CA ANZ supports in principle the purpose of a taxation principles-based reporting framework but urges that the Bill be substantively rewritten and delayed until full consultation is undertaken, according to NZ Tax Leader John Cuthbertson FCA.

"If we are to have a tax principles-based measurements reporting framework, it must be fit for purpose, appropriately reported upon, and used for all relevant purposes."

The Tax Principles Reporting Bill outlines a set of principles for the tax system and an accompanying framework for Inland Revenue to report (annually) on measurement against these principles. This is intended to provide better information for policy makers and the public on performance of the tax system.

The taxation principles should tie back to the core purpose of taxation being the efficient collection of revenue to meet the Government’s requirements. This will ground the principles and provide context. The descriptors of those principles should be clear, concise and avoid emotive comment.

The taxation principles measurements as described do not provide a framework (despite the title to the Bill) and are not fit for purpose to objectively measure taxation outcomes against the underlying taxation principles.

It is important that the taxation principles are measured impartially by applying an accepted scientific methodology. There should be transparency around weighting of principles, accepting that some principles may be more important than others and that they can compete with another.

The framework should not only report and inform in an historical context but help shape future tax system changes. Specifically, it should be used to inform and prioritise all key pieces of tax policy work, including for the purposes of the tax policy work programme.

Minimum reporting requirements should be prescribed for all reporting (including interim reports) to ensure information is consistent, data is appropriately captured and trends are analysed. All reports should be required to be tabled before Parliament to ensure an appropriate reporting rigour is maintained. The requirement for the Commissioner to report should be delayed until an appropriate framework is developed and reporting criteria is finalised.

The Bill goes beyond what is currently measured and reported on in the tax system. The reporting should only use information currently collected from taxpayers, as opposed to requiring additional reporting of information which was needed for the High Wealth Individuals Research Project.

Furthermore, reporting on the health of the tax system may best be done by an entity other than Inland Revenue given the anonymised and aggregated nature of the information being 
reported upon.

CA ANZ presented its oral submission on the Bill to the New Zealand Government’s Finance and Expenditure Committee last Thursday.