Bayly AndrewANDREW BAYLY (National—Hunua): Thank you Madam Chair. I was speaking a bit before about the pre-population of accounts and how that drives this bill and whether it can actually be implemented and I think one of the most important aspects of it is actually the computer system itself. Obviously it's part of a very large roll-out of a new computer system that's going to revolutionise tax in New Zealand and the way it's accounted for and how people interact with the IRD. The issue around the system though is that it was intended to be functional from 23 April and bear in mind that this bill comes into force on 1 April—effective 1 April—which is in a few days' time. So it's already been delayed to later in April when this migration is going to take place from the traditional or existing software system called FIRST to a new software system called START. One of the issues I'm very concerned about and I'm hoping the Minister of Revenue will talk about and come and address us about it is the issue around first of all why this delay—and this is after the start date of this bill—but secondly the level of testing that's gone on in terms of making sure that it is running operationally and it's got rid of all of its bugs from a computer perspective. I know there's been some batch processing of it and in fact the IRD are reasonably confident. They've done a significant amount of testing but they haven't completed the testing as I understand it. So what I'd like to hear from the Minister is in fact what is the state of the IT system because without having an operational system those refunds I was talking about before that are required and are normally paid back by June—or even just letting people know about the obligations—are a crucial aspect. That brings me on to the issue of if you're going to pre-populate the accounts with your contact details and all that sort of stuff the next thing is to make sure that the IRD is getting the right information. The issue that drives this bill is an issue called reportable income. That is part of the system trying to make it easier for interaction between the IRD and taxpayers and to some extent it is trying to reduce the levels of involvement required. If a taxpayer only receives reportable income then the requirement to do tax returns and all that sort of stuff basically falls away. The obligation falls away. But that assumption—that premise—means that you've got to have proper provision of information around the elements of reportable income. Madam Chair I'm referring specifically now to new section 22D in clause 21 as I know that you're keenly following the debate. But reportable income" is defined as first of all PAYE income—so the wages and salaries that most people earn—or the payment of resident passive income and that would be dividends from New Zealand shares and interest from banks. Then there's an element of a payment of non-resident passive income—so again this could be income from a US company claiming a dividend to New Zealand or it could be a foreign bond that someone's invested in and is getting a return on that bond. It may be an element of capital or it may be an element of interest which is interesting from a tax perspective. Or fourthly it could be a benefit under an employee share scheme described in Schedule 4. So if someone has just reportable income within that context then that makes it much easier for that individual to be able to account for their tax and meet their obligations. But the issue is: how does the IRD get this information? I'm sure as you will know there are about 330000 businesses in New Zealand—sorry 530000 businesses in New Zealand. Hon Scott Simpson: All going to be capital gains - taxed. ANDREW BAYLY: Yes I know there's going to be an element but of course I'm confining myself to this topic. But the issue is that of those there are about 200000 that have employees. These are the mums and dads that we talk about in this House and that that group across the other side of the aisle seem to forget about but those 200000 employers made up of mums and dads who put their money on the line—[Bell rung] Madam Chair. CHAIRPERSON (Poto Williams): Andrew Bayly—this is your fourth call in this debate. ANDREW BAYLY: Oh OK. So of those as at 8 February—not that long ago—only 21000 had actually logged on and started to provide the IRD with the information they need on the salaries and the wages they are paying to their employees. So the issue we've got—actually I'm sure the number's increased since then and I hope the IRD's made headway—is that we know there are 70000 businesses out of that 200000 who use paper-based systems. They don't use Xero because they are just used to doing PAYE on a paper-based system. It works well for them. They mightn't have many employees and that is the issue about how the IRD is going to get this information. It's going to be provided on a paper-based system. But the issue in this bill that is driving it forward is that previously they only had to provide their paper-based system information to the IRD monthly but now they will have to provide it every pay day. That means that the level of resourcing within the IRD to be able to handle that level of returns could be up to four times the existing level of information coming into the IRD and I think that is quite something. That's quite something and I'd like to hear the Minister talk about the staffing of the IRD and how it's going to meet those requirements. The other part of the reportable income that I've talked about was interest and dividends. Of course this also requires the goodwill of banks and also share registrars. At the moment banks have been providing information on interest that income earners receive annually and now there is a requirement to provide much more reporting regularly to the IRD. The issue I want to understand is to what extent are those banks required to do that and to what extent are they actually complying with the requests to do that because if the IRD does not get that information it runs a serious risk of not being able to determine the income of people and the intent of the Act is for the IRD to have a better measure a better assessment of people's income and the appropriate tax so that we're not getting into the situation where we have refunds or even worse taxpayers having to make tax payments at the end of the year. So that is quite something and I think how the share registrar is going to do it—the basis for doing it is really important. But of course what this issue doesn't deal with—which is the third part of that reportable income—is the income that people receive from overseas jurisdictions. So if you own shares in the US or the UK how's that going to be captured as part of your affordable income? That is quite a crucial aspect again because if you are inside that reportable income group then—as I keep saying—the idea is that there should be much fewer interactions with the IRD. To the extent that that's happening and what provision is taking place at an implementation level—which effectively needs to come into place in the next 23 days from 1 April—is a crucial part for this issue. Now the other thing I just want to turn to is the one around debt forgiveness. The issue around the debt forgiveness—and this is covered in new section 22IB just for your interest. The idea is for the IRD to be able to deal with the substantial issues of tax and for those people who are entitled to refunds to get them seamlessly and for those who don't pay a lot of tax to not have to file tax returns. At the moment there's a rule that if a taxpayer earns less than $200 then there's an exclusion around that which helps to some extent. But the debt forgiveness has been set at $50 provided the taxpayer's been on the right tax code which comes back to my earlier point that if the information's not been provided to the IRD how do you know what tax code you're going to do and whether the IRD's properly assessing it? If the IRD wants to reduce the tax code then it's up to the company and the people in these companies and businesses that we talk about—they will have to go back and change the tax code for that individual. Without that it never takes places. It's a very important aspect. It's all about compliance."