Companies (Levies) Amendment Bill

Members, the House is in committee on the Companies (Levies) Amendment Bill. Members, we come first to Part 1. This is the debate on clause 4—“Amendment to allow levies to be imposed in relation to certain persons using services of certain registers”. The question is that Part 1 stand part.

Point of order, Madam Chairperson. I seek leave for all questions to be taken as one debate.

Leave is sought for that purpose. Is there any objection? There is. The question is that Part 1 stand part.

I am pleased to open proceedings on the Companies (Levies) Amendment Bill. I want to thank the Finance and Expenditure Committee, of course, for their work on it. They had made a number of thoughtful amendments to the bill along the way, mostly around strengthening the checks and balances in the bill to make sure the new levy-making power in the bill is well used and that there is effective consultation before any levies are set.

The intention of the bill is pretty simple. It enables the Companies Office to charge its users levies as well as fees in the way that it does now. The levies will be used to help recover the costs associated with running the 16 registers that the Companies Office maintains. The Companies Office registers all benefit our society and economy in a variety of different ways. By maintaining these registers effectively, the Companies Office helps to build trust and confidence in our economy. This contributes to making New Zealand a transparent, fair, and easy place to do business. New Zealanders search these registers for information that they need to help them do business and to make decisions.

The levies will enable a more fit for purpose funding model for the Companies Office. It reflects that the Companies Office has 16 different registers and it doesn’t make sense for each register to be funded entirely separately from one another. In doing so, it creates a system where the maintenance of each register costs less than it otherwise would if each register was freestanding and operationally independent. That is, economies of scale are achieved by combining the overheads and administrative costs of all of the registers in an integrated system. If these registers were operated separately, each one would require more money to run it and taxpayers would pay more for the operation of these registers. I think that is something the ACT Party has acknowledged, and I welcome and thank them for their support for this reading through the bill. We certainly don’t want taxpayers to pay more than they need to for the service that the Government provides.

The bill enables a funding model that reflects how the Companies Office best and most efficiently delivers its registry services for the benefits of New Zealanders.

I wonder whether I might just make some introductory comments to Part 1 of the bill, and then I’ll had over to members for their contributions. Part 1 contains all of the operative provisions. New section 404 sets out the purpose of imposing levies. In short, that purpose is to recognise the Companies Office’s holistic approach to running the 16 registers. The section also sets out that any levies should be imposed on users in a manner that’s equitable, efficient, and justified. New section 405 contains the regulation-making power itself and details what can be prescribed in the levy regulations. New section 407 sets out the matters that the responsible Minister must have regard to when setting the regulations, and that includes the purpose statement and the costs that are proposed to be recovered through the use of the levy. New section 408 is about consultation. That is the section that’s been strengthened, as I mentioned, by the amendments made by the select committee process. And new section 409, which was added by the Finance and Expenditure Committee, requires a review of the new levies within the first five years after they are introduced, and that report will be made available to the public. I look forward to members’ contributions.

Thank you, Mr Chair, and nice to be talking at this committee of the whole House. I think I want to start off with the opening statement that Minister Clark just made, implying this is a good method because it’s going to lead to lower costs. Well, that was the proposition. My first question, I suppose, is: how the heck can that be, when the Parliament, only probably three months ago, passed, under urgency, a piece of legislation that was fixing up an absolute—I’m trying to think of my English words, here—muck-up, dog’s breakfast, where the Companies Office had illegally, and for years illegally, been taking fees and cross-subsidising a whole number of registers that are actually unrelated. So to suddenly ask for the good favour of the House to pass a piece of urgency very quickly to deal with this longstanding misappropriation of funding amongst different registers, and to now suddenly turn round and say, “Hey presto, this is the best thing we should have been doing, and we should have been doing it all along, and it’s the ideal model”—can the Minister just provide some justification for that assumption?

Thank you, Mr Chair. I thank the member for that question. Just to clarify for the committee, that misappropriation the member refers to goes back, we think, to the 1990s. Funds, we think, have been moving between registers since then. Certainly at the formation of the Ministry of Business, Innovation and Employment in 2012 it seems to have been the case, but, we think, for some time longer. Look, it’s something that came to light. Obviously, it has happened under successive Governments. It’s not what this bill is about now, but the member raised it, so I think it’s useful background and context for what we’re doing here. So parties across the Parliament agreed that we needed to set right what had been done previously. I think that was the right course of action. That happened at the Budget debate.

This bill which we’re putting in place today really is asking the House to say, “Let’s put in place a system that is contemporary, that costs taxpayers the minimum amount necessary, but that also picks up certain principles in applying the fees and levies that are to be laid down for users of those important registries.” So that’s what we’re doing with the bill that we’re putting through the House today.

So, just in reference to that, can the Minister now tell the committee how the charging regime that is proposed under this bill is different from the way that the registers were previously accounted for? What’s the big principle difference? From my reading of it, we’ve still got a large scale of cross-subsidisation, which is one of the issues that this Parliament doesn’t like to put in place—cross-subsidisation between different entities or different groups, and here we are, we’re putting it across, I think, 16 registers. So what is the difference in the approach taken under this bill from what had been occurring in the past?

So, obviously, in the past, there had been cross-subsidising happening, it just was not within the legislative framework, and that’s what was uncovered. So what was anticipated previously was that a rigid user-pays model would be put in place, and that suited well when there were separate registers, as I understand it, back before modern IT systems where you could get the economies of scale that you have now. We think that it’s sensible to make use of those economies of scale so that the costs are less overall for all of the users of the scheme than they would be if separate registries were offered. That’s part of the benefit of modern technology. It’s the way that contemporary registries work in the world today.

Thank you. I’m not quite sure that answered the question as to whether we’re still just enshrining the similar approach that was deemed illegal only up to a few months ago, but now, suddenly, under this bill is deemed to be legally acceptable. I’m not sure I got quite the right answer on it.

But the next question that the Minister raises, and, again, he said in his opening statement that this is going to lead to lower costs. So what is it that’s going to lead to lower costs? Have the IT systems already been changed so the registers can be managed in a more coordinated manner? Has that already changed? Because if that’s the case, the cost savings would have been captured and the fees, presumably, if it’s on a cost basis, would already reflect that change in the registers, and maintain the registers. Or is he anticipating there’s going to be a further investment in IT systems that would in time reduce the costs across the registers?

My understanding is there are, effectively, a few systems which already are integrated across different registry users. So there are economies of scale now captured. How far back that goes, I couldn’t tell the member. I can’t go back to the 1990s and the history of when those different systems became integrated in the way that they are now. But there is, I think, intention of the Government to continue looking at where further economies of scale can be achieved over time.

The Minister made it clear in his opening remarks that this is going to lead to cost savings. Now, either he’s saying that there has been some consolidation of registers already; if that’s the case, the fees, the levies—whatever—should reflect that lower cost structure. That should be a given. But your opening statement made it clear—and you implied that ACT supported this—that there would be cost savings as a result of putting this together and allowing this to be a levy put across the 13 or 16 registers, right? If you are talking about further investment, how do you know that you’re going to get further savings? Have you put up a business case or is that just you talking as if you think it may lead to it? And if you think it may lead to it—

CHAIRPERSON (Greg O’Connor): Mr Bayly, a very liberal use of “you” in there. Can we just—

Yes, I’m sorry. Is the Minister just making an assumption and trying to make it sound like a fact, or what is the nature of his opening comments?

I’ll respond to the substance; I think I have already. My understanding is that with the integration of existing systems, some economies of scale have already been achieved. That is why—and I take it is a fundamental truth that economies of scale tend to achieve savings. That is generally the case. In any case, the fees are set in accordance and after consultation with the users of the scheme. That’s a requirement that’s been laid down that we’ve already discussed. So I would anticipate that, over time, IT systems would continue to be more efficient and that would be a benefit to users. Now, the fact that we can capture those benefits legally, as opposed to in the past where it appears there was cross-subsidisation happening through an integrated system, illegally—it’s got to be a good thing, in my view.

Thank you. I’m not sure, I guess, what part of the bill Mr Bayly was referring to. But I’m wondering if the cost efficiencies perhaps are partly there in new section 404 in clause 4, where, rather than running separate levies for each register—which would be the alternative case—in fact, those efficiencies are there in new section 404(1)(c), having a single levy that is administered across all of those registers.

Thank you very much, Mr Chair.

💬 Andrew Bayly: Simon who?

💬 Hon Member: Watts.

Thank you very much, Mr Bayly. It’s a pleasure to rise—

CHAIRPERSON (Greg O’Connor): Mr Bayly, if you’d like to come sit here, you’re welcome, but otherwise just allow the member to have his speech, please.

Thank you very much, Mr Chair. Just following on from the thematic that was raised by my colleague Andrew Bayly, in regards to the cost savings, the question I have for the Minister is: can he outline to us, as part of the assessment for this solution that’s on the table here under new section 404, what assessments of alternative options were undertaken in order to come up with this solution? Were other systems and other registries considered overseas? Were there considerations of technology solutions that may have been able to achieve the same outcome? Because I think it links back to the conversation that my colleague Mr Bayly was referring to around whether there were any cost savings. So I’m interested in that process around the system asset. The Minister also mentioned in his statement in terms of the fact that the system costs of this integration would actually lead to a reduction in costs. And he’s made the assumption that just by simply centralising something or consolidating it, you would derive savings. Well, that’s not always the case. Actually, sometimes that can be the opposite in that regard. So, again, what is the substantiation or consideration that justifies the point that the Minister’s making in that regard? Thank you.

Thank you, Mr Chair. Well, I’ve got to appreciate my comments from Simon Fox—Simon Watts. Ha, ha! But, look, I just do want to attend to this question. Minister Clark, I’ve just got to say to you, you cannot have it both ways. Either savings have occurred and the Companies Office, the manager of these registers, hasn’t actually passed on the cost savings, and that’s why you’re going to see a reduction in costs relating to this, or you are clearly anticipating that there’s going to be some further investment that would lead to it. But you can’t just say there’s going to be further savings. Have you got a business case? Have you got anything to support that, Minister? Could you outline all that, or what?

I mean, I have entertained the member’s questions, though they don’t really pertain to the principles in the bill that we’re discussing. I guess I have struggled to cope with the idea that you could get some efficiency gains and then never look for any more in the future, which the member Andrew Bayly seems to be suggesting: that once you’ve captured some efficiency gains in a process, you should just stop. Modern manufacturing would suggest otherwise—that, you know, we do things differently to how we did them in World War II. Manufacturing is now more efficient, and we anticipate that it will get more efficient still over time. I don’t think that that fundamental premise somehow is flawed. That is a premise I have made in answering the member’s more general questions that don’t pertain directly to the bill. The bill is setting out the principles which we are trying to achieve with the system that is in place, and I would anticipate that those principles will translate well to any future system where future efficiencies are also anticipated to be gained.

Thank you, Mr Chair. It’s remarkable to be interrupted by something so intellectually powerful as Mr Goldsmith’s sneeze, but I want to come to the problem with this bill. Now, it’s correct that ACT is supporting the bill, on the basis that we’ve been assured by officials at select committee that there will be cost savings and that it will be streamlined.

Now, when I look at the Companies Office, I find 21 registers, ranging from the personal property securities, financial services providers, and, of course, the Companies Register, but then we have registers that not a lot of people will be familiar with: the registered unions. Now, it’s important that unions are registered; we need to know that they’re using their members’ funds wisely and not donating excessively to political parties.

💬 Dr Deborah Russell: Well, the Taxpayers’ Union won’t be donating then, will it?

Of course, the Taxpayers’ Union doesn’t necessarily donate to political—I wouldn’t know; if they wanted to and you were allowed to, fair enough. But we also have friendly societies, the 21 registered friendly societies, and retirement villages. Now, clearly, this is a very broad range of organisations, which the Ministry of Business, Innovation and Employment, in their role of managing the Companies Office, has responsibility for making sure they’re fulfilling their regulatory obligations.

The ACT Party understands that it makes sense to consolidate the day-to-day operations and management of what, essentially, are similar functions for quite a disparate range of activities, although I wonder if we could outsource the administration of registered unions, maybe, to Minister Michael Wood’s office, just specifically—just give him that delegated authority.

But that’s not the subject of this bill. Now, what I’d like to ask is: when we’re looking at regulations relating to levies, Minister, and we consider new section 405(3)(b), it says, “the costs of collecting the levy money.” Now, in business terms, the costs of collection are known as overheads, Minister—overheads. What we know about this Government is that the tax take has increased by about 40 percent under this Government, but Kiwis who expect Government to deliver services haven’t necessarily seen a 40 percent increase in the delivery of State services and wonderful things as a result. In fact, what was interesting at the Building Nations conference yesterday, Minister, we learnt—and, in fact, the transport Minister might have been there—

CHAIRPERSON (Greg O’Connor): Mr Court, instead of narrowing down to the bill, you are now expanding. So—

I will narrow it down—I’ll narrow it down.

CHAIRPERSON (Greg O’Connor): The bill, please.

So, in terms of the cost of collecting money, and when we think about the role of the State—collecting money, spending money—what we heard yesterday was that in one part of Government, they’re spending 30 percent more, but 5 percent less infrastructure is being delivered.

So the ACT Party has a concern: when it comes to the overheads—you know, what the costs are to operate these registers—what on earth are we to make of this fact that there’s no system set out here. There’s no schedule that says on what basis are these costs to be derived, what’s the overhead currently, how many staff are tasked with delivering these services, and how are they accounting for their time. And that’s potentially something you can ask the officials here in the Chamber with you, Minister, because, at select committee, when I was deputising for our permanent member, Damien Smith, who sits on the Finance and Expenditure Committee, I asked the officials, “Do you do time sheets? Do you allocate time spent on these different registers via a time sheet so that you can correctly account for the time?” And we didn’t get a clear answer, Minister.

So what I’d like to know is: how are these costs of collection to be determined, Minister? Would you please give us some insights into that.

Look, the general principle here is that where the effort is going to administration of the overall register, to keep it functioning to support all of the different registers contained therein, the 16 that are active, the others—the member cited 21 at the start of one of his contributions. That counts the inactive registers, the legacy ones, that are on the system. Where the effort goes to maintaining the system as a whole, that’s something that can be levied for; where it’s a particular service that is being provided, that is where a fee can get charged—that’s the principle that’s in operation.

I move, That the question be now put.

💬 Simon Court: Oh, Mr Chair. I’ve got a couple more questions, if that’s OK.

Simon Court—just a simple call will be sufficient.

Thank you, Mr Chair. If we look, say, for example, at the Charitable Trusts Register, we know there’s a whole lot of very simple charitable trusts that deliver wonderful things like Surf Life Saving. And then there’s some very unusual ones. It must be quite difficult to administer, Minister. I’m thinking about trusts that purport to be doing things for charitable purposes and, in fact, have gone to court to demonstrate that. I’m thinking of organisations whose members like to glue themselves to the road, like Greenpeace. I mean, it must be quite difficult to work out how to administer a charitable trust and hold them to account when it appear that they’re primarily advocating for political reasons and in order to force New Zealanders to stop driving, for example.

I’m wondering about the costs of administering the Charitable Trusts Register, when you’d have to spend all of this time and effort working out whether Greenpeace, for example, are really a charity or if they’re just having a loan of the Government departments’ goodwill and the people of New Zealand’s goodwill, with the way they wander around busy CBDs with clipboards trying to convince people that, if they sign up, they’ll save a whale or a polar bear.

There must be quite a wide range of time and cost that’s put in to administering different individual charities, for example; building societies; and all of these other organisations that are registered on this Companies Register. It’s not clear, Minister, and it wasn’t clear when the officials came to the committee, how they allocate their time, whether they have a basic system—like, I don’t know, if this is something Government uses, like Oracle or SAP or an Excel spreadsheet even—to determine how they allocate their time from their general overhead to the activities that are required to administer the register.

While the ACT Party supports the bill, I’m starting to feel queasy, and it’s not just because of the unusual meal that I accidentally ate at Coppers tonight, which I think was vegetarian, but I wasn’t sure until it was too late. It’s because we really don’t have clarity, Minister.

Then, I just want to come down to this thing. If we look down to new section 405(5)(k) and (l): “(5) The regulations may— … (k) specify penalty payments for the late payment of a levy.” We expect the Government to be diligent in the way it collects money, but I wonder if the penalty payments would be any different, say, for a charity like Greenpeace or a union which donates to the Labour Party. Would the penalty regime be any different for a Surf Life Saving club or one of those organisations that is quasi-religious but largely a political advocacy organisation? A number of those have also lost their charitable status recently. How will the penalty regime be determined?

The Minister is asking the House and the people of New Zealand to put an awful lot of trust in officials. But, again, in the ACT Party, we would like to think that the ministry of M, Bs, Is, and Es actually knows how to operate business systems. They were, after all, set up by that doyen, that grand lord of business Steven Joyce, who set up this superministry—the Ministry of Business, Innovation and Employment (MBIE)—on the basis that they would know how to run business on behalf of the Government and administer it better. Potentially, under this Government’s governance, the functions of MBIE’s operations haven’t been subject to the same rigorous tests as they would be under, say, a regime which had a whole lot more ACT MPs in a Government. For those of us who’ve run businesses, who’ve actually filled out time sheets and had to report on profit and loss every month, this is important to us. I’d appreciate you describing how this is intended to go, Minister.

I move, That the question be now put.

Motion agreed to.

The question is that the Minister’s amendment to Part 1 set out on Supplementary Order Paper 308 be agreed to.