Barker Rick: Income Tax Bill — First Reading 
Barker Rick: Income Tax Bill — First Reading 
[Volume:606;Page:3539] 
Hon RICK BARKER (Minister of Customs) 
 on behalf of the 
 Minister of Revenue 
: I move  
That the Income Tax Bill be now read a first time. 
 Later I will be recommending to the House that the bill be referred to the Finance and Expenditure Committee for consideration. 
At more than 2000 pages in length this bill must be one of the largest if not the largest bill ever introduced into this House. It has been a long time in the making. It represents the third stage of a progressive rewrite of the Income Tax Act that began in the early nineties. The first stage was the reorganisation of the Act to make its structure logical and coherent. This was completed in 1994. The next stage was the rewrite of the Act’s core provisions enacted in 1996. The core provisions are the gateway provisions that give readers an overview of the scheme and purpose of the Act and a summary of its key features. They also summarise the main steps that taxpayers must follow to meet their tax obligations. The third stage of the rewrite of the Income Tax Act culminates in the bill before the House today. The bill‘s main purpose is to rewrite Parts C D and E of the Act. They contain the fundamental rules for calculating net income so they are the most frequently used parts of the Act. 
The remaining parts of the Act will be rewritten in future stages but for the present the bill re-enacts them for the benefit of users to minimise confusion over the numbering of sections. That re-enacting of legislation accounts for a good part of the sheer size of the bill before us today. 
The aim of rewriting the Income Tax Act is to produce tax law that is clear written in plain language and structurally consistent. This will make it easier for readers to locate all the material they need and to understand what they read ultimately saving time and costs. New Zealand is not alone in seeing the need to rewrite its income tax legislation; similar work has begun in the United Kingdom and Australia. 
Today’s Income Tax Act is based on legislation dating back to 1891. The original Act the Land and Income Assessment Act was just 24 pages long. To a certain extent the dramatic lengthening of the Act over the years especially over the last two decades reflects the changing nature of business and taxation. Over time a great many provisions in a variety of drafting styles were added to what had become a creaking structure by the 1990s. By then it was fairly widely acknowledged in tax circles that the Income Tax Act lacked cohesion was hard to read and needed help from both a structural and a presentational perspective. 
The first major recommendations for rewriting the Act came from the Consultative Committee on the Taxation of Income from Capital usually known as the Valabh committee in 1990. They were supported by recommendations from other groups in 1993 and 1994. Much of the structural work was done in the first two stages of the project which were completed by 1996. 
Work over the last few years—the subject of this bill—has concentrated on refining the structure and progressively redrafting Parts A to E using plain-language drafting techniques. The plain-language law-drafting movement is an international one within English-speaking countries. It seeks to present ideas clearly and directly and to avoid archaic terms repetition and verbosity. It also seeks to use everyday words as much as possible. Therefore this bill avoids the use of legalese such as “beforementioned” “hereinbefore” “hereinafter” and “hitherto”. Likewise a phrase such as “by virtue of the fact that” simply becomes “because” and the phrase “until such time as” simply becomes “until”. 
Another feature of plain-language drafting is the use of short sentences in preference to long sentences. This is to ensure that the core structure of a sentence is not obscured by multiple or complex modifiers. A graphic example of sentence length and complexity is found in section DJ 2 of the current Act which consists of a single 14-line sentence. I suspect that by the time most readers have got to the end of the sentence they have forgotten how it began. Sensibly the rewritten legislation breaks it up into three easily understood subsections. 
The draft legislation in this bill is the work of a small project team of law drafters from the public and private sectors and tax policy analysts. They have consulted interested parties throughout the exercise sought views and tested drafts of rewritten law on a number of people and organisations. Most recently the project team sent draft legislation to 15 private sector tax specialists and a plain-language specialist for their checking comments and views. That was followed by the publication in 2001 of an “exposure draft” of the rewritten legislation for wider comment. Submissions on that publication were considered in the preparation of the draft legislation contained in this bill. 
An advisory panel has been overseeing the rewrite of the Income Tax Act since 1995 providing valuable assistance. Chaired by Mr Colin Blair the advisory panel is made up of representatives from the Institute of Chartered Accountants the New Zealand Law Society the policy advice division of the Inland Revenue Department and Treasury. One of the roles of the advisory panel is to ensure that there is a procedure in place to identify any policy issues that might arise in the course of the rewrite. The other is to act as a steering committee for the rewrite. Both roles have been filled admirably. I take this opportunity to thank the advisory panel for its work and to thank the many people who have had a hand in the development of this bill—the private and public sector experts the professional organisations the people who wrote submissions on the “exposure draft” and the rewrite project team itself which undertook the massive exercise. 
Care has been taken in the development of the bill to ensure that the provisions of the rewritten legislation have the same outcomes as those in the current Income Tax Act. A few minor policy clarifications have been made but they were subject to consultation before they were included. If in the first few years of the new Act’s operation it is found to produce a different result from that intended under the present Act the Government will seek a remedial amendment to correct the position from the date of effect of the new legislation. 
The changes introduced in this bill are described in some detail in a separate commentary which has been distributed to members of the House. I recommend it to members. I commend the Income Tax Bill to the House on behalf of the good Minister of Revenue the Hon Dr Michael Cullen.