Dunne Peter: Taxation (Annual Rates Returns Filing and Remedial Matters) Bill — First Reading 
Dunne Peter: Taxation (Annual Rates Returns Filing and Remedial Matters) Bill — First Reading 
[Volume:676;Page:21432] 
Hon PETER DUNNE (Minister of Revenue) 
: 
 I move  
That the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill be now read a first time. 
 At the appropriate time I will be recommending that this bill be referred to the Finance and Expenditure Committee for its consideration. This bill is an omnibus tax bill that proposes some wide-ranging reforms to our tax system. Some of the proposed changes aim for greater efficiency and innovative tax services some deliver on changes announced in Budget 2011 and others ensure that the current rules continue to work efficiently and with greater fairness. 
The centrepiece of the bill proposes a major shift in the way individuals and businesses currently deal with routine tax-return filing and record-keeping requirements making these processes simpler and easier. These changes have been progressed from the proposals that were outlined in the public consultation paper  
Making tax easier 
 which was released by the Government last year. Under the proposed changes the two main tax forms for individuals the IR3 and the income statement will be replaced by one form. The bill will also remove the requirement for taxpayers to file an income tax return merely because of their Working for Families entitlements. These people will however still be required to provide their income information to the Inland Revenue Department and to reconcile their Working for Families payments. 
To bring greater equity to the returns filing system the bill will also tighten the rules that currently allow certain salary and wage earners to cherry-pick only the most favourable years in which to square up their tax obligations in order to receive a refund. Instead the taxpayers who choose to file a tax return will be required to have their tax obligations squared up for each of the previous 4 years as well as the current year. This rule will be phased in over 4 years beginning from the 2014-15 tax year and will remove a tax advantage over other taxpayers who are required to file a return every year. 
For businesses the bill simplifies and reduces the costs of record-keeping by removing a number of legal barriers to electronic filing as the Inland Revenue Department moves away from cumbersome paper-based systems and towards greater use of electronic services. For example under the changes proposed in the bill taxpayers or their agents who send electronic returns to the Inland Revenue Department will be able to retain copies in an electronic rather than a paper format thus reducing their record-keeping costs. Together these measures will make taxpayer filing requirements simpler easier and fairer. 
As I mentioned earlier the bill also includes two measures that were foreshadowed in Budget 2011. To encourage a higher level of private savings and make KiwiSaver more financially sustainable the bill introduces changes to the minimum employee and employer contribution rates which will increase from 2 percent to 3 percent from April 2013 as previously announced in the Budget. 
In the second Budget 2011 - related measure the bill also gives effect to an increase in the minimum equity requirement for foreign-owned banks operating in New Zealand. From 1 April 2012 the minimum equity rate will rise from 4 percent to 6 percent and this change is part of the Government’s continuing focus on ensuring that all taxpayers pay their fair share of tax. 
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. Accordingly the bill introduces changes in order to give businesses greater certainty over the tax treatment of costs incurred on software development projects. Under this bill a deduction will be allowed for expenditure on an unsuccessful software development project in the year the project is abandoned. This measure addresses the immediate concerns of businesses involved and will help to ensure that the tax rules do not act as a deterrent to investment and innovation. 
The bill also contains measures to change the tax treatment of profit distribution plans. Under the changes proposed shares issued under these schemes will be treated as a taxable dividend to ensure that the tax treatment is consistent with other similar arrangements such as dividend reinvestment plans. This will ensure that such schemes cannot be used to undermine the imputation credit rules by streaming imputation credits to shareholders who can best use them. The Government is strongly opposed to the misuse of imputation credits in this way as it undermines the whole basis of the imputation credit system which is to tax all shareholders evenly on their share of a company’s profit. 
In further clarifying the rules for businesses a number of GST-related changes are included in this bill. These largely deal with technical matters resulting from rules that were introduced last year to prevent phoenix fraud schemes. The changes will ensure that the rules operate as intended thereby improving their fairness and the overall integrity of the tax system. Other measures in the bill will bring greater certainty to the GST rules more generally. For example the bill clarifies that late payment fees charged by businesses to customers who are late in paying their accounts are subject to GST. That will resolve any previous uncertainty. 
Finally the bill confirms the annual income tax rates for the 2012-13 tax year and introduces a range of remedial amendments to give greater certainty to taxpayers. They include enhancement to KiwiSaver operational processes clarifying entitlements to Working for Families tax credits amendments bedding in the new look-through company rules adjustments to the binding rulings and depreciation determination regulations and clarifications to the life insurance transitional rules and the emissions trading rules. 
These are the main features of this omnibus bill. Taken together they help strengthen our tax system to make it easier for taxpayers to comply with their obligations and they are generally more fair for taxpayers overall. With those remarks it gives me great pleasure to commend the bill to the House.