Roy Eric: Taxation (Annual Rates Returns Filing and Remedial Matters) Bill — In Committee 
Text is incorporated into the Bound Volume 
Roy Eric: Taxation (Annual Rates Returns Filing and Remedial Matters) Bill — In Committee 
[Sitting date: 18 September 2012. Volume:684;Page:5321. Text is incorporated into the Bound Volume.] 
The CHAIRPERSON (Eric Roy) 
: Members the Committee resumes its consideration of the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill. Before the dinner break we were debating Part 3 and the Hon Clayton Cosgrove has the call. He has used 8 seconds of his 5 minutes so he has 4 minutes and 52 seconds remaining. 
Hon CLAYTON COSGROVE 
: Thank you Mr Chair. Indeed it was— 
Chris Hipkins 
: I move an extension of time! 
Hon CLAYTON COSGROVE 
: Indeed it was a short call before dinner—even shorter I think than your colleague the other Chairperson who was in the Chair at the time in metaphorical terms in good humour. 
I want to address a number of clauses in Part 3. I know that the Minister in the chair the Minister for the Environment will be ably prepared to answer some questions. Specifically in clauses 104 to 106 there are a number of provisions that deal with the electronic and otherwise filing of forms and the aim I am advised is that as is the case with many tax bills that flow through the Finance and Expenditure Committee it is an attempt to reduce compliance costs for taxpayers and to make the Inland Revenue Department more efficient by moving from paper to electronic services. 
I would note though—and it would be interesting if the Minister could provide some background to this—that there is still a gap in the Inland Revenue Department system in that when you get a personal tax statement it will allude to salary and wages but it does not take account of interest paid on bank accounts. Some years ago I inquired of officials why that was and it was because of the archaic computer system that we still have at the Inland Revenue Department. 
So we have this bizarre situation as this bill tries to gain some efficiencies within the department where if you request your personal tax statement and you align that with your resident withholding tax certificate you will find that the two do not match up even though the bank has transferred—if you are on the right tax code which most people are—your resident withholding tax from your account to the Inland Revenue Department and for some reason relating to the archaic computer system the department cannot then reproduce that as part of your personal tax statement. 
So what you are required to do I am advised is either assume the Inland Revenue Department has got it right and that there has not been a mistake which is probably in about 90 percent of cases if you have the right tax code or if you want to be safe ring up your bank get your tax certificate and advise the Inland Revenue Department in writing. The Inland Revenue Department then both reconciles on paper and produces another tax statement with the correct amount on it even though the Inland Revenue Department has got the money. 
I said to an Inland Revenue Department official that given that the banks are compelled to transfer the funds the resident withholding tax from a person’s account to the Inland Revenue Department surely there is a more efficient way given that the Inland Revenue Department has got the money for the department then to produce a piece of paper that says: “Here is your wages and salary and anything else. Here is your personal tax statement. And it will include the money that we the Inland Revenue Department have already received from the bank.” But apparently this is a sheer impossibility. It cannot happen because there needs to be some reform or some change to the Inland Revenue Department computer system. 
So I ask the Minister given the wonderful things that are contained in clauses 104 105 105B 105C 105D and 106 whether there are any moves afoot to deal with the basic basic anomaly whereby the Inland Revenue Department receives the money but cannot actually reconcile the amount it receives from an individual’s bank account and have it reflected in the individual’s personal tax summary without that person or business having to go back with their certificate from the bank and go through the motions again. 
Can I also ask the Minister a question in respect of clause 104 which one could nominally perhaps refer to as the “John Banks clause”. Clause 104(1) states the following: “Where information contained in a taxpayer’s return has been transmitted by electronic means in the prescribed electronic format in accordance with”—I am sure the Minister is familiar with this—“section 36 the taxpayer shall retain or cause to be retained—(a) the return in the form of—(i) a signed hard-copy transcript of the information transmitted:”. Given that there has been some controversy in recent days—and I can see the National Party members have sort of perked up and are taking this very seriously—over whether people who sign forms read them retain the notion in their brain that they have signed them and have a memory of signing them and given that that is a normal human biological and mental practice for 99.9 percent of the populace apart from one person from Epsom what would be the penalty regime if somebody acted in a fraudulent way? 
What would be the penalty regime—I see Mr Goldsmith the chief biographer of Mr Banks is drafting his obituary as we speak; volume 2—if somebody acted in a fraudulent way? What I ask the Minister if a person did not retain the correct documentation or did sign that documentation and could not remember the name they used in signing that documentation—which is very 
 The Day of the Jackal 
 is it not—or could not remember or did not read the documentation they signed? Would that absolve them? I am sure the officials will be poring over the statute book as we speak— 
Hon David Parker 
: What about David Garrett? 
Hon CLAYTON COSGROVE 
: I will come to him in a minute. What would be the penalty regime? I am not a lawyer but Mr Parker and others around the place are eminent lawyers. I would have thought that that was fraud in its simplest definition. I would have thought— 
Michael Woodhouse 
: Careful. 
Hon CLAYTON COSGROVE 
: No I am talking about if a taxpayer— 
Michael Woodhouse 
: Is this a hypothetical situation? 
Hon CLAYTON COSGROVE 
: Absolutely. It is very hypothetical very hypothetical. I would have thought that that is fraud. If one signs a document or signs it negligently or falsifies documentation or maybe has a bout of amnesia and cannot remember their own name or perhaps signs somebody else’s—who knows—but cannot remember doing it would that absolve them of their tax obligations under new section 23(1)(a)(i) of the Tax Administration Act set out in clause 104? Then we come to new subparagraph (ii) whereby the taxpayer must retain “an electronic form meeting the requirements of section 25 of the Electronic Transactions Act 2002; and”—it goes on—“(b) for a period of—(i) 7 years after the end of the income year to which the return relates;”. 
Then we turn to clause 105B clause 105C and clause 106. Clause 106 inserts new section 33AA which relates to “Exceptions to requirement for return of income” and it says: “(1) A natural person is not required to furnish a return of income for the tax year if for the corresponding income year the person—(a) derives no assessable income other than—(i) income of a type referred to in subsection (2) including a total of $200 …” blah-blah-blah. 
So there is a whole series of requirements here that require a high requirement from the individual taxpayer: first that they do not have amnesia; second that they are being honest and not fraudulent; third that they actually read the documentation unless they have entrusted it to a trusted adviser; fourth that they sign their name to it; and fifth that they retain it. Presumably the Minister can advise us that the law would state that assuming you have signed it yourself you are aware of its contents and therefore you are responsible for the veracity and accuracy of those contents. I know that the Chairman is taking great interest in this; I can see the look on his face. I think he is an alumni of the Finance and Expenditure Committee possibly. 
We could call this the “John Banks series of clauses” and I think it is important given the environment in which we find ourselves floating around in this Chamber that we get squarely on the record whether this would be considered fraud whether a person in that situation would be seen to have lied to the Inland Revenue Department to have falsified documents or to have falsified the position and that being the case I ask what penalties or remedies the Inland Revenue Department would have through our judicial system. It is a worry. 
The other point is that I presume that under the mental health legislation some power of attorney would be required if somebody did not have the mental capacity to sign—I am being very serious—their own name because they had for instance amnesia. 
Michael Woodhouse 
: There is a scope issue here surely. 
Hon CLAYTON COSGROVE 
: No no. It is in scope because in order to comply with clause 104 presumably you would have to delegate power of attorney to somebody of sound mind who could sign on your behalf. But presumably a court would hold that the court would have to determine whether you indeed did perhaps have amnesia were incapable of remembering your own name or were acting as a responsible citizen and therefore requiring power of attorney to be delegated to a third party. That might happen and if that was the case presumably you would comply with the law. 
But if you falsified the documentation there is a question of penalties—and I know that the Minister in the chair is a lawyer a very senior lawyer I am told so she will be able to snap her fingers and gain the answer for us. What are the penalties? What are the remedies that Inland Revenue Department would have under that theoretical case if the documents were not retained under clause 104 and they were not signed appropriately? 
I know that Mr Bridges is a former chair of the Finance and Expenditure Committee and this is an issue that is very close to his heart—that and wheel clamping as he is the Associate Minister of Transport. He asked me whether I would mention him in the speech tonight. We call him Jed Clampett for obvious reasons. He is famous for his role as Associate Minister of Transport.