Companies (Levies) Amendment Bill

I present a legislative statement on the Companies (Levies) Amendment Bill.

ASSISTANT SPEAKER (Hon Jacqui Dean): That legislative statement is published under the authority of the House and can be found on the Parliament website.

I move, That the Companies (Levies) Amendment Bill be now read a second time.

I’d like to start by thanking the Finance and Expenditure Committee—

💬 Barbara Edmonds: Great committee.

—for their work on the bill, which has resulted in some thoughtful amendments to it. A very modest committee, unlikely to sing their own praises, so I shall make something of it at the start of my speech, particularly for the member Barbara Edmonds behind me! The amendments strengthen the safeguards in the bill to make sure that the new levy-making power is used well. I’d like to thank, also, those who submitted on the bill for their valuable contributions.

The Companies Office maintains 16 different registers, all of which benefit our society and economy in different ways. Those registers include registers or entities such as the Companies Register and the Incorporated Societies Register; professional service registers, including for licensed auditors and insolvency practitioners; and registers for disclosure of financial products and security interests over personal property. By maintaining these registers effectively, the Companies Office helps to build trust and confidence in the economy, and that is part of what makes New Zealand a great place to do business—the ease of doing business, the acceptance that it’s a fair and transparent place to do business.

Importantly, the registers also allow New Zealanders to search for information to help them make sound business and investment decisions—you can see who you’re dealing with through those registers. The Companies Office registers also bring wider benefits to society, such as not-for-profit entities, like sport groups and community groups.

The registers were set up under 16 different Acts of Parliament, all at different times and in different contexts. Over time, the Companies Office has developed an increasingly holistic approach to running its registers. That approach has had its benefits, including achieving the economies of scale and a provision of registry services, and all registry users benefiting from the registry expertise of the Companies Office.

The bill is designed to support such a holistic approach to running the registers by allowing a funding model that supports that approach. That’s needed because, while the Companies Office remit, environment, and operating model has evolved over time, the legislation governing it has not. At the moment, the legislation requires that each register is funded only from fees collected from specific users of the particular register. As people who use modern IT systems know, that can create a good deal of inefficiency.

Money collected from users of one register cannot help pay the administration of another one under the current law. The Companies Office, therefore, cannot pool any money to use for the good for the registry system as a whole, nor to make fees paid by users of the smaller registers fairer and reasonable. In short, there’s a mismatch between how the funding model is legally supposed to operate and how it actually has been operating.

The bill will change the funding model. It’ll allow the Companies Office to charge levies that can be used across the different registers to fund shared resources such as IT and registry staff. It will be able to collect and use money more flexibly across the whole registry system, and I expect that that will ultimately lead to a more efficient and effective use of taxpayer resource.

As I said, the Finance and Expenditure Committee proposed a number of changes to the bill, mostly to strengthen the safeguards around how the levy-making power can be used. The committee has recommended that the levy-setting regulations be a confirmable instrument, and that adds an additional procedural safeguard in the bill’s regulation-making process by expressly allowing for Parliament’s scrutiny of the regulations.

Another of the committee’s recommendations was to require a review of how the new levies are working within the first five years of them first being introduced. That’s something that the Companies Office is already planning for, and the committee has also recommended strengthening the consultation requirements in the bill.

The bill requires that before any levies can be set by regulation, the responsible Minister must consult, therefore, with anyone who is affected. The committee has also recommended inserting an explicit statement in the bill that the consultation material must be published on a website of the Ministry of Business, Innovation and Employment.

I’m pleased that the committee recognised how important consultation is in this particular area. The first stage of implementing the new funding framework will be a full public consultation. It will be detailed. It will cover who will be charged levies, how much they will be, what the money is intended to be used for and why, and how and when levies will be paid. I am looking forward to hearing people’s views on the options once those detailed proposals and analyses are available to them.

It remains for me to again thank the committee for their work. They made recommendations back to the House, I understand, as a group, unanimously. It’s great that that degree of agreement could be reached on the committee and that they could work constructively together to ensure that we have fit for purpose legislation for running our Companies Office system—where we get the benefits of scale, where we get the benefits of modern IT systems, and where we use taxpayer resource wisely, carefully, and appropriately. So I take some pleasure in commending this bill to the House. Thank you, Madam Speaker.

Thank you, Madam Speaker. A pleasure to be talking on the Companies (Levies) Amendment Bill. I see the Minister didn’t quite get to 10 minutes, but, anyway, he did seem to traverse some of the issues in the bill.

💬 Hon Dr David Clark: Succinct. Accurate. Incisive.

Nicely written prepared speech for him. Unfortunately in Opposition, you don’t have that liberty and that support. But anyway, we are opposing this bill. We’re opposing this bill—I like that lovely, glowing sort of summary that the Minister gave.

The main reason why, is this is a fundamental principle that has been broken by this Government. I’d say to you, Madam Speaker, that this bill actually preys on the generosity and the goodwill of the Opposition and the members of this House, because it wasn’t long ago that this entire House came together and recognised that the Companies Office had illegitimately, inappropriately—whatever words you want to use—been cross-subsidising and charging a number of people and organisations an incorrect fee and levies over a long period of time.

Somehow this mistake was brought to the attention of the Minister and the Minister brought the bill, which was to recognise that illegal activity, and we retrospectively passed legislation not that long ago to say that was OK. You don’t normally do retrospective legislation, but there was a wrong and Parliament agreed to it. Yet, here we have a Minister putting up another bill which says, “Hey look, you know how we came and saw you about this thing and said it was all wrong and let’s pass the piece of legislation. Let’s not worry about it; let’s just enshrine it—let’s have the principle going forward.”, Minister. What has happened in this bill is that the Companies Office will be able to cross-subsidise a whole range of registers. And we just think that is wrong; we really do think that is wrong. The main reason is, for anyone who sat on the Regulations Review Committee—and I’m looking at my esteemed colleague here, Mr Bishop, who going back some time ago, we had the privilege of sitting on regulations—

💬 Chris Bishop: We were on it together.

Yes, I know, we were on the regulation—

And I see Hon David Parker over the other side. He was the deputy chair of it when Labour were in Opposition and Hon David Cunliffe was the chair. But guess what happened? Mr Cunliffe moved on and Hon David Parker took over, didn’t you, Mr Parker?

💬 Hon David Parker: What’s this for?

Regulations Review Committee.

💬 Hon David Parker: No, I took over from Richard Worth.

No, you didn’t; you were with me. Anyway, how many times did we get Government agencies in front of that Regulations Review Committee—the only bipartisan committee, basically, in that Parliament—and get them in? And remember we got the fishing people in because they were cross-subsidising, and we got them to show us their models, Mr Parker.

ASSISTANT SPEAKER (Hon Jacqui Dean): Order!

Absolutely related to this and I’ll tell you why, because it’s about cross-subsidisation. I can say that member over on the other side, the Hon David Parker, was vigilant, was keen to see a wrong put right. And we did—together. Cross-party support; we got it right. And here we are tonight, Mr Parker. We’ve got a Minister from your party putting up this bill, saying, “Let’s now make that the standard practice. This is the new principle.”

That is why we are opposing this bill. Some of the members are going to get up and say, “Oh, you know, it’s administratively easy.”, and I heard the Minister talking about, you know, efficiency. Efficiency? Efficiency? It is nothing about efficiency; it is about charging costs where they lie. This bill cuts across it, and that is why we are going to oppose this bill.

Certainly I acknowledge the members on the Finance and Expenditure Committee work collaboratively. We tried to improve it and there are some improvements, and my good colleague over here, Mr Simon Watts, was heavily involved in that, as all members were. So there are some improvements, but it still is the precedent that will be set and used going forward. And that is why we are opposing it.

So look, it’s going to be an interesting time at the next stage of this bill going through the House, but it’s fundamentally wrong and we oppose it.

Thank you, Madam Speaker. I rise to take a call as the chair of the Finance and Expenditure Committee to report back to the House on the Companies (Levies) Amendment Bill. What’s probably really important is the first sentence in that particular commentary of the bill: “The Finance and Expenditure Committee has examined Companies (Levies) Amendment Bill and recommends by majority that it be passed. We recommend all amendments unanimously.”

As the Minister has already canvassed what this bill will do, I will go straight to the changes that the select committee made and cover them again. The select committee received three written submissions on the bill, and I’d like to thank the submitters for their time. Of the three submissions, two said we shouldn’t invoke levies; the third one said we should make sure there is public consultation and then we shouldn’t invoke levies. I’d also like to take this time to thank Ministry of Business, Innovation and Employment officials; the Office of the Clerk, who do a stellar job of supporting the committee every time we meet; and to Parliamentary Counsel Office for the quality legal drafting.

Again, like the member across the House and the Minister, I’d like to acknowledge the Regulations Review Committee for their review of the bill. The Regulations Review Committee recommended that we consider strengthening the procedural safeguards in the bill’s regulation-making powers process by expressly allowing for parliamentary scrutiny of the regulations. One of the changes that was made was to reclassify the regulations in clause 4 of the bill as confirmable instruments.

The select committee also suggested three other changes. One clarified that fees be combined into one payment. The Companies Office, though, would still have to be transparent and need to tell users what portion was for the purpose of the levy. So it wasn’t just a split $20, that’s how much the fee was; they’d have to actually split out, of that $20, what part goes to what service and to what levy.

We also recommended we strengthen the consultation provisions, again, as a result of one of the submissions, by removing the validating provisions—and also by the Regulations Review Committee—and requiring that proposals for regulations being made publicly available on a relevant Government website.

The last one I will touch upon is a result of a committee request, and that is a post-implementation statutory review of the levy system be conducted within five years of the date that the first regulations were made and for the report to be made publicly available. This was as a direct result of the committee’s concerns around the bringing together of the different levies and also the sharing of them across the different shared services. So we asked officials how difficult would it be to do a post-implementation review, given that it is a new regime in some respects, and they confirmed that it would be a change that would be easily made.

This is a good, tidy bill that brings the legislation up to speed and was within the operations of the Companies Office, who operate a number of shared services. My concern is that, if you don’t pass this particular bill, those levies or fees will possibly have to go up. They will have to maintain 16 different types of fees and levies, and therefore, ultimately, the cost might go back on to those people that need to register with those 16 registers. So, therefore, I commend this bill to the House.

Well, thank you very much, Madam Speaker, for the opportunity to speak on the Companies (Levies) Amendment Bill, second reading. It is an absolute pleasure, as a member of Parliament for North Shore, to have this opportunity. I had the pleasure, as the prior speaker member and chair of the Finance and Expenditure Committee just noted, to sit on this committee through the deliberation process of the select committee. Madam Speaker, as you’ll appreciate, on such processes, while we didn’t have a large number of submissions, it was interesting to get some feedback on those that did make submissions, and it raised a number of concerns for us in regards to, I guess, the process which was undertaken, or not undertaken, in regards to drafting and recommending this bill.

In the submissions we heard, we asked a simple question. We asked: is there any way, other than putting this legislation on the table, to fix the problem? I think that’s a pretty legitimate question to ask, and you would expect that we would’ve got an answer that was reasonably comprehensive from officials, to say, “Yeah, absolutely. We’ve looked at all the different alternatives across the board, and we’ve come up with this as the preferred option.” In short, that wasn’t the case. A horizon scan of ways in which to fix this problem, using international examples or other jurisdictions where they have similar systems, was not undertaken. This solution, in terms of legislation in an amendment bill, was deemed as the only solution option that was basically considered and therefore recommended. I don’t think that’s unreasonable to say from an Opposition perspective that that doesn’t necessarily feel like we’ve been through due process.

The example in terms of the way in which my colleague Mr Andrew Bayly noted around cross-subsidisation: there are, for example—and we questioned officials in regards to this—other mechanisms to achieve the split-out or the separation, such as through systems enhancements and other technology solutions. You know, call me old-fashioned, but some of the accounting systems that are available in the market can actually achieve in part the solutions that are required under this bill. But those aspects were not considered, and this piece of legislation was rammed through by majority by the members on the committee, with opposition, obviously, from National and, I believe, ACT as well at the time. You know, that is disappointing in the context of where we are, as the prior speaker, Mr Bayly, noted.

The actual process in regards to what occurred in the past, in that amendment that was done on a bipartisan basis, was, in our view, the way in which to deal with this problem. But what we’ve gone back to and set quite a significant precedent on in terms of the cross-subsidisation model—which very much sits out of piste in terms of where we should be and sets, I think, a precedent which isn’t consistent in regards to how we should be approaching such problems. So that’s a little bit of context in terms of just one small element around why we have been and continue to be opposed to this legislation.

The other aspect is one around simple fairness of the appropriation, and, in effect, the cross-subsidisation now of certain levy groups on to others means that some of the blurring of, you know, in effect, the Companies Register or the Personal Property Securities Register—previously, we had a good, clear articulation in terms of each of those different registers and whether they could stand on their own two feet, but, in effect, now we’ve got a blurred model of cross-subsidisation, and one of those levies being collecting their fees and using some of that to pay for another. At the end of the day, these levies are collected off hard-working taxpayers across this country, and I think they have a right, at its simplest level, to know where their money and their taxpayers’ money is going. That is no longer going to be the case under this amendment.

While there’ll be a lot of people sitting at home tonight thinking, “Geez, companies levies—geez, I’m glad I stayed up to 9.55 to watch this speech.”—because that’s exactly what I would be thinking about, potentially, if I was sitting at home in the beautiful North Shore on an evening like tonight. But for those that are sitting at home going, “Yep, I absolutely agree.”, I just want to make it very clear to those people that we did do what we could do in terms of opposition around that and raised the questions I think most Kiwis would raise, around whether this is fair, whether this is appropriate, or whether we’ve actually done a proper options analysis around the solutions that would solve this problem. But the reality is that—and I won’t go on too much further because I know we’re all looking forward to the end of this—that is what occurred, and that is a great shame. On that basis, the National Party will be opposing this bill.

Members, the House is suspended until 9 o’clock tomorrow morning.

Debate interrupted.

Sitting suspended from 9.58 p.m. to 9 a.m. (Wednesday)