Russell Deborah; Williams ArenaHon Dr DEBORAH RUSSELL (Labour): We need to probe into this difference between the personal tax thresholds the employer superannuation contribution tax (ESCT) rates and the fringe benefit tax rates (FBT). If we'd had a select committee process this is exactly the question we could have gone into in some detail because it is complicated.Now the Minister of Revenue said in his last reply to me that the decision was made to leave the ESCT rates and the FBT rates at the same thresholds as they are at now so there's no change in how employers are being taxed—having to pay FBT and ESCT—in comparison to what they're paying now. Here's the problem with that answer—and there's a whole series of things that flow from it—ESCT rates and FBT rates are set in comparison to personal income tax thresholds. They are very carefully calibrated to make sure that no matter whether a person is paid in cash or is paid in cash in kind the tax paid is exactly the same. But now we've got a difference. Because the ESCT thresholds and the FBT thresholds are not moving at the same time as the personal income tax thresholds we have a mismatch between being paid in cash or being paid in cash in kind. People who are paid in cash and in kind are in effect being overtaxed for the period from 31 July 2024 to 31 March 2025.Now the fact is the individual employees never see that particular tax—the FBT and the ESCT—but the employer does. The explanation given sitting in the regulatory impact statement says that the other consequential tax type rates—portfolio investment entities FBT ESCT retirement scheme contribution tax—would be adjusted from 1 April 2025. This will allow more time to make the changes and reduce the complexity of the changes." So it reduces compliance cost. It is a straightforward trade-off between compliance costs on one hand and paying extra tax in comparison to personal income tax rates on the other hand.Here's the question that flows from that: first of all what modelling was done on how much extra FBT and ESCT employers would be paying in comparison to the personal income tax rate—not in comparison to what they're paying now but in comparison to the personal income tax rates that apply from 31 July 2024 to 31 March 2025—in order to make the assessment that it was better to incur more compliance costs rather than pay more tax? There would have to be an assessment of how much extra FBT and ESCT was being paid. So what modelling was done to calculate that? So that's the first question.The second question is: were employers consulted? There's a choice there. Now we've actually already got choices in the FBT system. There's a really significant choice that employers already make between a couple of methods of calculating FBT. One ends up with them paying a bit more FBT but it's a simpler way of calculating it. So there's a straightforward trade-off there—already in the FBT system—between compliance costs and tax and the actual tax paid. But that's the employer's choice. In this case the Government has made the choice that the employers will pay more tax rather than having more compliance costs. So instead of allowing employers to make that decision the Government has made that decision for them. Now I'm assuming it's going to be on good grounds but I would like to know if the Minister consulted employers about what treatment they would prefer to have. Because in a case where there's a trade-off between compliance costs and the amount of tax paid—and it's compliance costs so that's the cost to the individual employer not the Government's administration costs—that should surely be the employer's choice. So there's a real problem there.So I want to know from the Minister: what modelling was done to assess the amount of extra FBT and ESCT that would be paid in comparison to personal income tax rates—as the personal income tax rates are set from 31 July 2024 to 31 March 2025—so that that assessment could be made and were employers consulted about it? So as already happens in the FBT system were employers enabled to make that choice about whether they would prefer to pay more tax or prefer to incur more compliance costs? Please Minister.CHAIRPERSON (Barbara Kuriger): Arena Williams—and just a reminder because some people have now come into the House—and I'm not referring to this particular member but we've had people coming in—that we're just looking for questions now not speeches.ARENA WILLIAMS (Labour—Manurewa): Thank you Madam Chair. I take your point and I heard your earlier ruling. You'll forgive me—this is a new a brand of inquiry and I'm struggling to not explain it so instead I will ask the Minister of Revenue a question but I hope he will explain to the committee what it is that I'm getting to. My question to the Minister is: what are retirement scheme contribution tax (RSCT) and resident withhold tax (RWT)? In light of the previous contributions by my colleagues about the effect of the income tax changes on employer superannuation contribution tax (ESCT) and attributed fringe benefits there's also a flow-on effect for RSCT and to RWT so we need the Minister to explain that to the House. Then—CHAIRPERSON (Barbara Kuriger): Can I just the member to repeat that question because the Minister was taking some advice.ARENA WILLIAMS: Absolutely.CHAIRPERSON (Barbara Kuriger): So if you could just repeat that because that was quite specific.ARENA WILLIAMS: Yeah. Two questions for you Minister. One what are RSCT and RWT? Two what is the effect of making the changes that you have made without further amendment to RSCT and RWT? My third question is: given the last time a National Government proposed to make similar changes to those you have made in clause 7 amending Schedule 1 of the Income Tax Act 2007 they made the flow-on changes to ESCT RSCT RWT and attributed fringe benefits why have you chosen not to make changes to RSCT AND RWT in this bill?"