Taxation Principles Reporting Bill

Taxation Principles Reporting Bill

Government Bill

253—1

Explanatory note

General policy statement

This Bill proposes a statutory framework for the reporting of tax information based on core taxation principles.

The reporting framework is intended to increase the availability of information about the operation of the tax system and contribute to an improved understanding of tax policy among the general public. The requirement for regular reporting would allow for the observation of trends and provide insights into how the tax system is developing and responding to external challenges.

Reporting would be required annually, with a more comprehensive report produced every three years.

The reporting of tax information based on core taxation principles would supplement other statutory reporting on the administration of the tax system and the Government’s revenue strategy.

Departmental disclosure statement

The Inland Revenue Department is required to prepare a disclosure statement to assist with the scrutiny of this Bill. The disclosure statement provides access to information about the policy development of the Bill and identifies any significant or unusual legislative features of the Bill.

A copy of the statement can be found at http://legislation.govt.nz/disclosure.aspx?type=bill&subtype=government&year=2023&no=253

Regulatory impact statement

The Inland Revenue Department produced a regulatory impact statement on 26 April 2023 to help inform the main policy decisions taken by the Government relating to the contents of this Bill.

A copy of this regulatory impact statement can be found at—

Clause by clause analysis

Clause 1 provides the title of the Bill.

Clause 2 provides an appropriate commencement date for the provisions of the Bill.

Part 1Preliminary provisions

Clause 3 provides the purpose of the Bill, namely obliging the Commissioner to report on New Zealand’s tax settings in relation to taxation principles.

Clause 4 provides the interpretation of terms used in the Bill.

Clause 5 provides that the Crown is bound.

Clause 6 provides that public service Te Tiriti o Waitangi obligations apply.

Clause 7 provides that revenue Acts are not binding in relation to the Commissioner’s duties under the Bill, except to protect taxpayers’ information in accordance with revenue Act settings.

Clause 8 provides that Commissioner’s reports and the content of the Bill itself can not be used in court (for example: they can not be used to change the amount of tax that a person must pay).

Clause 9 provides protections for taxpayers’ information.

Clause 10 provides authority for the consequential amendments listed in schedule 2 of the Bill.

Part 2Taxation principles reporting

Clause 11 provides that the Commissioner must provide an interim report annually, and a full report triennially, on New Zealand’s tax settings in relation to taxation principles.

Clause 12 provides for the presentation and publication of the Commissioner’s reports.

Clauses 13, 14, and 15 provide approved taxation principles measurements for reporting on current taxation settings in relation to the taxation principles. Also, they provide an administrative procedure for the Commissioner to include or exclude approved taxation principles measurements.

Hon David Parker

Taxation Principles Reporting Bill

Government Bill

253—1

The Parliament of New Zealand enacts as follows:

1 Title

This Act is the Taxation Principles Reporting Act 2023.

2 Commencement

This Act comes into force on 1 July 2023.

Part 1 Preliminary provisions

3 Purpose

The purpose of this Act is to oblige the Commissioner to report on New Zealand’s current taxation settings in relation to the taxation principles in this Act, as measured using the approved taxation principles measurements.

4 Interpretation

In this Act, unless the context otherwise requires,—

approved taxation principles measurements means measurements, described in section 13, or approved in accordance with section 14

Commissioner means the Commissioner of Inland Revenue

Commissioner’s report means a report described in section 3

Minister means the Minister of Revenue, or if there is no Minister of Revenue, the Minister responsible for the Inland Revenue Department

revenue Act means an Act listed in schedule 1 of the Tax Administration Act 1994, including this Act

tax year has the same meaning as in the Income Tax Act 2007

taxation principles means the tax system principles provided in schedule 1 of this Act.

5 Act binds the Crown

This Act binds the Crown.

6 Te Tiriti o Waitangi obligations apply

This Act must be applied consistent with the public service’s obligations in relation to Te Tiriti o Waitangi.

7 Revenue Acts not binding: no rights and obligations other than secrecy and privacy

Despite this Act being a revenue Act, the Commissioner’s rights and obligations in respect of the Commissioner’s duties under the Tax Administration Act 1994 and other revenue Acts do not apply to the Commissioner’s duties under this Act, except to the extent to which they relate to taxpayers’ information. Further, this Act does not affect quantification of a taxpayer’s liability under a revenue Act, nor does it affect any other taxpayer right or obligation under a revenue Act, except to the extent to which they relate to taxpayers’ information.

8 Justiciability

Commissioner’s reports and this Act (including the taxation principles) may not be used as evidence as to any matter of law or fact. Further, Commissioner’s reports and this Act (including the taxation principles) may not be used in the interpretation of any matter of law or fact.

9 Information and privacy

In performing the Commissioner’s obligations under this Act,—

(a)

the Commissioner may use any information the Commissioner holds, if the information was gathered and is held, lawfully, for any purpose, including if the information was gathered lawfully and specifically to help the Commissioner perform the Commissioner’s obligations under this Act; and

(b)

the Commissioner must ensure that all information in a Commissioner’s report is anonymised and aggregated.

10 Consequential amendments

Schedule 2 provides consequential amendments to other Acts.

Part 2 Taxation principles reporting

11 Duty to report: annual interim and triennial full

(1)

The Commissioner must give the Minister an interim Commissioner’s report annually before the end of a calendar year, for the tax year that ends in the calendar year, using the best information for that tax year that the Commissioner has on hand at that time.

(2)

Once every 3 calendar years, starting with the 2025 calendar year, the Commissioner must give the Minister a full Commissioner’s report before the end of the calendar year, for the 3 previous tax years that end in the calendar year.

12 Presentation and publication

(1)

The Commissioner must publish a copy of the interim Commissioner’s report at the Commissioner’s expense as soon as it is reasonably practicable after the Commissioner gives the Minister the report.

(2)

The Minister must present a copy of the full Commissioner’s report to the House of Representatives as soon as is it reasonably practicable after the Commissioner gives the Minister the report. The Commissioner must publish the full Commissioner’s report at the Commissioner’s expense as soon as it is reasonably practicable after the Minister presents a copy of it to the House of Representatives.

13 Approved taxation principles measurements

The approved taxation principles measurements for the purpose of this Act are:

(a)

income distribution and income tax paid:

(b)

distribution of exemptions from tax, and of lower rates of taxation:

(c)

perceptions of integrity of the tax system:

(d)

compliance with the law by taxpayers.

14 Approved taxation principles measurements: approval procedure for inclusion and exclusion

(1)

The Commissioner may include measurements beyond the minimum set described in section 13 for the purpose of this Act, if—

(a)

the Commissioner decides the new measurements are appropriate for inclusion as approved taxation principles measurements; and

(b)

the new measurements are within the direct responsibility of the Commissioner in relation to the tax system; and

(c)

the Commissioner publishes, in a publication of the Commissioner’s choosing, a description of the new measurements 2 months or more before the Commissioner uses them in a Commissioner’s report.

(2)

The Commissioner may exclude measurements that the Commissioner decides are inappropriate for the purpose of this Act, if the Commissioner’s decision to exclude the inappropriate measurements is published in a publication of the Commissioner’s choosing.

15 Approved taxation principles measurements: application of Legislation Act 2019

The approval procedure for the inclusion and exclusion of approved taxation principles measurements under section 14 is not secondary legislation for the purposes of the Legislation Act 2019, and does not have to be presented to the House of Representatives under section 114 of that Act, and may not be disallowed by Parliament under section 116 of that Act.

Schedule 1 Taxation principles

s 4

Taxation principleDescription
Horizontal equityPeople with similar levels of income should pay similar amounts of tax. The time value of money matters when considering horizontal equity. The tax system should generally recognise the economic effect of income, not its name, while acknowledging there are important areas where exemptions to taxing economic income are justified in the pursuit of wider societal outcomes (eg. not taxing the imputed rent or gains on an owner-occupied home).
EfficiencyTax revenue should be raised in ways that minimise distortions to the economy and the use of resources.
Vertical equityThe tax system should be progressive. Tax is progressive if people with higher levels of economic income pay a higher proportion of that income in tax. A progressive tax system does not mean that every tax should be progressive (eg. GST is regressive) but the overall system ought to be. In practice, wealthy people should at the very least pay no lower a rate of tax on their economic income than middle income New Zealanders already do.
Revenue integrityThe revenue system should be sustainable over time and minimise opportunities for tax avoidance and tax evasion.
Compliance and administrative costsCompliance and administrative costs for taxpayers and the Government should be reasonable, but this is not justification for substantial unfairness in the tax system.
Certainty and predictabilityPeople should be able to determine their tax obligations before they are due.
Flexibility and adaptabilityThe tax system should keep pace with changes in society, in particular technological and commercial developments, and changes in inequality.

Schedule 2 Consequential amendments

s 10

Tax Administration Act 1994

In schedule 1 of the Tax Administration Act 1994, insert, in appropriate alphabetical order, “Taxation Principles Reporting Act 2023”.