Dunne Peter: Taxation (Annual Rates Returns Filing and Remedial Matters) Bill — Second Reading 
Text is subject to correction 
Dunne Peter: Taxation (Annual Rates Returns Filing and Remedial Matters) Bill — Second Reading 
[Sitting date: 02 August 2012. Volume:682;Page:4268. Text is subject to correction.] 
Hon PETER DUNNE (Minister of Revenue) 
: 
 I move  
That the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill be now read a second time 
. It has been a while since this bill was introduced so let us just recap briefly on what it does. It is an omnibus bill that makes a number of wide-ranging changes to our tax system. Some of these aim for greater efficiency in innovative tax services some deliver on changes that were announced in Budget 2011 and others ensure that the current rules continue to work effectively and with greater fairness.  
It is a point that is worth stressing repeatedly that in tax administration an important way to simplify the system and to gain greater efficiency is through the greater use of electronic systems—a theme that underpins this legislation. For businesses the bill’s main thrust is to modernise the record-keeping requirements they face by making it easier for taxpayers to store their records offshore through applications from their data storage providers and by allowing taxpayers who submit returns electronically to also store them electronically. The bill also contains a proposal to simplify and reduce the costs of record-keeping by removing a number of legal barriers to electronic filing and record-keeping as the Inland Revenue Department moves away from its currently cumbersome paper-based systems towards the greater use of electronic services.  
The bill also proposes to rid taxpayers or their agents who send electronic returns to the Inland Revenue Department of the requirement to retain paper copies of those returns. That may seem a simple and indeed an obvious step in today’s environment but it is a significant one that will substantially reduce the cost of keeping records.  
It is also worth noting that the bill contains a proposal to give business greater certainty over the tax treatment of costs incurred on software development projects that are unsuccessful by allowing an immediate deduction for expenditure incurred in the year that the development is abandoned. The consequence of this will be a fairer outcome which should help more investment in innovation.  
Continuing the theme of fairness to bring greater equity to the filing returns system the bill also amends the tax return filing rules for salary and wage earners. Our tax system works on the principle of paying about the right amount of tax through the PAYE system and this will even out over time. The advantage for many taxpayers is the removal therefore of the annual requirement to file a tax return meaning a reduction in their compliance costs and freeing up the Inland Revenue Department from processing those returns to focus its resources on higher-value activities. 
 Over the years that advantage has been eroded. Some salary and wage earners have been cherry-picking only the most favourable years in which to square up their tax obligations in order to receive a refund while of course ignoring those years where there might well be tax to pay. This has resulted in the number of refunds for small amounts flowing out of the system and none of the balancing tax to pay it back if you like coming back in so the evening-out process that the legislation—which dates from the late 1990s—sought to put in place is in effect being nullified. So what this bill proposes is that taxpayers who choose to file a return for a particular year in which they expect an advantageous result should also be required to file returns for the previous 4 consecutive years.  
The bill will also remove the requirement for taxpayers to file an income tax return or to receive an income statement from the Inland Revenue Department merely because of their Working for Families entitlements.  
This bill was considered by the Finance and Expenditure Committee. I want to acknowledge the work that the committee did and the fact that in bringing the bill to its second reading the committee made two very important recommendations. The first of these is that the proposal to amalgamate the IR3 and personal tax summary return which members may recall was included in the original proposals should not proceed. Its second recommendation was that the implementation of the other return filing proposals for individuals that were remaining in the bill should be changed from the 2014-15 tax year to the 2016-17 tax year. These latter proposals can be activated earlier if that proves necessary by way of an Order in Council. I think that these are sound recommendations. I think that they will allow the Inland Revenue Department to implement the returns filing proposals for individuals alongside other high-priority changes that are already being implemented.  
I should also inform the House today that I intend to release a Supplementary Order Paper on this bill. That Supplementary Order Paper will focus largely on issues relating to the Canterbury earthquakes. I am confident that it will provide real help to the citizens of Canterbury as the matters that it addresses were all raised by taxpayers and their agents. It will introduce a series of remedial changes to ensure that the international tax rules are also working as intended.  
Overall this is a straightforward piece of legislation. It is consistent with the changes that we have been making over a number of years to simplify and make the process more efficient. It is taxpayer-friendly in the main. It has been well considered by the select committee and I acknowledge the members for that work. I am now pleased to commend the bill to the House for its second reading.