McClay Todd: Annual Review Debate — In CommitteeText is subject to correctionMcClay Todd: Annual Review Debate — In Committee[Sitting date: 29 April 2015. Volume:704;Page:2977. Text is subject to correction.]Hon TODD McCLAY (Minister of Revenue):It gives me pleasure to take a call in this stage of the debate around revenue and finance and the work of the Finance and Expenditure Committee. Can I recognise all members of that committee and thank them for their diligence and say that I particularly enjoyed reading their report. When looking across the impact that many of the members had some members seemed to know much more about what is going on than others. Therefore I certainly recognise my colleagues on the right of the chair at this moment.The Inland Revenue Department has a very big work programme in front of it. It was announced a few years ago by a former Minister of Revenue. It is about modernising and simplifying tax administration in New Zealand—a very large mouthful that as a description but it is a very important one because one of the ways the current Government and indeed future Governments can make sure we are serving the public well when it comes to tax is making sure that the cost of administering taxation in New Zealand is as low as it can be.There are two parts of this. The first is the cost to the Inland Revenue Department and therefore to the Government to run the tax system. That is one thing we should focus on but for this Government our focus is very much on reducing the costs to comply with tax on individual taxpayers large taxpayers—larger companies—but particularly small to medium sized enterprises. The country is not actually in a bad space in this area. A survey was done not so long ago in America of the costs of tax administration or tax compliance for small to medium sized enterprises and it found that the cost on average in a given year in America was about $10000. A similar evaluation in New Zealand shows that it costs small to medium sized enterprises in New Zealand about $4500 as part of tax administration. So they are significantly better off than in the case of America.When one considers how many small to medium sized enterprises there are in New Zealand that adds up to some billions of dollars. Through business transformation through an opportunity for the current Government and indeed all of the House to look to simplify and modernise tax administration in New Zealand that cost could come down. If it only came down by oh I do not know a billion dollars within that that could be as much in some cases as half a percentage point of GDP. That is money that businesses get to keep themselves and certainly the Government believes that businesses are the ones who are doing the hard work and they should keep more of their own money to invest in their businesses to help grow the economy and to employ more New Zealanders.This is an exciting opportunity. It is not actually about only a computer system although the current computer system called “FIRST” is more than 20 years of age now and indeed it probably already costs more to maintain than it does to replace but this is an opportunity to make sure that we have a tax system that is fit for purpose. Before any party in this Parliament needs to contemplate increasing tax rates in the future to meet some of the costs associated with the services that New Zealanders demand and deserve it is our duty upon the Parliament and indeed the Government to look to reduce the cost of complying with tax to simplify and to modernise it.There are a number of issues that we are working through that I know the Finance and Expenditure Committee canvassed during their hearings and their deliberations around this. The first is that we have set up a number of groups and bodies to consult and be involved with New Zealanders to ask them to consider how we can make the tax system simpler for them. This is not about reducing tax or saying to them that they do not have to pay their tax—indeed they do—but how we can make it easier for them to comply. Of course the majority of people in New Zealand comply with their tax obligations voluntarily. That means we do not have to make them pay their tax but certainly we want to make it as easy as it possibly can be for those who want to comply to do so and then to focus resources upon those who choose not to so that we can make sure that they are paying their way as well.We set up a taxpayer simplification panel where businesses large and small and individual taxpayers can send their ideas into Inland Revenue for an independent group to assess. We hope we can make some changes this year and others will be part of business transformation. We had a listening campaign as a trial in the Hawke’s Bay where we asked people to text or go online and tell us about ways to simplify taxation. A significant number of people took time to do that. We had a tax administration conference that also gave us an opportunity to consider the issue more widely. Just recently I launched two consultation documents: a green paper on tax administration and making tax simpler and a second one on better digital services and how we can bring Inland Revenue up into the 21st century to make things easier for people as technology allows. Thank you.