Smith Lockwood: Taxation (Annual Rates Business Taxation KiwiSaver and Remedial Matters) Bill — In Committee 
Smith Lockwood: Taxation (Annual Rates Business Taxation KiwiSaver and Remedial Matters) Bill — In Committee 
[Volume:644;Page:13719] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 I appreciate the advice the Minister has just given us about the situation in respect of unacceptable tax positions and shortfall penalties. But I might say to this Committee that the concern about backdating the provisions in this bill is not just something that the Opposition has dreamt up. There are many in the profession who believe it should be backdated to 2003 and National has simply said that that is unreasonable and that we should go back to when we tried to fix it up. I accept what the Minister has said—that the effort to fix it up last year has improved the position for many taxpayers. But this is a balance of the Government’s desire to keep maximum revenue and its responsibility to be fair to taxpayers. The changes that are made in this bill are designed to try to make the system more fair to taxpayers and it therefore should be accepted that what will be left now from 2003 on—but we suggest backdating it to only 2006—is that there will be some taxpayers left who will be treated unfairly by the way this Parliament sees this situation today. That is not right. 
I want to go on because we are running out of time I sense. My most important amendment is in fact to clause 191. If we look at clause 191 we see it looks very simple. It is simply headed: “Section 141KB repealed”. So it is important that members understand what section 141KB is in the existing Act. What section 141KB is all about is that it gives the commissioner discretion to cancel some shortfall penalties. That was the provision we brought in to try to deal with some of these problems. But what section 141KB gave the commission to do was to deal with issues covered by section 141B. Now section 141B is the section that deals with unacceptable tax positions. So what is being repealed here is section 141KB which gave the commissioner discretion to deal with what were considered to be unacceptable tax positions. 
The amendment I want to make is this: none of the provisions in this bill deal with simple mistakes. It is what my good colleague Katrina Shanks was talking about. She is an experienced person in this area and she knows that people filing tax returns can make simple mistakes. Let me give the Committee an example of what I mean. Some taxpayers pay the correct amount of tax but file the wrong tax return. They have made a mistake. According to the tax returns filed they have not paid the correct tax because according to the return they were meant to have filed they have paid no tax. Those taxpayers have paid all the tax they should have paid but filed the wrong return so that cannot be recognised as the correct tax paid. What happens? The taxpayer gets penalised for making a mistake—in fact the correct terminology is “not taking reasonable care”—which is covered in section 141A. 
My amendment to clause 191 simply retains the title of section 141KB—“Discretion to cancel some shortfall penalties” and would enable the commissioner to deal with unfairness in both unacceptable tax positions and not taking reasonable care—in other words deal with issues that arise under sections 141B and 141A of the existing Act. My amendment would enable the commissioner to use the discretion when faced with a clear mistake—when someone has paid the full amount of tax owing yet has done something wrong technically. The officials look a bit puzzled. The Institute of Chartered Accountants of New Zealand is deeply concerned about this not just Lockwood Smith. The institute is concerned because it sees this happening amongst its members all the time. People make these simple mistakes and although they have paid the correct amount of tax they are penalised. Is that fair? 
I really put it to the Minister and urge the Committee to give full consideration to the amendment that I have placed on the Table. All it would do is give the commissioner the discretion to not impose shortfall penalties where it is obvious that a mistake has been made. The Government has all its revenue. If the Committee says that it will not accept my amendment because it would have fiscal implications and that it was lodged with less than 24 hours’ notice I would argue that that decision was not valid because the amendment just gives the commissioner the right to exercise discretion. The Government is not going to lose any revenue. A technical mistake might have been made but at the moment the commissioner cannot deal with that issue in a fair manner. I urge that my amendment be given consideration.