Nash StuartTAXATION (ANNUAL RATES FOR 2018–19 MODERNISING TAX ADMINISTRATION AND REMEDIAL MATTERS) BILLThird ReadingHon STUART NASH (Minister of Revenue): I move That the Taxation (Annual Rates for 2018–19 Modernising Tax Administration and Remedial Matters) Bill be now read a third time. For the benefit of the members I'll use this opportunity to recap the objectives and the content of this bill. The core measure in this bill is a significant improvement in how tax returns of individuals are assessed. The Taxation (Annual Rates for 2017–18 Employment and Investment Income and Remedial Matters) Act passed in March last year laid the foundation for a smarter more responsive tax system by ensuring that the payers of employment and investment income provide better and more timely information to the Inland Revenue Department. With that in place inland revenue is now able to ensure the right amounts are deducted or withheld from individuals to meet their obligations and to more accurately determine entitlements such as Working for Families. This bill simplifies tax obligations for individual taxpayers. The changes will help individuals to use the right tax code during the year. Sitting suspended from 6 p.m. to 7.30 p.m.Hon STUART NASH: Thank you Madam Deputy Speaker. Well as I only spoke for about a minute I might as well reiterate from the beginning. For the benefit of members I will use this opportunity to recap the objectives and the content of this bill. The core message in this bill is a significant improvement in how tax returns of individuals are assessed. The Taxation (Annual Rates for 2017-18 Employment and Investment Income and Remedial Matters) Act passed in March last year laid the foundation for a smarter more responsive tax system by ensuring that payers of employment and investment income provide better and more timely information to Inland Revenue. With that in place Inland Revenue is now able to ensure that the right amounts are deducted or withheld from individuals to meet their obligations and more accurately determine their entitlements such as Working for Families. This bill simplifies tax obligations for individual taxpayers. The changes will help individuals to use the right tax code during the year so that about the right amount of tax is deducted from their income during the year. It will remove unnecessary compliance obligations. It will simplify filing obligations and help refunds be paid out automatically for most wage salary and investment income earners. The changes to the secondary tax codes are intended to address this Government's concern about secondary tax. These changes will enable Inland Revenue to more closely identify workers with more than one job who've been overpaying their tax. Inland Revenue will then be able to suggest a more appropriate withholding rate for an employee's second job. In this way we'll remove the negative impact of secondary tax for those employees. In fact these tailored tax codes are available at the moment but a taxpayer has to proactively contact IRD. This is going to make it pretty much automatic. Another key benefit is that most people won't have to engage with a third party to ensure they get a tax refund—great news. The changes in this bill will mean that many people will get their refunds automatically—Angie Warren-Clark: Yay!Hon STUART NASH: —and as a result—it's a great idea isn't it?Angie Warren-Clark: I like that.Hon STUART NASH: Yeah so do we—actually so will 440000 extra taxpayers as the Government expects to pay out refunds to that many Kiwis. Ensuring people are paid—Andrew Bayly: Good thing we initiated that reform.Hon STUART NASH: Oh it's fantastic. Ensuring people pay the right amount of tax and also receive correct social policy entitlements will further build people's trust in the New Zealand tax system. Taxpayers expect the Government to be a good steward of their contribution to New Zealand's public services and I think this bill contributes significantly to our tax system's reputation as fair and simple. I'm grateful to the Finance and Expenditure Committee for considering these enhancements to the tax system and suggesting further improvements—well done. In the spirit of simplifying the tax system the Finance and Expenditure Committee recommended clarifying that a taxpayer's information can be amended so that information can be corrected and easily without penalties or interest and also recommended simplifying the proposed write-off rules. The end result of the consultation and select committee process is that we have a better bill that enhances the simplicity of our tax system while not compromising its integrity. The full benefit of those proposed changes will be realised in the 2021 year when for the first time people will be able to see a full year of pre-populated information for PAYE and all of their investment income. Most people will pay what they need to and get what they are entitled to during the year without having to do anything. Inland Revenue will make it easy for customers to see what they've paid and what they owe and will be better at detecting errors. However it is important to note that while more customers will have income reported on their behalf people will remain responsible for reporting other income and deductions assessing their liabilities and of course meeting their obligations. But generally people will spend far less time and effort ensuring they meet their obligations and receive their correct social policy entitlements as tax will be correctly withheld and assistance provided at the time it is needed. This is the key thing: developing a tax system that responds in near real-time to changes in circumstances without requiring a wash-up at the end of the year. Angie Warren-Clark: Hoorah!Hon STUART NASH: It's fantastic isn't it? The people of Tauranga will just love this. These improvements to how individuals have their tax assessed constitute the main part of this wide-ranging suite of measures to modernise and simplify the tax system. Go this Government. As well as improvements to how tax obligations and entitlements are assessed for individuals this bill makes several other key improvements to our tax system which I am pleased to summarise. We'll improve how Inland Revenue collects and manages its information. Inland Revenue takes its role as a steward of the taxpayers' personal information very seriously which is critical to retain taxpayers' trust and confidence in the tax system. The bill modernises and clarifies rules to better provide confidentiality and sharing in the future and more clearly balance the trade-off associated with information sharing.In respect of collection the bill will also clarify in legislation that information collected for one Inland Revenue purpose can be used for the department's other functions. The bill also proposes a regulation-making power for repeat collection of third-party databases in order to provide greater transparency when this collection is to be done on a regular basis. These proposals will make the information management rules more efficient and transparent and better focus confidentiality rules to clearly protect taxpayers' information. Binding rulings—as the Minister for Small Business I'm pleased that the bill also proposes a new type of binding ruling called a short-process ruling designed to be more accessible to small to medium sized businesses and individuals. The ability for a wider range of taxpayers to obtain binding advice from Inland Revenue will help more taxpayers get their tax positions right the first time. Of course with a binding ruling it does bind the commissioner but it doesn't actually bind the taxpayer but it certainly provides a level of certainty. KiwiSaver—I'm also excited about proposed changes to KiwiSaver. The bill contains measures to introduce additional employee contribution rates of 6 percent and 10 percent—Hon Member: Brilliant.Hon STUART NASH: —it's fantastic—removes the five-year lock-in period for KiwiSaver which currently affects members who join KiwiSaver between the ages of 60 and 65; and it actually opens the scheme up to those Kiwis over 65 so age should be no barrier to saving. In conclusion these are the main features of this bill and it is a bill which will improve taxpayers' experience of tax administration and make the system fairer which is what we're all after after all. As well as these major tax policy improvements the bill proposes a number of remedial measures to tighten our current tax legislation and ensure it remains fit for purpose. I would like to thank the policy officials and drafters who worked on the detail of the bill the organisations and individuals who made submissions on proposed legislation and the Finance and Expenditure Committee for its consideration and recommendations to improve the workability and fairness of the provisions. I commend the Taxation (Annual Rates for 2018-19 Modernising Tax Administration and Remedial Matters) Bill to the House.