to the select committee and we will have a good look at it. Hopefully there will be one or two submitters who will support it and not the 100 percent who opposed the last piece of legislation that Mr Bennett put through the Finance and Expenditure Committee. But my plea is that the Inland Revenue Department needs to really look at hard-core, practical measures that will assist and allow flexibility for businesses so businesses can have control of their own financial situation and so the department can, in a practical and operational way, acknowledge that businesses just do not make the same money every week or every year or every season—they have fluctuations, they have seasonality, and they have different cash-flow difficulties.

Maybe the National Government may want to take up the challenge, grab our discussion document—as vetted by Robin Oliver, an eminent tax expert in New Zealand—and have a look at it in a bipartisan way, and may want to adopt it, although I am told by the rumour mill that since we released that document the Inland Revenue Department has gone into hyperdrive. It has grabbed it, got the xerox out, flicked it around the department, and said: “Hey, how did the Opposition, with no resources, come up with this?”. The Minister said: “Maybe we’ve got to pip them at the post and come out with our own proposal that will mirror theirs before the next election.”

But we live in hope. I am going to enjoy Mr Bennett’s speech because he will be able to give us a dissertation on the practicalities of this legislation and how it is going to benefit those tens of thousands of small businesses. I pray that somebody out there, when the submitters submit to the select committee, actually does support it.

I call David Bennett—no pressure.

No pressure—no pressure, Mr Deputy Speaker.

💬 Hon Clayton Cosgrove: Good call.

Yes. It is great to take a call on this. As that last speaker, Clayton Cosgrove, said, there are a lot of advantages in this legislation for New Zealand taxpayers. It certainly paves the way for a simpler tax system and really sets us up nicely for the use of more technology in our tax system to make sure that taxpayers have the easiest mechanisms to be able to converse with the Inland Revenue Department and to fulfil their requirements as taxpayers.

There are a number of changes in the bill that have been gone through and Minister Woodhouse has spoken about. As we go through the process of the select committee hearings and further readings, I am sure they will become more evident, but the general thrust of it is around the simplification of the tax administration system, and that paves the way for the changes that are going through the Business Transformation system. [Interruption] What is the member from New Zealand First saying?

💬 Fletcher Tabuteau: Would you like me to say something so you can attack me?

No, the New Zealand First member—no, we do not need Mr Tabuteau trying to interrupt other speakers. I have decided to go back to Mr Cosgrove’s speech on provisional tax. Are we not lucky we have got a master like Mr Cosgrove, who can tell us about provisional tax? He has probably never paid it in his life, but, you know, I am sure he has heard from somebody how it actually works.

💬 Hon Clayton Cosgrove: I raise a point of order, Mr Speaker. I always meet my tax obligations, unlike many of the donors to that member’s party.

💬 Mr DEPUTY SPEAKER: That is not a point of order. It is more a matter of debate.

Well, he did not answer the question, so he has obviously never paid it. So what we actually see, though, is that the true part of the Labour Party tax policy that those members did not talk about that all New Zealanders need to know—and New Zealand First and the Greens will be spoiling at the election when that comes up in 2017—is it wants to raise taxes on New Zealanders. Labour wants to increase taxes on New Zealanders. Talk about provisional tax—those members will talk about that until the cows come home, but they will not talk about those tax rates. Fifty percent is what those members will be aiming for in the Labour Party. That is what the Labour Party wants. Those members know it; they just do not want to say it. New Zealand First can laugh, but you will jump into bed with them and you will do the same thing—going out and asking for higher taxes on New Zealanders.

So when we look at the tax system in New Zealand for New Zealand taxpayers, this is good legislation, because it simplifies the system. But look out for the other side. Do not get rushed into anything about provisional tax. Look at the tax rates that those members want to apply to New Zealanders. That is the real policy, which they have not come out about to this Parliament or to the public and actually given out to the public. Thank you.

I really do want to acknowledge the member who sat down, David Bennett, for doing his level best to actually talk about a tax bill. We know in the Finance and Expenditure Committee that he is the guru of taxation in the National Party. He sits there like some sort of maharishi figure at the front of the Finance and Expenditure Committee, guiding us—silently—towards our understanding of the tax system. That speech really typified the depth of knowledge. The level of analysis that he brings to the committee is sharp—razor-sharp analysis. His fellow committee members sit in awe—either that or shock, we cannot tell—when he is chairing the committee on a weekly basis. Chris Bishop has not even been at the committee for the last two bills. He cannot cope with it. He cannot cope with the aura that is around the chair of the Finance and Expenditure Committee, a man of remarkable expertise in these matters. Really, there is little else to say after hearing David Bennett’s speech, because he covered it all, but perhaps I can fill in one or two minor gaps—for instance, all of the clauses of the bill—and then we will see whether Mr Bennett has any further contribution after that.

This is a bill that the Labour Party will be supporting. It has got a good title—the Taxation (Transformation: First Phase Simplification and Other Measures) Bill. First phase simplification is definitely something that the chair of the committee is able to help us on. We understand that the bill has, in particular, three goals: easier communication in terms of the whole tax system, simplifying the tax rules, and the sharing of information. It is quite remarkable when we look at the bill and the explanatory notes that have been provided for us that one of the main things this bill attempts to do in terms of improving communication is to remove references from the Income Tax Act, the Goods and Services Tax Act, and the Tax Administration Act that restrict interaction with the tax system to paper-based transactions. So just reflect on that for a moment: there are multiple clauses in these three Acts that currently mean that you can communicate with the Inland Revenue Department only via paper-based transactions—not even electronically, not even winding up the party line on the telephone and asking whether you can be put through to the department, but paper-based transactions. That is what we are left with in these Acts. So we congratulate the Minister of Revenue and the Inland Revenue Department on bringing this particular part of the legislation through to us. We think that the goal of removing any legislative barriers to receiving and sending electronic communications is an important step towards bringing the Inland Revenue Department and the tax system into the 21st century, if not the 20th century.

There are a number of changes within this section. One that we will be looking out for is around clause 74, which establishes this communications framework and actually facilitates flows between the Commissioner of Inland Revenue and an individual taxpayer. It does transfer some obligations that are currently with the Minister to the commissioner. It is always important, I think, when we are moving something from the Minister, where we have accountability mechanisms through the House here and so on, to a commissioner that we are careful about what those particular provisions will entail. The other interesting bit is that electronic signatures can now be accepted. For Mr Bennett’s benefit, electronic signatures are like writing a signature but are sent through the computer on the interweb. So, Mr Bennett, we will practise in the committee writing our electronic signatures so we can all see that. So the Inland Revenue Department will be able to accept electronic signatures after this. That is important. It is all very well to facilitate electronic communications and digital communications between taxpayers and the department, but if, at the end of the day, you still had to print them off and sign them by hand, that would be ridiculous. This is another important provision that we have in the bill.

There is a large set of simplification measures around tax rules, including around the employee share schemes, which I know the Minister spoke about in his contribution. Simplifying tax rules is something that I think we would all want to facilitate and encourage. I would join with my colleague Clayton Cosgrove in noting that the last two bills that have been before the select committee have not really met that standard, if we are honest with ourselves, particularly the brightline test bill, which was, as my colleague has said, opposed by virtually all of the submitters, all of the large tax accountancy firms, all of the large law firms, and the New Zealand Law Society. They all said that one of its main flaws was its failure to adhere to the idea that a tax system should be clear and simple. In fact, it reached the point where the senior partner of Ernst and Young, one of the largest tax firms in Wellington, said that he was “professionally confused” by the Government. He was “professionally confused” by the legislation that the Government was putting forward. He thought it was contradictory, but, fundamentally, he thought that it failed that test of simplifying tax rules. We like the rhetoric here, we like the goal, but we will be watchful and mindful, given what has happened in those two pieces of legislation, to make sure that it actually is simplifying the rules as called for.

The third matter is around the question of the sharing of information. I do want to just spend a little bit of time on this, because—a lot of MPs would have had this—members of the public are hugely frustrated when they deal with one Government agency, fill out a big series of forms, do that, go and visit another Government agency the next week, and have to fill out all the same forms all over again. It becomes an absolute waste of time, whether it is done electronically or whether it is done in person. So getting past that, getting ourselves to the point where people can simply have data that is entered and used in a number of different settings, would be very useful. However, with all approaches to sharing information like that, there are risks. I note that there are changes in this legislation to the sharing of biometric information. A lot of the material that is kept by the Inland Revenue Department is around voice recognition. How do we make sure that that is stored securely? There are clear and obvious risks. We have had information sharing from Government departments that has been unintentional in recent times. Information has been shared with random passers-by on Lambton Quay by some public agencies in recent times.

So if we are going to enhance and increase the amount of information that is being shared, then we on this side of the House do want to be absolutely sure that we have got the right rules and regulations built around that and that there are safeguards in the sharing of that information, because although we have many constituents who are concerned about having to fill out multiple forms, we equally have people who come to us very concerned that information that is personal to them is being shared when it is not necessary. I do see, in the drafting of the bill, that an attempt has been made to define “necessary information” for the tax system to operate. Again, the responsibilities for that now fall to the commissioner. The current commissioner is somebody who, we know, will be able to withstand any pressure around the release of information, but we need to make sure that the rules are there to facilitate that.

There are a number of other miscellaneous matters in the bill, in particular around KiwiSaver, with a number of amendments there. Again, there is the question of sharing information about KiwiSaver members for account maintenance purposes between the Inland Revenue Department and the scheme providers. Obviously, this would be useful, but, equally, we are then seeing information moved from, effectively, the public sector to the private sector. We need to make sure that there are the appropriate rules built around that. There are a couple of curious changes related to KiwiSaver. One of them is around a provision that would allow minors who have been incorrectly enrolled into KiwiSaver to opt out before their 19th birthday. I will certainly be asking the officials at the committee just how many people have found themselves unwittingly enrolled in KiwiSaver as a minor. It seems somewhat unusual, if that is the case, and I am wondering whether perhaps there are many people who have found themselves in this situation. Then there is a question of people being enrolled as children by their parents—perhaps they were upset about being enrolled in KiwiSaver. I kind of find that hard to believe, but we have actually—[Interruption] Well, that is right but we have legislation here that will deal with that.

Overall, we look forward to the debate on this bill. We look forward to the astute stewardship of David Bennett, who will be able to answer all of the questions that I have raised today on the question of the details in tax legislation. If he cannot, he will do what he always does and ask Chris Bishop.

I want, at the start of my speech, to mount a staunch defence of my friend and colleague David Bennett. David Bennett is a superb chair of the Finance and Expenditure Committee, a man who has defeated Labour’s best talent over the years: Cliff Allen; Sehai Orgad; Sue Moroney; Dianne Yates, a sitting member. No man would rise to the heights that David Bennett has risen in this House if it was not for the talent of defeating such luminaries of the Labour Party as Sue Moroney and Dianne Yates. He does a superb job as chair of the committee, as Mr Robertson well knows, and I take his remarks as tongue-in-cheek remarks, as they were no doubt intended.

I am looking forward to examining this bill in the Finance and Expenditure Committee because, quite seriously, it is an important measure that the Government is advancing: to make our tax system simpler and easier to navigate. We have a very good tax system in New Zealand. It is broad-based. It is of a relatively low rate—probably too high, but a relatively low rate. It is a broad-based system that has rightly won plaudits around the world for its navigability, its simplicity, and the way in which it can be easily used by people.

We have an excellent tax system, but that does not mean we should stand still and congratulate ourselves all the time on what a wonderful system it is. We need to keep up to date, and, particularly, we need to modernise the tax system. That is exactly what the Business Transformation programme that the Inland Revenue Department is undertaking is all about. On the Finance and Expenditure Committee we are keeping a watchful eye on that programme, which is being overseen by Todd McClay. We are going to make sure, on that committee, that the very large programme of change that the Inland Revenue Department will be undertaking over the next 5 to 7 years is implemented well, because New Zealanders deserve a well-functioning tax system.

Just in my brief remarks, I want to point to a couple of things that I am particularly interested in in this bill. It is a very wide-ranging bill; it is an omnibus bill that affects a number of Acts, most notably the Income Tax Act 2007. But I am particularly interested—and I know people watching out there at home will be interested—in the amendments that the bill makes around tax refunds, because people will know that at the moment there is a reasonably cumbersome process that exists around getting automatic tax refunds. What this bill does is it proposes an amendment to allow earlier tax refunds, based on personal tax summaries that meet the automatic refund threshold; reducing the waiting time from 30 to 15 days, halving the waiting time; and increasing the threshold for automatic refunds from $200 to $600. The advice that is before the House is that this will help approximately 400,000 people per year to benefit from these changes.

It is a minor and small amendment to a variety of legislation to make that happen, but, actually, it will have a real effect on the day-to-day lives of New Zealanders, people who pay secondary tax, people who for whatever reason pay at a higher rate of tax than they otherwise should do throughout the course of the year. I remember as a student often getting a tax refund for a variety of different reasons, and it does make a difference, receiving a bit of money back at the end of the financial tax year every year. Adjusting this legislation is the right thing to do if it means that we can halve the amount of time that people have to wait to receive tax refunds.

Other things the bill does have already been referred to by my colleague Grant Robertson. There are very useful changes around electronic signatures, which allow for documents such as tax returns to be filed with electronic signatures. Again, it is a sensible, pragmatic, and prudent change, and something that I would hope would have the unanimous support of the House.

There are also some very interesting provisions in the legislation around biometric validation. I note that the Inland Revenue Department is going to be running a trial with other departments to see whether or not voice recognition software can be trialled for the use of approval of documents. I think that is going to be an interesting thing to ponder.

This is a good bill. I think it will have the widespread support of the House. The Finance and Expenditure Committee, ably chaired by David Bennett, is going to do a good job of examining it in further detail. I commend this bill to the House.

I rise to speak on the first reading of the Taxation (Transformation: First Phase Simplification and Other Measures) Bill. If only this bill was really as transformational as the title implies. The Green Party will be supporting this bill to the select committee, but before I get into the details of our support on this legislation, I feel I must respond to comments made earlier by David Bennett about the Green Party and other Opposition parties simply wanting to raise taxes on New Zealanders. The Green Party is here working for a fair and cleaner economy that is going to benefit all New Zealanders, not just those at the top.

To that end, we have two major priorities. Our two priorities are the two biggest challenges facing New Zealand and, indeed, our world: climate change and inequality. Both of those challenges are also an opportunity. They are an opportunity to create a better New Zealand—a New Zealand where every child has a warm, safe, secure place to call home, where every child can walk or cycle safely to school, where they are not only educated but nourished and not going hungry as so many kids currently are in New Zealand, where families have time to spend together and are not working 60 or more hours a week simply to make ends meet, and where we protect our native forests and our beaches and rivers so that our kids can swim in them as they once were able to.

The tax system is a potential tool that Government has to make this a reality, to make this a New Zealand where we are not contributing pollution to, you know, potentially civilisation-ending climate change, and where we are actually reducing inequality and ensuring that every child has everything that they need to survive and thrive and make a great future for themselves. So Government has this potential tool—the tax system—and I am particularly interested in it. I think that the Green Party has a whole heap of policies that are going to create a fairer tax system that puts a price on pollution—so it is polluters who pay more—and also to create a fairer tax system in that those who have the most contribute the most back, and where capital is taxed the same as income from any other source of work. I think that is perfectly reasonable. It does not mean that people pay more taxes necessarily. It does mean that we all get a better future, and I think that most New Zealanders would agree that that is something worth working towards.

This particular bill is not transformational. I do have to agree with my colleague Chris Bishop’s comments that New Zealand has a very simple and easy-to-follow tax system. Comparatively, being originally from the United States, I can tell you guys what a nightmare it is to file tax returns in the United States. Comparatively, New Zealand is doing really, really well.

Of course, things can be improved, and this bill does make several mostly uncontroversial changes to tax law here in New Zealand. We absolutely want to support the updates to tax law to account for electronic communications, in putting them on the same footing as paper communications. New Zealand is already pretty strong in that, but, clearly, a number of pieces of legislation still rely on paper transactions. I think that is just bringing us up to speed with the 21st century, so it is great that we are getting on to that.

Another change this bill is going to make is to allow employers to manage the tax implications of employees’ shares, making it a bit more simple for those employees who currently might have to file extra paper work to deal with the tax that they owe on shares. This will allow employers to withhold that, just as it is done with PAYE. So that is pretty uncontroversial.

I echo the concerns raised by my colleague Grant Robertson in his speech about the information sharing. There is definitely potential to increase efficiency and to ensure that there is better transparency and better compliance by allowing information sharing across Government departments, but it is incredibly important that that information sharing is protected and that we respect privacy rights. I note that the Privacy Commissioner is comfortable with the proposals and seems positive about this, but I am looking forward to the select committee process where we will look at this in greater depth and ensure that the proposals are not going to be resulting in unintentional sharing of private information of citizens, which has occurred on a number of occasions under this Government—Government departments have shared information a little bit too widely. I think that is something that we all need to be very concerned about, so it is something that we will be looking at closely during the select committee process.

As I said, the Green Party will support the bill to the select committee. Thanks.

It is my pleasure to stand up and actually support this taxation legislation, but it does seem to be my instinct to dig in and critique some of the detail, so those on the other side of the House will forgive me—I do support it, but there are a few things that you should be cognisant of and perhaps be mindful of as we move into the select committee process.

I just want to start off with a reality check. This Government, the supposed advocates of business in New Zealand, only just now thought that this would be a good idea. It has been 7 years—we are getting into the eighth year—and despite its simplicity, the analysis actually shows us that the US tax system has fewer pieces of tax rules than the New Zealand one. We in New Zealand are overburdened with rules on taxation. So the reality and the intent of this legislation are right: there is a need for simplification, and transformation in that sense is a very good thing.

The bill describes itself as legislation that will simplify and improve the settings for the administration of the tax system. It asserts that there will be decreased compliance costs. One of the reasons it suggests that is because businesses will be so happy with the Inland Revenue Department that they will just naturally be more compliant, and self-regulate on their tax compliance issues. But this first phase does not look like it is actually aimed at big business. The reality is that this seems to be more about the individual, and, unfortunately, it does not seem to be much about simplification either. It is really about the end-user, and the reality is that the rules themselves are changing under this legislation.

In the picture that is painted, a future Inland Revenue Department will interact with New Zealanders more openly, but the reality is—and let us be very clear about it—you do not need legislation changes to interact with your clients in a more open and communicative manner. Sometimes it is not the legislation so much as it is the standards that are set from the top down—perhaps the standard set by this Government and how it pervades the practices of all Government organisations.

I had a couple come to visit me recently about a visit to the Inland Revenue Department. They went on to tell me just how initially helpful the Inland Revenue Department was. In the conversation they had an issue, and the lady from the Inland Revenue Department disappeared out the back. She then came back out with a combative attitude and was really dismissive and argumentative. She almost immediately told them that they had not laid their claim properly and that it was all their fault.

This is the conversation that this bill is purportedly having about simplification and making it easier for the end-user. But the reality is that you do not need a bill to make that happen. You need leadership and you need an organisation like this to be shown what it is to be a good leader in this kind of environment. It is one small example but it is an important one. Sometimes we do not actually need a law change. The couple did make a good point to me. There was a certain double standard there. That is not what this Government, or certainly the Inland Revenue Department, needs when it comes to dealing with New Zealanders.

New Zealand First has continually had, and still does have, quite a large concern about omnibus pieces of legislation brought to this House by the National Party. The reality is that there always seem to be a lot of these unintended consequences, and that is a very generous way of describing the situation. There have been examples brought to this House around tax, actually, where the purported intent of it had nothing to do with the outcome. In fact, New Zealand First ended up defending our veterans on their tax compliance and supposed changes there. All I am saying to the other side of the House is to just be careful. This is a big piece of legislation. It is an omnibus bill; it is a three-part piece of legislation, and it can get complicated, and we need to be mindful of that. That is why New Zealand First is actually supporting it to the select committee.

When I first made notes on this bill, the health and safety legislation had not passed, but one of the significant parts of this legislation is around health and safety. So there was a huge presumption that part of this legislation—that the Health and Safety Reform bill was actually going to pass and that the legislation there would already be in place for the legislation in this bill to take effect. It is a huge presumption, and it is not necessarily a democratic way of looking at our legislation.

One of the technical points: in looking to make deductions from employees without successfully informing them that this will be happening—or, more formally, to dispense with requirements to issue notice to the defaulter—the Inland Revenue Department decided, because of time constraints, that consulting with employees was unnecessary. None of the options was discussed with businesses, which would have to be a party to the deductions from their staff members’ salaries. The question was not asked—I do not believe it was asked—but the reality is this Government needs to be mindful in this particular situation that this could possibly undermine the common law principle of natural justice. So this is just another unintended consequence that this Government needs to look at in this bill.

New Zealand First does support the principle of the elective opt-in system for the collection of tax on employee share schemes. Here we were advised that employers and tax specialists agree with one another. This is fair to both the employer and the employee. Unfortunately, in this part we have, again, an example of oversight and unintended consequences. The current KiwiSaver Act 2006 has no remedy for minors who are signed up to KiwiSaver unintentionally. This bill actually seeks to fix up this oversight in the other piece of legislation, but it does not address the fact that minors can still be signed up accidentally, and there is nothing to be done about it until the problem arises.

The process known as co-location—and this has been spoken about a little bit tonight from this side of the House—and the management of private information, and the secrecy necessary, does raise more questions. The Inland Revenue Department sharing office space with other Government departments, often in literally shared office spaces, will likely lead to the unintended consequence of private information being shared with those unauthorised recipients, that has been so frequently spoken of this evening. New Zealand First is highly concerned that the proposed solution to this is the watering down of current privacy laws, so that breaches of New Zealand privacy will occur without consequence or risk of sanction.

With regard to the strengthening of enforcement and employment standards, New Zealand First has always said that more and more Kiwis are being exploited in the workplace, especially new Kiwi citizens, and this Government has just stood by and literally watched. There is, without doubt, a high level of non-compliance with employment standards. What is being discussed in this legislation is—in the support work for this legislation—sound. New Zealand First is worried that if this is the only approach to this problem—the only solution—then it is too little, too late.

I would like to just conclude by saying the Minister himself said that the department is regularly granted additional investigation funds, and my point here is that we agree with him in this instance. A dollar given to the Inland Revenue Department has resulted in $7 collected for large corporate tax avoiders, and we commend that and we need to focus more on that. What we are seeing here is an attack on individuals. The analysis suggests we might get $700,000 of tax savings from this legislation. The priority, to me, seems to be slightly backwards, and the focus is definitely wrong. Let us go out big, and make sure tax compliance is fairly applied to big business as well as to individual citizens of New Zealand. Thank you.

This bill, the Taxation (Transformation: First Phase Simplification and Other Measures) Bill, contains a range of measures and options in which we can simplify and make the inland revenue system easier for people and easier for businesses to interact with Government, and, basically, try to reduce some of the burden that people feel in their lives from the Government and the tax system. Far from the characterisation of Mr Tabuteau, where he said it was an attack on individuals, this, in fact, is all about making the lives of individuals a lot easier.

Many of the measures outlined in the bill have been covered by some of the earlier speeches on this bill. I just want to respond to a few of the things I have heard in the past few speeches from Mr Tabuteau and Julie Anne Genter.

Firstly, I want to tackle this comment from Mr Tabuteau that, supposedly, the New Zealand tax system is overburdened and is very difficult for New Zealanders. When he compared it with the US tax system in the way that he did, and tried to say that we are overburdened compared with the United States, I think he made a mockery of himself. As Julie Anne Genter herself pointed out, the New Zealand tax system is far simpler than the US tax system, and New Zealanders are far better off because of that. We are not the only ones saying that, though. Let me just point out that the Tax Foundation in Washington, D.C. found that New Zealand has the second-most competitive tax system in the OECD, and most respondents to the Deloitte’s 2014 Asia Pacific Tax Complexity Survey rated New Zealand’s tax policies as straightforward, consistent, and predictable compared with other countries in the region. We do not have an overburdened tax system.

I also want to respond to some of the comments from Julie Anne Genter. When she started off her speech it sounded like a bit of a stump speech that did not have much relationship to the bill itself, but she was talking about children and how we have missed an opportunity, supposedly, to make the lives of children easier through this tax bill. Can I just point out that this Government is the Government that is putting more money in the pockets of those at the bottom who need help, through the benefits system. We are the Government that is lifting achievement levels in the education system for children. We are the Government that is creating more jobs in the economy, which ultimately benefits children. So when we hear comments from the Green Party that we are not doing enough to help children through this tax bill, we have to point out those measures.

This bill is all about reducing some of the complexity in the tax system. My colleagues have talked about measures like electronic signatures and about reducing the time frames that people have to wait to get their tax return. We have talked about the fact that there is greater information-sharing amongst Government departments. All of those things make it easier for New Zealanders to interact with the Inland Revenue Department and make it easier for them to comply with their tax obligations. This is all about making the tax system simpler for them, and it will be better for New Zealanders in the long run.

I call Denise Roche in a 5-minute call from the Green Party.

Tēnā koe, Mr Deputy Speaker. As my colleague Julie Anne Genter has already said, the Greens intend to support this bill’s referral to a select committee. She has already talked about how this bill fits with our vision on tax and monetary policy, so I will just talk in general about the bill, as well as about how it could be helping working people in New Zealand.

One of the key effects of this bill is to update the tax law to place electronic communication on the same footing as paper communication, and other speakers have said that it is a bit of modernisation. We support this. This is a good change that will spare lots of Kiwis from the tedious, time-consuming, and environmentally wasteful processes of sending in paper copies. I have to say, as the only waste spokesperson in any party in Parliament, I would be remiss if I did not say that in New Zealand we have the second-highest waste emissions per capita in the developed world, so any little bit of effort around reducing that would certainly be appreciated, and it is certainly appreciated in this bill.

We support the provision that allows for easier management of the tax implications for employee share purchase agreements. We know that this applies to only a small section of working people, but we support the idea of worker-led, worker-owned companies in genuine economic industrial democracy. We support working people being able to save and invest so that they can create opportunities for themselves and their families. However, as I mentioned, these provisions in this bill apply to only a very small section of people in the workforce. What would really help most New Zealanders is secure jobs with living wages, with decent working conditions, so that they and their families can reap the rewards of the Kiwi dream—that is, if you work hard, you will get ahead in this country.

And I guess what would really help most working people in this country to save and invest is a KiwiSaver kick-start payment system—but this Government has already cut that—or even maybe payments for kids. But, apparently, the Government’s response to KiwiSaver has actually reduced the number of KiwiSaver enrolments by more than half, according to the ANZ bank.

However, the Greens support the provisions in this bill that will help the minority of working people to save and invest by making it easier to participate in employee share schemes. But I encourage the Government to work with us on making bigger steps to make sure that we have a balanced New Zealand economy that benefits everyone.

Finally, the bill’s provisions on information sharing make it easier to check for worker exploitation, and we support that. Clause 117 means that the Inland Revenue Department, the Ministry of Business, Innovation and Employment, and WorkSafe can communicate and share information, which will make monitoring and enforcing health and safety legislation, for example, so much easier.

I recognise that there are some restraints that we should place around the sharing of information, but it will be easier to detect whether people are being unlawfully underpaid or having their wages deducted. This is a problem, and I will refer to the regulatory impact statement on the Employment Standards Legislation Bill, which says: “There is a high level of non-compliance with employment standards, such as employees being paid less than the minimum wage, not receiving annual holiday entitlements and not having employment agreements. Seventeen per cent of respondents to Statistics New Zealand’s Survey of Working Life [in 2012] reported that they were not receiving at least one of these minimum employment standards.” That is shameful.

It is a shameful indictment that nearly one in five Kiwis in paid jobs are not getting the bare minimum, and it is a damning indictment on the climate of fear that this Government has created through its industrial relations policies. We have seen that climate of fear supported and promoted by this Government time and time again: with its changes to the health and safety legislation, with its changes to the Employment Relations Act, with the changes it made for the Hobbit movie, with the 90-day trials, and with youth rates.

It does not have to be this way. This bill proves that the Government is capable of making positive small steps forward for working people, and we would certainly encourage it to work with us to make more of them.

I call Meka Whaitiri—a 5 minute call.

Kia ora, Mr Deputy Speaker. Tēnā tātou e te Whare nei. I am happy to take a short call on the Taxation (Transformation: First Phase Simplification and Other Measures) Bill. As a small-business operator in the late 1990s and early 2000s, part of the obligation in my decision to go into small business, or to be a small-business operator, was the relationship I entered into with the Inland Revenue Department. In my time, in reflecting on that period, everything was done on paper. Providing monthly GST returns and provisional tax was just part and parcel of the obligations of being a small-business operator, but I know things have advanced significantly over the last 15-odd years. There are many more expectations from Kiwis to be better served by the services and the relationship they establish with the Inland Revenue Department. I digress, but Labour does support simplifying and improving the settings for the administration of the tax system.

There have been plenty of contributions in this House on the particular provisions in this bill. If I may take the time, there are two particular parts in the explanatory note that I just want to make mention of as a small contribution, and one is titled “Secrecy in a co-location environment”. This bill looks at increasing efficiency and improving services, and “Inland Revenue is co-locating with other Government agencies in some offices and call centres in New Zealand.” We all know that having a one-stop shop is always an efficient way to do business, but the point in the particular sentence that I read out is the last part, which is “call centres in New Zealand.” I do hope that the intention in the bill is for the call centres to be actually based in New Zealand. Perhaps many members have had experience dealing with call centres that are not based in New Zealand, and in our tax system we need to make sure that people who are there to assist us—how do I put it—not only know the geographical challenges of our country but can deal with the way that Kiwis, New Zealanders, expect to be serviced through call centres. So I look at that and I hope that the proposals of the bill and those who put in submissions also support the fact that call centres for the Inland Revenue Department must be based—in my view—in New Zealand. So I hope that point is taken on board.

The relevant part in the explanatory note about the secrecy in a co-location was raised by a colleague from the Green Party. It is around information sharing. We need to ensure that we have some very strong protections, particularly around privacy, around what is gathered and what is released. I just want to endorse the sentiments of that member, who said we needed to ensure that the information sharing between the Inland Revenue Department, the Ministry of Business, Innovation and Employment, and WorkSafe has some strong protocols and regulations around it to ensure that we do not share information that we should not be sharing. I guess with the recent mishaps that we have had, particularly through ACC, I hope that those lessons, particularly, are taken on board under this bill.

When we examine the bill—and part of why Labour is supporting its referral to a select committee is to ensure that we are able to scrutinise all the provisions that this bill is intended to address, which are intended to simplify the tax system, through the select committee. We will want to ensure that small businesses throughout the country are encouraged to enter—not only those wanting to enter it but those that are already in it—a very productive relationship with the Inland Revenue Department. As all members who have contributed on this bill have said, simplifying that relationship with the department will definitely go a long way to ensuring that not only do small businesses operate successfully in New Zealand but they also thrive. I commend this bill to the House.

I rise to give a short call in the first reading of this great piece of legislation—the Taxation (Transformation: First Phase Simplification and Other Measures) Bill. I think we have actually reached nirvana—utopia—because everyone in this Chamber tonight seems to be agreeing with this wonderful piece of legislation. I cannot actually believe it. Not only do we have our Labour members but also we have our Green members, and even New Zealand First—actually, I think this is one of the few times that those members have ever supported one of our bills.

I think that we have to look at this bill in the context of what a great tax system New Zealand has. It is the envy of the world. We have very simple personal tax rates, with only four levels; very simple company and trust rules; and a GST system that, really, everyone around the world looks at and marvels at. This bill is part of an ongoing refinement process and it needs to be considered in relation to the changes that the Inland Revenue Department is making to its IT system and the general business transformation programme that it has under way.

As my colleagues have noted, and I think all of us have noted tonight, there are four key areas where this bill is seeking to bring about change, which I do not actually think is that difficult, but my colleague Mr Tabuteau obviously thinks it is. There are only four key changes. The first is that the bill removes references to outdated communications systems and allows voice and digital communication systems, which is, obviously, what is happening and has been occurring with legal documents around the world and in New Zealand; so it is just bringing us into the 21st century.

Also, it allows for earlier tax refunds, and I would think there is a vast proportion of New Zealanders who are going to welcome the change, which means that if they file their form using their personal summary, not only will they get their refund quicker, decreasing it from 30 days to 15 days, but also the threshold for the automatic refund is going to increase from $200 to $600. I think there will be many people rejoicing once they learn about this.

The third thing is that the Inland Revenue Department is going to be able to share information with other agencies, and that is a good thing to do. Just to give a logical case, where a provider has left a superannuation scheme, the Inland Revenue Department has the ability to share that information with a provider. It just makes it much easier for the taxpayer.

Fourthly, it will allow taxpayers to treat differently how they put in place employee share schemes. These are now quite common in many companies, and, of course, in the case of share purchase schemes, as an example, employers are bound to withhold tax legitimately. So it is great to see this bill coming in. I know that it is an omnibus bill, but I think it is bringing about a number of good changes, which are an ongoing refinement of this bill. I am glad that I have got through this speech with my voice still intact. Thank you.

I am standing to support this bill, the Taxation (Transformation: First Phase Simplification and Other Measures) Bill, to select committee. We support simplifying and improving the settings for the administration of the tax system. The areas that this bill looks at focusing on simplifying are useful ones: communication and process, electronic signatures, employee share schemes, releasing information, and KiwiSaver membership. We will be examining the bill closely at select committee to see whether it genuinely simplifies these provisions rather than adding additional complication, and I guess that where the real analysis needs to take place is at select committee, because the rhetoric is great, but we need to make sure that it actually does simplify.

However, we think that there are larger issues that the Government should be focusing on around making tax more flexible and dealing with provisional tax. Business people know their businesses better than the Inland Revenue Department, so Labour wants to let business owners tailor their tax payments to fix their cash flows. Under Labour’s proposal, businesses will have the option of choosing to pay their tax through regular instalments at a rate they can adjust. This means that businesses can align their payments to suit their circumstances. To further help our businesses get ahead, our proposal scraps harsh late penalties for provisional tax and raises the level at which provisional tax kicks in from $2,500 to $5,000.

Flexible tax for business is about giving our businesses more control over how they pay tax. That is how we will help them do well, grow, and create jobs. That is our objective. We will be going to the select committee looking at this bill to see that it does simplify things for these business owners, and we will make our assessment at that stage. Thank you very much.

This is another piece of legislation—another piece of good legislation—that supports small businesses. We know on this side of the House that supporting small businesses is the key to the success of the economy. It is the key to increasing incomes. It is why we have high worker participation rates. It is partly why we have created 190,000 new jobs in the economy. This bill supports small businesses by making it easier for them to be compliant. It brings us into the 21st century. It uses technology to communicate. It talks about sharing information to make customers’ lives easier and it helps superannuitants comply with their obligations by providing some special tax codes for them.

We are the party of small business. We are the party that supports small business, unlike the Opposition. Although those members suggest and think they are the proof is in the pudding. They still do not know whether they support the 90-day trial period, for example. They still do not know. Some of them do support it and others do not. Another example of the proof being in the pudding is the Trans-Pacific Partnership. We are unequivocally supporting the Trans-Pacific Partnership.

💬 Iain Lees-Galloway: Talk about the bill.

I am talking about small businesses and the legislation that we put through to support small businesses. The Trans-Pacific Partnership agreement is key to supporting the economy. It is key to supporting small businesses. Thank you. [Interruption]

It is not that funny, I do not think.

Bill read a first time.

Bill referred to the Finance and Expenditure Committee.