Foss Craig: Taxation (Annual Rates Business Taxation KiwiSaver and Remedial Matters) Bill — In Committee 
Foss Craig: Taxation (Annual Rates Business Taxation KiwiSaver and Remedial Matters) Bill — In Committee 
[Volume:644;Page:13721] 
CRAIG FOSS (National—Tukituki) 
: 
 I would like to speak to two other clauses in Part 2—first to clause 173 and then to clause 184 which talks about the International Financial Reporting Standards. Clause 173 deals with provisional tax and rules on the use of money interest. There is always discussion about this but in particular this provision looks at the rules around the use of money interest—that is when there are excess funds at the Inland Revenue Department the department has use of funds. At the moment it pays a credit rate of I think 6.5 percent or if the taxpayer supposedly has moneys due he or she has use of the funds owed and is charged something like 13 or 14 percent—about a 7 percent spread. So that is a 7 percent spread between the money that is owed to a taxpayer and stays at the Inland Revenue Department and the money that it is essentially lending to the taxpayer. Any bank or financial institution would give its right arm its left arm and probably both its legs to have an interest rate spread between deposits and loans of over 7 percent. That is absolutely outrageous. I think the term there is “usury”. 
There has been much commentary even from members on the other side and from the smaller parties on the unfairness of charging interest rates like that and actually driving people into further debt borrowing to pay the borrowings to pay the borrowings. The amendments proposed by my colleague Dr the Hon Lockwood Smith try to address some of the issues that bring people into that position. Again I will quote from the Inland Revenue Department’s desired future details: “Society has confidence that appropriate action will be taken against customers who do not apply.” That also implies that those customers who are doing the right thing and pay the right money at the right time but perhaps tick the wrong box in the form they send in also need to know there is good faith on the part of the Inland Revenue Department. I would be interested to hear the comments of the Minister in the chair the Hon Peter Dunne on the good-faith ambitions of the Inland Revenue Department and whether it will be addressing the difference between its borrowing rate and its lending rate. 
Clause 184 as Dr Lockwood Smith touched on earlier talks about the unacceptable tax position. Towards the end of clause 184 is an explanation of what does and does not put someone in an unacceptable tax position. Interestingly it talks about the International Financial Reporting Standards which have been recently adopted. I believe that there is such a thing as the New Zealand version of the International Financial Reporting Standards. Is that deliberate or is it just to internationalise it? We have asked Treasury about this quite a few times at the Finance and Expenditure Committee and even the Government accounts have been reproduced under the New Zealand Financial Reporting Standards as opposed to the International Financial Reporting Standards. I apologise to the many listeners out there who think that this may sound like gobbledygook but sadly this is taxation law. Even Landcorp in its annual report suggested that the International Financial Reporting Standards made a mockery of its reporting etc. So Landcorp cannot understand it. 
I believe that in a recent paper Treasury said it was looking to readdress the necessity of the New Zealand Financial Reporting Standards or at least how it was created and measured against the International Financial Reporting Standards and whether it was having a desired outcome for New Zealand. In many instances the fluctuations in their profit and loss accounting and therefore their tax obligations were flying around all over the place and not giving a solid and transparent report to whomever their agents might be. 
There is one other clause in here that we discussed at the select committee—and I apologise for not finding it right at the moment—but the Minister or the officials may remember it. It addresses KiwiSaver and refers to KiwiSaver members being able to forgo interest in relation to funds at the Inland Revenue Department or I believe at some entity.