Bayly Andrew; Russell Deborah; O'Connor GregANDREW BAYLY (National—Port Waikato): Well thank you. I beg to differ about convenience because convenience can be an online—it doesn't mean—I don't know why she keeps talking about bricks and mortar. It's about the way that taxes can be paid and it could be online it could be any other business model—seemed a spurious argument to me on that.But I just want to draw back to this vertical equity because you made the assertion it's just you know passive reporting. Well actually that's not what the description says. The description says the progressive tax system does not mean that every tax should be progressive but the overall system ought to be. In practice wealthy people should at the very least pay no lower a rate of tax on their economic income than middle-income New Zealanders already do." So do I take it from her comments that the purpose of this particular section of the bill is that the tax department will be going about assessing everyone's—and obviously the Labour Government went after certain families—she'd like to see this bill and the annual reporting be specific about both using her terms "taxable income" and also unrealised and realised gains is a separate part to that? Is that what she's saying very explicitly?Hon Dr DEBORAH RUSSELL (Associate Minister of Revenue): No. Just to clarify the IRD would be using information that is already available to it. So there won't be an order to—and there are a variety of ways of gathering that information they have so in fact on that they won't be going out and trying to assess every single individual's economic income. Instead in the way that they already do and that other entities and people can do is use the whole suite of data that is available to develop measures to develop an understanding of all sorts of types of income and tax paid and so on. So that information is already available. It's just a matter of pulling it together in the reports. And it's worth noting that you know that sort of reporting might actually only come through in the comprehensive triennial report. We'll see how that develops over time. The idea is just to make sure that we do get that better information about our tax system every three years.ANDREW BAYLY (National—Port Waikato): So I just want to ask a very simple specific question: will this bill require the IRD to go out and make an assessment of the unrealised gains and that individuals or corporations or trusts will be required to pay tax on?Hon Dr DEBORAH RUSSELL (Associate Minister of Revenue): On an individual basis no.ANDREW BAYLY (National—Port Waikato): Not on an individual basis for a company individual trust—whatever. What would be the—if that's the answer no and she's saying it's going to happen at a more global level how does that take place?Hon Dr DEBORAH RUSSELL (Associate Minister of Revenue): Inland Revenue will develop those systems over time.ANDREW BAYLY (National—Port Waikato): OK. So we're sounding like very much a politician here. Mr Parker's sitting over there; hopefully he might join in the debate. It was a very specific question. The term "economic income" has been injected into this bill quite specifically. It has a very specific definition which includes unrealised gains and so the point I'm making: if you are going to put it in stand by it and be clear about it because New Zealanders need to know what would be required by the IRD to do it. You're talking about using other methods of collecting that information; I didn't ask about that. I'm asking about what will the IRD report on annually in terms of both "taxable income" using her term and "unrealised gains" as per that definition I talked about before?Hon Dr DEBORAH RUSSELL (Associate Minister of Revenue): As I've said Inland Revenue will be reporting on economic income and that's gathered from a variety of sources.ANDREW BAYLY (National—Port Waikato): Does that include unrealised gains? So again I'm going to be very specific does that include unrealised gains?Hon Dr DEBORAH RUSSELL (Associate Minister of Revenue): Mr Bayly I believe you answered that question yourself already.ANDREW BAYLY (National—Port Waikato): Well I take it and I'm just looking around here I think that's got to be a confirmation. If I'm making a wrong assertion because I'd hate to incorrectly interpret the comments from the Minister but my assertion my understanding of what she said is that the IRD will be required to go out and assess both taxable income and unrealised gains and look at that in this respect of vertical equity and at the same time the same term is used in terms of horizontal equity. This is why it's such an important aspect to be clear about. So is that proposition—that premise I've just said is that correct Minister?Hon Dr DEBORAH RUSSELL (Associate Minister of Revenue): Mr Bayly I've lost track of the propositions and premises that you've suggested. It's clear that economic income does include unrealised gains. That's always been the case with economic income. As I've already said all this bill will do is report on it so that ordinary New Zealanders can actually have a conversation about tax. So the bill doesn't introduce any new taxes; it doesn't impose any new taxes it doesn't require any new taxes it doesn't require unrealised gains to be taxed. All it does is report on them.CHAIRPERSON (Greg O'Connor): Mr Bayly I'm following this debate and I'm not quite sure whether we can go much further without repetition here. We are hearing this one part and I'll be very generous but—ANDREW BAYLY (National—Port Waikato): Mr Chair I've got acknowledge I'm going to thank the Minister for being clear that she's now explicit that it does include unrealised capital gains. So hopefully the Minister can give me a more substantive question: when she talked about using different mechanisms to determine unrealised capital gains as well as taxable income—which is very obvious because the IRD has that information—how will it go about assessing unrealised capital gains? And she's saying there are other mechanisms to do that; could she be clear about that?Hon Dr DEBORAH RUSSELL (Associate Minister of Revenue): This is a very detailed question. Inland Revenue will not be assessing individual taxpayers in order to assess this report they will be using information which is readily available to them already for their reporting. They will simply be reporting tax paid against economic income and against income all the sorts of information they already have. But in terms of then assessing the tax system and so on which is what this bill will enable—because it will enable reporting on the tax system—they will simply be using the information that is already available to them. In fact they are going to use very specific measures they're sort of sitting there in clause 13 of the bill saying "income distribution and income tax paid" so they'll look at that. They'll have these sorts of measures available and those measures will then be used to assess how well the tax system—they'll be used to report against those key principles. So that's just exactly what's going to happen and the bill is simply going to report on them."