Nash Stuart: Taxation (International Taxation Life Insurance and Remedial Matters) Bill — In Committee 
Nash Stuart: Taxation (International Taxation Life Insurance and Remedial Matters) Bill — In Committee 
[Volume:656;Page:6005] 
STUART NASH (Labour) 
: 
 I think Aaron Gilmore was very very unkind to his colleague Colin King. I know who Colin King is and I knew who he was before he came to Parliament because he was a three-time winner of the Golden Shears contest. Paul Henry does not know who he is but who cares what Paul Henry thinks? We certainly do not. No one listens to him. 
The other thing is that Colin King put me to shame. We met in the changing rooms both fully clothed and he asked me whether I was going to play for the New Zealand Parliamentary Rugby Team this year. I said that I was getting a little old and was thinking about it but was not too sure. Colin said to me that he was wondering whether he should this year as he was turning 60. He said maybe he would have 1 more year. It just shows that life begins at 60. I tell Colin not to worry about what Paul Henry says; we do not and no one else does. I think it is dreadful that Aaron Gilmore could question his commitment and who he was. But I come back to the Taxation (International Taxation Life Insurance and Remedial Matters) Bill. 
Colin King 
: It’s a taxing subject. 
STUART NASH 
: It is a very taxing subject I agree and I am very impressed that the member plays rugby at 60. I do not think Aaron Gilmore will be out there when he is 60. In fact he will not be in Parliament when he is 60 so that is OK. 
Anyway I get back to the payroll giving provisions. This is a very important part of the bill. It is quite a nice part. Mr Gilmore waxed lyrical about the wonderful things this bill was doing; well this is another thing. Eleven submissions were received on the proposed payroll giving scheme and five confirmed their support for the concept of payroll giving and the tax credit mechanism of delivering tax relief on payroll donations. Even so most submissions were concerned to ensure that compliance costs of the scheme for employers were kept to an absolute minimum. We agree with that. Earlier I talked about the five basic objectives of tax legislation and compliance was one of them. Otherwise the benefits of the scheme might not be fully realised and I think we all agree that this is very important legislation that allows people’s benevolent spirit to come out. I think the Prime Minister John Key said to people that if they did not like the tax cuts they could give them to charities. Well this legislation allows that. 
A common theme throughout the submissions though was the need to provide greater clarity in the legislation. We addressed this theme in the Finance and Expenditure Committee. The Inland Revenue Department officials came back and gave us great peace of mind that it had in fact been achieved. There was concern that the participation in payroll giving would be voluntary for employers and employees. KiwiSaver was voluntary; it is a shame that the Government cut that off at the knees. But this is voluntary and it allows people to give money out of their pay to their favourite charity. 
There was also concern about the roles and responsibilities of employers employees and donee organisations and also sanctions for non-compliance. This quite important point was brought up and discussed in reasonable depth. This point is around what happens if a company goes broke and money is being contributed by an employee but it is not paid out. Again the Inland Revenue Department officials came back and assured us that employees would not lose their tax deductibility—their tax credit—on this which was fantastic. For the most part officials agreed with the submissions and they ensured that the underlying policy intentions would be achieved and this would provide overall integrity to the scheme which is what I was talking about before. Again tax integrity must be a fundamental part of any tax legislation. 
A further prevailing theme in the submissions was a desire for the legislation to prescribe the details for payroll giving scheme arrangements. As proposed the bill simply provides a tax mechanism to deliver tax relief for payroll donations on a pay period basis. It does not prescribe the nature of the arrangement of relationships between employers employees and donee organisations or how the schemes should be set up. Matters that need to be decided upon between the relevant parties include for example the process for establishing a scheme that works best for all parties concerned the use of intermediaries the level of employee education around payroll giving—again this comes back to the fundamental objective I talked about which is the ability for the taxpayer to be able to access information on tax—and the process for selecting donee organisations to participate in the scheme. I think we said that they had to be registered charities and all registered charities were to be put up on the Inland Revenue Department website so one could determine straight away if a charity was registered which is fantastic. This is a very important part of the legislation and it affects a lot of people. 
I am hoping that once this legislation is put through a lot of Kiwis will donate to these organisations because I think probably all of us—well all of the Labour MPs anyway—have been around a lot of the social service agencies and the charities in our electorates and have found that these guys are suffering. Their workload has increased dramatically as we find that legislation that the National Government has put through begins to erode the social fabric. These charities need the most help at this particular time and this bill does that. 
As I was saying the matters that would need to be decided upon by relevant parties include the process for selecting donee organisations to participate in the scheme—as mentioned they had to be registered charities—the number of donee organisations that can participate in the scheme which came down to registered charity status and that is fantastic; the level of engagement between the donee organisations and the employee donors which refers to how an employee can interact and contribute to the charity itself; and any minimum payroll donation threshold. The non-prescriptive nature of the proposed scheme is intended to provide flexibility to allow relevant parties to work together to establish schemes that work best and to manage the associated costs. I think all members in the Chamber will agree that if someone is to donate money to a charity through his or her payroll it must be done on a voluntary basis. It must be worked through one on one. The vast majority of charities and the vast majority of employees want to know what is going on and how it works. The key policy outcome of payroll giving is that it has the potential to establish a genuine partnership between businesses and the community while supporting employees’ community activities. As mentioned this is becoming more and more relevant in these tough times. 
The voluntary nature of the scheme also reflects the ethos of giving which is very important. It sets up a system that facilitates but does not mandate giving. Anything that would be compulsory around payroll giving would not be acceptable to anyone from employees to employers. That is why this provision was put in. It is not a mandate; it is voluntary. 
Paul Quinn 
: Are you going to give it to my campaign? 
STUART NASH 
: I am sure Mr Quinn gives a substantial part of his salary to a registered charity. This provision will help Mr Quinn to make that transition to giving a lot easier. He will be supporting this I have no doubt. 
The Inland Revenue Department has a very good way of getting information out to the general public. It does this through a  
Tax Information Bulletin 
. The Inland Revenue Department said that it would publish all this information that we are talking about at the moment in a  
Tax Information Bulletin 
 so that taxpayers employees employers and donee organisations could have access to all this information that allows them to optimise their processes. That is very important. The proposed scheme would deliver pay-day tax relief on payroll donations by way of a tax credit which is most important. Employees will receive a tax credit on the amount of their donation made each pay day. Employers would offset the credit against the PAYE calculated on an employee’s gross salary. The tax credit would then be calculated to set a rate of 33.3 percent. Employees who make payroll donations would not have to keep receipts or wait until the end of the year to claim the tax benefits of their donations. 
We all know how this works. We have all given money to registered charities and they have given us a receipt. We have thought that in order to claim it back we must put in a tax return but that is too onerous so we do not bother doing it. This legislation removes that and makes it a lot easier. The scheme would also operate in addition to the current end-of-year tax credits claim system. Therefore employees who do not or are not able to give through payroll giving can still claim tax relief on their donations through the end-of-year process as a consequence of this clause in Part 2. 
I support Part 2 and I thank Mr Foss who worked this through. I also thank Inland Revenue Department officials who provided much-needed advice on Part 2. To our consultants and our drafting experts I say thank you very much.