Woodhouse Michael; Mallard TrevorTAXATION (BUSINESS TAX EXCHANGE OF INFORMATION AND REMEDIAL MATTERS) BILLSecond ReadingHon MICHAEL WOODHOUSE (Minister of Revenue): I move That the Taxation (Business Tax Exchange of Information and Remedial Matters) Bill be now read a second time. This bill proposes a number of important changes to our tax system. The centrepiece of the bill delivers on the changes announced by the Government as part of Budget 2016 and proposes a major shift in the way businesses currently pay their tax making these processes simpler and easier. It is important to the Government that these changes are sound workable and deliver benefits to the New Zealand taxpayer. I am grateful to the Finance and Expenditure Committee so ably chaired by its chair David Bennett for its careful consideration of all the proposals in this bill and its recommendations for improvements. The bill is in better shape as a consequence.The key objective of this bill is to simplify taxes for business—in particular the process for provisional tax. We are proposing to introduce a new calculation method to better match tax payments with income earning. The proposed new calculation approach the accounting income method takes advantage of technological advances to smooth the process. It more closely matches income earning with tax payments and reduces compliance costs for smaller businesses. Because tax will be paid as income is earned businesses using the accounting income method will have more certainty that they are paying the right amount of tax. There is no intention to do away with the other methods for calculating provisional tax; the proposal is simply for the accounting income method to be a fourth option for calculating provisional tax.The bill also seeks to reduce or remove the application of use-of-money interest to a large number of taxpayers. Combined these proposals will remove some 67000 additional taxpayers from the impacts of use-of-money interest. For those using the new accounting income method who pay the required instalments the use-of-money interest will also not apply.The bill also proposes flexibility for businesses that could trade their way out of debt. The bill proposes to reform late payment penalties by no longer imposing the monthly incremental penalty from new GST income tax and overpaid Working for Families credits. The provisional tax proposals are part of a much larger programme of changes aimed at modernising and simplifying tax administration in New Zealand. Viewed as a whole the modernisation programme will bring great benefit to New Zealand taxpayers and the economy by improving simplicity and certainty. But during the transition from the current to the new tax administration flexibility will be required allowing the Inland Revenue Department to quickly overcome transitional issues. For that reason a proposal was added to the bill at the select committee stage to provide the ability to use regulations to deal with urgent transitional issues. The intention is to avoid undue delays to the transitional process and to provide certainty for taxpayers. Introducing the proposal at that stage allowed the public the opportunity to make submissions on the matter and allowed the select committee to fully consider the proposal and submissions.Submissions to the Finance and Expenditure Committee on this point were focused largely on concerns about the breadth of the regulation-making power. Not all of those concerns as outlined by media and the submitters were that rational and certainly this type of tool has been used many many times before by this Parliament to ensure smooth transitions. It was not the huge Henry VIII" provision that some had said. However on reflection the reading of Supplementary Order Paper 190 could have been construed as much broader than was intended and therefore the select committee considered those concerns and accordingly has made recommendations.The key recommendations proposed are that any regulations must be limited to issues that arise during the IT system changes must not increase a liability and must not undermine the relevant rights of taxpayers. In my view incorporating these recommendations achieves the objective of allowing the Inland Revenue Department to respond to transitional issues but by narrowing the scope of the proposal and building in further safeguards it addresses the concerns of submitters.The second major component of this bill proposes enabling legislation requiring New Zealand financial institutions unless exempted to review their accounts and collect and report information to the Inland Revenue Department on accounts held or in certain circumstances controlled by non-residents. Where necessary the Inland Revenue Department will then share that information with other tax jurisdictions in specific countries. The objective is to help eradicate tax evasion.The legislation gives effect to New Zealand's international commitment to implement the OECD's common reporting standard for the automatic exchange of financial account information in tax matters. It will ensure that New Zealand remains fully compliant with international standards for transparency and tax cooperation. The overriding principle in this proposal is the desire to bring more transparency to international tax matters. This is also true for one other item in the bill: the proposed amendment to our foreign trust disclosure rules. Although our tax settings are sound by international standards the Government is always open to making improvements to New Zealand's already strong tax settings if that is warranted.Dr David Clark: The Minister's already moved on to the health portfolio. Come on Minister—some passion.Hon MICHAEL WOODHOUSE: This is not a valedictory. That is why earlier this year we committed to act on recommendations from the Shewan inquiry to ensure our disclosure rules are fit for purpose and healthy. The proposed amendments to the foreign trust disclosure rules included in this bill will strengthen and help make sure that we maintain our reputation in the context of best practice of international exchange of information.The remaining changes in the bill are of a practical nature and ensure that the tax rules are applied consistently that they are clear and that they achieve their correct policy purpose. Bringing the bill to its second reading I again acknowledge the significant contribution made by the submitters and the committee to the clarity and the practicality of the bill. In particular the committee spent significant time with submitters in carefully weighing the context and controls of proposals introduced by the Supplementary Order Paper which would allow regulations to be made to facilitate the essential building blocks of the Inland Revenue Department's business transformation. Submitters can therefore be assured that their concerns have been carefully listened to during open consultation and the bill reflects the considered view of the committee that the proposals are sound. I commend this bill to the House.The ASSISTANT SPEAKER (Hon Trevor Mallard): Grant—the question is that the motion be agreed to."