Nash Stuart: Taxation (Consequential Rate Alignment and Remedial Matters) Bill — In Committee Third Reading 
Text is incorporated into the Bound Volume 
Nash Stuart: Taxation (Consequential Rate Alignment and Remedial Matters) Bill — In Committee Third Reading 
[Sitting date: 24 November 2009. Volume:659;Page:8239. Text is incorporated into the Bound Volume.] 
STUART NASH (Labour) 
: 
 I would like to reiterate all of what my colleague the Hon David Cunliffe said and just elaborate on it a little bit more. He was dead right. But I suppose that one of the things that is slightly concerning which Mr Cunliffe alluded to was the fact that it did get as far as the select committee. Mr Foss said that it was a test. He said that in jest. It was a joke but I suppose it outlines the problem when we have all this legislation being rushed through under urgency. This Taxation (Consequential Rate Alignment and Remedial Matters) Bill went to the Finance and Expenditure Committee which was great so we were able to pick up the problem. But a lot of legislation is being rushed through the House under urgency that has not had the scrutiny of a select committee. 
Hon David Cunliffe 
: Half the ETS bill. 
STUART NASH 
: Half the emissions trading scheme bill—exactly. That is of huge concern. If we had not picked that up well over 3 million New Zealanders would have been overtaxed. That sounds like a lot because people will say that there are only 4 million New Zealanders in this country but we have to remember that we are talking about resident withholding tax here. That means tax paid on the money in bank accounts that have been set up for children who are 1 2 3 or 5 years old by their parents because if we have bank accounts it does not matter how old we are we are liable to pay resident withholding tax on the money. That means that everyone with a bank account—not just people earning salaries and wages but everyone with a bank account—would have had to pay that tax. The vast majority of those people are actually on the 12.5 percent rate not on the top 38 percent rate. 
That is why the Labour Party completely agrees with the due process that every bill is supposed to go through in this House—that is first reading second reading Committee stage and third reading. We end up with robust debate and we allow New Zealanders to come in stand in front of a select committee prepare their submissions and voice their concerns about or often their support for various legislation. That is robust democracy in place. 
On that note I will speak briefly about Supplementary Order Paper 93 which the Minister in the chair the Hon Peter Dunne has put forward to amend the bill. I will speak about new clause 70B which the Supplementary Order Paper proposes to insert the one about GST on inbound tour package services. This amendment is quite unusual because it clarifies that GST applies to inbound tour operators. This was a fuzzy bit of the law. Some people paid GST and some did not pay GST but there was real concern over the intent of the law. Obviously if we have a law that is as unclear as this then we need to do something about it. What this law does is to say that from the period from 1 July 2007 to 30 June 2008 a zero rate will be applied. So in essence it is saying that if an inbound tour operator has a concern with this and approaches the Minister of Tourism—who is the Minister of Tourism? 
David Bennett 
: John Key. 
STUART NASH 
: It is John Key; that is right. How this happened is that John Key as Prime Minister I understand attended a conference of tour operators and he was asked about this. He said he would sort it out for them. That was seen by many as the Prime Minister saying: “Don’t worry about it. I’ll sort it out.” He has finally learnt that in fact what he has to do—like every other politician from Prime Minister down—if he wants to make a law change is go through due procedure. 
The legislation is actually saying that in that period a zero rate will apply. That sets a slightly dangerous precedent because if people have already paid GST like a lot of people did they will get a refund. If they did not pay it then that is fine: “Don’t worry about it guys. You’ll be right.” The precedent that may set is that other people who have concerns about the law or who might see a little bit of fuzziness will say that goodness if those people can have a retrospective holiday from their tax or get their tax wiped retrospectively then so can they. Labour obviously supports this bill. We will support this Supplementary Order Paper because it is probably the right thing to do as the law was so unclear. But I would just highlight the fact that it sets a little bit of a dangerous precedent and certainly Labour would not like this to be done too often. 
Let me talk about some other things in the bill. As Mr Cunliffe mentioned resident withholding tax was the main gist of this bill. It was the area where the vast majority of the debate was centred. But there are other things. The portfolio investment entity rate was changed to line up with the company tax rate. Those rates were put in place with KiwiSaver and the jury is still out on whether the portfolio investment entity is the right structure to have. There were submissions on that at the select committee but we decided that anything to do with portfolio investment entities apart from rate alignment was not part of the committee’s ambit so we did not discuss it. The tax rates on secondary employment and extra pays are being aligned with the new primary tax rates. That is what a lot of the bill is about. Further there is a new 12.5 percent tax rate for secondary employment income and extra pays are being introduced. Again that just aligns it with the bottom marginal rate which is important for people who have two or three jobs. They are paying the secondary rate of tax and they then have to go through the process of claiming refunds. That change is important. We talked about the Permanent Forest Sink Initiative and Mr Cunliffe also talked about it. 
If I could digress ever so slightly I would say that Mr Foss stood up yesterday and said that he was disgusted at some of the language that was being used. I sat there thinking “Goodness me!”. I will say what disgusts me. It is the fact that we are putting on a $100 billion liability. What can we say to our children when they say: “Dad what went on in Parliament back then?”. We will say: “Well son we spoke against it. We fought against that but that was a National bill.” But that will be changed anyway because Labour will be back in Government in 2 years’ time. Members should not worry about that. 
The bill amends the Income Tax Act 2004 and the Income Tax Act 2007 to include a forester who receives emission units under the Permanent Forest Sink Initiative with its special income tax rules to apply to a forestry business—it is quite technical. There are changes to the beneficiary income rules. There is electronic communications. Electronic communications allow the Inland Revenue Department to send out electronic notices if there are no reasonable grounds for the department to believe that the communication would not be received by the person concerned. We debated this quite a bit. The issue was what is the definition of “reasonable grounds”. We understood the logic behind this. The Inland Revenue Department sends out I believe something like a million pieces of mail a day. Is it a million a week? 
Hon Peter Dunne 
: 100000 a day. 
STUART NASH 
: Well whatever it is it is a huge amount of mail. What this will hopefully do is streamline the process. It is an efficiency measure. But we just need to be clear on the definition of “reasonable grounds” and therefore in what circumstances a person could reasonably be expected to have received an email. Someone suggested that with the modern email systems these days if someone opens an email it automatically sends something back saying that it has been received. Unfortunately the Inland Revenue Department’s email system does not allow for that. Hopefully there will be money to change that so people can confirm the receipt of messages which would make things a lot easier. The tax recovery obligations were good. 
In relation to personal tax summaries the Tax Administration Act is being amended to provide the Inland Revenue Department with more flexibility. Again that is to allow a reduction in compliance costs and provide efficiency for the taxpayer and for the department’s administration. Again that goes to the heart of the problem of 100000 pieces of mail a day being sent out and reduces that. There was slight concern expressed however by submitters like KPMG that it would disengage people from the tax system or they would not automatically get a tax summary and therefore they may not be aware that they are owed a refund. We hope that the Inland Revenue Department will manage that process. 
There was the correction of minor errors. That was a proposal that allows the Inland Revenue Department the discretion to allow taxpayers to correct minor errors in tax returns. It is about $500 at the moment. Some submitters suggested it should go as high as $10000 but the committee heard the department’s submissions on that and took its advice. The committee believes it should stay at around $500. 
One issue that we debated for a little while was the requirement to pay disputable tax which will itself be non-disputable. The Inland Revenue Department currently has the power to require in exceptional circumstances certain taxpayers to pay tax in dispute before the dispute is decided. That is to address risks such as flight risk. We understand this has been put into force only twice in the last 10 years so it is quite rare. But KPMG in its submission said: “We believe that this change is more than just a remedial amendment as it removes the right of appeal available to taxpayers. We struggle to see how any amendment which removes the ability of taxpayers to dispute the commissioner’s position can be properly described as remedial.” We talked to the Inland Revenue Department about that and the department assured us that it is used only in absolutely exceptional circumstances. We said OK we would agree on it but again it is something that we would like to monitor. In effect it takes away the right of every taxpayer to challenge in a court of law the commissioner’s decision. 
Amy Adams 
: No it doesn’t. 
STUART NASH 
: Yes it does. In the end we decided that the risk was worth this legislation going ahead. We heard KPMG say that it is sort of OK so we stuck with it.