Smith Lockwood: Taxation (Annual Rates Maori Organisations Taxpayer Compliance and Miscellaneous Provisions) Bill — In Committee 
Smith Lockwood: Taxation (Annual Rates Maori Organisations Taxpayer Compliance and Miscellaneous Provisions) Bill — In Committee 
[Volume:607;Page:4233] 
Dr the Hon LOCKWOOD SMITH (NZ National—Rodney) 
: 
 Part 3 covers amendments to the Tax Administration Act. Clauses 86 to 89 cover the issue of distribution statements of Maori authorities and the credit account returns of Maori authorities. I ask the Minister in the chair again whether there are differences in the way the imputation system or the credit system will work for Maori authorities. Are there differences from the standard imputation system? We were led to believe at the Finance and Expenditure Committee that there were differences that were discriminatory because the way the system will work here confers favouritism that is not available through the standard imputation system to the people of races other than Maori. I think it is fair enough and there may be good reason there is a different imputation system but we need to know. If this Parliament is passing legislation it is fair enough to know what it is doing. I think it is reasonable that the Minister should explain. Is the imputation arrangement here the same apart from the fact that it is a discriminatory tax rate or does the credit system or the imputation system differ in the refunds available for tax not actually paid? That is my first issue. 
The next issue is this. Clause 74 in particular relates to the power to remove documents from businesses. The Law Society was very concerned that the power provided in this legislation—the power of search and seizure—on the face of it was in conflict with the New Zealand Bill of Rights Act. This was not some minor submission to the select committee. The New Zealand Law Society made this submission. Again I would like the Minister to advise us what further advice the Government has taken on whether clause 74 and this issue of the power of search and seizure is in conflict with the New Zealand Bill of Rights Act. That is my second question to the Minister. 
Another very important issue in this part of the bill is I think under clause 100. Up until now if a person has had a dispute with the Inland Revenue Department there has been a provision that the department collects 50 percent of the money from that person and that person does not have to pay the other 50 percent until the dispute is sorted out. The amendments in this legislation will enable the Inland Revenue Department to claim 100 percent of the money in dispute. Sure the select committee managed to get some easing of this provision so that the department is meant to claim this 100 percent only if it has concerns that it may not receive the money in the event it wins the case. But the problem is this: if the department gets 100 percent of the money and it is wrong the use-of-money interest rate it pays is only 4.83 percent—way below commercial rates. 
There is an issue there that should be addressed by the Government. I would like the Minister to respond to this. If he is allowing the Inland Revenue Department to claim 100 percent of the tax in dispute with this legislation why is it not that a more reasonable use of money interest would be paid if in fact the department were proved to be wrong when the dispute is resolved? That is my third question to the Minister. 
The fourth question concerns clause 114 which from memory provides for promoter penalties where promoters promote schemes that are clearly inconsistent with our tax legislation. National has no great problem with penalties in that clause to start avoiding what are ridiculously avoiding schemes. But the problem is—and I want the Minister to explain what would happen in this case—what happens when there is a tax adviser who has promoted a scheme that he or she believes is perfectly reasonable? The Inland Revenue Department is not sure about it and gets into dispute with the taxpayer. The taxpayer gets all nervous about being in dispute with the department and settles with the department because lots of taxpayers are scared of the might of the Inland Revenue Department. That means a precedent is set that suggests that the scheme is outside the law. 
Now the tax adviser who promoted the scheme is caught without having had any say in its defence—in the first place because a person involved in the scheme may have agreed to a settlement with the department. I would like the Minister to explain to us how in this legislation the situation will be overcome in which we have a perfectly honest and reasonable tax adviser promoting what he or she believes is a reasonable scheme but being caught because a taxpayer agrees to a settlement.