Taxation (Income Tax Rate and Other Amendments) Bill

Members, we now come to the debate on clauses 1 and 2, which are the title and commencement clauses. The question is that clauses 1 and 2 stand part.

This often affords us an opportunity to briefly round up the bill and then talk about what I think is very important: the commencement of this bill.

The bill is going to be made effective on 1 April 2021, which is customary for the tax year. What we do know, though, is that the changes that are being made firstly to the tax rates will affect individuals but the changes that are being made to the trust requirements actually affect trusts, and the tax year for trusts is often not 31 March. It can be any number of dates in the calendar year.

I wonder if the Minister has considered whether or not to delay the implementation. I haven’t got a tabled amendment on this, but I would like the Minister’s views on whether or not he would consider, or did consider, whether or not—despite the fact that he wasn’t prepared to allow people to have an opportunity to submit on Part 2 of this bill, or any part of this bill—he would now consider, or did consider, delaying the effective date of enactment past 1 April in order that the plethora of tax advisers and tax lawyers who have contacted Messieurs Bayly and myself and Nicola Willis can now say to IRD and to the Minister what they believe is wrong with these clauses. The Privacy Commissioner said in the departmental disclosure statement that he hasn’t even been asked for comment—well, he was asked whether he had been asked, and the answer was no, because he hadn’t had time.

The Attorney-General, it appears, has not had an opportunity to revise his opinion on whether or not those parts of the bill breach two fundamental human rights that the Attorney-General, at least, holds dear and has told the Minister of Revenue the right to freedom of expression and the right to prevention of unlawful search and seizure is fundamental and is being breached in this case. Now, the Minister of Revenue’s gone, “Well, here’s an amendment.” We are none the wiser about whether the Attorney-General is OK with that—whether he has moved in his opinion that this is a fundamental breach. And, actually, the Attorney-General should have an opportunity.

So even if we pass this bill this morning, delaying the enactment of Part 2 of this bill will give the plethora of tax advisers, the Privacy Commissioner, and the Attorney-General an opportunity to have a say on it.

As was pointed out by Mr Seymour, we do two or three tax bills a year. I don’t know what the hurry is with this. Well, I do know what the hurry is—the Minister’s not prepared to say what he really thinks, in my view. But we could come back if it was found that there was a better way to do Part 2, even though the bill would be passed. It’s not like an immigration bill, where you get one every 10 years. You get three a year chances to improve tax legislation. Let’s take that chance if it’s found that those advisers are of the view, and the Minister agrees, that this could have been done better, and delay the start date of Part 2 of this bill.

In respect of whether the amendments that went through a tabled amendment in the last part meet the Attorney-General’s requirements, refer to paragraphs 20 and 32 of the report of the Attorney-General on the Table. They do.

In respect of the start date, I think it’s sensible that the information-gathering powers match the date when the incentive to avoid tax by diverting income through trusts start. As members have noted, from both sides, that starts on 1 April, and, therefore, the information-gathering powers should start on the same day.

Thank you, Madam Chair. Thank you for standing up—I think there was a little bit of confusion from both the Hon Michael Woodhouse and I as to your comment around the Attorney-General’s—

CHAIRPERSON (Hon Jacqui Dean): To the Minister of Revenue’s comment.

Oh, the Minister’s comment; we didn’t quite hear it. But, anyway, in terms of the start date, the whole premise for putting this through for urgency, the Minister told us that that was because, principally, one, it was an election promise to put it in place early, but, secondly, there were IT issues, and if we didn’t pass it through quickly, there wouldn’t be sufficient time for all the IT work to be done so that this could be actioned and implemented from 1 April 2021. So it seems a pretty interesting approach that we have been driven around IT for a date.

In terms of the process of the bill passing through the House, I think it’s a real disappointment that Michael Woodhouse’s amendment wasn’t accepted, because that would have given some latitude around maybe having a differential start date. At the moment, we’ve got a hard start date of 1 April, but I do note there is also a subsequent date of 1 April 2022, because during the course of 2021 it is proposed to go out and actually do some consultation around the integrity issues of this bill, which is something some of the members from the Government side seem to just blush over. But, obviously, the Minister has regard for that and that’s why he has set out a process for further integrity measures to be implemented during the course of 2021, with a commencement date for those of 1 April 2022.

I just don’t think that this issue around urgency for this bill has been proven. I think there is a lot of concern, we’ve been hearing it, and once this bill finally finds the light of day, and people fully realise the implications of this from a technical and accounting perspective to try and do the accounting work to make sure that everything’s in order, we don’t know how the commissioner’s going to react and what she might do. I think, given that uncertainty, postponing the start date, in my view, would be not only advisable but preferable because that would give sufficient time for further consultation to make sure that there are no fish-hooks that have been embedded into this bill, and I think we’ve talked about that long and hard during the course of the last 24 hours, because there is a large potential for this. I think, on those grounds, there’s a strong reason why the commencement date of the bill should be deferred for a later date.

I want to make a contribution on the title of this bill, and I’m wary that members have heard these sorts of contributions before and sometimes they can be frivolous. This is not a frivolous matter, because this bill is described as the Taxation (Income Tax Rate and Other Amendments) Bill, and I think that title’s misleading. I’d like to invite the Minister of Revenue, the Hon David Parker, to reconsider it. The reason I think it’s misleading is that it describes “other amendments” generically as if they’re a matter of small, administrative issues of no import—and, of course, that is absolutely not the case. The amendments in Part 2 of this bill, which relate to administration of the tax system, are hugely significant.

First of all, in clause 17GB, we have a new power for the Commissioner of Inland Revenue to require information or production of documents for tax policy development. Now, this requirement is a significant new requirement. It is a requirement that is of such significance that the Attorney-General has said, “Well, actually, that’s going to breach New Zealanders’ rights to be free from unreasonable search and surveillance; it is going to breach New Zealanders’ rights to freedom of expression and the right not to be compelled to say certain things or to provide certain information.” So this is an extraordinary new power for the Commissioner of Inland Revenue to gather information for policy-creation purposes, and I think that should be addressed in the title of the bill. Actually, this isn’t just a bill about increasing the top rate, the “Income Tax Rate”; this is the “Income Tax Rate and New Information-gathering Powers Bill”—that is what it actually is, and the Minister knows it.

I think that is the bit that members on this side of the House have been particularly concerned by, which is that the public thinks, “Oh, the Labour Government, they’ve campaigned on a top tax rate; fair enough, they’re rushing it through under urgency.” What the public didn’t expect is that under urgency the Government would also rush through extensive new information-gathering powers that potentially impinge on the privacy of every New Zealander whose financial affairs can now be looked into by the Commissioner of Inland Revenue on the basis that it might help with potential policy development—this is an extensive power and it should be addressed in the title of this bill so as not to mislead. That’s one power.

The other two powers, of course, that are contained are around new requirements for annual returns for trusts. These are extensive. So, actually, this is not just an income tax bill; this is the income tax rate and new information-gathering powers and new information-disclosure requirements for trusts. The new information-disclosure requirements are not just for the future—they are extensive for the future in terms of the returns that must be filed—they’re also retrospective. The commissioner, in this bill, is given the power to go back to 2013 to ask trusts to submit information in the prescribed form.

So what I am highlighting to you, Madam Chair, is that we have here a title that I think is misleading to New Zealanders about what this bill actually does. I would invite the Minister, as a gesture of good faith, to demonstrate that he is prepared to be upfront and transparent about what he is doing in this House today to rename this bill so as to highlight these matters. I make a prediction: over the next couple of days, tax lawyers around the country, New Zealanders with trusts—and there are 240,000 of them; so members opposite may laugh, but this is going to have an extensive effect—anyone who has ever had a payment from a trust or who has been the beneficiary of a trust, is going to find out that new filing requirements and new compliance is happening.

Every single New Zealander, not just those involved in trusts, is going to wake up to the fact that under urgency in this House, with no notice, no submissions by the Privacy Commissioner, no analysis by the Law Society, no second look by the Attorney-General, the Government has slipped through a bill to give the Commissioner of Inland Revenue the power to inquire into your personal financial affairs, and all she or he has to do to justify that is to say, “Well, it will help the Minister create policy in the future.” The only carve-out that that Minister has put forward is to say, “Well, it won’t be able to be used to prosecute you, but don’t worry we’re quite prepared to invade your privacy.” So, Minister, I invite you to reconsider the title of the bill.

I move, That the question be now put.

Clause 1 agreed to.

Clause 2 agreed to.

House resumed.

The committee has considered the Taxation (Income Tax Rate and Other Amendments) Bill and reports it with amendment. I move, That the report be adopted.

Motion agreed to.

Report adopted.

Third Reading