Business Payment Practices Bill

Members, we come now to Part 5. This is a debate on clauses 49 to 52, “Amendments to other Acts”. The question is that Part 5 stand part.

Normally, the parts amending other Acts are reasonably perfunctory and belts and braces, but there is a particular clause in this part that troubles me greatly as a chartered accountant and a former Minister of Revenue, and that is clause 52, Schedule 7 amended, inserting new section 25B. This is an amendment to the Tax Administration Act. Now, the Tax Administration Act sets out the very strict requirements for the collection of revenue on behalf of the Crown, and the commissioner’s powers and obligations in respect of, among other things, confidentiality and sensitive information. As a lapsed accountant, I recall doing the tax returns, would you believe, for people who were on the wrong side of the law. It was pre - prostitution law reform, and I would do tax returns for people in that industry, and they were confident that they were able to fulfil their revenue obligations without anybody knowing the nature of their earnings and how they were gained.

Section 18 says that a revenue officer must keep confidential all sensitive revenue information, and must not disclose the information unless the disclosure is a permitted disclosure that meets the requirements of sections 18D to 18J, which are obviously then laid out. As a former Minister, not even the Minister gets to see that information. I remember asking for information as Minister of Immigration about non-payment of student loans for people who are overseas, and the Commissioner of Inland Revenue said, “Sorry Minister—can’t have it”. That obviously was because she was complying with the law.

So we now have this amendment which says it doesn’t matter about section 18 of the Tax Administration Act. Section 18 does not prevent the commissioner disclosing to the Registrar of Business Payment Practices information for the purposes of monitoring compliance with the requirements of the Business Payment Practices Act—this Act that we are passing. So for all of the things that we could provide in exception to section 18 of the Tax Administration Act, this, I would suggest, is well down the list of reasons why we should breach that important confidentiality obligation on the Commissioner of Inland Revenue.

So my questions are these: why do we need this power? What is the information that is being held by the IRD that is so important to the Registrar of Business Payment Practices that he or she would need to breach—well not breach, but, well, yeah, breach a longstanding convention on the sensitivity of revenue information? What is the sort of information that the registrar is seeking? Because clearly, the Ministry of Business, Innovation and Employment have asked for this clause to be put in. Is it about payment timeliness for tax obligations? Is it about whether somebody files and pays their GST on time, or their income tax or their PAYE? Is that appropriate in the circumstances, given the very strong convention that we have had over a long period of time of the confidentially of the very sensitive information that Inland Revenue holds?

Thank you, Madam Chair. To be clear: no one’s personal tax information is being shared. All that is happening is that Inland Revenue will help the Ministry for Business, Innovation and Employment (MBIE) to be able to identify which entities fall in scope of this regime. So these are New Zealand’s largest corporate entities. Disclosures about corporate revenue are not as sensitive as disclosures about individual taxpayers’ personal affairs, as the member referred to in his personal experience. Through working with Inland Revenue to identify which reporting entities are, in fact, in the scope of this regime, MBIE will be able to then notify them of their pending obligation to make disclosures. In essence, it’s to ensure that they are not unpleasantly surprised when the bill’s transitional period comes to an end.

So just to be clear: this clause is required to give IRD the authority they need to share that information.

I thank the Minister for that answer, which comforts me not one bit, because we are, remember, talking about organisations with quite high levels of turnover—$33 million, I think, at the start, and then it goes up even higher than that. All of those organisations will have tax agents, tax accountants, and lawyers who would be able to advise them on all of their obligations. But what we are talking about now is the breach of that strong convention under the Tax Administration Act that information be disclosed to a third party—the Minister says, to assist them in their obligations.

Well, they don’t get that sort of information on other issues—I’m talking about the Ministry of Business, Innovation and Employment here. They don’t get that information that revenue might hold for their compliance on other issues—number of staff, number of people who might be working under the table or on visa conditions that are different. All of these things could be information held by Inland Revenue, but, somehow, their turnover information—which is only one metric in the qualification under this bill—can be got from other sources. And the Minister says, “Well, we think we’re helping the business”; I think this reflects a lack of trust in businesses to understand and comply with the expectations under this bill, and that’s rather unfortunate.

But the most unfortunate thing about this clause is that it breaches that strong convention: Inland Revenue is a sealed unit for almost all pieces of information, and the idea that we would so flippantly breach that convention for this bill, I think, is a bit sad.

Thank you very much, Madam Chair. My question is in relation to clause 54 of Part 5 of the bill, and this clause is amending section 48 of the—

💬 Hon Michael Woodhouse: Financial Reporting Act?

—Financial Reporting Act—thank you—2013.

💬 Hon Michael Woodhouse: We put that in, don’t you know?

Yeah! Interestingly in regards to that. So my question in regards to this is that under the Financial Reporting Act, there is section 48(2), which requires that specific legislation—this clause is putting this, the Business Payment Practices Act, within that financial reporting legislation—then requires, under section 48(2) of that Act, that the first review of the numbers occur eight years after the bill is put into play. And then section 48(3) of that Act says: in every six years subsequent to that.

I guess my question to the Minister, in regards to the decision for this bill to be put under that, is: what is the rationale and specific points and reason why this bill is deemed to be appropriate to fall within that guise? I note that the questions that I raised around clause 47, in the prior section, in regards to the amount of infringement fees, went unanswered. But I guess maybe this is an opportunity. I was just doing a bit of the back-of-a-packet exercise and, God forbid, if inflation continues at 6 percent over the next eight years, $100 today, in eight years’ time, at 6 percent inflation, is $160. Just a little bit of—

💬 Hon Michael Woodhouse: Compounding, it would be even more.

Compounding interest there. I thought you’d appreciate that, the Hon Michael Woodhouse—a little bit of accountancy late in the day on a Wednesday. But, anyway, it’s quite a lot of money, quite a lot of growth. Eight years is a long time. A little bit of context on that clause would be appreciated, Minister.

The question is that the Minister’s amendment to Part 5 set out on Supplementary Order Paper 363 be agreed to.