Kuriger Barbara; Russell Deborah; Watts SimonCHAIRPERSON (Barbara Kuriger): Members before the lunch break we were debating Part 4 of the bill. So just a reminder that Part 4 is clauses 33 to 39 Income Tax Act 2007 amendments commencing 1 April 2025" and the question we're on is that Part 4 stand part.Hon Dr DEBORAH RUSSELL (Labour): Before the lunch break we were back to dates and I did question the Minister over the 1 April 2025 start date for this part of the bill in comparison to the 31 July 2024 start date for the changes to the personal income tax thresholds. I just want to make sure I've got the explanation from the Minister correct. The Minister explained that for changes to fringe benefit tax (FBT) thresholds and employer superannuation contribution tax (ESCT) thresholds the decision was made to have those changes start from 1 April 2025 for compliance cost reasons. The way the Minister's nodding I sense I've got the gist of that. OK so that's helpful. It's a really interesting decision and I'm looking to see if the Minister asked his officials to do any modelling of it because what it means is that from 31 July 2024 until 31 March 2025 employers are going to be over-taxed on fringe benefit tax and on employee superannuation contribution tax in comparison to the personal tax rates of the employees on whose behalf they are paying fringe benefit tax and ESCT.The fringe benefit tax thresholds are really really carefully set. They look like very odd numbers but they're really carefully calibrated so that if an employee is paid entirely in money—you know salary or wages—then their personal tax rates are as set out in the Income Tax Act. But if they are paid in a combination of money—pretty easily taxed—and benefits say like the use of a car or whatever then you have to do a whole lot of grossing up of the value of the benefit and then taxing it back and there are some pretty complicated calculations that go into that space.But the objective there is to ensure that if an employee is paid in salary and benefits—say $100000 worth of salary plus benefits—compared to an employee who is paid straightforwardly in just $100000 of cash that the tax rates that are applied whether it's through the personal income tax rates or a combination of the personal income tax rates and the fringe benefit tax rates work out exactly the same.Now of course the employee never sees the fringe benefit tax rates. They are paid by the employer because it's the employer's decision to use the benefit and things like that. What it means is that if these changes to the fringe benefit tax rates and the employee superannuation contribution tax rates are not changed at exactly the same time as the personal income tax rates then employers—small businesses large businesses Government departments medium-sized businesses little one-person bands and the like—are being over-taxed on fringe benefit tax and employee superannuation contribution tax.Now the amounts per employee are not going to be large but it is still over-taxation and by the time it goes across numbers of employees it could add up to a fairly significant amount. So there are a couple of questions here. Since when does the party that prides itself on being the party of business—and that's a bit dubious actually—charge employers more? Since when do they add those sneaky extra costs onto employers? That's exactly what's happened here.Now there could be a good reason for this. It could be a good reason. It could be that by the time the calculations were done the amount of extra FBT and ESCT per employee was outweighed by the compliance cost of doing the calculation. So you weigh up the amount of tax paid versus the cost of actually paying the tax and sometimes you might as well just pay the extra tax rather than go through the hassle of doing the calculations. I'm hoping that was the explanation. I'm guessing that's the explanation the Minister's going to give to me in a moment but I actually genuinely want to know what's gone on there because it looks odd.Now maybe I've got the wrong end of the stick on this but I would like the Minister to explain it to me. Following his explanation I do want to dig into this because this is actually quite serious so I'll just wait for the Minister's explanation on that.Hon SIMON WATTS (Minister of Revenue): Thank you very much Madam Chair. We're back from the lunch break on the home straight of this bill. We are nearly there. Kiwis will soon have the benefit of tax cuts which they've been waiting for.The prior member's question in regards to this—she used the term over-taxation; it's simply not the case. I mean the status quo in regards to the rates is unchanged. The changing of the rates will come in on 1 April 2025. So it's not that anyone's getting over-taxed or more tax. The rates as they sit today are unchanged until that point in the future. Therefore the reasons and rationale as I outlined previously in an answer to the same question relate to some of the compliance considerations of what happens when you introduce a change in the personal income tax rates part-way through a year. We've made that decision assessment based on the cost compliance trade-off but rest assured that the rates of FBT that are paid today don't change all of a sudden today. They will be changing on 1 April so no one's getting over-taxed.Hon Dr Deborah Russell: Madam Chair?CHAIRPERSON (Barbara Kuriger): Francisco Hernandez.Hon Dr Deborah Russell: I want to pursue this Madam Chair; it's important.CHAIRPERSON (Barbara Kuriger): Share around."