Taxation (Annual Rates, Venture Capital and Miscellaneous Provisions) Bill

Part 3 is all to do with amendments intended to improve the working of the Inland Revenue Department and to make it more friendly to taxpayers. But can I just point out—[Interruption] Yes, but even with advertisements like those stating the Inland Revenue Department is here to help, I am afraid there is still a lot of scepticism in the minds of the public. For example, one of the large number of amendments in this legislation is to do with how the department could improve the dispute resolution procedure, so I want to demonstrate to my colleagues in the Chamber how successful that attempt is. Twelve submissions were made to the Finance and Expenditure Committee on the so-called improvement of the dispute resolution procedure. Five submissions supported the improvement but considered the amendment did not go far enough, and five noted that the amendment did not address taxpayers’ concerns and that the proposals were weighted heavily in favour of the Inland Revenue Department, rather than taxpayers. I think that clearly demonstrates that the majority of submitters, comprising taxation consultants and large accounting firms, still believe that this is very much one-sided legislation. The Inland Revenue Department, for example, has introduced time frames as to when taxpayers can dispute how much GST they have to pay, if they need to. Four years or 2 years is the time limit for taxpayers, yet no time limit is imposed on the Inland Revenue Department.

I will take the opportunity, as Rod Donald has said, of the “real Minister” being in the chair to raise an issue about how taxpayers perceive themselves as being helpless when dealing with the Inland Revenue Department. A constituent wrote to me about an issue to do with a child support payment. Through mediation, he and his ex-wife came to the arrangement that for 30 percent of the time that taxpayer would look after the children. So over 120 days of the year the children would spend time with their father and over another 200-and-something days they would spend time with their mother. My constituent was very upset though, because the Inland Revenue Department adopted the stance that unless parents spend 40 percent of the time with their children, they cannot qualify for what the department calls shared custody. I think that that father had a point when he said that, in effect, he is paying for 400-odd days of child support for his children.

Then he looked through the Inland Revenue Department website, and first of all—

Hon Dr Michael Cullen: 400 days in a year?

PANSY WONG: Because he still paid child support when the children were with him—right? For 120 days a year he looked after his children, yet he still paid 100 percent of the child support. So it was almost as though he were paying for more than 365 days. I raised that case with the commissioner, who said that, yes, the department has to draw a line in the sand somewhere, and that 40 percent sounded like a good line to draw. That is such an arbitrary rule. On the Inland Revenue Department website there is once again a message that the department is friendly, and that all people have to do is to write to the commissioner. But when my constituent wrote to the department, the standard answer was that it did have that 40 percent rule.

In that particular case the father was, through mediation, only allowed to spend 30 percent of his time with his children, so should that not be taken into account? How friendly is the department? I do not know whether there is a process whereby that very frustrated person can bring his case. I raise that matter because it does impact on the Inland Revenue Department’s working. Today we looked at the financial review of the department. We saw that child support payments of over $840,000,000 were outstanding, and more than half of that was from penalties. I accept that some people will not pay, and they should rightly have penalties imposed on them. But maybe some taxpayers simply find the system so unfair that they refuse to pay.

I raised with the Minister, in regard to clause 113, whether the problems that we have been hearing about recently, with regard to Mr Tamihere, were wider than we previously thought. This clause is in regard to the employer and PAYE intermediaries failing to make tax deductions. Is this a wider problem than we had previously thought? Alternatively, does this mean that the Government actually knew about the Waipareira Trust situation and was changing the law, but had not got around to telling us about it?

Brian Connell: Retrospective!

Hon RICHARD PREBBLE: Retrospective legislation. It does seem to me that—

Dr the Hon Lockwood Smith: We have seen it before.

Hon RICHARD PREBBLE: We have seen it before, and I want to know from the Government what it thinks about this tax situation. Indeed, I have not actually heard from Dr Cullen with regard to that particular case. Is it typical? If it is not—

Dr the Hon Lockwood Smith: They supported forging paintings, so I guess dodging tax is part of it.

Hon RICHARD PREBBLE: I think the member is being too harsh. It appears to me the Government thinks that employers should pay PAYE. Now that it understands the situation of the Waipareira Trust, has it changed its mind? If Government members think that it is a serious problem, how do they feel about having a member of their caucus who has not paid tax? Perhaps he has not paid it, perhaps it was his employer who had not paid it. How do those members feel about people who knew that their employer had not paid? This is a question we would like to know the answer to. Here we are being asked to change the law with regard to PAYE deductions, and the most famous case that we know of is the case of their colleague the honourable John Tamihere—I presume he is still honourable; maybe he is not, maybe he is now Mr Tamihere; anyway, all members are honourable members.

What does the member think about that situation? Is that the sort of situation that he was concerned about? Is the John Tamihere situation common, or is it uncommon? What does he think the moral position should be? How does he feel about having a caucus member, who apparently is going to be a candidate for this Government in the next election, who gets up in this House to say: “Even though no tax was paid, I am blameless.”? Does the member accept that? Does he think that an employee who knew that no tax had been paid is blameless? Should he have advised the Inland Revenue Department? Should he have taken steps to advise it? What advice does he give to other John Tamiheres out in the community who may discover that their employers have not paid PAYE? Should they just sit back like his colleague did and hope that no one ever finds out, or ought they to draw it to the attention of the authorities?

Here we are, as members of Parliament, being asked at 9.25 p.m. to change the law with regard to employer or PAYE intermediaries failing to make tax deductions, so presumably he thinks it is important enough to change the law. Does he think it is important enough to give us his opinion on the matter? What sort of example does he think the Labour Government is giving to employers and employees when it has in its bosom a member of Parliament who did not pay the tax, knew that his employer had not paid it, and every one of those members today clapped that member, even though they knew he had not paid his tax. What sort of standard is this Labour Government trying to set?

Hon Dr Michael Cullen: What about a false declaration on a marital settlement?

Hon RICHARD PREBBLE: Oh, I think that would be pretty shocking, too. Is the member going to tell us what his settlement was? I have no idea. What I do know is that a false declaration on an electoral return is a shocking matter. When it is fraudulent, as the one from Mr Tamihere was, from a proven forger, I say that it is a serious matter. It seems to me—I do not know—that birds of a feather flock together. Here is a party that clapped a member who said that there was nothing wrong with putting in a forged return.

Only a couple of points have been made. Ms Wong decided to refer to the Child Support Act. This bill actually amends the Tax Administration Act, and the question she raised should have been raised in a different debate. In respect of the point made by Mr Prebble—I think that is his name—clause 111 simply corrects a reference error in the Income Tax Act. I would point out that Mr Tamihere has made it clear that he did not know that tax was not paid—nor does any other member in this House—

Dr the Hon Lockwood Smith: What kind of fool does he think he is?

Hon Dr MICHAEL CULLEN: Not as big a fool as Dr Lockwood Smith—that is certainly true! Not as big a fool as that member has proved to be throughout his career! I invite that member to explain to the House how he became a multimillionaire, having been an MP for most of his life.

I want to speak to Part 3, which amends the Tax Administration Act, because I want to pick up from where the Hon Richard Prebble left off. I am not yet convinced that there is nothing in this bill designed to get John Tamihere off the hook for cheating on tax. We know this Government. When Harry Duynhoven tried to cheat on citizenship, the Government changed the law. We know that the Prime Minister forges paintings, and thinks that is acceptable. What kind of mischief is this Government prepared to get up to, to change the law to help John Tamihere who cheats on tax?

Let us have a look at Part 3. Let us have a look at the clauses here. Taxpayer assessment—[Interruption] Listen to that member! She should think a bit before she gets into that. Let us look at clause 92. [Interruption]

The CHAIRPERSON (Hon Clem Simich): I ask the member to apologise for that, please.

Hon Annette King: Apologise for what?

The CHAIRPERSON (Hon Clem Simich): Apologise for addressing the Chair in that way.

Hon Annette King: I apologise. I raise a point of order, Mr Chairperson. I have been sitting here for the last 10 minutes and we have had a debate that has nothing to do with this bill. It is a continuation of the Wednesday debate, and no action has been taken to stop it.

The CHAIRPERSON (Hon Clem Simich): I will decide what is relevant and what is not. Dr Lockwood Smith was coming to the bill. It was not easy for him, because of the noise from the Government side, and I would ask members, if they want to carry on in that way, to take a call, but not to do it again from a seated position.

Dr the Hon LOCKWOOD SMITH: They are all huddled around because they know they risk a by-election, because they know a resignation from Cabinet is not where it stops. They know the Serious Fraud Office will have John Tamihere out, and they are worried about a by-election.

I want to come back to these clauses. Let us have a look at clause 92, “Taxpayer assessment”. Is the Government going to change the law to remove the liability on taxpayers to be honest about the taxes they have to pay? Let us have a look at what they say under clause 92. Will the Government change the law to let John Tamihere off for not being honest about the tax he had to pay? I have to be fair, as I look at clause 92(4). Whatever changes the Government is making are to apply from 2004-05 onwards, so it appears not to be retrospective to let John Tamihere off the hook. That is clause 92.

Let me then go to clause 105, “Late filing penalties”, and clause 106, “Tax shortfalls”. Is this Government up to sneaky stuff here to get John Tamihere off the hook for failing to pay his taxes? I look at clause 106, and it appears to me—well let us look at late filing penalties because it seems there could be some late filing penalties, if nothing more, when one dodges one’s tax and does not pay it. It seems that that applies to annual imputations, and it would not apply in the other case.

Again, Clause 106, “Tax shortfalls”, appears to relate to matters after 1 April 2005. I accept that that clause is not designed to get John Tamihere off the hook. [Interruption] He is still a member of Parliament. People who cheat and do not pay their tax do not deserve to be members of this Parliament.

We go then to clause 116, which is about write-offs by the commissioner. Is the commissioner going to write off what John Tamihere owes? He owes a bit of money. He received $200,000 as his golden koha. Even if we do not gross it up, there is $80,000 in that. But gross it up and it is a lot more that he owes. Is the commissioner going to write it off? No, I have to confess that clause 116(2) states that this will apply “after the date on which this Act receives the Royal assent.” I accept that clause 116 looks OK.

I turn to clause 118, “Remission for reasonable cause”. If the Prime Minister says we have to let John Tamihere off the hook, is that reasonable cause? Look at clause 118, “Remission for reasonable cause”, carefully. It states: “Section 183A(1) is replaced by the following: … (f) Maori authority distribution penalty tax … ”. Is that a sneaky one, designed to get John Tamihere off the hook? I do not know.

There have been some interesting contributions. Like the other speakers I am pleased that sitting in the chair is the Minister who might have some relevance to the bill, Michael Cullen. If there are some questions we might expect some answers. There has been no evidence so far that that is likely to happen, but we might expect some answers.

I note with a great deal of interest that this legislation has suddenly appeared on the scene, as a result of some recent political events. Given some of the assertions that have been made by senior members in the Chamber tonight, will the Minister take a call and absolutely deny that there is anything in this part that in any way would help to mitigate the problem that John Tamihere finds himself in? The Minister could easily rule that out. He could easily take a call and say: “Look, you are all wrong. There is nothing in here that in any way will influence the outcome as far as John Tamihere is concerned.” Have we had a single peep on that? Not a word!

I say to the Minister that we are looking yet again at another 212 pages of regulation on what the Government should or should not do in our lives. Can I also say that when we wander around the galleries in this place we see huge rows of books of legislation. I asked the Hon Richard Prebble how many volumes of Hansard he has acquired in his time in Parliament. Just think about that—a huge room full of books. The only place I have been recently where I have seen that number of books, or a number of pieces of information that would match what we see in this place, is my accountant’s office. Members should go to modern accountants’ offices today and have a look at the amount of legislative requirements they have to read through, have a look at the amount of tax law they have on their premises at any one time—that is even allowing for digital information; for computers, which can store massive amounts of information—and ask them why they go to the expense of having all that information at their fingertips.

I ask the Minister in the chair, the Hon Michael Cullen, the Minister of Finance, how this bill will help to achieve the goals set down by his Prime Minister in her Address in Reply, when she said that this Government is pro-growth. How will it help? That is an easy question for the Minister to answer. He might be able to find some obscure clause in Part 3 that may reduce costs. I do not know where it is; I cannot see where it is. But there is a simple question for the Minister: why do we have to have this level of bureaucratic nonsense dished out over and over again, when a flatter tax rate would deal with most of the problems he is trying to overcome in this bill? Why do we have to have so many layers of bureaucratic nonsense when it comes to taxation?

I have a simple question for the Minister, which takes a yes or no answer: has he ever paid PAYE on behalf of an employee, in his own right as a businessman?

Hon Dr Michael Cullen: Yes.

SHANE ARDERN: The Minister says yes. I am heartened by that. It must have been a mighty long time ago; I know he has been in this place for a long time. I am heartened by that, because if I had had to guess I would have said no, but maybe the Minister can clear that up. There are a large number of us in this Chamber who do pay PAYE on behalf of our employees on a regular basis, like every month. If we do not, if we get it wrong, somewhere in this part there will be a heavy hammer that comes down on us with 20-plus percent penalties, which compound from the point when we do not get it right.

I ask the Minister how that helps simplify the tax system. My colleague who was on the Finance and Expenditure Committee said that the debate that took place around Part 3 was about trying to simplify the system. I cannot for the life of me see how Part 3 will simplify it. It certainly does not simplify the PAYE system. I know that my colleague the Hon Lockwood Smith certainly pays PAYE on behalf of his employees on a monthly basis and knows what a convoluted, mind-boggling process that is. Let me tell the Minister that even if one does not employ somebody for a couple of months or 3 months, one still has to fill in a PAYE IR66 form every month.

I move, That the question be now put.

There are three great lies in the world. One of them is: “I am here from head office—trust me.” The second is: “I’m from the IRD, I’m here to help—trust me.” The third one is: “I didn’t know I had to pay tax.” In fact, we might be able to add a fourth one: “I didn’t know it was a golden handshake.”—no, it would be: “I didn’t take it.” Have members tried to deal with the Inland Revenue Department when it has come to “assist” them? Do members know what the experience is like? The department turns one over every which way because it has a view that one has done something wrong. That is the position the department starts from. Anyone who suggests that this legislation will try to make the department more user-friendly is engaged in a giant misconception.

But giant misconceptions come easily to this Government, do they not? Clause 105 deals with late-filing penalties and clause 106 deals with tax shortfalls. I have heard a number of arguments mounted that those measures might be retrospective legislation to try to get John Tamihere off the hook. I have to say to those members that they have got it all wrong. They surely were not designed with that in mind, because John Tamihere simply does not pay tax. Therefore, there are no tax shortfalls. It does not apply to him. The Government is saying to New Zealanders that that is OK.

Have members ever been in the position where the Inland Revenue Department says they owe it money? If a person says in return: “Well, actually, no I don’t. You owe me money, and by the way I want a 20 percent tax penalty on top of that.”, does the department do that? Absolutely not! [Interruption] There are a few members calling out over there. I do not know which ones they are, but we could pick any one of them, and they would be all the evidence we would want to see that the moratorium on GMOs should never have been lifted.

Let us turn to clauses 112 through to 114. Those people who believe that acting as the Government’s tax collector, in terms of PAYE, is a good idea should put up their hands. Not even a Government member put a hand up. Not even the Minister put his hand up. This is a person who maintains that he has been in a position of collecting PAYE before, and he simply has not done it; he is intellectually dishonest—and that is being very kind to him. Those people who maintain that the collection of PAYE actually helps the productive sector have got rocks in their head. Actually, that tells us that those members have never engaged in earning a fair buck for this country in their lives. They have never been part of the productive sector. They have been on the front teat all their lives, and they want the hard workers in this country to continue to contribute on their behalf.

It is compliance costs and red tape costs such as those that this hugely complex piece of legislation is reinforcing that are driving business people in this country to distraction. The cost is hard to measure, but when one is spending 1 or 2 days a month acting as the Government’s tax collector one knows that there is a real cost to one’s business. It might be hard to quantify, but there is a real cost to one’s business.

The argument that has been proposed that with this bill the dispute resolution procedures are somewhat streamlined is another one of the fallacies that the Minister in the chair is trying to peddle. Anyone who has engaged with those procedures knows that that is a nonsense.

I move, That the question be now put.

Let me put my question to the Minister of Revenue in terms that I think he should think very seriously about. The question that was asked by myself, and then by Dr the Hon Lockwood Smith, was whether these clauses actually—from the facts that we have seen in the newspapers and from the facts that have been given in this House—result in a change in the tax position of the Waipareira Trust, and make a change to the tax position of one of his colleagues, Mr John Tamihere.

Hon Dr Michael Cullen: No.

Hon RICHARD PREBBLE: The Minister says “No”, and I just invite him to take another look. We have clause 105, “Late filing penalties”. That would appear to me to be applicable. We have clause 106, “Tax shortfalls”. In clause 108 we have section 141FB, “Reduction of penalties for previous behaviour”. I think that might actually apply in this case. Then we go on to the clauses that I drew to his attention before: clause 113, “Employer or PAYE intermediaries failing to make tax deductions”, and clause 114, “Unpaid tax deductions, etc., to constitute charge on employer’s or PAYE intermediary’s property”. Then we get to clause 116, “Write-off of tax by Commissioner”, which Dr Lockwood Smith thought was not retrospective, but I think that when one reads it ones finds that it does not say that. What subclause (2) actually states is “Subsection (1) applies to tax that is written off on and after the date on which this Act receives the Royal assent.” So it could well be that the Commissioner of Inland Revenue is having to look at the facts we are seeing, and deciding whether to write off taxes.

Then we come clause 117, which has the interesting section 181D, “Remission of late payment penalties and interest incurred due to obligation by Maori authority to pay further income tax”. Well, I am not sure, but maybe the Minister knows whether the Waipareira Trust is a Māori authority. I think it is. It would appear to me that that new section might well apply. Then we get to clause 118, “Remission for reasonable cause”, which states: “Section 183A(1) is replaced by the following: (1) This section applies to—(a) a late filing penalty: (b) a non-electronic filing penalty: (c) a late payment penalty:”. It appears to me that they all might possibly apply.

The point I am making to the Minister is this. He should understand the position he finds himself in. Here he is, a Minister of Finance, saying to the country that the Government is levying tax, and that every citizen, company, trust, and Māori authority has a duty to pay tax, yet we all witnessed earlier today his party applauding a person who, apparently, now does concede that no tax was paid. The Minister said he believes Mr Tamihere. Did he believe Mr Tamihere earlier when he failed to tell the whole country that he had, in fact, received a golden handshake? Does not the Minister’s confidence at some point get shaken? Is not a more serious point that the confidence of this House and the country in the tax legislation that we are being asked to pass is questioned? When members ask whether it could be that the tax legislation we are passing today affects a member of Parliament who has had to resign as Minister, and who has a peculiar tax position—I hope it is peculiar—in that he has not paid it and nor has his employer, surely the Minister can see the impossibility of the position he is in. Of course, we all know that he thinks that, too, but a thing called the foreshore and seabed legislation means that he is prepared to embrace anyone, even a person who has failed to pay his tax.

I move, That the question be now put.