Customs (Levies and Other Matters) Amendment Bill

Members, the House is in committee on the Customs (Levies and Other Matters) Amendment Bill. We now come to Part 1. Part 1 is the debate on clauses 3 to 11—“Customs and Excise Act 2018”. The question is that Part 1 stand part.

I just would like to take the opportunity to open the initial discussions and thank the members for their contributions in the second reading. It has been helpful to structure this discussion.

This bill is about making revenue collection on imported and exported goods fairer and more effective. It is creating a levy regime in place for recovering costs related to travellers—the border-processing levy is an example. This works well and we think we should do more.

We want a similar system for cost recovery around goods. A levy means that similar types of people, a category of payers, can pay the costs related to that service. It makes sense that, for example, those people shopping overseas, online, importing products should be paying for the costs associated with that, rather than that cost falling on all taxpayers.

The bill makes three key changes, which have been outlined: introducing a levy regime into customs legislation and providing an assurance that it is a levy regime and that the establishment of any levies would work through a process, which would require Cabinet approval and would definitely require consultation, so that it isn’t at the discretion of a Minister individually.

It clarifies that Customs or other agencies can collect, as has been outlined, the stewardship fees. This, again, is about creating some efficiencies to support their process, and, finally, as has been raised, the ability to recover GST on returned goods. At this stage, there has been no mechanism under which we can do that.

In summary, the bill is really about improving systems. I recognise the contributions that have been made in the second reading. I look forward to answering your questions on this bill.

Thank you for the opportunity—kia ora, Mr Chair—to, as the spokesperson for customs for the Labour Party, make a contribution in the committee of the whole House stage. The Customs (Levies and Other Matters) Amendment Bill is an omnibus bill that proposes to amend three different pieces of legislation: first, the Customs and Excise Act 2018; second, the Waste Minimisation Act of 2008; and, third, the Goods and Services Tax Act of 1985. The goal, as the Minister of Customs has set out, is for revenue collection at the border to become fairer and more effective.

Now, Labour has supported this bill at first reading as well as at second reading, and one of the reasons is that we are in support of the broader aim that the bill proposes, which is to modernise cost recovery and to enhance efficiency, including the measures to fund environmental programmes and to make GST rules fairer for our consumers. However, Minister, we have serious reservations about the sweeping new levy-making power, particularly in Part 1 of this bill, and the potential impact that that would have on—and our former Minister of Trade spoke about it earlier in his second reading speech—especially, our small and medium sized enterprises (SMEs) and our small businesses.

If we are to refer to new section 414A(2) in clause 6, which actually states that this bill will be able to relate to “goods management”, it actually includes these words. It says that in collecting the new levies, it will have—and it’s got it in brackets—“(without limitation) costs incurred”, and then it goes through and lists various other activities that it could actually levy in order to collect from small and medium sized enterprises. This is what we have major reservations about. One of the reasons why we have major reservations about this part of the bill is that the two words “(without limitation)” may sound like it’s kind of innocuous and it’s only two words, but it’s actually huge because it does not give any minimum or maximum limitations on the costs to our small businesses. At a time when Aotearoa New Zealand is going through and experiencing cost of living issues, we hear on the ground from many of our small businesses that they too are experiencing smaller margins and slimmer margins, and when they are feeling the effects of the cost of living as well, it is of concern.

The other concern that we have with this term of it being “(without limitation)” in terms of costs that could be incurred by a levy made by Order in Council is that you have the environment of a country like the United States charging tariffs which, in the past, were going to be at 10 percent but are now actually going to be at 15 percent, and, at that same time, our export and import businesses are going to be hit with yet another tax. It’s called a levy, but it is actually a tax, and—worse than that—as businesses, they won’t be able to actually forecast into the future what those costs are likely to be.

When you’re running a business and you have to actually look at your bottom line and you have very slim margins, and you get a possible levy where, in the legislation itself, there is no limit, it is actually a cost that says that it is without limitations. It will be charged on the importation and exportation of goods. It will be charged on shipments, on transshipments, and on the transportation of goods, and so this could even be the transportation of goods, because it doesn’t say that it’s only the domestic transportation of goods. It could be charged on the transportation of goods here, after they actually arrive in the country.

I have introduced an amendment that says that, in new section 414A(2) in clause 6, we should delete those two words “(without limitation)”. We should delete it. Why do we even have such expansive powers, and it’s actually given to the executive. The Minister of Customs, via Order in Council through Cabinet, can decide what this levy charge could be. It is, effectively, a broad taxation power delegated to the executive, via the Minister of Customs, that is creating a new charge with no specific dollar cap, and it is narrow in terms of its scope in the primary law.

The other concern that we have is the fact that this is actually not a confirmable instrument, and so the Minister can, by Order in Council, come up with a levy charge, and who knows how big this levy charge is going to be? But it’s actually not going to even come back to the House for us, as members of Parliament, to have a say on as to whether or not this levy is reasonable.

In fact, in one of the clauses here, it says this. The only safeguard that I can see—and the Minister can correct me if I’m wrong—in this bill is that the Minister can go and consult, but there is no definition about who the Minister should go and consult with and what is reasonable, and also it is up to the Minister, after she consults, as to whether or not the levy that she proposes is reasonable. It is really all up to her, and all of this is because it is going to be done by executive Order in Council and, as I say, it doesn’t even come back to the House of Parliament to confirm whether or not it is a reasonable levy. This is something that we should definitely interrogate further because this levy could apply to virtually any category of goods and it could apply to any transaction whatsoever, and there is no limitation on how much the cost is going to be.

My question to the Minister: why are such broad powers needed? Clause 6 hands the executive the sweeping ability to impose these levies without limitation. Would the Minister consider, for example, limiting the scope of the levy in law so that parliamentarians can set the outer boundaries on these charges?

Another question: how will the Minister ensure that Parliament retains oversight of this new taxation power, and, specifically, why are the levy orders not made confirmable instruments, requiring a House vote? Does the Minister agree that delegating taxation to regulations is a significant step that should involve greater democratic control?

Another question: who will be consulted before a levy is imposed? The bill requires no consultation, but there should be a commitment specifically to include SME representatives. The Minister should consult Māori and should consult with ethnic businesses, Pacific business networks, consumer advocates, and unions, particularly where it impacts on workers. How will the Minister determine what constitutes reasonable consultation, and will the consultation feedback be made public?

Cost recovery is something that when we are in Government, we do. However, cost recovery should be reasonable. Our industries and our small businesses should have a say about what is a reasonable levy. Having a levy-making power like this, which has no limits whatsoever, is outrageous. It is unreasonable and, can I say, it is not very democratic, either, to have an instrument that doesn’t come back to the House to be confirmed by members of Parliament.

I think it’s probably relevant at this point—sorry, I’ve got a cough, so I’ve got a cough drop in my mouth. As the Hon Jenny Salesa is a former Minister of Customs, I had assumed there was some sort of level of understanding, but if you read the legislation as it’s written, the “without limitation” is referring to the list of functions, not to the levy itself.

If we record what is said in the position, it’s new section 414A, “under subsection (3), to pay a levy to the chief executive in relation to the costs incurred by Customs in, or for the purpose of, performing a function under this Act, or any other legislation, relating to goods management, including (without limitation) costs incurred relating to”. The “without limitation” relates to the list of activities, and so it is talking about not limiting the activities listed. it’s not about the levy fee, it’s not about the levy; it’s about the list of activities—so it is not about that function.

I think it’s important to differentiate that a levy is not a tax, as you’ll be aware from the border-processing levy. It is a levy that is established on a cost recovery basis. As you know, Customs is operated on an activity-based costing model. Under the Estimates process, it is very clear that Customs cannot gain revenue from something. This is about recovering the cost from where the cost is incurred, and this is what we’re talking about here. A levy recovers the cost from payers who are provided a service or who create the risk of the need or activity. When we talk about fairness, a tax is applied to everybody; a levy is applied to someone who is creating that activity requirement. That is what we’re talking about.

This legislation is creating the mechanism under which we can establish levies. As you will have been through the process yourself around the border-processing levy, it is a negotiated, consulted process that goes through to ensure that those that are generating that cost are consulted in this process. There is a lot of transparency, a lot of engagement with those sectors. As you’ll be fully aware, Customs rely on this building a relationship with—we want to encourage trade, we want to encourage travel. Customs is very focused on ensuring that we optimise the opportunities, too.

I think that’s the key point here: we are creating a mechanism under which levies can be established. Levies are a much more relevant process, a much fairer process, because it is not applying a cost to everybody; it is applying a cost to those that generate that cost. I hope that answers the question.

Thank you, Mr Chair. I just want to make a quick contribution to ask a question around a point that the Hon Damien O’Connor raised in a speech in a previous section of the debate. It was the question around how a levy order would be applied to prohibited or prescribed goods. Is there precedent for that in legislation? Definitionally, if something is illegal, how could that be taxed? I’m curious to see what the nexus is between taxing something that’s not technically legal.

Yes, I thank the member for the question. I think I can clarify. Again, this is not about a tax; it’s about a levy. If we’re talking about prohibited goods and if there’s a cost incurred to respond to those prohibited goods, to deal with those prohibited goods, those that have generated the risk should be paying the levy or the cost for dealing with that prohibited good. It’s not taxing something; it is about the process under which levies can be applied. At this point, what we’ve been using as the example is the small goods, the packages, the Temu-type products that come through. We have a huge amount of packages that come through. That has increased significantly. The cost incurred for processing that has grown significantly. The Crown ends up paying to monitor and control and deal with those packages, because we don’t have a mechanism to apply levies to that process, and rather than taxing everyone, what we’re talking about is a process whereby, where those costs are being incurred, levies are applied to those who are generating that cost.

All of those areas are talking about applying a levy to where that activity is causing a cost. Nothing, again, in this legislation is actually establishing the levy. The levy will go through a secondary process, as has been mentioned, through an Order in Council, but that would go through a process of Cabinet approval, then it’s scrutinised through the Estimates process and the Budget, and there is a consultation process in order to achieve it. I think it’s really important to reference the fact that it’s important for Customs to build trade and maintain those positive relationships, so that’s what we’re trying to do.

Thank you, Mr Chair. Let me just follow up on my previous contribution. The Minister of Customs somehow denies what is written in the bill in black and white, so can I just read the clause out?

Clause 6, new section 414A, the subheading is: “Levies for recovering costs relating to goods management”. Subsection (1) states, “In this section, specified person means any person or class of person specified in a levy order made under subsection (3) as primarily responsible for paying a levy.”

Subsection (2): “Every specified person is liable, while there is a levy order in force under subsection (3), to pay a levy to the chief executive in relation to the costs incurred by Customs in, or for the purpose of, performing a function under this Act, or any other legislation, relating to goods management, including (without limitation) costs incurred relating to—(a) any of the following activities: (i) the importation or exportation of goods: (ii) the shipment, transhipment, or transport of goods: (b) any of the following goods: (i) prohibited goods: (ii) craft: (iii) other prescribed goods.”

The reason why I read that out is just so we’re clear what is actually in black and white, stated in this Customs (Levies and Other Matters) Amendment Bill. This cost recovery matter—as I said earlier on, we do agree with cost recovery in general, because there are cases where it is the right thing to do, but this delegation in this bill, Minister, is very open-ended, and the use of “without limitation” to define the scope of the costs recoverable means that the executive and the Minister gains wide discretion to decide what Customs costs to recover from small businesses. This could extend to border protection activities, and the reason why I say that is because, in new section 414A (2)(b), the very first bullet point of “any of the following goods:” to be covered is “prohibited goods:”.

Now, one of the main responsibilities of the Minister of Customs is to ensure that our borders are safe and secure. It is a public good for all of Aotearoa New Zealand that our borders are safe and secure and that we do not allow prohibited goods to come through the borders—that includes illicit drugs, it includes illegal guns, and includes many other prohibited goods.

My worry about the possible direction that is being taken with this bill is the possibility that private companies, small businesses, our traders, our exporters, our importers are, in the future—that this is the first step to, possibly, privatising Customs, because this Minister will, by Order in Council, be able to, without any limitations in terms of costs, charge any of these folks—and I don’t want to read out the list again. People can actually get the bill, it’s up online on the Parliament website, and they can read, in black and white, what the legislation says.

It is like Parliament being asked to approve a blank-cheque authority for future levies—the details of who pays, how much, and for what services will be set later by regulation. We are being asked to trust the Minister in respect of the regulations by Order in Council that she will regulate later. She will set them later in regulation—just trust her. Small businesses—no worries, trust the Minister. Whatever the levy charges will be, they will be reasonable somehow. Just trust this Minister. Who pays how much for what services she will charge? Just trust this Minister. That is, essentially, what MPs and parliamentarians are being asked, because it is not a confirmable instrument; it does not come back to the House for confirmation.

Yes, I’m sorry, I probably didn’t explain it particularly well. To reassure you, the “without limitation” refers to the functions—“performing a function under this Act, or any other legislation, relating to goods management, including, (without limitation)” the list below. What we’re saying is the “without limitation” relates to the functions. I’m not sure if I’ve got that clear still. As the member will be aware, I do not have the authority to create anything. This is a Cabinet process that requires Cabinet approval. I do not have the authority, and no Customs Minister would have the authority, to set a levy. The secondary regulation is a process that would be developed in consultation to develop. Therefore, we go through a Cabinet approval process before the levy is set, and that is a process that’s in existence now. All we’re doing is looking at a levy structure that allows levies to be applied for all of the activities that Customs do. I hope that answers the question.

Thank you, Mr Chair, and thank you in advance to the Minister of Customs for responses to my upcoming questions. I actually will just start with the first question around why the use of urgency for this particular bill. While I understand that the bill did proceed to select committee, having a truncated second-half process in my view doesn’t aid good lawmaking, doesn’t facilitate a true dialogue over the committee of the whole House or allow the Minister to truly consider amendments. I think that there are several that my colleague the Hon Jenny Salesa has proposed that deserve consideration.

I wanted to first make some comment on what we’re seeing happen with secondary legislation generally because it will be clear by now that this is the real issue that we have. Having sat as a member of the Regulations Review Committee in the past, it is becoming clear that we’re seeing a trend towards the creation of framework legislation where there is much more autonomy given to sole Ministers to make significant policy decisions. We’re seeing delegation through Order in Council for very significant, substantive policy decisions to be made, and that’s not just the case in this legislation. We also saw it in regards to FamilyBoost, which has recently come through the House under urgency, and the Rates Rebate Amendment Bill, which the Government also put through under urgency where they created what’s called the “Henry VIII” power that allows a Minister to alter legislation. We saw it also through adoption reform which allowed, through Order in Council, the list of countries to be adapted solely through a Minister’s recommendation.

Now, the Minister made a comment on this in terms of there being a process in place; the process is that the Minister recommends. There is a lot of power in that recommendation. As the Minister will know, the Governor-General doesn’t often not grant—or I struggle to recall a time when the Governor-General has not granted—that Order in Council on the basis of a ministerial discretion.

The point of my colleague in this case is that the Minister has selected the option that gives the Minister the most scope and the least oversight of this House in relation to this bill. Now, for any ordinary power that covered Justice or Foreign Affairs, that would be an issue. However, historically around the world, the concept not just of taxes but of levies as well has always been seen to be a power that sits most closely with Parliament. It sits most closely with Parliament and even in this House, there have historically been times when these sorts of powers are made, not by bringing new legislation to the House, but through resolution of the House, and then, that shifted into Orders in Council provisions. It got more loose, if you like, from those resolutions of the House into Orders in Council.

What we’re seeing here is a dramatic shift and a purposeful decision to pass this law, to make Orders in Council not subject to confirmation, the agreement of the House. That is the next step down because you can then have secondary legislation that operates, but the House still needs to consider it, and the Minister has purposefully decided not to do that. My colleague Jenny Salesa has raised that issue, but I just have noted that the Minister hasn’t yet responded to the intent behind why that option was taken, as opposed to going for, in my view, the more accountable option of having an Order in Council. We don’t object to Orders in Council, but I’m talking about ensuring that as much accountability can be given to the order, given the subject matter of this bill, which is a levy power. It is a very broad levy power and, hopefully, I can speak more to that in upcoming calls. But if the Minister could speak to that particular decision, that would be appreciated. Thank you.

I just think it’s worth clarifying, firstly, there is this existing system where we have fees applied and levies recovered. This is already a system in place; this is just about how we apply this. The scope of the costs that are recoverable are limited to those that are incurred by Customs in performing a legislative function relating to goods management. This is a limit that is built into the levy-making power. This isn’t just “We can apply a cost to anything.”; this is about costs that are generated by Customs and are performing a legislative function.

The other part that is worth highlighting is that Customs costs in relation to goods are already recovered by the fees set by secondary legislation. That secondary legislation system already exists. Levies just provide more flexibility and fairness than fees and having them set by secondary legislation is not an extraordinary function; it is not without precedent. I think it is, again, ignoring in this process that this isn’t a power bestowed on the Minister; it is a power bestowed on the Minister to take something to Cabinet, and for Cabinet to approve it before it goes to the Executive Council for sign-off.

Thank you very much, Madam Chair. I appreciate that the Minister of Customs has brought this legislation back to the House having had it scrutinised by the Foreign Affairs, Defence and Trade Committee. I guess there is an opportunity now to sit down once again, because we’re under urgency, to actually just check that what we’re doing here is appropriate.

I know my colleagues have asked a question around the words “(without limitation)”, in new section 414A, in clause 6. It wasn’t a big part of consideration at the select committee. On reflecting—and I appreciate the Minister’s response. But the wording of new section 414A(2), if you go through, is “or any other legislation, relating to goods management,”—right, so that’s what the levies are being set for—“including … costs incurred relating to”. That’s what it says, and then in brackets we’ve got “(without limitation)”. I’m no lawyer. We’ve got plenty of lawyers here—probably too many, but anyway—and so there might be some who can clarify that.

My reading of this is that—I’ll go back again, because these are genuine questions. “(2) Every specified person is liable, while there is a levy order enforced under subsection (3), to pay a levy to the chief executive in relation to the costs incurred by Customs in, or for the purpose of, performing a function under this Act,”—all right, so that’s the function—“or any other legislation, relating to goods management, including … costs incurred relating to”. Including costs. Then there’s a brackets in there, “(without limitation)”.

I guess the Minister’s explanation, I think, was that it didn’t restrict the kinds of costs that it would relate to, rather than the cost itself. I know, further down in here, and setting through the Order in Council, the Minister can recommend a rate of a levy and not specify it, of course, in the legislation, because there needs to be some flexibility, but I do need to check with the Minister about that “(without limitation)”. She said that relates to which particular activity, not to the cost of it. I’m sorry to ask the Minister to repeat. If she could clarify that, that would be really good, because I think anyone coming in like myself, who’s not a lawyer, would look through this and say, “Oh, hold on, there’s a bit of a danger here.”

The next area that I ask a question of the Minister is around a memorandum account, which is a standard part of—and I referred to it briefly in my other speech—a system of setting up an account where we’re not quite sure of the income from a charge or a levy, but there’s an agreement with industry that the Government’s not going to rort it for the consolidated account that actually will take the fee and the levy for the purposes for which it is legislated for.

I guess the question is—and, again, it’s not something that came up in the select committee. In clause 7, which is part of Part 1, “Section 415 amended (Trust accounts for levy money payable to chief executive)”—now, that may be referring to what is a memorandum account, but it’s not clear here. The question is: if it is there, that’s great, because that’s standard practice; if not, how do we know this is not just going to go back into the consolidated account? Actually, if you look at the standard practice of this incoming coalition Government, it does go to the consolidated account. The international visitor levy is taken off visitors coming into this country—$100 a person—and it goes straight into the Minister of Finance’s slush fund. It does not go back to—[Interruption] With very little, in fact. The money that the Minister for Tourism and Hospitality has given out has come from our international visitor levy fund—I don’t think it’s all been spent—and the $100 charge, as I understand, is just going straight into the—

Hon Louise Upston: No, you’re not right. Go check your facts.

Hon DAMIEN O’CONNOR: The Minister can take a call and explain that. I suspect—and I know the early payments from that fund, where the conditions were that it go back into tourism, have still been allocated out. In fact, the Minister of Finance now is the beneficiary of the $100 per visitor levy.

Can I come back to the point? I don’t want to get off track, Madam Chair, of course. But the questions around that—

CHAIRPERSON (Barbara Kuriger): I wasn’t taking it as being off track; actually, I was taking it as using another example to try and explain the example that you were talking about.

Hon DAMIEN O’CONNOR: Thank you very much. That is it, indeed. I come back to clause 7 to say: does that relate to a memorandum account or an equivalent? Does that have the normal safeguards that industry normally seeks from Government to ensure that this is not just a tax; that, in fact, it’s a fee or a levy for the genuine purposes of cost recovery? We support cost recovery, but we are not going to, in Government, at the end of next year, impose unnecessary costs, but as we have worked through, we have sought cost recovery. So the question to the Minister is: can she give us an absolute assurance that it’s only cost recovery, and will that memorandum account process be the one that is used? Thank you.

I thank the member. Yes, it is a memorandum accounting model. Again, this is the mechanism stuff. We’re talking about the mechanism to create the levy. If you apply it to the border-processing levy, for example—because we have an activity-based costing model—it’s very clear that we cannot use the recovery of processing passengers through the airport to offset package processing and that sort of thing. It is rationalised over a three-year period, so the levies are set in a three-year advance model, which is what we’ve just gone through recently to reset those levies. If we have overestimated, then there’s a reduction in the levy moving forward because we’ve recovered too much, and if we’ve underestimated, there’ll be an increase in the levies. That’s the same. That is that memorandum account model, to assure you.

Just going back to the—I think it’s about where we put the brackets of the “(without limitation)”. It’s saying “including (without limitation) costs incurred”; it’s not saying, “costs without limitation”. It’s including the functions. It’s trying not to limit the functions. It’s trying to say that these are the functions to which we may incur costs, but “without limitation” means there may be other things for which there’s a legislative requirement for us to recover costs. That’s what the earlier part of it says—it’s for “performing a function under this Act, or any other legislation,” in which goods management incurs a cost. That’s that cost recovery discussion you have. The “without limitation” isn’t referring to the cost without limitation; it’s referring to the list of functions below. We’re not limiting the list of those functions as there may be other ones for which there may be a cost, for good management, that could come under this.

Thank you, Madam Chair. To the Minister of Custom’s point, might the Minister be clear to the Chamber, then, about what some of those other ones might be, to help us understand where she’s going with this? I appreciate that in respect of “(without limitation)”, she talks to it, saying, “any of the following activities”. Might she help us by providing what some of those instances might be that fall under the scope of “(without limitation)”‘? As I take the point made by my colleague the Hon Damien O’Connor, it was a piece of work called the Legislation Design and Advisory Committee—I think it was in 2021—that actually covers off these matters around tax, levy, and fee.

We’ve got to get this language really crystal clear for us here, because if we look towards what the Minister’s saying, which is a levy, it’s got to—at least from my reading of that particular recommendation and in order to make sure that what we’re doing here is sound and makes reasonable sense, but also is passed democratically—answer two questions. The first one is the terms of empowering provisions. That’s the first question that has to be answered—the terms of empowering provisions—and I accept that in this particular bill, in this particular clause, it sets out to do that, but for the purposes of this debate around “(without limitation)”, there is clearly still some confusion here. Whether it’s been lost in translation or whether or not we haven’t quite got it right and we’re not connecting here, I think it’s still important that we get that particular question answered.

The other part, which is in respect to what the Hon Damien O’Connor was saying, is that in secondary legislation, we’ve got to make sure that the appropriate circumstances for secondary legislation are used—the appropriate circumstances. I’m afraid that with language like “(without limitation)” and some of the other matters that we see here, as raised by my colleagues in respect to new section 414A(4), inserted by clause 6, “The Minister must, before recommending that a levy order be made under this section”—it goes on and the Minister knows what those words are. Are we satisfied, then, that the appropriate circumstances for secondary legislation are being met here? While I accept that in some instances it might be, but we’re talking about something quite considerable here, something that will impact large groups of society in our communities. We’re talking about small to medium enterprises, as highlighted by my colleague the Hon Jenny Salesa.

In order for those to be answered, perhaps, then, coming back to the Supplementary Order Papers by my—are they still called SOPs?

CHAIRPERSON (Barbara Kuriger): Amendment Papers. Some of us have been around for a while. We still call them SOPs from time to time.

Hon PEENI HENARE: Amendment Papers. Sorry, yeah, showing our age. Sorry, Madam Chair. Perhaps it might be advisable to the Minister, then, that because of this confusion, we just simply take out that “(without limitation)” as proposed by the amendment tabled by my colleague the Hon Jenny Salesa.

Those are the questions that I do have for the Minister. Are the terms of empowering provisions—is the Minister satisfied, then, that it’s covered off within this particular bill? The second part is the appropriate circumstances for the use of secondary legislation. We’re talking about the Order in Council matter here. The questions have already been asked by my colleague the Hon Jenny Salesa, and we want to be very clear about who they must consult with and whether or not there’s enough transparency there to give us any form of comfort, to make sure that this is going in the right direction.

Then, just finally, coming back to my first question: can the Minister give us any examples—any examples—that would fall under the remit of “(without limitation)”?

I’ll try to work through these. I suppose, when you talk about if you take out “(without limitation)” from this piece, we end up with having to ensure that this list is fully exhaustive. Therefore, because we’ve talked about other legislation, because Customs is in the position—there may be levies that Customs would be asked to collect on behalf of other agencies and this is the part where we’re trying to ensure that we have the ability to collect levies as they arrive from other legislation.

Some of those activities that may relate to the process of goods management, which is what we’re talking about here—so some of the examples that have been put forward is a risk assessment process, and we are really reliant on understanding risk on products before they arrive to us. That is one of the components. Ship rummaging, offshore intelligence gathering—those sorts of functions that are functions that occur because of the goods management process. Again, it’s about this idea that the person generating the cost, or the entity generating that cost or that liability to New Zealanders should be responsible for that fee. So this is about alternatives to taxing to cover everything—those that generate the cost—and I think it’s that fairness process that we’re talking about. If you are generating the risk to New Zealand or you’re generating the cost, then you should be incurring the levy around that.

The other part I’d like to talk about is the levy-setting process and the consultation process. If we look at where we had gone through some processes with levy setting—we’ve done it recently around order processing—we need from a “New Zealand Inc.” point of view and from Customs’ point of view, we need those that are generating the cost to want to work with us. Customs, as you know, we collect revenue. We contribute to the economy. Customs is a function that we want activity, we want trade, and we want people travelling here. So that’s why the consultation process is really important to ensure that we are not turning trade away. If you go back to the customs and excise legislation, the reason that this exists, the purpose of Customs is trade, border security, and travel. We want to make sure that all of those functions are—we’re motivated to generate it so it’s not about incurring liability. That consultation process is very engaged through that process.

Thank you, Madam Chair. I want to thank the Minister of Customs for that, but she raises an interesting point—and, as I say, we are supportive of the cost recovery, as well—but the Minister has left the door open for other agencies that might go out and say, “Look, we’ve got a cost that we’ve incurred.” It might be the Ministry for Primary Industries, it might be somewhere else, biosecurity, or it might be relating to the Police, and they’re checking on these things. We don’t want to leave an open cheque-book here. The Minister of Customs is in a really difficult situation; she has to front the charges or the costs, but if, as she suggested, this allows the flexibility for other costs incurred through other agencies to then come through customs and be imposed on someone who’s importing or exporting, then that’s quite a huge impost.

I need to know—or the Minister, actually, needs to know, too—that other agencies can’t front up and just say, “Look, we’ve got this cost. It cost us a couple of million dollars for these people who are importing this product, and you’ve got the ability now, Minister, to charge for that—so, please, can you do that?” Then you come under pressure at Cabinet, where some more senior Minister who’s got an agency that has gone out and necessarily, perhaps, or not necessarily; who knows.

So it’s the checks and balances. But what she’s explaining, I think, is that any kind of cost recovery levy or management practice can be, in fact, funnelled through this levy-making process. Now, that itself is—as I say—a bit of a risk, it’s a bit of pressure on the Minister, and maybe she can explain how the checks and balances before those other agencies go out and do that work need to be in place, as well. Otherwise, they say, “A $2 million cost—it’s been incurred, we can show you invoices. We want you to go and recover that from those importers.”—and that could be quite unfair. The Minister needs to have appropriate safeguards.

The second thing I’ll just ask—and, again, it comes back to when the Minister explained that it’s a “model” of the memorandum account, but she didn’t say it’s a memorandum account. Now, I can’t recall the specific safeguards around the memorandum account. My recollection is that with those go some requirements for review and some requirements for no additional or overcharging. Does the model include the safeguards—and, in fact, they may be the sections referred to in clause 7, and maybe the Minister can answer that and say “Yes, there are the same safeguards as we get in any other memorandum account, be it biosecurity or some other one, and, in fact, the references through clause 7 and the subsections in there are, indeed, the ones referring to the safeguards.” Two questions for the Minister, really.

Yeah, so the memorandum accounts are audited. They are audited by the New Zealand auditors, so they are audited. We have the performance bands and also, we report on it through the performance band process.

The other component you’ve talked about around the—this legislation only enables Customs to incur costs that they incur. We haven’t touched on it yet but the product stewardship thing—if there is a system by which Customs is going to be collecting a levy, or collecting a fee, this is about the costs that Customs incurs. The only thing this applies to is the costs that Customs incurs. All we are collecting is the levy as it applies to what costs that Customs incurs.

If we are acting on another agent, all we are talking about is the costs that Customs incur; the levy is about Customs recovering its costs. Again, it’s about that logical discussion around we don’t have an agency that is doing a whole lot of work for a whole lot of people, and we’re just going to charge everybody; this is about specifically the things that Customs is required—and again going back, this is about goods management.

Thank you, Madam Chair, and I appreciate the Minister of Customs. I read through this again. Again, I’m not a lawyer, but new section 414A(2), in clause 6, does say, as she quite rightfully points to, “to pay a levy to the chief executive in relation to the costs incurred by Customs”—so it’s by the agency—“in, or for the purpose of, performing a function under this Act,”—so it’s under this Act, the Customs and Excise Act—“or any other legislation”.

The question is: does the other legislation refer to other parts of the importation process or does it just come back to Customs? The wording—and I’ll read it carefully, because that might be just my misunderstanding—is “(2) Every specified person is liable, while there is a levy order in force under subsection (3), to pay a levy to the chief executive in relation to the costs incurred by Customs in, or for the purpose of, performing a function under this Act,”—which would relate to Customs or this one—“or any other legislation, relating to goods management”. I accept the Minister’s explanation on the “(without limitation)”.

Maybe, just a clarification on what may be my misunderstanding that, actually, another piece of legislation imposing a cost could then be channelled through Customs in the repayment system.

I suppose the logical one is the Misuse of Drugs Act. We stop drugs on behalf of the misuse-of-drugs legislation, which incurs a cost to Customs because we do that on behalf of another agency. It’s another piece of legislation that Customs incurs a cost to do, so that’s that function that you’re talking about.

I’m going to take a call from the Hon Jenny Salesa. I think we’ve pretty much exhausted that particular topic, and so if there’s any other related questions—the Hon Jenny Salesa.

Thank you, Madam Chair. Thank you for giving me this opportunity to ask a question, and I will go to a different clause.

My questions are about clause 4, which amends section 5 of the Customs and Excise Act 2018 by adding references to new section 414A and new section 414B in the definition of “prescribed”. Now, technically, this ensures that any regulations or Orders in Council made under the new levy section is recognised as prescribed matters under the Act. In practice, this is consequential to integrating the new levy regime into the Act’s new terminology. Our concern is actually not with the drafting per se, which is standard, but rather what this section facilitates because it gives the legal effect to the levy order that can be imposed, potentially, including significant costs on stakeholders and small-business owners without returning to the House of Parliament, because, as we discussed earlier on, this is not a confirmable instrument. Once this bill is passed into law, it doesn’t actually come back to the House for us to have any say about any of the costs, the levies, whether or not it is fair or reasonable for our small businesses.

Clause 4, by plugging the new sections into the Act’s definition of “prescribed”, makes it so that the levy powers that follow are something that are able to be implemented. As we see from—and I go back now to section 414A, in clause 6, and to subsection (3)—the Governor-General is the person who actually gives the levy power. That is true. However, any Orders in Council cannot actually be implemented until the Minister—and, in this case, it is the Minister of Customs and her department—actually drafts up the Order in Council. Then the levy is prescribed and according to the legislation, to the bill we have in front of us, it includes the rate of the levy, the basis on which that rate is to be calculated and ascertained.

Even though the Minister, in one of her answers much earlier on, said that she doesn’t actually have the power to make a levy, I suppose that is possibly technically true. However, this Order in Council, which will have the levy, none of that could happen until the Minister takes an Order in Council paper to Cabinet for Cabinet to approve. She actually does have that power, and this bill, in doing this, delegates that lawmaking power to set levy details over to the executive when the Minister takes that Order in Council to Cabinet. This is actually one of the reasons why we have major reservations about Part 1.

My questions to the Minister are: can the Minister confirm that clause 4 expands the definition of “craft” or relevant terms so that any levy can cover aircraft as well as ships, thereby ending the current cross-subsidy where goods fees have been partly funding ship-related costs? How will the Minister ensure that a fairer distribution of border costs between aviation and maritime sectors occur in the future as a result of this new bill?

Another question: does clause 4 or any part of this whole bill explicitly classify the new levies as duty under the Customs Act; if so, how will this assist, if at all, in enforcement and collection; if not, what legal mechanism ensures that unpaid levies can be collected or that goods can be held until levy obligations are satisfied?

A further question about the levy, to the Minister: is she going to consider ring-fencing this levy so that, following up on a question that the Hon Damien O’Connor had before, it actually just stays within Customs because this levy is being collected for Customs?

Yeah, there’s a few there. First of all, the cost recovery processes: we’ve talked about memorandum accounts—and the member the Hon Jenny Salesa was a former Minister and should understand the process around memorandum accounts. There’s a guidance around best - practice cost recovery from the Auditor-General. Levy funding goes into a memorandum account that shouldn’t be in deficit or surplus. A strong activity-based costing model at Customs is recognised. It’s reviewed regularly and reported in the annual reports that are delivered to the House, so there is an assurance that there is no way it is being used—and the member will know full well about how that process works.

I think the other component that we’ve talked a bit about—I think that answers the ring-fencing component. We’ve got to be very careful here that we’re not conflating—the member talked a lot about ships and aeroplanes and the costs. That is the border-processing levy, that system exists, it’s been fully traversed. This bill relates to goods management, not border processing, so we’re talking about the cost incurred with border processing. In relation to the Minister’s power to do these things—again, as the member knows, the Parliamentary Counsel Office drafts the levy orders, they follow through policy work that is carried out by Customs, which is then taken to Cabinet for approval. There is, again, a robust process that is in place around how those levies are established. The bill doesn’t amend the definition of “craft”.

Going back to the first point, the member talked about prescribed, and prescribed by regulations. This amendment, which was referred to in clause 4, is a technical amendment to support consistent definitions across the Customs and Excise Act. The definitions section in the Customs and Excise Act, section 5, defines “prescribed” throughout the Act as meaning “prescribed by regulations”. The two new sections inserted by the bill, sections 414A and 414B, relate to levy orders, not regulations. Therefore, “prescribed” should not mean “prescribed by regulations” in relation to those sections. That is why that clarification is there. Thank you.

I feel like I’ve got a burning question from Vanushi Walters.

Thank you, Madam Chair, and thank you to the Minister of Customs for answering some of the questions thus far. My first question is in relation to whether the Minister received advice in terms of how this would impact complaints on the scope of levies made. At present, if there is a sense that a levy has been made outside the scope of primary legislation, an individual could potentially argue that it’s ultra vires; they could make a complaint to the Regulations Review Committee. This is really why the advice from many quarters, including the Office of the Auditor-General (OAG), is to have those powers quite specific in terms of what you’re intending to cover. Would there be any unintended consequences in terms of excluding a complaint because it was deemed to be within the scope of very broadly drafted discretionary powers, when the Minister’s intent is for it to be drawn down more closely?

The Minister just then referred to border processing, and so I wonder whether there are examples of language that the Minister has contemplated which could draw down those powers in the way in which the Minister does intend, but also not without that unintended effect of limiting the ability of those complaints to be very validly brought to fora such as the Regulations Review Committee, and then instruments to be disallowed should they be outside the scope of the Minister’s and the Government’s intent.

My other question was in relation to new section 414B, “Contents of good management levy order”, and this in clause 6 of the bill, where there are powers of exemption, so powers to exempt certain persons or classes of persons from the requirement to pay the levy and, also, provide the circumstances in which the levy paid may be refunded. The first half of my question is whether the Minister considered putting some caveats around when that can occur—and I’m pleased the Minister referred to the OAG’s advice, which I also have here. The Regulations Review Committee has also commented on the drafting of secondary legislation, and often, across both sets, there are comments about the value of being specific when powers are created, but also when exemption powers are created—was that considered?

Part B of that question would cross-reference to new section 414A(1), which talks about the person primarily responsible for paying a levy as the person who’s liable. That is a determination, of course, on fact, and my question is whether the Minister and officials have thought through risks in terms of conflicts of interest and how they would be managed, and decision making in terms of exemptions or payback of levies, and identifying precisely who the primary person responsible for paying a levy is versus a person who may benefit from an exemption or a payback. For example, if a company exists or if entities are held within trust, there could be multiple individuals who may have an existing conflict who would benefit from an exemption who wouldn’t be identified as the person primarily responsible. Yes, those are my three questions for now.

I move, That debate on this question now close.

The question is that the Hon Jenny Salesa’s tabled amendment to clause 6 new section 414A(2) deleting “(without limitation)” be agreed to.

The question is that the Hon Jenny Salesa’s tabled amendment to clause 6 new section 414A(2)(b) deleting subparagraph (i) “prohibited goods” be agreed to.

The question is that the Hon Jenny Salesa’s tabled amendment to clause 6 new section 414A inserting new subsection (7) be agreed to.