Robertson GrantTAXATION (ANNUAL RATES FOR 2018-19 MODERNISING TAX ADMINISTRATION AND REMEDIAL MATTERS) BILLFirst ReadingHon GRANT ROBERTSON (Minister of Finance) on behalf of the Minister of Revenue: I move That the Taxation (Annual Rates for 2018-19 Modernising Tax Administration and Remedial Matters) Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill.This wide-ranging bill builds on recent work and represents a significant step forward in the modernisation of New Zealand's tax system. It supports much of the work the Inland Revenue Department is doing as part of its Business Transformation programme. It represents an opportunity for New Zealand to transition its tax system to one where it is easier to get your tax right compliance costs are lower and Government policy changes can be made more quickly and cost-effectively.The Taxation (Annual Rates for 2017-18 Employment and Investment Income and Remedial Matters) Act passed in March this year laid the foundation for a smarter more responsive tax system by ensuring that the payers of employment and investment income provide better and more timely information to Inland Revenue. With that in place Inland Revenue is now in a position to ensure the right amounts are deducted—DEPUTY SPEAKER: I'm sorry to interrupt the member but we seem to have people standing there talking. Could they please respect the member on his feet?Hon GRANT ROBERTSON: You don't want me to start again?DEPUTY SPEAKER: No no—you can continue.Hon GRANT ROBERTSON: With that in place Inland Revenue is now in a position to ensure the right amounts are deducted or withheld from individuals to meet their obligations and more accurately determine entitlements such as Working for Families. This is primarily what this bill is about.The proposed changes will apply for the 2018-19 tax year end processes and the full benefit of the changes will be realised from the 2021 year when for the first time people will be able to see a full year of pre-populated information for PAYE and all of their investment income. Most people will pay what they need to and get what they are entitled to during the year without having to do anything. The changes which would come into effect on 1 April 2019 subject to the passage of this bill will help individuals to use the right tax code so they pay the correct amount of tax during the year. They will remove unnecessary compliance costs simplify filing obligations and ensure refunds are paid out automatically for most wage salary and investment income earners.The changes proposed to secondary tax codes are intended to address this Government's concerns about the over-withholding caused by secondary tax. These changes will enable Inland Revenue to more closely identify workers with more than one job who have been overpaying their tax. Inland Revenue will then be able to suggest a more appropriate withholding rate for the employee's second job. In this way we will remove the negative impact of secondary tax for those affected workers. Inland Revenue will make it easier for taxpayers to see what they've paid and what they owe and will be better at detecting errors. However while more people will have income reported on their behalf they will continue to be responsible for reporting other income and deductions assessing their liabilities and meeting their obligations. A modern digital tax system will serve the needs of all New Zealanders. It will help people to get their tax and welfare entitlements right the first time avoid errors and give them a clearer view of what they've paid and what they owe during the year.The tax system will be simple to comply with and responsive to people's changing circumstances. People will spend far less time and effort ensuring they meet their obligations and receive their correct social policy entitlements as tax will be correctly withheld and assistance provided at the time it is needed. This is the key thing: developing a tax system that responds in near - real time to changes of circumstances without requiring a wash-up at the end of the year.The bill simplifies tax obligations for individuals who currently apply for a personal tax summary or file a tax return each year in order to get a tax refund. The changes in this bill will mean that many of these people will be able to get their refunds automatically. Under the proposed changes around 750000 more individuals who don't currently interact with Inland Revenue will be given a tax refund without having to do anything. These changes will mean that most people whose only income is from salary wages or investment will pay what they need to and get what they're entitled to without having to do anything. These improvements to how individuals have their tax assessed constitute the main part of this wide-ranging suite of measures to modernise and simplify the tax system and they have risen directly out of the new technology that Inland Revenue has been rolling out as part of its Business Transformation programme. The Commissioner of Inland Revenue Naomi Ferguson has assured me and the Minister of Revenue that these changes as a result of the Business Transformation programme as well as other Government priorities will be delivered on time.In addition to the changes benefitting individuals a number of other important changes are being made to the Tax Administration Act but again these changes are focused on ensuring a simple and fair tax system. A key aspect of these amendments to the Act is to clarify Inland Revenue's ability to collect use and disclose information. The changes proposed in the bill will make the rules more efficient and transparent which will improve taxpayers' trust and confidence in the way Inland Revenue manages the information it holds.This bill clarifies that information collected for one Inland Revenue purpose can be used for the department's other functions. It also provides a more transparent and efficient process for collecting large sets of data where this is done on a regular basis. The proposed changes in the bill will better focus the confidentiality rule to protect taxpayer information and more clearly set out any expectations. These changes strike the right balance between the stewardship of taxpayers' confidential information and improved customer service. These changes help affirm this Government's commitment to improving openness and transparency while continuing to protect individuals' private information.Another proposed improvement to the Act is the introduction of a short process ruling where small businesses can more easily apply for a binding ruling from Inland Revenue on a broad range of matters. Binding rulings are where taxpayers can apply to Inland Revenue for a ruling on a specific tax matter. Currently this service can be prohibitive to many small businesses due to the time and cost involved. The ability for a wider range of taxpayers to obtain binding advice from Inland Revenue on their tax positions will assist in the goal of first-time accuracy. Therefore the bill proposes to extend the ability to obtain private binding rulings to taxpayers who are in practice excluded from this because of the complexity of the process and the fees charged. This aligns with work the OECD has been doing to encourage first-time accuracy in its members' tax systems but more importantly it opens up a key service that the commissioner of revenue provides to a wider range of taxpayers and businesses.This bill also provides the Commissioner of Inland Revenue with more flexibility to correct anomalies in the tax legislation. The bill proposes additional tools for the commissioner so that anomalies can be resolved earlier therefore reducing taxpayer compliance costs by providing earlier certainty. The proposed new tools comprising regulations determinations and administrative actions will be subject to a number of constraints including being optional for the taxpayer to apply and being for a period of not more than three years.The bill also proposes a suite of improvements to KiwiSaver as a result of the Retirement Commission's 2016 review of retirement income policies. These changes range from introducing more choice for employee contribution rates to making it easier for our older working population to join and stay in KiwiSaver.Other changes proposed in the bill include amendments to add 13 charities to the donee organisations—Hon Member: Oh you're kidding!Hon GRANT ROBERTSON: —with overseas purposes in schedule 32 of the Income Tax Act 2007. Mr Bishop's been waiting for that for years. It will allow taxpayers to switch to the accounting income method from either the standard or GST ratio methods at any time during the income year. The bill also sets the annual rates of income tax for the 2018-19 tax year.Finally the bill contains a large number of mainly technical amendments and while mostly remedial in nature these measures are of major importance in making sure that the existing tax rules work well in practice. The proposals in this bill make paying tax simpler and clearer for Kiwi taxpayers and it is therefore my great pleasure to commend this bill to the House.