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

This is an interesting bill and it is one we support. It is the Taxation (Transformation: First Phase Simplification and Other Measures) Bill. It is one of those bills where you would think that with everything going on in the tax world at the moment, there would be a much broader agenda that the Government would be concentrating on, instead of little nuances. But this is important in terms of the integrity of the tax system and in terms of bringing it into the 21st century—of that there is no doubt—as a lot of our other tax law should be brought into the 21st century around overseas trusts and all that sort of carry-on. We all know about that. I am assuming that my colleague Grant Robertson is going to talk a little bit more about that at a certain point in time.

As mentioned, this bill—or part of it; Part 1 certainly—is about bringing the tax law into the 21st century. Let me give you just one brief example. What we talk about in this bill are things like—in the past the legislation has talked about “in writing”. In the past what a taxpayer has had to do if they required anything from the Inland Revenue Department (IRD) or the Commissioner of Inland Revenue was they had to put it in writing. It was not counted as valid, I suppose—for want of a better term—unless it has been in writing, and therefore, if it is not, then, I suppose, it is challengeable.

Let me just give you just one brief example, or maybe a couple of examples. Clause 23 relates to section EI 1 of the Income Tax Act 2007, and it is just an example of the sort of thing I am talking about. Section EI 1 (1), “Spreading backward of income from timber”, says: “A person who wants to make an allocation under subsection (2) must apply in writing to the Commissioner no later than 1 year after the end of the income year in which they derive the income.” What this section of the Income Tax Act will change to is “A person who wants to make an allocation under subsection (2) must apply to the Commissioner no later …”. What we have done is we have taken out the term “in writing”.

There are a whole number of pieces of legislation that are being amended—the Income Tax Act, the Tax Administration Act, and a whole lot of other Acts—that are covered by this bill. There is one interesting thing, though, that I would like to talk about, which I think is in the context of where we are in this day and age and is an interesting example. It did not come up at the Finance and Expenditure Committee, and I consider myself slightly remiss because I did not pick it up, to be honest. But this is clause 47 in Part 1 of the bill we are talking about, and this is talking about repealing sections LZ 9 to LZ 12 of the Income Tax Act. These sections are being repealed.

Let me tell you what sections LZ 9 to LZ 12 relate to. They are about credits for savings in special homeownership accounts. This provision is being deleted, so now there is no such thing as a tax credit for a homeownership account. What that actually did was it meant that if a taxpayer put money into a special homeownership account as set up by the bank, then they got a credit of 4.5 percent. It was a very simple formula, but what it actually did was it provided another vehicle for New Zealanders to save for their first home. We have heard many times in this House how hard it is for New Zealanders to get into that home. What section LZ 10 did was it gave a maximum amount for a special homeownership account for 1 year. It is quite insightful, because what section LZ 10 actually says is: “For the purpose of calculating the amount of a credit under section LZ 9, the maximum amount of a single increase in savings for a special home ownership account for a tax year is”—wait for it—“$3,000.”

Section LZ 11 talks about the maximum amount that you can have to get this credit, which is $10,250. This is the 2007 Income Tax Act, so it is only 9 years ago, and 9 years ago we thought—when I say “we” I am talking about Parliament—that having $10,250 in a homeownership account was actually a lot of money. In fact, we made that the maximum amount you could have in an account in order to get the tax credit. Now we look at homeownership, and if you have got $10,000 in an account you do not even get a meeting with the bank manager—in fact, the bank manager will not even open your email. In fact, I suspect that the reason why we are repealing this section of the legislation as opposed to amending the amount of money that you can have is (a) because homeownership accounts do not exist and (b) because if we did think they were a good idea, we would amend that amount from $10,250 to $100,000, because $100,000 is the sort of money you do need in a homeownership account to have any chance whatsoever, certainly in Auckland, of getting a foot in the door. So we have repealed this section.

We have repealed section LZ12, “Meaning of increase in savings”, but it is just one of those anomalies, I suppose. It is interesting to look at from a historical perspective, because only in 2007 we thought this was important for New Zealanders to be able to save for their home. Now we have decided there are other vehicles, or we have probably decided—what is the point of having $10,000 in an account? It is just not worth it.

Back to what we are doing—the proactive side of this legislation. What we have actually said, as mentioned, is that we have taken out, by and large—when I say “we”, I am talking about the select committee and, I suppose, Parliament as a whole—the sort of archaic term where you have got to apply “in writing”. Let me give you quite a salient example of this. Just this evening I had dinner with a couple of tax experts, and I said to them: “Your office is based in Lower Hutt, isn’t it?”. They said: “No, no, we are in Featherston Street.” I said: “But your PO Box is in Lower Hutt.” They said: “Oh, yes, no it is. It is down there.” I said: “How do you collect your mail?”. They said: “Literally, we collect it once every 3 months because no one writes us letters any more. We have had three letters in about 3 months.” One of the letters was a card from me, another of them was a cheque—

💬 Peeni Henare: Bit old school.

—yes—from the IRD. I am not too sure how much it was. The third letter was a bill. This reflects the 21st century. No one does anything in writing anymore. What we have done is replace the words “in writing” with words like “ask”, “request”, “reply”, or “notify”. These verbs have been defined to allow a freer interpretation of actions and how people work in the 21st century. What this has done is it has put emails on the same footing as paper letters delivered by post.

There was some concern—well, no, there was not a concern. There was a query in the Finance and Expenditure Committee about how we would actually determine whether someone had received one of these emails, but in a way, if you think about it, it is the same as if a letter was posted. How do you actually know whether a person has received that letter? It is actually, I would argue—and I think we argued—easier to determine whether a taxpayer has received an email as opposed to whether a taxpayer has received a letter.

This just improves the integrity, in a way, of the tax system. What it also does is it is part of the IRD’s Business Transformation process, which we hope is going to make things a lot more efficient and make it easier for taxpayers to engage with the IRD but also make it easier for the IRD to engage with taxpayers, because what we certainly require is for taxpayers to work with the IRD. If they can do that through electronic means, it is by far the easiest way to do it. It would be interesting to know—and I do not know this; I doubt the Minister in the chair knows—how many transactions or how many interactions have been deemed null and void because what happened was done through an email conversation and then someone said: “Ah, but you are not allowed to do this via email. It is got to be done via writing, via the Act.” I am assuming that what the IRD has done when it has communicated via email is it has taken the pragmatic approach and said: “Well, technically—technically—by legislation you have got to deliver something to us in writing. You have got to notify the commissioner in writing, but because it is an email and we have received it, it is all good.”

So, as mentioned, probably all we are doing with Part 1 of this bill is actually just legislating a practice that has gone on ever since email has been in common usage, I suspect. But what this does do is it is a simplification process, I suppose. We always like to make tax law simplified. I know that sounds a little bit of an oxymoron—tax law and simplification—

💬 Dr David Clark: The Government likes a bit of complexity.

—we do like a bit of complexity, Dr Clark—but what this part is about is it aims to provide a greater use of digital channels for increased convenience and reduction in compliance costs. Would that not be great? There is a reduction in compliance costs as well. I suspect that one of the major reductions in compliance costs will not necessarily benefit the taxpayer; it will benefit the IRD. I think it was one of the largest customers of New Zealand Post until recently because, of course, everything had to go out in writing and it complied with the law, so there was a lot of money spent on stamps. What has sending a letter gone up to these days? I think it costs $1 to send out a letter, and they deliver only 3 days a week. So this is sort of a pragmatic perspective from that—there is no doubt about that.

Because we are going to make this very simple, these terms are going to be relevant, are going to be part of law, and are going to be part of common practice from the day this legislation receives Royal assent. We are not going to wait until the end of the fiscal year just so the Government can get every last little bit out of it. As mentioned, it is part of the pragmatic process.

In rising to speak on the bill this evening, I would like to comment first on the Supplementary Order Paper that I have put forward, which is Supplementary Order Paper 173. This would amend the Taxation (Transformation: First Phase Simplification and Other Measures) Bill, which fundamentally amends the Income Tax Act.

The purpose of my Supplementary Order Paper 173 is to improve the disclosure around New Zealand foreign trusts. We did not consider this issue at length in the Finance and Expenditure Committee. Of course, the reason for that is that the Inland Revenue Department never did continue its review that it intended to undertake back in 2014 around the disclosure regime for New Zealand foreign trusts. It had intended to undertake a review because we were attracting criticism because there was the possibility that people offshore were using New Zealand foreign trusts as a way to avoid paying tax in their home country, and for perhaps more nefarious purposes. But, of course, as we have come to know in recent weeks, the National Government was lobbied directly by people who are very active in the New Zealand foreign trust industry, some of whom were very close to the Prime Minister, and some of whom are directors of an astonishing number of companies.

We have here the Cone Marshall directors of around a thousand companies—look-through companies—and of course they lobbied the National Government, which then decided to give that message to the Inland Revenue Department that we should not continue the review of the New Zealand foreign trusts regime. So we are left here with a situation, because the Mossack Fonseca leak has pointed to the role of tax evasion and avoidance globally, and the terrible problem that it is playing in increasing wealth inequality around the globe. Of course, tax havens serve no useful economic purpose. They do not further the goal of achieving a more prosperous and fairer economy for all people, and that is something the Green Party holds very, very dear. We want to have a fair and prosperous economy and we do not want New Zealand to be playing the role that it has been playing.

Simply—very simply—we think that it is a perfectly reasonable and sensible idea to have the Inland Revenue Department collect information on the people who are setting up New Zealand foreign trusts so that they cannot be used for tax evasion, avoidance, or any other nefarious purpose. We just want full disclosure. I think that is something that the National Government—really, I cannot understand why it would not want full disclosure. It does not cost anything. It simply means that our New Zealand foreign trust regime cannot be abused by people who are seeking to break the law or do things that are wrong.

Although the Prime Minister started talking about this issue when it first broke, saying that New Zealand already had full disclosure in respect of New Zealand foreign trusts, of course it turned out that that was not true, and many tax experts and academics pointed this out. I have a paper here from Michael Littlewood from the University of Auckland. Anyone can go and look it up online. He is a tax expert—

The CHAIRPERSON (Lindsay Tisch): I am sorry to interrupt the member. I have looked at this closely, I say to the member, and this is actually outside the scope of the bill. Because we are in the Committee stage here, we must focus on Part 1 of the bill. I have sought advice, and if we look at Speaker’s ruling 132/1 it is covered there that amendments that are outside of the scope of the bill do not widen the scope of the debate of the bill. So, unfortunately, I am going to have to rule it out. If the member wants to continue, I am not going to cut your time off, but in terms of the Supplementary Order Paper specifically that you are actually referring to and the foreign trusts part of that, then that is out of the scope of the bill. The member can continue, but keep it within the bill, as Part 1 actually identifies.

I raise a point of order, Mr Chairperson. I am just seeking your clarification because my understanding is that the Supplementary Order Paper was accepted and it was not ruled out of scope. So I am unclear how it is that you are able to now rule it out of scope.

The CHAIRPERSON (Lindsay Tisch): I am just going to seek some advice on this, because although a Supplementary Order Paper can be tabled and then it becomes evident whether it is in or outside the scope of the bill, my understanding is—and I am seeking advice—that if it is outside the scope, it cannot be ruled out until it is tabled. That is why it has been tabled. You have got a Supplementary Order Paper number on it. I am seeking advice now, but I am advised that because it is outside the scope of the bill, you cannot actually refer to it in the context that you are. You can refer to Part 1, of course—that is the part that we are on—but in terms specifically of your Supplementary Order Paper on foreign trusts, that is what is out of the scope and out of order. I say to the member that I have sought advice, and the ruling that I have made stands. Although you have tabled the amendment—and that is fine to table the Supplementary Order Paper that you have—until you actually start speaking to it, one does not know what you are actually going to be saying. It was not until your speech had started—I did seek advice before I intervened. The ruling is a ruling of the Chair that it is outside the scope and it is out of order, so, from the member’s point of view, if you wish to continue you still have time available. You need to come back on to the scope of the bill, which is Part 1.

💬 Grant Robertson: I raise a point of order, Mr Chairperson. I just want to ask a couple of questions about your ruling, because I would have thought it was normal practice when the decision is made to rule out an amendment that either it is at the point at which a person attempts to table—this is not a handwritten amendment. This is an amendment that has been tabled. It has a number. It has been accepted. So the first hurdle is that, it has to be accepted and that has occurred. It is then, in my understanding, normal practice that when we come to the vote on the amendment, that would be the stage at which you may or may not decide that it remains relevant to the bill, rather than you making a ruling actually in the middle of someone’s speech, when it is being debated. I mean, I had intended to give a speech, and I would have thought you might hear some calls and that would be what would help you decide, when we came to a vote, as to whether or not it was in order.

The CHAIRPERSON (Lindsay Tisch): I thank the member for those comments. They are helpful. Although a Supplementary Order Paper can be tabled, and the Clerk’s Office has allowed it to be tabled, until a debate on it actually happens one does not know what the points of debate are going to be. It is only once the debate has started—and that is why I did allow it to carry on longer. In reference to what you are saying, I did allow it to happen to see what the content of the debate was going to be. On that basis, once the member got into the discussion of the substantive part of what the debate was about and referred to the Supplementary Order Paper and the foreign trusts, it was at that stage that I intervened and said it was out of scope of the bill and now out of order.

💬 Stuart Nash: I raise a point of order, Mr Chairperson. I am just seeking your guidance on when we will actually be able to debate the Supplementary Order Paper. There are some clauses in the bill that do talk about foreign investment funds. So there could be some relation to that, or there are parts in the bill that talk about listing on the Australian Stock Exchange. I suppose my question is, at any point in time during the Committee stage, will we be allowed to debate Julie Anne Genter’s Supplementary Order Paper at all?

The CHAIRPERSON (Lindsay Tisch): It is the Chairperson at the time who makes that deliberation. I have ruled that this Supplementary Order Paper is out of order and out of context. If the member wishes in the course of the debate to talk about the points that you have mentioned, the presiding officer at the time will make that determination. I have said that this Supplementary Order Paper is out of order because it is out of scope, and that is the end of the matter. Now I am inviting Julie Anne Genter to continue with the time available, if she wishes to continue on Part 1.

Thank you, Mr Chair. The purpose of this bill is to simplify and improve the administration of the tax system, and so it makes a number of minor amendments to a variety of Acts, including the Income Tax Act 2007. I take it that I am allowed to at least say what my Supplementary Order Paper would have done, which was amend section 59B of the Income Tax Act, which currently requires only the name or, potentially, just the date of settlement on the trust that relates to a foreign trust, which is clearly not full disclosure. I am sorry to say that the National Government will not even allow us to debate this in the Committee, even though it would have been a perfectly relevant and simple amendment to the Income Tax Act that would have simplified, greatly, our tax system and provided a whole lot more disclosure on an issue that is of great importance to New Zealanders and, indeed, people all over the world.

Part 1 of the bill, as other speakers have noted, consists of a series of amendments to the Income Tax Act, and, as Julie Anne Genter has just said, the vast bulk of them are actually about amending terms to give them clarity of meaning. When we were in the Finance and Expenditure Committee, it really did become a little like an English language class in that we had a number of discussions about the difference between “ask” and “apply”, and between “request” and “apply”. As Stuart Nash has already said, we deleted the word “written” in a number of places because, of course, people are not, strictly speaking, writing things today as they have done in the past.

Quite clearly, taxation law needs to be modern. It needs to keep up with the way in which terms are used in the modern world, and that is why I had hoped that we would be able to debate other changes that also modernise terminology and process in the Income Tax Act, because, surely, that should be what Parliament does. These tax bills come to us on a regular basis from the Government. We come in hope each time that the word “transformation” will actually mean something—that a bill will actually change, in a significant way, the way the tax system operates—and disappointment greets us on every occasion on which we come to this House. This would have been the opportunity to make a change like the one that Julie Anne Genter suggested in her Supplementary Order Paper 173, because Part 1 of the bill is about amending the terminology that is used in the Income Tax Act so that everybody using the tax system understands it.

Right now, today, there is a section covered by this—section 59, as Julie Anne Genter said—that is not at all clear about what it actually is there to do. There is a heading in the Act, “Foreign trusts”, but, actually, when it comes to what is required of people when they read that section—they come to the Act, they read the Act, and they say “What is a foreign trust?”—at the moment, it is bizarre. What it actually says is that unless you are in Australia, we are not actually interested in who the foreign trustees are or where they are coming from. So that kind of terminology is actually important to the operation of the Income Tax Act.

Being able to understand when someone fills out a form—and the process here is that there is the section of the Act, section 59, which was sought to be amended here, which then in turn creates an obligation under the Act that is fulfilled by filling out something called an IR607 form, which is the form that you fill out if you want to have a foreign trust. What the Supplementary Order Paper that Julie Anne Genter put up sought to do—

The CHAIRPERSON (Lindsay Tisch): That is out of order.

I raise a point of order, Mr Chairperson.

The CHAIRPERSON (Lindsay Tisch): No, wait until I have ruled. We cannot talk about foreign trusts because that is not in the bill. Foreign funds are a different matter. Foreign trusts are out of order because it does not appear in the bill. That is what I ruled on earlier on, and that is why I want the member to come back and focus on. It was all right up until he started talking about foreign trusts.

I raise a point of order, Mr Chairperson. I want to be clear here that the ruling that you made just recently was that you were judging on the debate as to whether something was relevant or not. With great respect to my colleague Julie Anne Genter, a debate actually involves more than one person, and I believe what I have been trying to do in my call is explain why Part 1 is important, why terminology in the Act is important, and why—

The CHAIRPERSON (Lindsay Tisch): That is fair enough.

Yes, and that is what I have been trying to do. I do not want to relitigate your ruling, but I am doing what I think is the appropriate thing, which will help the Chair in a decision about whether or not a Supplementary Order Paper is actually within scope, by having a debate about it. So I will keep speaking and you will probably sit me down.

The CHAIRPERSON (Lindsay Tisch): I thank the member. I say to the member Julie Anne Genter that I think you have raised a very important issue here that is going to need further, much closer examination. I have made a ruling—and I know that you are probably not happy with that ruling—on the basis of advice, but I am sure you have raised something that we will need to consider more fully in time. But as it stands at the moment, I have made the ruling, and we are staying with that. I say to Grant Robertson, in respect of the points that you are making, to tread very carefully, but up until the foreign trusts part you were within the scope, in my view.

Thank you, Mr Chair. The point that I was making—the first of a couple of points I want to make about Part 1—was that the issues that are covered in Part 1 are around terminology, essentially, and that those things are important and that they are in constant need of updating because the meaning of words and the way words are interpreted does change.

For instance, there was a discussion on clause 31, which amends section EK 16, about what is the difference between “informed” and “notified”. The idea was that being “notified” came back in the definitions that we discussed as being a very formal concept—a concept that would be one that would have to be in writing, for instance. We discussed the importance of how those terms changed their meaning over time, and the same applies, I think, to matters throughout the Income Tax Act, including definitions of terms like “foreign fund”, “foreign trust”—whatever you want to choose. I think that it is a valid discussion to be able to say: “Let’s get the terminology right and let’s be consistent with what happens in the rest of the world.”

One of the criticisms that has been taking place in recent times over aspects of our tax legislation is that we are out of step with the rest of the world and that we are creating the mismatches that the Prime Minister talked about, and the Minister in the chair, Michael Woodhouse, talked about, in the House earlier today. The concern that there is a mismatch between our tax regime and that of another country is what creates difficulty. It creates what they call arbitrage opportunities for people if there is a difference between one country’s tax system and another. Therefore, the terminology that we use needs to be consistent internationally, and I think that is precisely what Julie Anne Genter was attempting to get across in her Supplementary Order Paper 173—the way in which we govern particular aspects of our tax regime is not consistent with the rest of the world.

The terminology we use and the underlying meanings of the forms that we ask people to fill in are not the same. That can be exploited by people who want to hide their wealth and people who do not want to pay their fair share, and we should not stand for that as a country. That is why in Part 1 of this bill the changes to terminology are important, because New Zealand should have a tax system that is consistent and that is well regarded around the world, and that is at risk as we stand here today.

I do want to move on in the remainder of my call to another matter in Part 1, which is the question of employee share schemes. Just to make sure we are all happy that this in scope, it is covered precisely by clause 52 and onwards from there. Essentially, the issue that the select committee was asked to debate when this came up was, effectively, changes that allowed employees to choose to withhold tax using the PAYE rules on any employment income that an employee received under a share scheme. There was a balancing requirement put into the legislation that there be a requirement on employers to disclose the tax value of any benefits under a share scheme done using a monthly schedule for employers. Largely, people supported the first part of that, which is that there should be more flexibility around the way that tax on employee share schemes is imposed, but people were not so keen on the requirement on the other side to be able to actually report on that. So the officials and our expert adviser worked on this.

Employee share schemes are a good thing. They are an important part of many people’s contracts and working lives now, and they are well regarded by a lot of employees. It helps people feel a sense of ownership of the organisation that they work for. But, obviously, when it comes to taxation, they create some level of complication and the possibility that people will not be as transparent as they were.

The select committee, when we considered this, adopted a series of changes that, essentially, allow the—there was a general acceptance that employees could choose to use withholding tax to deal with this, but, in terms of their reporting obligations, a number of changes were made, essentially, allowing large employers to have additional time to compile the necessary information for making the returns that were needed. Essentially, this has been done by deeming share scheme income to arise in the next repayment return period for a large company. That is understandable, because it gives them the benefit of having a little bit of additional time to be able to do this while still disclosing the information that would be required in a normal monthly schedule.

We in the select committee were happy to accept that recommendation to allow companies to do this, but our expert adviser was at pains to point out to the select committee that this was the kind of clause we would probably have to return to and review at some point to ensure that the obligations were actually being met and that they were not themselves too onerous when they were met. It is important because, as I say, on this side of the Chamber we support the idea of employee share schemes being part of contracts, because they are, in many ways, part of the new way of doing business.

I know my colleagues on the other side of the Chamber are fascinated by the Labour Party’s Future of Work project, and one of the things that has arisen during that—

💬 Brett Hudson: Oh, I was wondering when you’re going to do some.

Brett Hudson, I know, spends all day poring over the Labour Party’s Future of Work documents. If he did, he would see that one of the issues that has arisen during that discussion is different forms of organisation of work, be they cooperatives, be they people working on their own and self-employed—or examples like share schemes and the growing use of those in the future of work.

On this side of the Chamber, we are happy to support the clauses about this because they allow us to support a new way of people being recompensed and keeping the Inland Revenue Department happy at the same time. That level of flexibility that has now been included for those employers with employee share schemes to be able to choose how they pay their tax and to have a little bit of scope in terms of when they disclose that, needs to be handled carefully.

In speaking about transformation in respect of this bill, what is, I guess, interesting—and unfortunate, in my view—is that the bill is incremental. It is actually not about fundamentally transforming the tax system, although the bill uses explicitly in its title the word “Transformation:”. What we do need in our tax system—and this will be agreed, I think, across the Committee—is transparency. We need rules that are simple and straightforward so that they can be understood, so that they do not provide opportunity for abuse of the tax system.

The Transparency International organisation, in its Corruption Perceptions Index, has viewed New Zealand as being less transparent over time. We were first in the world in 2012 and now we are rated as fourth in 2015, and that drop down the international rankings in terms of corruption perception is damaging to New Zealand internationally. So I want to commend the Government for the changes—the incremental changes—that are made in this bill to make the system clearer and more straightforward.

If we refer to the information provided by the Inland Revenue Department (IRD) in the commentary, it refers to the communications framework, and clauses 60 through to 66 of the bill clarify—and we have heard some of the examples used already. The word “ask” is changed to “apply to”, and so on. These changes seem trivial, and in some ways they are, but where they are clarifying things and making it more difficult for people to misinterpret them or skew them for purposes that are less than honest, that has got to be a good step forward. A good deal of the communications changes, we are told by the IRD, relate to making sure that we have a system that can cope with electronic communications, because that is the world we are living in today, where we no longer necessarily send a written statement to the IRD ending an agreement or giving notification of change, and so on, but we do it by email. That is reflected in the changes that are being made in these clauses and, specifically, in clause 61. There is the opportunity to “notify the Commissioner” as opposed to doing it “in writing”, as a limited example of what notification might mean.

I note also that in the Supplementary Order Paper that is being discussed, there is an attempt in there, in the definition of “foreign trust” that is put forward, to put it forward in an electronic form. So I do bring that to the Committee’s attention because there seems to be something in concert there with what the bill is trying to achieve. It is trying to make it easier for people to comply, and to provide less ambiguity in the law, because precisely when things are difficult and ambiguous is when we run into problems. I think the principles we could agree on across this Committee are that the tax system should be simple and it should be broad. We will have different definitions of that. The Government’s definition of “broad” is certainly not one that I share. The tax system seems, from my perspective, stacked in the interests of the mega-wealthy, and most New Zealanders will feel hard-done-by when they look at tax legislation closely, not only because they are being forced to look at tax legislation closely but because when they actually do that, they will see that it is often written in the interests—and, particularly, some of the changes this Government has brought in—of those who are very well off indeed, and that it is not in the interests of most New Zealanders.

So I would commend this Supplementary Order Paper 173 of Julie Anne Genter because it has made an attempt to say that we can make this more straightforward. We can make sure that people are able to supply information in a way that is transparent, that is straightforward, and that attempts to ensure that as a country we are not perceived as having a tax system that is designed deliberately to be complex and to favour those who have wealthy and clever tax lawyers, but, rather, as having a system that is easy to comply with for all New Zealanders—one that makes sure that we are perceived internationally as a fair place to do business. I come back to the point I made right at the start, which is that concern about New Zealand slipping down the rankings in the corruption perception index, because this is a very real thing.

I have had the opportunity—and I consider myself very fortunate—to travel abroad recently, and that opportunity—

💬 Hon Member: Who with?

On the Speaker’s tour. My goodness, I am not going to talk about that at length. But, very seriously, one of the opportunities that that provides is the opportunity to go and visit other parliaments and to see how they do their business, and see just what they are wrestling with in their domestic affairs. Many countries that we visit as parliamentarians, when we have that opportunity, want to know how New Zealand has attained this reputation for being a fair place to do business. It is an incredibly important part of New Zealand’s story. It is what the rest of the world would like to be like. So they are concerned, as we are concerned, when we see New Zealand’s reputation dropping, when we see a perception of corruption rising in New Zealand, and when that reputation that we have fought for for so long to attain as being a place that is transparent and fair to do business is undermined.

So I would say that any amendment to this bill, and any Supplementary Order Paper that seeks to make the tax system fairer, more transparent, and easier to comply with, and that makes it possible to comply with the tax system without having fancy tax lawyers well-versed in international tax avoidance, is a good thing. We should be affirming it here in this House. We should be supporting the changes that make our tax system fairer and avoid the perception of corruption. It is a simple point—it is a simple point. We know that there is work going on in the OECD. The Minister of Revenue, I am sure, will regale us shortly with progress on the base erosion and profit shifting programme that the OECD is undertaking to try to make sure that there is transparent tax treatment around the world. From my point of view, the Supplementary Order Paper put forward that would seek to define foreign trusts and require—

The CHAIRPERSON (Lindsay Tisch): No, no. That is out of scope.

I will come back to the point.

The CHAIRPERSON (Lindsay Tisch): Just concentrate on the provisions in the bill. I have already ruled about the foreign trusts, so let us concentrate on Part 1.

The simple point is that anything that seeks to make the tax system more simple and transparent should be viewed as a good thing. Any defensiveness on the part of Government members will reflect on them—it will reflect on them. I look forward to hearing their viewpoints on this material, because they ought to be in favour of the measures that are in the bill that do make it more modern, that make it clearer, and that make it simpler. But, by gum, it is not transformative.

💬 Grant Robertson: By gum?

By gum, it is not transformative, and it needs to be—it needs to be.

I am sure the member David Bennett opposite, who is a lightning rod for thinking in this sphere, will have a constructive contribution to make, which we will all want to hear, about how the tax system can be made simpler and how the perceptions, which are growing, of New Zealand as a more corrupt country can be challenged so that we can once again seek to be viewed as the most transparent and fair place in the world to do business. That is something that I truly believe is worth striving for. New Zealand’s contribution on the world stage is something that we ought to be proud of, and to those of us on this side of the House, who see our ranking slipping over the years as other countries perceive us to be less transparent and more corrupt than we used to be, it is of concern. It is of concern to us, and I believe it should be of concern to this whole House.

I have got a contribution to make around clause 59. It is quite interesting that there are three members of the National Government who are members of the Finance and Expenditure Committee and that they are quite happy to yell across the floor. I would love it if the chair of the committee, at least, would stand up and give a contribution. I am sure he has a lot to offer. He certainly does when he is sitting down. I think he should make that official.

We have talked about the fact that we are simplifying, mainly, away from writing. Let me just give you an idea of—I will not say how “far-reaching” this is, but how many amendments we have had to go through. So for words like “apply”, there are 39 changes to different Acts; “ask”, there are 11 changes; “inform”, two changes; “notice”, 28 changes; “notify”, 14 changes; and “request”, nine changes. This is in the schedule, and this is where we insert these defined terms at the bottom of each clause so that if a taxpayer has any concern or any doubt about what, for example, “apply” might mean or “ask” might mean, they can go to the interpretation section in the Act and they will find out exactly what it does mean.

One thing I would like to talk about is a change to clause 59, and I think this is actually a very good thing. This is the Income Tax Act, and what clause 59 basically says is “Section RM 5 amended (Overpayment on income statements)”. This is overpayment on income statements. If we look at section RM 5 of the Income Tax Act, it says: “This section applies when an income statement has been provided to a person and the result is that an amount of tax must be refunded to the person. For the purposes of this section, the amount of tax must be more than $200.”

What clause 59 proposes is to move this threshold from $200 to $600. So how it works at the moment is that when a salary and wage earner—not a business taxpayer, but a salary and wage earner—needs an end-of-year assessment, they can apply for or get issued what is called a personal tax summary. The result is that if the refund at that moment is less than $200 and they do not confirm their personal tax summary—so they do not put it in, but it is less than $200—then what will happen is that the IRD—

I am sorry to interrupt the honourable member. The time has come for me to report progress.

Progress to be reported presently.

House resumed.

The Chairperson reported the New Zealand Public Health and Disability (Southern DHB) Elections Bill without amendment, and progress on the Taxation (Transformation: First Phase Simplification and Other Measures) Bill.

Report adopted.

The House adjourned at 9.55 p.m.