Simplifying record-keeping requirements for businesses
Clause 103
Overview
The bill contains amendments to modernise the record-keeping requirements of businesses by making it easier for taxpayers to store records offshore through applications from their data storage providers, and by allowing taxpayers who submit returns electronically to store them electronically.
Issue: The form of the record
Submission
(Matter raised by officials)
The words “in an electronic form” should be removed and replaced with “in a form approved by the Commissioner”.
Comment
Clause 103 allows for a person to hold for taxpayers, records in an electronic form, at places outside New Zealand.
The reference to “in an electronic form” should be removed, as although it is highly likely that most applications by a taxpayer or person (on behalf of a taxpayer) will be for records that are in an electronic form, there may be a rare circumstance when the application to the Commissioner will be for records in another form, such as paper or a non-electronic form. The Commissioner should have the flexibility to approve what type of form a record may be kept outside of New Zealand as part of the conditions imposed for authorisation.
Recommendation
That the submission be accepted.
Issue: Removal of the application of the Electronic Transactions Act 2002
Submission
(Matter raised by officials)
The cross-reference to section 25 of the Electronic Transactions Act 2002 (ETA) should be removed so that the Commissioner is able to specify the form (e.g. paper or electronic) that the records must be kept outside of New Zealand. In addition, the Commissioner should be able to specify as a condition the way the records are to be accessible to the Commissioner.
Comment
Clause 103 allows for a person to hold for taxpayers, records in an electronic form, at places outside New Zealand, in a manner consistent with section 25 of the ETA. Although the reference to section 25 of the ETA is incorrect, and it should be section 26, officials consider that the reference to the ETA should be removed. This will allow the Commissioner to specify the form in which the records must be kept overseas.
Furthermore, as the ability for the Commissioner to access the records is a key pre-requisite for such authorisation, clause 103 should be amended to provide for this.
Recommendation
That the submission be accepted.
Issue: The conditions for authorisation should also apply to individual taxpayers
Submission
(Matter raised by officials)
The conditions imposed by the Commissioner in new section 22(9) of the Income Tax Act should apply to all taxpayers seeking to keep records offshore under subsection (8).
Comment
Clause 103 allows the Commissioner to impose reasonable conditions on a person (on behalf of a taxpayer) who applies for the authorisation to keep records outside of New Zealand. However, these conditions do not apply to individual taxpayers who apply for this authorisation under new section 22(8). Therefore to ensure consistency, it is proposed that the conditions apply to all those who apply under subsection (8).
Recommendation
That the submission be accepted.
Issue: Protecting the privacy of a taxpayer’s records held outside of New Zealand
Submission
(Matter raised by the Committee)
At the briefing on the bill on 8 February 2012, some members of the Committee expressed concerns about the keeping of tax records offshore and the need for privacy.
Comment
The changes proposed by clause 103 refer to a taxpayer satisfying their record-keeping obligations and the Commissioner’s discretions, to ensure on-going access to taxpayer records by the Commissioner when required.
Ultimately it is the taxpayer’s responsibility to ensure the privacy of their business records. The security risks associated with storing records offshore is a commercial matter for the taxpayer to consider with their offshore storage provider.
The privacy of taxpayer information and data held by Inland Revenue is not within the scope of clause 103 and is covered by other provisions such as section 81 of the Tax Administration Act.
Recommendation
That the submission be noted.
Issue: The Commissioner should be restricted from requesting information that is over seven years old
Submission
(New Zealand Institute of Chartered Accountants)
The Commissioner should be restricted, under statute, to the seven-year record-retention period when requesting information from taxpayers in all circumstances.
Comment
A taxpayer is required to retain records for seven years and, in certain circumstances, for an additional three years if given notice by the Commissioner. However, the Commissioner is not restricted to requesting records or information that is over the seven or 10-year periods if in fact the information exists. Examples of when such a request would be made include when certainty or the reconstruction of income is required or when a taxpayer may be fraudulent, or wilfully misleading the Commissioner. Many older documents may also remain relevant to the tax affairs of taxpayers in more recent periods.
Recommendation
That the submission be declined.