Does he stand by his statement that “The idea behind the changes is to have tax penalties that reflect the seriousness of the offence, since people comply with the law more willingly when they see it as reasonable”; if not, why not?
Is it correct that section 141A(4) of the Tax Administration Act, which his department administers, states: “Subsection (3) and section 141B(1B) do not exclude a taxpayer who makes a mistake in the calculation or recording of numbers in a return from being liable for a penalty for not taking reasonable care.”, and does that subsection not essentially mean that mistakes in recording numbers do not excuse people from penalties for not taking reasonable care?
The Income Tax Act and the Tax Administration Act relate to tax returns and the figures that apply in respect of those returns. In that narrow regard, the member is absolutely correct in the point he makes.
Is it correct that the penalties an ordinary taxpayer could face for not taking reasonable care include a 20 percent penalty for any shortfall, and, potentially, use-of-money interest at 14.24 percent, calculated daily; and does he believe that the Inland Revenue Department took reasonable care in calculating tax revenues for inclusion in the January 2008 Government accounts?
As I said in my previous answer, the provisions of the Income Tax Act and the Tax Administration Act relate to tax returns by taxpayers. The issues that the member is referring to relate to the calculation of figures by the Inland Revenue Department. They are not a tax return. I know that the member was trying to set me up, and I played along with his question. But the point is simply this: the report has been completed and tabled, the recommendations have been made, and they will be implemented.
Is it correct that the recent report Investigation of an Error in Tax Revenue Numbers shows that the Inland Revenue Department did not follow agreed procedure, had not adequately documented that procedure, and had made the same mistake again and again over a period of 7 months, and also shows that the $592 million error was discovered by somebody other than the Inland Revenue Department; and does he agree that had an ordinary taxpayer made those same errors, the Minister’s department would have treated him or her very differently from the way that it has treated itself?
Can I say again, in response to the member, that he is linking two things that are not related. I doubt that any taxpayer who had a tax bill of $600 million would in any way be described as ordinary.
Is it correct that full-time equivalent staff numbers at the Inland Revenue Department have increased by over 25 percent since 2002, with departmental funding increasing by 56 percent over that same time period—to just under $600 million a year—and that the department’s latest annual report shows that staff turnover is consistently below the Public Service average; does not this suggest that the recent errors show a lack of prioritisation and attention, rather than a lack of resources?
What the recent errors show is that a very specialised unit of around half a dozen staff had a higher than normal rate of staff turnover. We do need to put better procedures in place, and that point is acknowledged. The report drew attention to that, and it will happen. I do not expect those types of situations to recur in the future.
Can he understand why the public could be angered by his department’s low-key response to its own major errors, when a taxpayer who had been released from 6 months’ imprisonment for only 3 weeks was told by one of the Minister’s departmental officials, in a telephone message about outstanding tax returns that was left on the cellphone of the taxpayer’s 18-year-old daughter: “I’m sure you don’t want to go back where you came from, so if you would give me a call …”, etc.; is that the standard for the way that his department now treats the public, and is it consistent with the way that it treats itself?
I think there were five questions in that supplementary question. Let me make this point: I am not privy to an individual’s tax affairs, but the type of conduct that the member referred to is unacceptable, and if he is prepared to share those details privately with me, I will undertake to follow it up. I do understand also the point that there may be a level of public amusement at what has happened. The fact of the matter is that the $600 million sum was identified, the procedures by which that error occurred have been identified, and they are in the process of being corrected. The final point I would make is that no loss was suffered as a consequence of that error. It is not in any way like the situation where taxpayers fail to meet their responsibilities.
On the issue of public servants’ accountability and responsibility, how does such an action compare with that of another public servant who told the young people of this country that he would get rid of student fees totally, then brought in student loans and called it keeping his promise?
I think that is something Dr Smith should answer, not me. But I do make this point: in this instance, when it first became clear to us that there were some unusual factors relating to these figures, an inquiry was undertaken internally and the mistake was identified, and an independent inquiry has now been held. The consequences of that inquiry will be implemented. There will be a further independent inquiry in 6 months’ time, to make sure all is working well.