Tolley Anne; Russell DeborahPart 3 Amendments to Tax Administration Act 1994CHAIRPERSON (Hon Anne Tolley): Members that brings us to Part 3 which is a debate on clauses 186 to 284 and schedule 2.Dr DEBORAH RUSSELL (Labour—New Lynn): I am pleased to speak about Part 3 of this very important bill. It's the part of the bill that deals with PAYE and how employers pay PAYE. I think it's a really interesting part of the bill because it's one where the Finance and Expenditure Committee worked together very hard to ensure that the pretty good changes which have been proposed under the bill were actually improved a little to make it easier for business.There's a really old principle in tax law set up first by Adam Smith in his great book The Wealth of Nations published in 1776. One of his principles for a really good tax is that Every tax ought to be levied at the time or in the manner in which it is most likely to be convenient for the [taxpayer]." When it comes to PAYE—that's the tax that all of us pay on our salary and wages if we are salary and wage earners—it is pretty convenient for us as salary and wage earners because our employer is the person who does all the work around the tax. So as ordinary people they kind of almost have nothing to do with the calculation of tax but employers have to do it on their behalf.One of the interesting things that's going on with the big Business Transformation project of the IRD is that they are working really hard on working with employers and using that Business Transformation project to make it more convenient to make it easier for employers to calculate and pay their PAYE. So as part of that there have been a whole set of changes to the Tax Administration Act to make it easier for employers to pay tax—in particular now employers are going to be asked to calculate PAYE on a payday basis. So every time they're running a payroll they'll run the PAYE at the same time and that information will get sent over to the IRD. That was the change in the original bill but one of the interesting things that came out of the Finance and Expenditure Committee was that some employers found that wasn't going to be so convenient after all. In fact for some employers having to report the PAYE information every single payday was going to be very inconvenient.It turned out that those employers were in fact the very small employers—the people who were perhaps still working with paper the people who had only one or two employees. So one of the changes that the select committee has suggested is that in fact some of those very small employers the ones who have a payroll maybe of about $200000 a year maybe one or two or maybe three employees they can still continue—and if they're working on paper instead of doing those calculations and paying it up and sorting it out with IRD every payday they can elect to do it twice a month instead. So in other words the number of times they have to communicate with IRD is reduced that reduces their compliance cost and it makes paying the tax more convenient for them. That's a change I really recommend that has come through from the Finance and Expenditure Committee.Look there was another change and at first glance this does look pretty bad. There's a payroll subsidy for small employers. Very small employers who are working through what we call a PAYE intermediary—someone who would calculate the PAYE for them—could get a subsidy for that. It wasn't a very large subsidy but it was enough to make it a bit easier for small employers to calculate and pay PAYE. Now in the original version of this bill that subsidy was removed altogether but as it turned out in the submissions which came in a lot of small employers made the case saying actually it was still pretty hard for them to calculate tax; actually they still needed a hand with it; actually it would make life easier for them if they could still access that subsidy through a PAYE intermediary. So that is exactly the change that the select committee has recommended. The change we've proposed is that employers who have less than $50000 of PAYE deductions each year—so that's going be about $200000 of salary and wages; one two or three employees—they can still get that payroll subsidy. So that's something that select committee has suggested. I recommend it as an example of making PAYE much more convenient much easier for employers to calculate and pay."