Nash Stuart: Taxation (GST and Remedial Matters) Bill — In Committee Speaker Recalled In Committee Procedure Third Reading 
Nash Stuart: Taxation (GST and Remedial Matters) Bill — In Committee Speaker Recalled In Committee Procedure Third Reading 
[Volume:669;Page:16133] 
STUART NASH (Labour) 
: 
 There are a couple more clauses in the Taxation (GST and Remedial Matters) Bill that I would like to talk about. Clause 84 is more of an explanatory clause dealing with shortfall penalties. If the Committee will allow me I will give a brief summary of the proposed amendment. I refer to section 141JAA of the Tax Administration Act 1994. That provision is probably more easily referred to as “the TAA” because if I have to say Tax Administration Act 1994 a number of times I will use up my 10 minutes without actually saying anything. 
Hon Trevor Mallard 
: TAA—isn’t that an airline? 
STUART NASH 
: Yes. What happened to that one? As I was saying section 141JAA of the Tax Administration Act caps some of the shortfall penalties being clarified. It does not apply if the taxpayer makes a disclosure at the time the tax position is taken. This is under section 141H of the Tax Administration Act 1994. This is a bit of background to clause 84. If the cap applied to the disclosures made at the time of filing taxpayers can actually take positions—or they could take positions before this bill—that could not meet the standard of being about as likely as not to be correct knowing the maximum penalty they would face is $50000.  
Obviously this amendment will apply after the bill comes into force but I will give a little bit of background on clause 84. Shortfall penalties can be reduced for a number of reasons. Under section 141 of the Tax Administration Act the shortfall penalty is reduced by between 40 percent and 100 percent if the mistake is voluntarily disclosed before the beginning of an audit. So the tax department allows the taxpayer a little bit of leeway. It recognises that people do make mistakes. This bill is a classic one. This Supplementary Order Paper is a classic one. But taxpayers do make mistakes. 
Sue Moroney 
: What kinds of mistakes? 
STUART NASH 
: Well occasionally they put in an incorrect tax return. But if they voluntarily say to the Inland Revenue Department that they have made a mistake and have put in the wrong tax return then the Inland Revenue Department if it is in a benevolent mood can actually reduce the shortfall penalty by 100 percent. But if it is not feeling that benevolent and it was honest it could reduce the shortfall penalty by only 40 percent if it wanted to. But the bottom line is that if the mistake was voluntarily disclosed then the Inland Revenue Department did have the ability to make a reduction there. 
Hon David Cunliffe 
: But now it is capped. 
STUART NASH 
: Yes. Well under section 141H of the Tax Administration Act a shortfall penalty for an unacceptable tax position or an abusive tax position is reduced by 75 percent if the taxpayer makes an adequate disclosure of their tax position at the time they take the tax position.  
There are two types of mistakes that are made. Well there are probably more than that but there are people who deliberately try to rort the tax system. I do not think there is any member on any side of the Chamber who thinks that is a good idea. In fact we fight very hard to stamp down hard on the people who rort the tax system. There is no doubt about that. [ 
Interruption 
] Accountant? I have no comment to make on that I say to Mr Cunliffe. But with regard to accountants I say that I have a very good accountant. He is a very good guy. 
Hon Darren Hughes 
: Why does the member need an accountant? 
STUART NASH 
: Well that is another story as well. But having said that there is another type of person who tries to rort the system. When I say “rort the system” I mean that they hand in incorrect tax returns. As I said they are the bad ones. But others may have just made a mistake. That can happen. A bill might fall on the floor and be found under a desk and as a consequence a mistake is made.  
This bill caps the penalty at $50000. In the past the Inland Revenue Department could be benevolent about it. Under section 141JAA (1) of the Tax Administration Act the shortfall penalty for not taking reasonable care—and I suppose we use the reasonable care test—or for taking an unacceptable tax position can be limited to $50000 if the taxpayer voluntarily discloses their tax position or the commissioner determines the shortfall “no later than the date that is the later of—(a) the date that is 3 months after the due date of the return to which the shortfall relates; and (b) the date that follows the due date of the return to which the shortfall relates by the lesser of—(i) 1 return period; and (ii) 6 months. It is not clear that the limit in section 141JAA of the Tax Administration Act 1994 applies only to voluntary disclosures under section 141G. It is also not clear whether it applies to disclosures made under section 141H.