Nash StuartSecond ReadingHon STUART NASH (Minister of Revenue): I move That the Taxation (Annual Rates for 2017-18 Employment and Investment Income and Remedial Matters) Bill be now read a second time. What an extraordinary call that was. Normally these sorts of bills move through the House. That member Andrew Bayly sat in the Finance and Expenditure Committee (FEC). He heard all the deliberations. It went through the normal process. This is the way this Opposition is going to behave—oppositional the whole way. Well if that's how you want to do things be our guest—be our guest. In the meantime we are going to put forward an aspirational vision for New Zealand. Oppose it all the way—we'll love it. In the meantime we're going to be aspirational. I would also like to congratulate Mr Fletcher Tabuteau for being elected the deputy leader of New Zealand First. Congratulations mate—well done. You'll be a fantastic deputy leader. This bill sets the income tax rates for the 2017-18 tax year and contains proposals aimed at strengthening the current tax settings to ensure that taxes are applied fairly and evenly—Brett Hudson: Has anyone seen Ron today? Hon STUART NASH: He can't listen. But the principal focus of this bill is to simplify and improve taxpayers' experience of tax administration in New Zealand—something I would think we all strive for. The bill contains measures that will provide the IRD with good more timely information direct from employment and investment income payers. Better information will mean greater accuracy of tax collected through the year which will help prevent people getting into debt. It will also help reduce the annual tax return chore for many. So it's important to this Government that these changes to our tax administration are well-designed to deliver these benefits to the New Zealand taxpayer. I am very grateful therefore to the Finance and Expenditure Committee for their careful consideration of all the proposals in this bill and their recommendations for improvement. Many of the recommendations focus on further smoothing processes or reducing compliance obligations for businesses particularly for the process of filing income information to inland revenue. Some employers provide PAYE information to inland revenue on paper but because of declining demand the postal service makes fewer deliveries and no longer offers Fastpost. With this in mind instead of the originally proposed seven working days from payday or deemed payday to provide this information to IRD the proposal in this bill is that these employers have 10 working days. Further these employers would also only have to file a maximum of two returns per month rather than for each payday in a month for information reporting. In addition to regular paydays many employers make out-of-cycle payments—for example to pay a departing employee their final pay on the day they leave. It is now proposed to generally allow employers to report out-of-cycle payments with their reporting for the next regular payday rather than having to file separately. Again this limits the number of returns an employer is expected to file and makes life easier for taxpayers—something the members on this side are very happy about. For schedular payments—for example payments to certain contractors in employee share scheme benefits—it is now proposed to allow an option that would at a minimum require reporting on a twice-monthly basis rather than every payday in a month. It is also proposed that for payments by non-resident employers to persons on shadow payrolls the recognition of payments can be deferred by 20 days and add the option of reporting on a twice-monthly basis. This allows them more time to calculate the New Zealand taxable income in PAYE deductions for their New Zealand - based employees. These are the changes recommended to help smooth processes. Another change recommended related to the repeal of the payroll subsidy. The bill as introduced proposed to repeal the subsidy with effect from 1 April 2018. However submitters told the select committee that the subsidy should remain in place until PAYE improvements such as payday reporting of PAYE information are bedded in and the select committee has backed this—well done FEC. The Government has therefore decided to retain the subsidy for another two years until 1 April 2020—another case of the Government listening to those who appear in front of the select committee and I congratulate the chair on the great work he did in getting this through. Some changes have also been made to reduce compliance costs associated with proposals for reporting investment income. The main change means that payers of investment income will not be required to report on exempt recipients. I now turn to the second major component of the bill: proposals to modernise and improve the taxation of employee share schemes. The main objective of the proposed reforms is to ensure that as far as possible the tax position of both the employer and the employee is the same whether remuneration for labour is paid in cash or shares. This includes ensuring that the share scheme cannot be structured to give employees tax-free remuneration. It's about paying your fair share. For example under current law an employee can be given a disguised share option without ever being taxed on that benefit whereas the provision of an actual option is taxable when the option is exercised. The Government is very keen to improve the fairness and integrity of the tax system so the proposal in this bill will remove this distortion and bring this form of remuneration more in line with other forms of remuneration. The Government expects that employers will particularly welcome the ability to claim a deduction for employee share scheme benefits without the need for complex structuring. The bill also clarifies and modernises the provisions related to widely offered share schemes because the benefit that can be offered under these schemes is relatively modest and it's tax exempt. The trade-off for this is that the provision of the benefit is also not deductible for the employer. Five new charities are proposed to be added to the list of donee organisations in schedule 32. These are Byond Disaster Relief New Zealand Flying for Life Charitable Trust Médecins Sans Frontières New Zealand Charitable Trust the Tony McClean Nepal Trust and Zimbabwe Rural Schools Library Trust. Now I would also like to advise members that I intend to release a Supplementary Order Paper that will give effect to the Government's intention to extend the current brightline test for residential property sales from two years to five years. This is about the integrity and the fairness of the tax system. I would have thought that this was something that every New Zealander is passionate about—fairness and the integrity of the tax system. It sort of boils down to paying your fair share—that's all it is. The thing about this is that when it arrived in select committee in the last term it was debated vigorously and the Government unfortunately came up with two years. But we have said that the fair way to do this—the fair way to bring the people who flip houses who speculate on property into the tax system is through changes to the brightline test. In bringing the bill to its second reading I must again acknowledge the significant contribution by the Finance and Expenditure Committee to the clarity and practicality of the bill and especially the chair who I think does a fantastic job—well done Mr Chair. In my view these recommendations have greatly improved the bill and as mentioned have brought a level of clarity fairness and integrity to the tax system. It is my pleasure to commend the bill to the House.