Business Payment Practices Bill

Members, we come now to Part 3. This is the debate on clauses 27 to 45, “Compliance, enforcement, and offences.” The question is that Part 3 stand part.

Thank you, Madam Chair. I note the Supplementary Order Paper (SOP) of the Minister extended the date for “Review of compliance notice” in clause 29(2A), “The application for review must be received by the registrar no later than 10”—and the new insertion is—“working days”, effectively, two weeks, “after the date on which the notice was served.”

So, on one side of the coin, the Minister has chosen to increase the time period for an application, but on the second, in clause 30A, her SOP reduces the appeal against review decisions to be lodged at—what it states under 30A(2), “The appeal must be lodged within”—and this what it says, existing terminology—“14 days after the date on which the notice referred to in section 30(4) was served” and has reduced that to 10; not 10 working days, just down to 10.

So I suppose my first question is—I can understand the 10 working days, because that is a useful metric. Why has the Minister chosen to reduce from 14 days to 10 days, and, even if she were to do that, why haven’t we used the term working days? Because all that’s happened is that we’ve reduced it quite significantly in terms of days. That means a week and a half, and if there’s a long weekend in between, that becomes impractical, and I would have thought that that was actually a bit of an issue.

Thank you, Madam Chair. A question, now, on clause 25, “Registrar may monitor and investigate compliance with Act”, and reading through this one does get the concern that it is somewhat arbitrary, but, more importantly, is going to take up a lot of resources—not only of the registrars and the person that the agency will have to employ to fulfil those requirements or those duties that the registrar has power over but also for the businesses to then make sure that they are fulfilling the tasks that are set on to them.

So if you look at clause 25(1), you see that the registrar has the power to “(a) to ascertain whether information provided to the Registrar is correct: (b) ascertain whether a person is complying, or has complied, with this Act:” and then to “(c) ascertain whether the Registrar should exercise any of the Registrar’s powers under this Act:”, and “(d) to detect offences against this Act.” The powers there—there are quite a lot of them that are listed, you know: to require a person, to confirm information is correct. So presumably that means the registrar will have to employ a set of people. They will then go out to these large companies and say, “Can you please confirm this information is correct?” and then require that company to produce documents which will then get sent to the registrar. Just try and think through how you would operationalise this. You know, then they’ve got to go away and inspect them all and review them and then give that feedback back. And, you know, they’ll take copies of the documents, they’ve got the ability to take possession and retain them.

What I can see here, and I’m wanting to get a bit of feedback from the Minister or ministry officials on this, is: what is the cost imposition on this? Not only to the registrar—how big of a workload do they see them taking on? Has there been any study done on what sort of burden this would place on the registrar or any consideration to the time and money loss to businesses who have to fulfil all of these requirements: answering these inquiries, producing the documents, sending the documents, answering queries, going backwards and forwards? What sort of analysis has been done around how often the registrar will require information to be collected or reviewed or copies sent in and the general cost that this could have, and also the consideration around lost productivity as a result of filling out information for a registrar. Thank you, Minister. Thank you, officials.

Well, I thought I might talk on that excellent Supplementary Order Paper (SOP) 365, which happens to be in my name! I can’t claim to be perfect because I’ve got to acknowledge the help of the House in preparing this. But in the spirit of trying to improve this bill—the Opposition is committed to this bill, albeit that we don’t agree with the bill—what my SOP does seek to do is to make sure that if this bill is pushed through, and no doubt it will be by Labour as it commands a majority in the House—

Hon Scott Simpson: At the moment.

ANDREW BAYLY: “At the moment”, as my good colleague says.

CHAIRPERSON (Hon Jacqui Dean): Order! The member is speaking to Part 4 of the bill.

ANDREW BAYLY: Yeah, I thought we’re on new clause 48A.

CHAIRPERSON (Hon Jacqui Dean): Can I ask the member to come back to Part 3?

ANDREW BAYLY: Oh, that’s right. I see we’re one over. OK.

Hon Scott Simpson: He’s getting ahead of us.

ANDREW BAYLY: Slightly ahead. I thought I was very careful about that but I wasn’t.

So what I’d like to talk about now is the pecuniary penalty for contraventions of compliance notice or involvement in a contravention. In clause 39, there’s a whole stack of contraventions and why a person might be deemed to be subject to pecuniary penalty. For instance, if they have “(2)(a) aided, abetted, counselled, or procured any other person to contravene the requirement; or (b) induced any other person, whether by threats or promises or otherwise … or (c) been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention”—gee this is a long list—“(d) conspired with any other person to contravene”—

Barbara Kuriger: Don’t run out of breath!

ANDREW BAYLY: Yes. Then, Holy Toledo! What happens is we make our six-monthly report and we realise that we’ve made a mistake. Under subclause (3)(a) in the case of an individual, we’re subject to a $50,000 fine or, in any other case, $500,000 for each act or omission.

So one of the things about this is, first of all, there was some debate about the level of these penalties, because it does introduce the issue of proportionality. If an entity ends up saying that they think that they meet their payments at 49 days, as opposed to the reality being 50, then they’re potentially up for $500,000. So why does the Minister believe that these fines are proportionate? Because inevitably we find in legislation going through we see the same sort of figures being driven through; albeit for differing types of severity. It’s fine that the Minister might say, “Well, $500,000 is the maximum.” Well, actually, it is the maximum, but it’s a high bar to start to work back towards what the ultimate fine might be for an entity, or even $50,000 for an individual.

I suppose it gives rise to the issue around, given the level of the severity of these payments and whether in fact it actually has caused any loss to a particular entity, because if it hasn’t actually resulted in loss, i.e., a firm has entered into an agreement with a company because it thought it would pay within a certain prescribed period of time and it hasn’t made that payment within one day of it or one day extra, has a loss actually occurred? I would have thought that was a pretty important issue in determining what a proportionate fine is for any person who contravenes this requirement to publish or provide the data.

So maybe we’ll just start off with that point and then we can come back to a wider issue as well.

Thank you, Madam Chair. So, in terms of compliance, the bill’s penalties in Part 3 are really consistent with those used in other regulatory regimes and were vetted by the Ministry of Justice’s penalties vetting team, in fact, for that very purpose. The infringement penalties are not large when taken into consideration that they would apply to some of New Zealand’s largest companies. And I have had several people ask me what the compliance approach will be.

I can’t speak in terms of hypothetical situations, but I can say that what the Ministry of Business, Innovation and Employment has advised me is that the primary focus in this area will always be on communication and also on education, and there won’t be a compliance holiday as such. But equally we can expect the registrar to show a level of good faith and also common sense to see how these compliance tools would be used. In relation to a pecuniary penalty, I think that it’s really important to note that it only follows a compliance notice. So it’s the end of the line in terms of notifications and that level is obviously up to the court to do that.

The next point I’ll come to is I do note this is actually in the title and commencement clauses, but I will touch on it anyway because the question was raised in relation to the transitional period being extended from six to 10 months. So it was clear that the select committee wanted a six-month transitional period, but it was looking unlikely that the bill’s regulations would be gazetted immediately after the bill passes. Because it’s not possible to guarantee that, we believed it was the most prudent thing to do to extend that transitional period. And by doing that, it will ensure that the regulations are gazetted up to four months after the bill passes. But it also gives effect to the select committee’s intent that there would be that six-month implementation period. And so we’re not compromising that by the fact that the regulations have taken a slightly longer time.

So that point around the six to 10 months was raised in conjunction with another point, and I don’t quite see how they’re related but I will speak to them anyway. So it was the point of 14 calendar days and 10 working days, which is included in the Supplementary Order Paper. So what that does is it just standardises. So 14 calendar days are the same as 10 working days. By making them all the same, it removes confusion by having one term for both.

And the final point I’ll make was in relation to sort of compliance and extra work and that sort of being, I guess, non-productive and causing extra red tape. What I would say is that the more we move to an e-invoicing system in New Zealand, the more we get not only big businesses but small businesses using cloud services, using digitisation. We know that that in fact is a significant driver of increasing productivity in our economy. We know that the more that small businesses use those platforms, the more that they’re able to use those ways of digitising their finances. That, in fact, improves our productivity. And interestingly enough, it also frees them up to have a bit of better work life balance so that they know things are ticking over regularly. That’s definitely the reports we see back from businesses like MYOB, from Xero, that we’re wanting to drive a system where we can do all of these things in a digital platform format.

So I think that this bill incentivises businesses to be using this. I think also the other really important incentive that I haven’t mentioned—and while I touch on a few things more than once, I haven’t mentioned this—is that it will incentivise those big businesses to be proactive in paying. And that’s what we’re looking for. We’re wanting to drive that change so that if there is a bill that needs to be paid, it’s more likely to be done if it’s made public, knowing that that particular company is a good payer and they’ve got a good reputation and they can be proud of that reputation, and more people will want to do business with them if they have that reputation.

Lucky me. Thank you very much, Madam Chair. Thank you, Minister, I appreciate you taking a five-minute call there to run through the list of questions this side of the Chamber have been putting to you. That is definitely an improvement from what we saw earlier today, so it’s appreciated from our members.

You mentioned there around productivity and how the move to e-invoicing will improve productivity. Yeah, it absolutely will. That’s a really positive thing and a better work-life balance—absolutely a good thing. Just a quick question about that. Why would we then undermine those advances by burdening companies and officials or people who could be doing productive stuff in the economy? Why would we then burden them with a regime like this that gives them information that goes into a system that is out of date and probably won’t get used for the specific purposes that your side of the Chamber has been saying that this is why it’s such a fantastic thing to have? Thank you.

Yeah, thank you for the response, Minister. I’m reminded, when I heard those soothing words, that the Ministry of Business, Innovation and Employment will be supportive and do educational things. I’m reminded about when we did the health and safety reforms, and we had two key aspects in the health and safety reforms, which we worked closely with the then CEO about having both an educational aspect—and a big focus on that—and alongside that, the enforcement.

Of course, the preference was for as much educational focus as possible to support and encourage better health and safety practices across businesses. Now, four CEOs later, you could argue that we’ve ended up with an agency that seems overly fixated on prosecutions and is probably paying less attention to education, and that’s where I am concerned. Whilst it sounds all very nice that these fines and all that sort of stuff and the approach and that the ministry will be supportive; actually, in many years to come, that often is not the case. Some people forget and certainly don’t go back and listen to the debate or the speech by the Minister in the chair at the time.

So I suppose the issue with these fines and the compliance, the pecuniary penalties, has got to be read and understood in connection to clause 15, which I did highlight earlier on, which is saying that the regulations will specify at what point an error or omission has occurred and at which point a company or a CEO or an owner, whatever, has to come and say to the registrar, “Look, I made a mistake.” There’s an inevitable consequence of that, because that’s what clause 39 is about. If it’s deliberate or whatever—and that’s obviously an interpretation issue—and if there’s a different interpretation why the company actually ended up with an incorrect period than what they nominated in their return, then potentially they could be up for a $50,000 fine individually or $500,000 for the entity.

So one of the big concerns we’ve always had is about this reliance on regulations, because the Minister says it’s out for consultation. I know most of the business associations actually oppose this bill because they don’t think it’s necessary. So without the clarification of the regulations, but we know on the other side the hard coding around the pecuniary penalties, then there’s a real issue with that. What’s disappointing in the bill is there’s no graduation of different types of infringements that may lead to a penalty; it’s just hard coded, those amounts.

So what further assurance can the Minister give that the type of errors or omissions—whether genuine or not—covered in clause 15 are and not going to lead to the situation where an individual is up for a $50,000 fine or in fact a company or an entity is up for a $500,000 fine? Because those are not insubstantial amounts of money.

Progress to be reported.

House resumed.