Copeland Gordon: Income Tax Bill — Second Reading 
Copeland Gordon: Income Tax Bill — Second Reading 
[Volume:616;Page:11796] 
GORDON COPELAND (United Future) 
: 
 Before I get into the substance of the bill I would like to pause and thank the member John Key for his ringing endorsement of the United Future policy to cut the corporate tax rate from 33c to 30c in the dollar. I guess that in a way imitation is the ultimate form of flattery. 
In income tax history terms the second reading of this bill is a historic occasion. As others have mentioned this bill tips the scales at a massive 2421 pages undoubtedly an all-time record for any bill coming before this Parliament. The bill represents the culmination of many years of work by officials at the Inland Revenue Department and I would like to begin today by thanking them for their dedication and professionalism over such a sustained period of time. I also thank them for the way in which they cooperated fully with the Finance and Expenditure Committee for it must be said that we worked them virtually right through 2003 between the first reading of the bill and today. The officials responded with energy and good common sense kept their heads down and brought together a bill expressed in common English that is destined to form the tax law of New Zealand for another generation or more. I thank also Therese Turner and David Patterson who were retained by the committee as specialist tax advisers. 
A few people have asked me whether anyone has actually read right through the bill from cover to cover. I have not but I can tell members on good authority that Therese Turner has. Therefore it needs to be acknowledged that those of us on the committee who have not read the entire bill relied enormously on the excellent advice and guidance given to us by Therese and David. Those advisers together with the officials also worked tirelessly with the Institute of Chartered Accountants of New Zealand the New Zealand Law Society and Treasury to give this bill its final shape and content. Since I am a chartered accountant myself—one I believe of only two in the House—I would also like to pay a special tribute to the institute and to the enormous amount of time and energy that it put into this bill. Many institute members were involved and put in extra hours in their own time over and above and in addition to their normal work commitments. All of those who appeared before the committee displayed a dedicated professionalism and a deep interest in both the drafting of this bill and its practical application. 
I am very conscious that the rewrite of the tax legislation will be regarded with a degree of both apprehension and anticipation by tax practitioners in both the accounting and legal professions. Many of the best tax advisers in this country have grown up using the original 1960 law and the 1976 Act and could literally quote great hunks of it almost from memory. The partial rewrite of that Act in 1994 meant tax practitioners had to go back to school and such relearning will be again necessary once this bill has been enacted. 
The Finance and Expenditure Committee was mindful of those realities and for that reason has striven to ensure that the transition from the old to the new will in practice occur as smoothly as possible. With that in mind we have done a number of things. Firstly we have endeavoured in conjunction with our advisers and practitioners to road test seven key areas of the bill. This has been a most useful exercise and has identified a number of drafting changes and in a number of instances involved a complete rewrite where clarification or correction was seen to be necessary. The bill when enacted will have application for the 2005-06 tax year. We note that for some taxpayers that year will start on 2 October this year. Accordingly we have encouraged the officials to continue their work with the Law Society and the Institute of Chartered Accountants in this interim period. We have also squarely faced up to the problems that may result from the unavoidable “going back to school” relearning phase as practitioners swap from the old law to the new. 
Overarching provisions have been included in Part Y—I wonder whether this is the only bill that has ever had a Part Y—to indicate that no change in the effect of the law is intended and that the old law should be used as an interpretive guide in cases where the meaning of a provision in the new law is unclear ambiguous or even gives rise to an absurdity. Such cases will be able to be referred to a panel comprising representatives from the Law Society the Institute of Chartered Accountants Treasury and the Inland Revenue Department and the Government has given a commitment to consider amending the Act retrospectively in circumstances where the panel finds it necessary to amend or reword in order to clarify matters as they arise. 
We have also given reassurance to tax advisers and taxpayers that where there are such accidental or unintended changes between the old law and the new then taxpayers will not be penalised provided they have taken reasonable care and a reasonable tax position under the old law. However we are conscious also that the Government cannot bind its successors. To guard against the possibility that a new Government may decide to retain the rewritten law without retrospective amendment taxpayers will not be subject to penalties or use-of-money charges. Even with those safeguards we recognise that there will be a one-time disruption for both practitioners and taxpayers in preparing tax returns for the 2005-06 tax year. Diligent practitioners will want to double-check against the new legislation and it seems inevitable to me that they will then want to pass some of the extra costs arising on to their tax clients. We have also encouraged the Inland Revenue Department to undertake an educational programme to inform practitioners of those realities and in particular to encourage them not just to rely on their memories or on their current understanding of the law but to actively check the position against the provisions contained in the new legislation. 
I said a moment ago that experienced practitioners can pretty much prepare tax returns on autopilot because of their long experience with the legislation. However that does not in itself guarantee they will get matters right so we encourage all taxpayers and their advisers to familiarise themselves with the new law as quickly as possible. It is my hope for example that come the 2006-07 tax year all the initial kinks will have been ironed out and everybody will be able to return to plain sailing. 
In case individuals should feel that this rewrite provides an opportunity for tax evasion let us be quite clear that Parliament’s intention is that except for the small number of intended policy changes which are set out in schedule 22A it should not change the underlying policy of New Zealand tax law. The committee believes that these provisions will ensure as smooth a transition as is humanly possible from the old law to the new. I have enjoyed working with the committee and team of advisers on this major rewrite and I signify United Future’s support for the bill.