Bill good for Maori authorities, charities, businesses and tax debtors

Legislation presented for second reading today would benefit Maori authorities, charities, businesses and people who fell behind with their tax, Revenue Minister Michael Cullen said.

“We have always had specific tax rules to deal with the administration of Maori freehold land and other tribal assets and they will continue to be necessary.

“But the definition of Maori authority will be tightened to include only those entities which are subject to specific legislative restrictions or which receive and manage Treaty of Waitangi settlement assets.

“They face constraints not faced by ordinary companies and trusts, including the fact that they cannot easily sell their assets. The 19.5 per cent tax rate contained in the Bill will apply only to them. It will not apply to Maori as a group or to all businesses run by Maori, or even to all organisations managing communally owned Maori assets,” Dr Cullen said.

The rationale for the 19.5 per cent rate was that it was the statutory rate paid by some 90 per cent of the Maori beneficiaries of these assets. It was much cleaner and simpler administratively to withhold tax at the rate paid by most members than to withhold it at a higher rate and require those people to seek refunds at the end of the tax year.

“To receive what would often be a small refund, they would have to file an income tax return – something most individuals no longer have to do.

“For the estimated 10 per cent on a higher tax rate, the 19.5 per cent rate will only apply in the interim. When the income is distributed to them by the Maori authority, they will pay tax on it at their normal rate.

“The present system was last revised in 1952 and is badly out of date. It is unnecessarily complex, imposes high compliance costs and – in some cases – even double taxes income,” Dr Cullen said.

“The Bill also ushers in a long overdue rationalisation of the tax treatment of charities. It increases the amount that people can claim as a tax rebate for charitable donations from $500 to $630 a year and extends the corporate tax deduction to a wider range of companies.

“It also accords marae the same tax status as public halls and churches and relaxes the public benefit test applying to charities so that organisations which meet all the other criteria are not automatically debarred simply because their members are connected by blood ties.

“The Charities Commission, which the government agreed to set up at the request of the charitable sector, will be legislated for in a future bill.”

The government had already moved to provide relief to people who got into tax debt, and to give Inland Revenue greater flexibility in dealing with tax debtors. The Bill continued that direction by providing that a taxpayer’s “good behaviour” could be taken into account when imposing shortfall penalties.

It also marked another step in the government’s programme to reduce business compliance costs.

“It allows businesses to reduce their exposure to use-of-money interest by pooling their provisional tax payments and makes it easier for them to transfer the bulk of their PAYE obligations to an accredited intermediary. These are both useful initiatives,” Dr Cullen said.

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