Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill

Thank you very much, Mr Chair. While the title’s self-explanatory, albeit rather long, the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill 2018—anyway, I’m not going to go on about the title; it is as it is. I think the much more significant issue is around the commencement date, and, obviously, clause 2 sets those out, and there’s a myriad of them, going over a couple of pages. But I think the context for the commencement date of this legislation is actually quite important, because while some of the matters covered in this bill, and it is an omnibus bill, cover aspects such as fixing up old pieces of legislation, etc., the key part of it is around what’s going to happen with the new tax arrangements with the IRD as the IRD is rolling out its new system.

As I’ve spoken about before, I think the key issue, in the context of this discussion around the commencement date, is that we’ve had one million taxpayers who have had a relationship with the IRD, and we have all their contact details and, principally, their emails, their addresses, and their phone numbers so that if the IRD wants to contact them, they’ve got the option of an email or they can actually send a letter or, in the last situation, that can actually call them, and that’s good—that’s fine and dandy.

The second thing is, though, we’ve got one million of these taxpayers who have up to now been principally serviced by 30 personal tax summary intermediaries (PTSIs), and they’ve always had the relationship with the intermediary not with the IRD system or the IRD department itself. And that information needs to be transferred across to the IRD, and no doubt that is taking place. Whether that will have occurred at all by this commencement date for this component, 1 April, is another question and something I’d like to hear from the Minister. But there are 30 of those PTSIs in place, and some are big and some are small.

But the most worrying component is the million taxpayers who’ve never had any dealings with the IRD—or actually, in fact, with anyone—because they’ve never really had to file a tax return, and that’s the issue that worries me about the commencement date in this piece of legislation, because the IRD, the department, has actually estimated that about 1.67 million people will get a refund. And that’s great. But if you can’t send the refund to the right people or the right address or whatever, that’s going to sit in abeyance, held by the IRD, and there’s an obligation to pay that to taxpayers.

But the more important side is on the debt, the issuing of the—well, the situation where about 263,000 taxpayers are going to get a bill for the first time, will get a bill for tax for the current year. But of those it’s estimated about 115,000 will be receiving a tax bill for the first time. And I think here is the issue about putting this in place. We’ve got a computer system that’s coming into play now. It was due to start the transfer from FIRST to the new system called START on 23 April. That’s already been delayed. There’s been some testing of that system, as I understand, but using a sort of a batch system, but the metal is going to hit the road from 1 April. And when you put that in the context of when these refunds should be paid back by the IRD to taxpayers—normally by about June; in just a few months’ time—the capability of the IRD to be able to do that is of concern.

And I think, just going forward in terms of that tax liability that’s going to be incumbent on taxpayers to meet, if they’re not aware of their obligations—and many don’t read papers, don’t read emails, and don’t have contact, and are simply out of the system—they will be building up penalties, and we know they become very significant: 1 percent after the first day and 4 percent rising thereafter. And those over time become very, very significant.

So I think the question around the capability to service this—we know that there’s a bigger call centre; over 300-odd people, but is it enough? And are there enough people in the IRD to be able to handle the incredible amount of additional information that’s going to come—not monthly from employers, but from now on out weekly, because most people pay salaries and wages weekly—a big concern.

Thank you, Mr Chair. I just want to take a brief call, not so much on the title, because it would be hardly likely to name the title of this with anything other than what it is, but I did want to take a call on what is a slightly unusual—well, in my experience, a little bit unusual, in that the commencement date is the commencement date, but interesting, there’s a retrospective piece in this bill, which deals with the prospective of purchase of bloodstock. It’s quite an unusual addendum to the legislation in that respect in that it allows, irrespective of the commencement date of the bill, that these are treated retrospectively back to, effectively, the date of purchase prior, provided it is after 1 January 2019. I thought it was worth mentioning in this brief call I’m going to take on this part of the bill because it is a bit unusual and, as I said—

💬 Andrew Bayly: Call it a Winston Peters special.

Yes, you could do too. But as I said earlier in a contribution to an earlier part of the bill, it was a piece of legislation that was designed to achieve something which it clearly hasn’t achieved initially. It may well do in the future, but we’ll see. But I just thought I’d take a very brief call to just point out the fact that it is unusual and that that part of the legislation—in fact, clause 133B and from there on—would have become, I guess, effectively, treated as retrospective legislation, and anyone who purchased a yearling prior to the implementation of this bill could have worked to claim that tax exemption on it.

So Mr Chair, that was just the brief contribution I wish to make to that part of the bill. Thank you.

Thank you, Mr Chair. Unlike my esteemed colleague Mr McKelvie, I think this bill does merit a name change because the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill 2018 may seem applicable to some, although as Mr McKelvie has just pointed out, with all the retrospective elements of the commencement date it doesn’t seem quite right—that 2018-19 doesn’t describe the effect of the bill. But, actually, I think there’s an opportunity here. We could rename this the “Taxation (Simplification of Taxation) Bill 2018”, because I am aware—I am aware—that there is a Standing Order that does prevent irony in question time in questions, but I’m not aware of a Standing Oder that prevents irony in the naming of bills, because if there’s one thing that this monstrosity—I mean, carefully crafted document—is not, it is not a simplification of our taxation system.

And, after all, if we want compliance both in personal income tax and business tax and all the vast and myriad ways that taxation touches on the lives of people, of businesses, of trusts, then surely simplification would be a goal that we should set ourselves to, and particularly we should set the Inland Revenue Department to? Certainly their Business Transformation programme was supposed to be all about that simplification. Perhaps we could send a message? I think the Rt Hon Winston Peters once used that term—“send a message”. We could rename this bill the “Taxation (Simplification of Taxation) Bill 2018”.

The other part that is very relevant, and Mr McKelvie did raise this, looking through this, there are just so many different commencement dates here. For a member of the public—and, let’s face it, they are the people who will actually be affected by this if it is enacted, and based on previous votes tonight it looks like that is a danger for them—when, and if, this is enacted, it is poor old New Zealanders who will have to deal with this, and the only ones who are going to win out of this particular commencement clause are accountants and lawyers.

My guess, as Mr McKelvie noted, and if it wasn’t for a case of certain retrospectivity—by the way, Mr Chair, having spent a short but very interesting four and a bit years in this Chamber, I can well recall when members of every other party would scream blue murder at the merest hint of retrospectivity in legislation that the Government brought before the House. Like sheep, mild; not a mutter, not a murmur, not a thing. I mean, this is an absolute myriad of strangeness to try and work through. I think, as Mr McKelvie pointed out, maybe some of it has got to do with making sure that good-looking horses that were good looking a little while ago are still going to give their owners some sort of tax credit.

I think there is still time. The bill is not through the committee stage; the Minister could support an amendment to change the name to the “Taxation (Simplification of Tax) Bill” and perhaps something—anything, quite frankly; it’s such a mess—to simplify these commencement clauses, because I’d argue that this is a difficult thing for New Zealanders to try to get their heads around, unless they are charging by the hour as tax consultants, accountants, or lawyers.