Taxing Times: New Minister of Revenue still has work to do

Craig Macalister   Crowe Horwath Tax Principal

Craig Macalister Crowe Horwath Tax Principal

A couple of weeks ago now it was announced that our current Minister of Revenue, Todd McClay, has been appointed Minister of Trade, with Michael Woodhouse drawing the short straw as Minister of Revenue.

Readers may recall that McClay was appointed Minister of Revenue in June 2013 when the then minister, Peter Dunne, shot himself in the foot after an investigation into the leak of a report on the Government Communications Security Bureau. Peter Dunne had, of course, been the Minister of Revenue in both the previous labour-led Government and current national-led Government, and had occupied that role since 2005 having done an earlier stint in the 1990s.

Before that time Michael Cullen occupied the Revenue portfolio. So, it seems that of late the appointment to Minister of Revenue is a little like the game of pass the parcel, with the difference being that when the music stops it's the booby prize.

So how did Todd McClay go as Minister of Revenue?

In my view, taking on the Revenue portfolio is a hard ask for anyone without a strong background in either accounting, tax law or economics. This means relying heavily on the advice of officials who reside in the lofty heights of the IRD's Paranoia Hilton. So I think he did a fair job of coping with a very technical portfolio that brings with it an enormous workload. Also, when you read some of the press releases and speeches that his officials put in front of him, you have to say he did a stunning job of delivering them without choking on the dribble.

On the other hand, the one area where things are not progressing as well as they could be is tax simplification. Too much that is not simplification is done in the name of simplification, and too little actual simplification is achieved. Further, even with the raft of recent well-intended initiatives touted as simplification, a real problem for New Zealand remains – which is that our tax system for small to medium-sized businesses is old, patched and clunky. Putting central locking, blue tooth and cruise control into a Morrie Oxford is still a Morrie Oxford.

A further problem that remains is that our tax policy tends to be designed from the comfort of an Ivory Tower, and can often overlook how the rules might work in practice. Thus, as well meaning as they may be, our friends in the Paranoia Hilton do struggle at times to design tax policy that is fit for purpose outside of Lambton Quay and Queen Street. Unfortunately for taxpayers, there is a real trend for over-engineering policy and legislation so that it is not comprehensible and practically difficult to comply with. When this occurs, in my experience, it becomes too difficult for people to comply and there is a real risk of legislation failure.

However, to be fair to our friends in the IRD's Paranoia Hilton, other government agencies also make decisions devoid of understanding real world consequences: witness the recent decision of the occupants of the office space above Inland Revenue's to prosecute a helicopter pilot who breached a rule to save a life. IRD policy, for all its faults, would likely have remedied that legislation long ago to give a policy outcome in the best interests of the public.

So as our new Minister of Revenue swaps the truncheon for the pen and a calculator, he still has some work to do: the first task being to find someone to write dribble-free press releases. Merry Christmas.

* Craig Macalister is tax principal at accounting firm Crowe Horwath in Invercargill. He can be contacted on 03 211 3355.

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