Wong Pansy: Income Tax Bill — Second Reading 
Wong Pansy: Income Tax Bill — Second Reading 
[Volume:616;Page:11798] 
PANSY WONG (National) 
: 
 The National Party will be supporting the passage of the Income Tax Bill. I want to make it very clear that this rewrite of the Income Tax Act has nothing to do with tax rates. This legislation does not mention what personal or corporate tax rates should be. That is the subject of other annual legislation which Parliament will debate. So I do not agree with the ACT party which gave that as the reason it will be voting against this bill. 
The sole purpose of this bill is to bring together the income tax legislation which has had so many amendments and binding rulings over the years. Many of my parliamentary colleagues have mentioned there are over 2000 pages in this bill. I do not want people to overemphasise the fact that because the bill is written in a simpler style of English a lot of people will supposedly find it easier to interpret; I think that is an oversimplification. We are dealing with legislation and we need to accept that there are technicalities that this legislation will not overcome in terms of the definition. I will demonstrate that later on. 
I want to comment that New Zealand First’s Craig McNair should at least be as honest as Labour’s Darren Hughes. We appreciate from Darren Hughes’ speech that he had not read the bill. I listened with a lot of intensity but I could not really understand what Craig McNair was driving at. I want to acknowledge the hard work of the Finance and Expenditure Committee members. Myself and John Key joined the select committee only this year so two of us participated only at the final stages of the examination of this legislation which comprises over 2000 pages. I would like to acknowledge the effort of the other select committee members and also the former members of that committee our National Party leader Dr Don Brash and Dr the Hon Lockwood Smith and the Hon David Carter. It must have been quite a daunting task. I also think it is to the select committee’s credit—as Gordon Copeland mentioned—that there was an initiative to do “road tests” and also to extend the transitional period of this legislation. It is such a massive piece of legislation that all due care should be taken during the consultation process. 
I also want to join my colleagues in acknowledging the efforts of Inland Revenue Department staff in trying to bring thousands of pages of legislation together. That cannot be an easy task. As one of the two members of the Institute of Chartered Accountants who are in Parliament I want to join Gordon Copeland in acknowledging the efforts and contributions made by the members of that institute. 
I want to re-emphasise a promise that was made by the Hon Michael Cullen during his second reading speech. He promised that in this legislation he will try his best to maintain the tax policy and try to maintain the stand that it does not aim to change any policy. But there are two exceptions. First of all there are some changes made I understand in the interests of clarifying or simplifying the policy intention and there are also changes approved under the generic tax policy process. I want to re-emphasise that because at the final stages of deliberations on this legislation cases have already been raised by people disputing whether the rewrite has led to a change of the underlying tax policy. Some of those issues raised have already been referred to the panel for decisions. 
I know that we can all be optimistic when standing in the safe atmosphere of the debating chamber and making promises that this legislation does not intend to change tax policy so therefore taxpayers should be safe that if queries are raised with the Inland Revenue Department or the Minister they will be satisfactorily resolved. My experience is that those types of issues tend to be a lot more complicated and for any taxpayer trying to take on a department in terms of changes to interpretation whether intentionally or unintentionally it is difficult. I raised that issue during our consideration but I was told that the department has taken upon itself the responsibility to ensure that any taxpayers who believe they have been disadvantaged by the changes to interpretation in the rewrite of the Income Tax Bill will have the opportunity to take their concerns to the tax panel. So I think it is very important to reassure taxpayers and tax practitioners in New Zealand that the rewrite of the Income Tax Bill will still enable them to have a fair hearing if they believe unintentional changes are being brought in during this rewriting process. I am glad that the Minister of Finance the Hon Michael Cullen repeated that assurance. It is one that has to be honoured. 
I mentioned previously—and I promised to share this with the public—that as parliamentarians we should not try to overpromise or oversimplify how user-friendly this rewrite of the income tax legislation will sound to them. Let me give a few examples. In Part A “Purpose and interpretation” clause AA2(2) tries to give us the definition of defined terms: “If a defined term is used in a section and is not included in the list of defined terms following the section the term is nevertheless used in the section as defined.” I have to confess that I am none the less any clearer after reading the definition of the defined terms. I am just trying to warn people that as parliamentarians we should not overpromise how wonderful this piece of rewritten income tax legislation is. If anybody is in doubt they should still seek the advice of experts. 
To demonstrate how complicated the tax system has become I point out that even the definition of income can be varied. Ordinary taxpayers might think that income is simple enough but in subpart BD1 of Part B income is defined as exempt income excluded income and counted income. So to me it is not a matter of standing today in Parliament and telling the public to trust politicians because we have a trustworthy process of rewriting the Income Tax Bill and from now on it is a very simple issue. Legislation by its nature has technicalities and complications. The intention of the Income Tax Bill no doubt is to make sure people are paying their fair share of tax. If one derives income one is supposed to be able to deduct the expenditure incurred in deriving of that income. 
Ultimately I agree with ACT and also with my own party in saying that a lower rate of income tax undoubtedly helps to simplify tax legislation. When people believe that their rate of income tax is reasonable then they will try less to challenge the system or devise means to avoid paying tax. Ultimately individuals anywhere will try to challenge income tax schemes no matter how low the rates are. 
The National Party supports the passage of the Income Tax Bill through its second reading and looks forward to the Committee stage debate.