Robertson Grant: Taxation (Transformation: First Phase Simplification and Other Measures) Bill — In CommitteeText is incorporated into the Bound VolumeRobertson Grant: Taxation (Transformation: First Phase Simplification and Other Measures) Bill — In Committee[Sitting date: 24 May 2016. Volume:714;Page:11146. Text is incorporated into the Bound Volume.]GRANT ROBERTSON (Labour—Wellington Central): It is a pleasure to take a call on Part 2 of this bill.I want to focus my initial contribution on the section of the bill that deals with the communications framework and in particular clause 74. It may come as a surprise to those who follow tax legislation intimately and closely that this particular clause tended to be more like an English grammar class. Chris Bishop came into his own during this period as somebody who was educated in the 2000s when grammar was taught. I struggled because I went to school in the 1980s when they had stopped teaching grammar at all and so some of this was confusing to me but—Chris Bishop: It was a terrible Labour Government then.GRANT ROBERTSON: That is right. Well that particular Labour Government—yes Mr Bishop. But this was quite an interesting and actually quite important part of the bill. Essentially what this was about doing was trying to simplify and make clear different forms of the ways in which the Inland Revenue Department (IRD) interacts with taxpayers and trying to bring that into the modern age at the same time as defining various terms. Essentially what the bill did was to set up three tiers of interactions between the IRD and taxpayers and it then sought to define those. The Finance and Expenditure Committee did actually come to the conclusion that we needed to amend aspects of this to make absolutely clear to taxpayers the meaning of these different terms.So the three tiers that were proposed were a tier that included the terms “asking requesting or informing” and any one of the following was a means by which you can do that: “by telephone” “orally in person” “by electronic means” “in print” or “in another manner permitted by the Commissioner.”Kris Faafoi: What does that mean?GRANT ROBERTSON: Well that is right. You may well ask Mr Faafoi what it means. So we could take the example perhaps of whether or not John Key asked requested or informed Bill English that he was going to put tax cuts back on the table 3 days after Mr English had taken them off. He certainly did not notify him—which is something we will come to shortly—nor formally notify him so he possibly did ask or inform him by phone orally in person by electronic means and perhaps he texted him.Hon Clayton Cosgrove: Semaphore?GRANT ROBERTSON: He may have done that. So the lowest level of form of communication is asking requesting or informing. Then we include—David Bennett: Tell us about your tax increases.GRANT ROBERTSON: Mr Bennett was all over the detail of this when we went through it I can tell you.Then we came to “applying or notifying” by which any one of the following is an acceptable means to apply or notify: “by electronic means” “in print” or “in another manner permitted by the Commissioner.” So we have stepped up here and you cannot do it by phone and you cannot just drop into the IRD and let it know. You actually have to do it by electronic means in print or in a manner that is acceptable to the commissioner. Then the highest tier of communications is that of “formally notifying” which is to be “in print delivered personally or by registered post” but not by way of “email the internet or other electronic means.”I guess in many ways that starts to show us the limits of what we were trying to do here in the Committee. So it is a recognition that most people are not going to fax through their communications. Mr Cosgrove might still fax people as he does from time to time but actually most people have moved on from that and frankly most people have moved on from using the post to communicate with the IRD. So these clauses do have a serious element which is that it is time to bring the IRD into the 21st century and have email as an acceptable form of communication.What we learnt in the committee was that from a tax accountant’s point of view for those people who have regular interaction with the tax system these terms need to have specific meaning within specific Acts. So the Tax Administration Act is one of those but the Income Tax Act is one as well. And we had submitters come to the committee and tell us that unless those terms are notified this could provide some difficulty. They felt that the three tiers were not sufficiently defined within each of those Acts. So in a sort of belt and braces approach we now by the amendment of the committee have decided that we will define each of those terms in each place that it appears in taxation legislation. As I say you might think that this is not an important thing but if people fail to comply with what the IRD wants from them there are serious penalties. If they do not know for example that notifying cannot take place by telephone then they may find themselves in breach of various things. So it is actually an important thing to make clear to taxpayers that the way that they communicate with the Inland Revenue Department is confined—[Bell rung] Mr Chair?The CHAIRPERSON (Lindsay Tisch): Grant Robertson.GRANT ROBERTSON: I tell you there is more to come on this. So this I think is actually an important part of it. The—Kris Faafoi: This is the soundtrack.GRANT ROBERTSON: That is right. This is only tier one notification I can tell you. We have got more coming here.Interestingly the IRD itself was very keen to tell us that it was trying to put emails on the same footing as paper letters delivered by post and I think as I say for most people that that is important. However its highest level—the formal notification—is still done by post and not electronically. One day perhaps that will change.There was an element of futureproofing so there is some ability for the commissioner to be able to say that as new technologies arise and as new forms of communication occur they can be adopted into the practices of the IRD without necessarily needing to change the legislation every single time that occurs.So that is an advance. There was a bit of confusion I have to say between the officials our expert adviser the submitters and ourselves about the exact meaning of various terms. But under clause 74 and related clauses I do believe that we have now found our way to a position where people will be able to understand what is required of them and certainly it is now possible to use electronic means for at least the first two tiers of communication between the IRD and others.Hon Clayton Cosgrove: Brilliant.GRANT ROBERTSON: Yes and it is an advance. It is to quote from the title of the bill transformational because that is the standard this Government has for transformation—the meaning of the word “notify”. We will come back in a later debate to the title of this bill and I think this is the point at which we must acknowledge the radical transformation of the definitions of the words “notify” “inform” “ask” and “request”. So well done I say to the Government—radical agenda there! That will turbocharge the economy for you right there!The other point I wanted to make was related to this and that concerns the use of electronic signatures which have previously not been allowed but are now allowed under this legislation. There was some concern about the veracity of them and about how they could be stored and so on but actually again this is the modern world. An electronic signature is your own signature. In a whole lot of walks of life people use electronic signatures where they have obligations under the law and there is no reason why the Inland Revenue Department cannot also be in a position to deal with that also.The other matter—which I may not get to finish in this call but I will certainly happily take up another call—Hon Clayton Cosgrove: Have another one.GRANT ROBERTSON: My colleague Clayton Cosgrove will want to talk about this because it was a matter that he was seized of when the committee considered it. It is the question of co-location of offices.Chris Bishop: Oh this is a cracker.GRANT ROBERTSON: I know Mr Bishop enjoyed these discussions as well. So the IRD—as are now a number of Government departments—is co-located with other Government agencies. In Christchurch for instance the Ministry of Social Development is looking at being in with the IRD because they are the people who are going to be in the Christchurch central business district because Gerry Brownlee has forced all the Government agencies in there. So they are going to be working together and there is an issue about the secrecy requirements on IRD staff versus the secrecy requirements on other Government agencies. We had a very long and in-depth discussion in the committee about how to manage this. And in the end what the committee came down on the side of was to say that IRD employees are not considered to have breached secrecy conditions “if they did not intend the breach and took the care reasonable for place and conditions to prevent it.” That notion of reasonable care was what the committee inserted into the bill.There was considerable debate about this. Obviously if you have knowingly contravened the Act and if you have deliberately gone out and broken secrecy rules then there are punishments that should follow that. But where you are sitting in a co-located environment and you are having a conversation with one of your IRD colleagues about a taxpayer or a tax matter—which you are able to do—and you are both aware of your obligations if there is a staff member of another Government agency within earshot to what extent is it the responsibility of the IRD staff member to not have those kinds of conversations? You know the nature of modern work spaces now with open-plan offices means that the risk of this increases and in fact all of the co-located ministries and so on are starting to work in those environments.On the committee we were concerned because the secrecy of taxpayer information is something we should all take seriously and it is actually more often than not a higher obligation than that of other Government agencies. So we were concerned to make sure that we had adequate protections in place around both the understanding that taxpayers would have of how their information would be treated—