Young Jonathan: Questions for Oral Answer — Questions to Ministers Questions to Members 
Text is incorporated into the Bound Volume 
Young Jonathan: Questions for Oral Answer — Questions to Ministers Questions to Members 
[Sitting date: 28 August 2012. Volume:683;Page:4763. Text is incorporated into the Bound Volume.] 
1. 
JONATHAN YOUNG (National—New Plymouth) 
 to the  
Minister of Finance 
: What is the Government doing to ensure that people are paying their fair share of tax? 
Hon STEVEN JOYCE (Acting Minister of Finance) 
: 
 The Government has made a number of policy changes that have been very effective in improving the fairness of the tax system and I will just briefly outline a few of them. We have changed the rules so that people can no longer use investment losses including those from rental properties to reduce their income and so become entitled to programmes like Working for Families or student allowances which were not intended for the wealthy. We have brought in stricter tax rules for foreign multinationals to reduce their ability to minimise tax payments in New Zealand. We have aligned the top personal and trust rates to improve the integrity and coherence of the tax system and to get rid of the incentive provided by the previous Government for people to hide their income in trusts. We have also tightened the rules for loss attributing qualifying companies and qualifying companies to ensure that property investors are taxed at the correct rate and this year’s Budget includes measures to close loopholes around holiday home ownership and livestock valuation. 
Jonathan Young 
: Is the Government being more vigorous in enforcing the tax rules? 
Hon STEVEN JOYCE 
: Yes it is. The Government has been significantly boosting the Inland Revenue Department’s capacity to investigate and prosecute tax fraud and tax avoidance. In Budget 2010 the Inland Revenue Department was provided with $119 million in additional funding over 4 years to increase its audit and compliance activity in areas like property transactions the hidden economy and debt collection. That was increased by a further $78 million in this year’s Budget. As my colleague the revenue Minister Peter Dunne said at the time of the Budget when people do not pay their fair share of tax everyone else suffers because there is less money for health education and other services. I would note that the Inland Revenue Department has been taking and winning a number of court cases relating to tax avoidance which is sending a strong message that the Government takes the issue of compliance very seriously. 
Jonathan Young 
: How successful has that extra funding for audit and compliance been? 
Hon STEVEN JOYCE 
: I am pleased to say it has been very successful. In the first year of increased audit and compliance the Inland Revenue Department has assessed additional tax of $86.9 million—a return of $6.62 for every dollar invested—in the hidden economy and in the property sector. An additional $115 million of tax debt was recovered which is a return of $9.50 for every dollar invested. It is estimated the extra compliance activities provided for in this year’s Budget will have a net positive impact on revenue of around $345 million over the 4 years to 2015-16. So it has been a very worthwhile investment. 
Andrew Williams 
: Mr Speaker. 
Mr SPEAKER 
: I call Andrew Little. [ 
Interruption 
] Oh Andrew Williams. I beg your pardon—I beg your pardon. 
Andrew Williams 
: Thank you Mr Speaker 
Mr SPEAKER 
: Andrew Williams my apologies. 
Andrew Williams 
: Thank you Mr Speaker. You are not the only Speaker who makes that mistake. Does he agree with the Minister of Revenue’s statement of 1 October 2010 that lowering the top tax rate to 33 percent was “a major tool in stopping tax avoidance …”; if so how does he reconcile this with the Inland Revenue Department’s announcement in recent days that only half of wealthy individuals are paying income tax? 
Hon STEVEN JOYCE 
: What the Inland Revenue Department actually said was that half of the small group of New Zealand’s wealthiest individuals are not paying the 33 percent rate of PAYE. However they could for example be receiving income through a trust—often people arrange their affairs through trusts—in which case they will be paying the trust rate of 33 percent which is of course the same rate. 
Hon David Cunliffe 
: Does he consider it fair that less than half of high-wealth individuals are currently paying income tax at the top tax rate? 
Hon STEVEN JOYCE 
: I think the answer to that question is the same as the answer to the previous question which is that the point that the Inland Revenue Department was making was that roughly half of these high net worth individuals were not paying PAYE but that does not necessarily mean they are not paying a 33 percent tax rate. For example they could be receiving income through a trust. I thought I had explained that previously but I am happy to do it again. 
Hon David Cunliffe 
: I raise a point of order Mr Speaker. The reason that I asked the supplementary question was that it went to the question of fairness rather than to the mechanism of the tax payments and the Minister did not address himself to the issue of fairness. 
Mr SPEAKER 
: The member is quite correct. He asked whether the Minister thinks it is fair. He sought the Minister’s opinion. The implication was that the Minister did think that was fair but if that is not correct the Minister should correct that. 
Hon STEVEN JOYCE 
: I was just making the point that because somebody does not receive a certain type of income it does not mean they are not paying the tax rate on another different type of income and if the tax rates are the same across the different types of income that is indeed fair. 
Hon David Cunliffe 
: I seek leave to table the Inland Revenue Department’s report  
Helping you get it right: Inland Revenue’s compliance focus 2012-13 
 which showed that in a survey of high-wealth individuals only 49.5 percent of them were in fact paying income tax on the top tax rate. The survey— 
Mr SPEAKER 
: The document is now understood. Leave is sought to table that document. Is there any objection? It is in the public domain. There is objection I take it? There is objection. 
Hon David Cunliffe 
: I seek leave to table a document prepared by the Council of Trade Unions that summarises Inland Revenue Department data and draws a similar conclusion that less than 50 percent of top income earners are in fact paying at the top tax rate and thereby looking— 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is no objection—[ 
Interruption 
] I beg your pardon. There is objection. 
Jonathan Young 
: Has he seen any recent reports on how the Inland Revenue Department is enforcing the tax rules? 
Hon STEVEN JOYCE 
: Yes as a matter of fact I have. Just this weekend I saw an article in the news media written by Greg Harris a specialist tax partner in the Hamilton office of Deloitte commenting on the Inland Revenue Department’s latest annual compliance focus document which sets out its priorities for the next year. Mr Harris wrote: “An overarching theme in this year’s document is the importance of self-assessment—in particular taxpayers understanding their obligations and meeting them … IRD provides guidance on the appropriate actions to take when taxpayers get it wrong.” He goes on to say: “For taxpayers who don’t comply Inland Revenue has increasingly sophisticated methods of detection. It will not hesitate to use the full force of the law against those who do not comply.”