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

I must admit that it is difficult to stand in the middle of a Committee stage that I think we were talking about 2 weeks ago and hit it, because I was really hitting my straps, I remember, when we pulled up stumps. If you give me about 2 minutes, I will talk about what this bill is about, once again.

This is the Taxation (Transformation: First Phase Simplification and Other Measures) Bill. The title is probably longer than a lot of matter in the bill. Basically, it looks at bringing the tax system into the 21st century. This is about simplifying the communication process, electronic signatures, and sending and accepting emails instead of written notices. In the tax Acts before this, if you wanted to officially communicate with the commissioner or vice versa, it needed to be in writing. It was required to be in writing. Now we are talking about emails.

As in all tax bills that have come through this House recently, we do think this is a missed opportunity because there are some huge, huge issues in our tax system at the moment that we know about: avoidance, aggressive tax planning to the tune of between $1 billion to $7 billion worth of lost revenue to our economy. And here we are talking about whether we should be saying “notify” or using other small terms. What I was talking about when I was interrupted by the bell is something that I think is quite important. This is clause 59 and this amends section RM 5. It is an amendment of the overpayment on income statements [Interruption]—it is, Mr O’Connor; this may affect you—in the Income Tax Act 2007. What it did say—

💬 Grant Robertson: Very interesting.

You are dead right, Mr Robertson. It is very interesting. It is a huge piece of legislation but also a very important piece of legislation. What it used to say was: “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.” As we know, $200 these days hardly pays for a good night out on Ponsonby Road. What they have actually done is they have brought it into the 21st century.

Let me provide a little bit of background. When a wage or salary earner—not a company, but a wage or salary earner—needs an end of year assessment they are issued with, or they can request, what is called a personal tax summary. If the result of this personal tax summary is a refund and they can confirm the personal tax summary, that refund will be issued automatically. [Bell rung] Mr Chair?

The CHAIRPERSON (Lindsay Tisch): Stuart Nash.

Ha, ha! Thank you for that vote of confidence!

The CHAIRPERSON (Lindsay Tisch): Your big moment!

In the past, or before this bill—well, at this point in time, if the refund is less than $200 and they do not confirm their personal tax summary, then that money will be automatically released to the taxpayer—i.e., it will be put into their bank account or they will be sent a cheque after 30 days. What this bill does, and I think this is most important—it is sort of tucked away but it will affect a lot of people—is it proposes to reduce the time delay and increase the threshold, so credits that would be released in 15 days after a personal tax summary would be issued if the refund is less than $600. So instead of waiting for 30 days and not having to do anything if the refund is under $200, it will now be done in 15 days—15 working days, so it is 3 weeks; still a bit of time—but it is $600.

The reason I think this is important is that the Inland Revenue Department (IRD) actually owes New Zealanders $750 million. Not many people know that—that the IRD owes New Zealanders $750 million. A good chunk of this money is owed to people who have paid secondary tax or other withholding taxes and do not actually realise that the IRD does owe them this money. There are not many engaged—well, there are a number, and I must admit that awareness of the personal tax summary, or the fact that there actually exists a personal tax summary, is increasing. There is no doubt about that, and what I will say to anyone who pays secondary tax is that I would absolutely encourage them to go to the IRD and request a personal tax summary. Even if it means that they do not do anything about it, they will come up on the radar of the IRD, and I would almost guarantee that if someone pays secondary tax they will be owed money by the IRD. If they do not do anything else except apply for a personal tax summary and they are owed $600 or less, then the IRD will automatically either (a) send them a cheque or (b) put the money in the bank account if the IRD holds that bank account.

The reason I say this is important is that what it does, I think, is it enables more people to become engaged and to get the money back that they require. I must say that the interesting thing about this $750 million is if a taxpayer owes the IRD money, the IRD will go after them to the ends of the earth. If the IRD owes the taxpayer money, then this falls off the cliff after 4 years. So if the IRD owes you money and it is 5 years since that obligation was incurred, then the IRD does not have to pay that money back. In fact, it does not pay that money back. I think this is wrong.

We have talked to the IRD about this and asked it what it is going to do in respect of actually going as hard to give taxpayers their money back as it does chasing the money owed. It believes that this new business transformation system should make it a lot more streamlined, and people should not be owed money, or if they are owed money they probably will not even have to request a personal tax summary. In fact, for me, the ultimate is to not even have to pay secondary tax. Secondary tax at the moment is a withholding tax that people must pay, because what happened in the past was if they were working two or more jobs, they were underpaying their tax and at the end of the tax year they were hit with a massive bill by the IRD—something they just could not pay. It was a withholding tax. So secondary tax meant that they did not end up with a bill, but what a lot of them actually have ended up with is a credit, but most of them do not know.

I have an incident of someone who was working for a relative of mine. These relatives were saying to this person: “Give the IRD a call. Go on.” She was very reluctant to. In the end she did and she found out that she was actually owed $800. That is not an unusual story. So to everyone watching—and I know a lot are—who pays secondary tax, just go to the IRD. In fact, you can go to the IRD—public service announcement here—website. As long as you have got your IRD number, put it in and it takes about 5 minutes—

💬 David Bennett: How long?

—about 5 minutes—after you have put in your IRD number to find out whether you have got a credit or not. Until the IRD becomes a lot more proactive in giving this money back, we have got to do it ourselves. I would encourage you all to do it. Or, as mentioned, what I would do is I would go to the IRD and I would ask for a personal tax summary. The taxpayer will then come up on the radar and if they are owed less than $600—

💬 David Bennett: Is this the best he can do?

—they will get it back automatically. It is very important. Mr Bennett here, on this side of the Chamber, is going “Oh, $600 isn’t important to good hard-working Kiwis.” I believe it is, and most people do.

I call Jo Hayes—stand up if you want to take a call.

💬 Joanne Hayes: I do.

The CHAIRPERSON (Lindsay Tisch): You must stand up. If a member wants to take a call, they must stand up and call out. I cannot second-guess whether someone wants to take a call.

I move, That the question be now put.

We now move to Julie Anne Genter’s amendment inserting new clause 45A, as set out on Supplementary Order Paper 173. This amendment is out of order as it is outside the scope of the bill, and I ruled on that earlier.

Part 1 as amended agreed to.

Part 2 Amendments to Tax Administration Act 1994