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Taxation Transformation First Phase Simplification and Other Measures Bill

Electronic communications

Overview

Accepting electronic signatures

OVERVIEW

Clauses 5 to 34, 36 to 46, 48 to 51, 55 to 58, 60 to 66, 68 to 69, 71, 74 to 82, 88 to 100, 103 to 104, 106 to 108, 110, 112 to 121, 123 to 129, 132 to 135, 137, 139 to 144, 146 to 152, 154 to 176, 178 to 202, 212 and 220

These amendments remove references throughout the Income Tax Act 2007, the Goods and Services Tax Act 1985 and the Tax Administration Act 1994, which restrict interaction with the tax system to paper-based transactions. In addition, the proposed amendments clarify the communication options available and provide general rules governing methods of communication delivery. The proposed delivery rules consolidate current practices and legal requirements and extend these to electronic communications putting emails, for example, on the same footing as paper letters delivered by post.

The changes in the Bill:

  • establish the new communications framework, contained in new sections 14 to 14G, to facilitate the information flows between the Commissioner and a person, and between two persons where the tax legislation governs that interaction (refer to clause 74);
  • update existing terminology referring to specific modes of communication, for example, the requirement for certain communications to be “in writing”, with terminology corresponding to an appropriate tier in the communications framework (refer to remainder of clause numbers).

Submitters were generally supportive of the rationale for the amendments. However the submissions raised questions about the effectiveness of legislative change alone, and emphasised the need for administrative change and a positive commitment from Inland Revenue to make better use of electronic communication methods.

Submitters also highlighted concerns around the use of common verbs as “defined tiers” of communication options in terms of providing legislative certainty about which method was to be used and when.

Finally, submissions highlighted the importance of accurately gauging the necessary formality of certain communications when allocating a tier. For example, whether a document is required to evidence the communication or the consequences of a missed communication (including penalties or use-of-money interest). The example submitters were most concerned about was section 17 of the Tax Administration Act 1994, which governs the obligation to provide information when required by the Commissioner, which uses the term “request” in the title.

In response to submissions, officials are making the following recommendations to modify the proposals in the Bill:

  • amendments to correct the drafting errors and cross-references as described in the comments below;
  • amendments to ensure that any provisions where the term “requested” has been replaced with the term “required” are consistent with intended policy; and
  • an amendment to clarify the inclusion of both “notify” and “notice” within the framework.

Officials also undertake to further consider whether an amendment to section 17 to formalise the Commissioner’s stated practice is desirable, as well as any remedial amendments, where necessary, to correct unintended meaning changes as a result of these amendments.

Issue: Support for the amendment

Submission

(Chartered Accountants Australia and New Zealand, Corporate Taxpayers Group, Covisory Partners, EY, KPMG)

Submitters support the rationale for the amendments proposed in the Bill to modernise and future-proof the means of communication in the legislation, and welcome the proposals to clarify the options available for communications. In particular the proposals to remove legislative barriers to electronic communications and the framework included in the Bill establishing general rules for communications are supported. Any amendments that are proposed that will facilitate easier communication with Inland Revenue and increase Inland Revenue’s flexibility to communicate electronically are encouraged and supported by submitters.

Comment

Officials note the submitters’ support for the proposed amendments.

Recommendation

That the submission be noted.

Issue: Administrative changes required

No clause

Submission

(Chartered Accountants Australia and New Zealand, KPMG)

We believe administrative changes are required, the Commissioner’s internal operational policies, for example, in relation to the use of e-mail and accepting files sent digitally should also reflect the objective of the amendments. (Chartered Accountants Australia and New Zealand).

The success of the Business Transformation proposals depends on a permissive tax administration framework and Inland Revenue’s uptake and acceptance of the proposals, which will require a significant cultural change within the Department. (KPMG)

Comment

In the Making Tax Simpler: A Government green paper on tax administration and Making Tax Simpler: Better digital services discussion documents – released in 2015 as part of the Government’s wider focus on transforming the way New Zealanders interact with the tax system – the Government indicated a clear vision for the future state of tax administration in New Zealand, which involved significant administrative changes for Inland Revenue. The discussion documents acknowledged that changes were needed to ensure that Inland Revenue could make better use of available and future digital technologies to provide more efficient services and to simplify interactions for taxpayers. To ensure that the integrity of the tax system and taxpayer confidentiality is maintained, it is necessary to roll out the use of the electronic communication technology following the Department’s staged transformation programme.

Recommendation

That the submission be noted.

Issue: Rules should provide positive obligation for the Commissioner to use electronic communications primarily

No clause

Submission

(KPMG)

We consider there should be a positive mandate for Inland Revenue to communicate electronically as the primary mode unless other means of communication, such as letter by post, are necessary (for example, if a taxpayer does not have access to digital services). In our view, the Commissioner has yet to properly and fully embrace current technology, and our concern is that without a clear legislative mandate the Commissioner will resist the application of future technology. A positive obligation to communicate electronically would be useful in supporting a mind-set change at Inland Revenue.

Comment

Officials consider that the current approach, allowing for varied communication formality which can be tailored to suit individual circumstances, is preferred over a mandated approach where electronic methods of communication are preferred over others. This flexible approach takes into account both the fact that not all communications should attract the same level of formality as well as the fact – as noted in the Making Tax Simpler: Better digital services discussion document – no one size fits all. It is critical that as the tax administration systems are transformed to accommodate better use of digital technologies that services are flexible enough to accommodate taxpayer preferences and to accommodate those taxpayers who may have reduced access to digital services. In light of these underlying principles, officials do not consider a positive obligation for the Commissioner to use electronic communications would be the correct approach. Overall the proposed amendments, coupled with the Government’s stated focus on embracing digital services for New Zealand’s tax administration, should provide the impetus for change within Inland Revenue.

Recommendation

That the submission be declined.

Issue: The communication framework should apply to all provisions

Clause 74

Submission

(Russell McVeagh)

We note that not all interactions are governed by the proposed new framework, for example, section 17 does not use one of the defined terms. We submit the proposed framework should apply to all provisions of the Tax Administration, Income Tax, and Goods and Services Tax Acts, that govern interactions between the Commissioner and taxpayers.

Comment

The amendments were intended to encompass all of the interactions between the Commissioner and taxpayers, and taxpayers and third parties where the tax legislation presently governs these interactions. Therefore where presently the legislation does not expressly describe or require a communication, then the framework will not apply. Section 17 of the Tax Administration Act is unique in this regard and is discussed specifically further below. Officials intend to rely on the framework, once enacted, for future legislative developments to ensure consistency in governing communication under the tax legislation.

Recommendation

That the submission be noted.

Issue: Amendments should extend to stamp and cheque duties legislation

Clause 74

Submission

(New Zealand Law Society)

The proposed amendments do not apply to Part 6B of the Stamp and Cheque Duties Act 1971, which deals with the approved issuer levy. This omission should be rectified.

Comment

The proposed amendments only apply to the Income Tax Act 2007, the Tax Administration Act 1994 and the Goods and Services Tax Act 1985. Therefore the remainder of the Revenue Acts, including the Stamp and Cheque Duties Act 1971, will require updating to align each Act to the proposed communication framework. Officials intend to continue work on the necessary amendments to the remainder of the Revenue Acts and once the framework is enacted, will recommend follow-up legislative amendments in due course.

Recommendation

That the submission be noted.

Issue: Amendments should future-proof the legislation

Clause 74

Submission

(KPMG, Chartered Accountants Australia and New Zealand)

It is difficult to predict where technology will lead and the risk is that this amendment will restrict the Commissioner’s ability to communicate with the appropriate technology in the future. The drafting should be considered to confirm that it allows for advances in technology so that Inland Revenue is not slow to respond to any changes. The framework needs to be flexible and to embrace digital communication however it develops. It should be possible to draft legislation in a broad way so that communication is not restricted to specific communication means and modes.

Comment

This amendment is intended to future-proof the legislation, by allowing for each category to be expanded without the need for further legislative change. Presently the defined communication modes have a set of available options for delivery (for example, in writing, electronic or on the telephone) as well as a broad category allowing for communication by “any other manner permitted by the Commissioner”. This catch-all allows for the Commissioner to facilitate new technologies and permit their use without requiring specific legislative amendment. This flexibility allows for the legislation to move with technology with relative agility. Equally, if technology becomes redundant, the legislation can be easily updated through direct amendment to the framework, rather than requiring a re-visit of each operative provision.

Recommendation

That the submission be declined.

Issue: Use of common verbs creates uncertainty

Clause 74

Submission

(Chartered Accountants Australia and New Zealand, EY)

The use of different verbs to signal to taxpayers whether they can or must write, call or do something digital should be reconsidered as it will lead to confusion. It would be simpler to have electronic communication accepted unless a taxpayer is notified that another means is required. The use of a tiered system is not practical.

Comment

Officials acknowledge that the amendments, which specifically define commonly used verbs for the purposes of the tax legislation, do pose a risk of confusion for taxpayers who may not expect that the terms carry specific meanings. However, the definitions of the terms are permissive rather than mandatory, allowing for flexibility in communication mode. This flexibility should allow for taxpayers to communicate in accordance with the law without necessarily needing to refer to the definitions.

The tiered approach allows for varying formality in the definitions of the terms, which is a practical way for Inland Revenue to signal which communications are considered more significant (because they may require documented evidence, for example). Given the volume of communications processed by Inland Revenue (both received and sent) it would not be practical to provide an individualised approach for specific taxpayers or even taxpayer groups. Therefore providing flexibility, more generally, in which modes of communication are acceptable to the Commissioner allows for taxpayers to select whichever method they prefer best when communicating with Inland Revenue. For the Commissioner, choosing which method to use would depend on both the individual circumstances and the significance of the communication.

Finally, given that the existing definitions and procedural provisions relating to the giving of notices (for example, the postal delivery rules) have been maintained and extended to the electronic forms of communications, officials expect that taxpayers should be largely familiar with the procedures around the more formal modes of communication.

Recommendation

That the submission be declined.

Issue: Commissioner’s express consent

Clause 74

Submission

(EY)

Where the proposed new provisions refer to using electronic communications, they generally require the person to comply with the Electronic Transactions Act, which includes the requirement for the person to seek the recipient’s consent to the electronic communications. The new proposals specifically deal with the consent issue for taxpayers and others who may receive communication from the Commissioner but do not cover the Commissioner’s position. To remove any doubt or uncertainty we suggest that there should also be express statutory provision that the Commissioner consents to the use of electronic communication and technology wherever the new provisions allow for this.

Comment

As noted in the Commentary to the Bill, wherever possible and practical, Inland Revenue staff seek from each individual recipient their consent for electronic communication. However, this may not always be feasible, particularly for large groups of recipients receiving a generic batch email notice or in circumstances where the email address is the only contact address available for the recipient as they are overseas-based, for example. In these circumstances requiring express consent from each individual is impractical and would unduly restrict electronic communications when compared with paper equivalents sent by post. As a result the general override in the existing notice provisions (see current section 14(7)) has been maintained and extended to cover the newly defined modes of communication (that is, to apply, inform and ask as well as to give notice).

However, in order to ensure that the systems requirements and processes are in place to protect taxpayers from misdirected electronic communications falling outside the net (for example, tax returns being sent via email to a generic Inland Revenue email address and never being picked up for processing) it is necessary for the Commissioner to phase in electronic communication as Inland Revenue’s Business Transformation programme progresses. By not providing the Commissioner’s express consent to all electronic communications, these amendments preserve the Department’s ability to phase in new digital services.

The amendments are designed to allow for these services to “go live” once developed without the need for further legislative change. Therefore, if a fringe benefit tax return online filing system becomes ready for use for example, the Commissioner would simply generally consent to this electronic communication by making the service available on the Inland Revenue website and none of the governing legislative provisions would require updating. These amendments therefore are not intended to, for example, allow for immediate filing of tax returns by email where that service has not been made available to date. The Commissioner’s consent can be given in specific circumstances for a particular matter through a consent agreement with the taxpayer or agent, or more generally by notice on Inland Revenue’s website or through the provision of an online filing service or electronic contact address.

Recommendation

That the submission be declined.

Issue: Communications must be in writing where penalties could arise or time periods are triggered

No clause

Submission

(Corporate Taxpayers Group, New Zealand Law Society)

In any circumstances where there is a penalty for non-compliance or the communication triggers a time period in which a certain condition must be met or a certain action performed, the relevant communication should be in writing as they may subsequently be required for evidentiary purposes. Any communication from the Commissioner to a person that triggers a statutory time period, requires a response by a particular date, or where non-compliance by the person could result in criminal or civil liability, should be made in writing (either electronically or in print). This would avoid disputes over what was required and when a particular communication was made.

Comment

In developing the proposed amendments to the substantive provisions – as part of establishing the communications framework more generally – officials have taken care to ensure that the current practice and expectation about how communications are to be completed in individual circumstances is disturbed as little as possible. This means that for more formal communications (for example, those where a statutory time period may apply) if the governing provisions have previously required communication in writing or by registered post, the amendments should not allow for an informal communication mode (for example, oral conversation or phone call). To the extent that unintended changes have been made such that formal communications are no longer required to be in writing or electronic equivalents, officials will undertake remedial amendments as required.

Recommendation

That the submission be noted.

Issue: Commissioner’s power to request information under section 17

Clauses 74 and 76

Submission

(Corporate Taxpayers Group, New Zealand Law Society, Russell McVeagh)

It is inappropriate for communication of a section 17 request to be via phone, orally in person or via email (albeit the Group is comfortable with a separate written letter of request being delivered via email). We submit that the Commissioner must “notify” a person from whom information is required pursuant to section 17. (CTG)

Section 17 is silent on how the Commissioner may require information to be provided, which is undesirable as a person who fails to provide information required under section 17 commits an offence. The heading of section 17 should be amended to “information required” rather than information “requested”. A request, as defined under the new framework, would be inappropriate for section 17 given that requests can be made by telephone or orally in person. The section should be amended to require the Commissioner to “notify” a person that information is required.

Comment

Section 17 provides a broad obligation for every person to provide information or documents to the Commissioner when required by the Commissioner. The title of the section describes the section as “information to be furnished on request of Commissioner”. Officials note, however, that section 17 does not set out a manner for how a request for information must be communicated (that is, at present “request” is undefined).

As stated above, in developing the proposed amendments to the substantive provisions officials have taken care to ensure that the amendments do not unintentionally change the current meaning of the individual provisions, and this includes section 17. Nonetheless it is arguable that the meaning of section 17 has been altered by amending the meaning of the word “request” in the heading, which was not intended. Given the significance of this section and the potential consequences for non-compliance, officials prefer not to make hurried amendments to the meaning of section 17. This would include inserting the requirement for a notice into section 17, as suggested by some submitters, which would be a law change away from the status quo.

Furthermore, given that section 17 is predominantly relied on for formal requests for information as part of an investigation or audit, officials are confident that the risk of inappropriate use of section 17 (for example, formal request for audit information over a telephone call) is minimised by the Commissioner’s clear departmental practice as discussed in the operational statement (OS 13/02) governing specifically section 17 notices. The OS outlines the procedures Inland Revenue will follow when issuing section 17 notices. It clarifies that although Inland Revenue staff will usually request information and documents without expressly relying on section 17, as this fosters a spirit of reasonableness and mutual cooperation, when information is not provided voluntarily or in a timely manner the Commissioner is able to use section 17 to demand the information by issuing a notice under the section. The OS clearly states that when information is demanded under section 17 a notice will be issued in writing.

However, to address the concerns raised by submitters, officials undertake to further consider whether an amendment to section 17, to formalise the Commissioner’s stated practice, is nonetheless desirable.

Recommendation

That the submission be noted.

Issue: Responding to an information request in writing

Clauses 74 and 76

Submission

(Russel McVeagh)

The amendment to section 17 should be clarified to provide certainty that a person is able to respond in writing to an information request under that section. The objective of facilitating greater use of electronic and other new communication channels is achieved by allowing the Commissioner to specify other acceptable methods of furnishing requested information but maintaining, as a default, the ability to respond “in writing” provides certainty for taxpayers that written documents will be acceptable.

Comment

This amendment is intended to both update the language to reflect the fact that documents “in writing” may no longer be the preferred method of providing information and to allow for the flexible application of the section tailored to individual circumstances. The removal of the reference to “in writing” in section 17 is not intended to restrict the way in which a person communicates their response or disallow written responses to information requests. Although certainty in drafting is desirable, officials consider that re-inserting the words “in writing” as suggested in the submission would appear to set written communication as the preferred method of communication which is inconsistent with the intention to allow for flexible adoption of modern communication technologies.

Recommendation

That the submission be declined.

Issue: Requirement to provide information for a binding ruling

Clause 140

Submission

(New Zealand Law Society)

The amendment to section 91EE to remove the word “requested” and replace it with “required” would mean that an applicant for a binding ruling would commit an offence under section 143(1)(c) if they did not provide the relevant information. Presumably this is not intended. It would be simpler to remove the “by notice” and retain “request” which would allow for requests for further information to be made by phone or in person, which is often the case in ruling applications.

Comment

Officials agree that the extension of the offence in section 143(1)(c) to section 91EE is not intended. An amendment to address this concern has been proposed. The Bill contains other similar amendments to sections covering other types of ruling applications, and officials have proposed further amendments to ensure the unintended extension has been corrected elsewhere in the Bill.

Recommendation

That the submission be accepted.

Issue: Legislative clarification for email bounce-back

Clause 74

Submission

(Corporate Taxpayers Group)

The Group recognises the need to ensure that a corporate taxpayer actually receives a communication, and we agree with the comments in the Commentary to the Bill that a notice should not be treated as delivered if it is simply sent to a generic email box at a company. The requirements for delivery by electronic means should be further enhanced by making it clear that in situations when an email bounces back to the sender (for example, due to the person having left the organisation or a response indicating the recipient is out of the office with no email access) it will not be treated as having been delivered.

Comment

Although failed communication is not desirable from an administrative and policy perspective, it is officials’ view that the legislation is a blunt tool to address the risk of communication non-delivery. There are many circumstances that could give rise to a communication non-delivery and an email bounce-back is just one example. To effectively legislate to cover off all of the circumstances would clutter the provisions, which may nevertheless remain incomplete. Furthermore a specific email bounce-back provision would put electronic communications on a different footing to paper-based communications delivered via post, on which the legislation is silent on the treatment of returned mail, and could create undesirable opportunities for recipients to dodge communications or impede administrative action.

Officials consider that the risk of failed delivery is ameliorated by both the delivery rules (including the definition of an acceptable corporate body contact address) and the positive requirement when sending electronic communication for the Commissioner to first seek the recipient’s consent to communicate electronically (except when there are reasonable grounds to suppose the electronic communication will be received by a person, in which case the recipient’s consent will not be required). Inland Revenue will aim to always preserve integrity and confidentiality in its communications and therefore it can be expected to be responsive to failed communications even without an express legislative direction to that end.

Recommendation

That the submission be declined.

Issue: Legislative clarification for “received by the person”

Clause 74

Submission

(EY)

Further clarification of whether the reference to having reasonable grounds to suppose an electronic communication will be “received by the person” test is intended to be met by apparent or assumed receipt by the named addressee, would be desirable. We suggest including an express provision that a sender holding evidence of having sent an electronic communication to a correct (or appropriately notified) address would constitute reasonable grounds for supposing the communication had been received.

Comment

References to communication to be “received” by a person are contained in both the Tax Administration Act 1994 (in the current provision which refers to electronic delivery of notices) as well as the Electronic Transactions Act 2002 (which governs when a communication is received). Existing case law and interpretive guidance will therefore be useful in determining whether particular communications will be treated as received. The phrase is used twice in the amendment. First, as discussed above, it is used as a qualification to the provision which allows for the Commissioner to send electronic communications without first obtaining the recipient’s consent. Secondly, it applies to electronic communications sent to addresses that are neither the electronic address provided to the sender nor the last known address. It is intended to provide additional protection against misdirected mail.

When an electronic communication has been sent to the address provided or last known address, the communication can be treated as received. Express provision, that a sender holding evidence of having sent an electronic communication to a correct (or appropriately notified) address would constitute reasonable grounds, would therefore not be necessary if an address is “correct or appropriately notified”.

When the address is only “otherwise available” and the electronic communication has not been previously consented, the reasonable grounds of receipt are still required. Officials prefer to allow for judicial interpretation of what may constitute “reasonable grounds” in particular circumstances over strict legislative criteria which may not effectively canvass all of the circumstances that could arise.

Recommendation

That the submission be declined.

Issue: Legislative clarification of what “directly alerted to” means

Clause 74

Submission

(EY, New Zealand Law Society)

Further clarification of what is intended by the requirement that an addressee or intended recipient must be “directly alerted to the communication in some manner” in order to communicate on the internet or by other electronic means, would be desirable. In particular the concern here is to minimise any risk that the Commissioner can dispute the fact or validity of taxpayers’ communication with the Commissioner. It is unclear what is required for the person to be “directly alerted”; the meaning should be clarified.

Comment

A communication via the internet will not always alert the recipient to the receipt of the message. Examples include posting a comment on an online newspaper article or posting a blog on a webpage. To protect recipients from mail going unnoticed, this condition is intended to ensure that electronic communications are used only where the recipient is alerted to the receipt of the communication, for example, via email or txt message.

Given the fact that the Commissioner has to consent to the receipt of electronic communication by either individual agreement with a person or more generally by providing an electronic communication channel (for example, myIR secure mail), it is unlikely that the use of a communication channel which does not “directly alert” the Commissioner of receipt would be consented to. For example, the Commissioner could give consent for electronic communication via email with Inland Revenue staff directly agreeing this with the sender or through a secure contact function via the Inland Revenue website. Therefore it is difficult to envisage a circumstance where the Commissioner would be in a position to dispute the receipt of electronic communications on the basis of there being no “direct alert”.

Finally, officials note that this amendment has been modelled on similar provisions in the Student Loan Scheme Act 2011 which refer to the person being “directly alerted” in some manner. Officials are unaware of any concerns or disputes arising over what the phrase means within those provisions, to date.

Recommendation

That the submission be declined.

Issue: Legislative clarification of what “advising” means

Clauses 103, 124, 127 and 161

Submission

(EY, New Zealand Law Society)

The term “advising” is not defined; it is suggested that where “advising” is used, that an appropriate level of category of defined term is used instead. The term “inform” is currently used in various provisions dealing with the content of documents to be provided in tax disputes, to infer that the information provided is in sufficient detail to “inform” the other party of the grounds of the proposed adjustment, for example. The Bill has replaced these references with “advise” as “inform” is a defined term under the framework. The term “advise” arguably has a different meaning to “inform” and as a result of the amendment to these sections it could be assumed that Parliament intended to change the meaning of these provisions. Therefore it should be clarified that there has been no intended change in meaning as a result of these amendments.

Comment

The use of the term “advising” within the amendments is intended simply to replace the term “inform” where the defined term would cause uncertainty within the context of the individual provisions. For example, where the section requires a notice providing sufficient detail to inform the recipient of the circumstance, the use of the term “inform” would appear to allow for an oral communication despite the fact that the communication is intended to be via a notice (that is, the communication must be written or electronic). The change of wording is not intended to change the meaning of the provisions, and to the extent that unintended changes have been made, officials will undertake remedial amendments as required.

Recommendation

That the submission be noted.

Issue: Consistent use of the term “provide”

Clauses 92 and 201

Submission

(New Zealand Law Society)

The proposed amendments replace some references to “provide” within various sections with a new defined term within the framework but not all references to “provide”. We submit that the amendments be checked for consistency with reference to the term “provide” and ensure there are no unintended omissions.

Comment

The term “provide” is undefined and used extensively throughout the legislation, signalling that information must be given. This set of amendments replaces the term only to ensure the provision uses a term defined by the communications framework or to simplify the drafting (for example, replacing “provide a statement in writing” with “notify”). Officials have re-checked the use of the term “provide” in the new amendments and have not discovered any un-intended uses. To the extent that unintended changes have been made officials will undertake remedial amendments as required.

Recommendation

That the submission be noted.

Issue: Legislative clarification of difference between “notify” and “notice”

Clause 74

Submission

(Russell McVeagh)

It is unclear how provisions of the Tax Acts that require a “notice” fit within the proposed communication framework. This should be clarified. An inference created by the amendments is that “notice” is not a derivative of “notifying”, therefore the provisions should be clarified to indicate whether “notice” is intended to form part of the new framework.

Comment

Officials agree that the amendments should clarify the intention to capture both “notice” and “notify” within the framework.

Recommendation

That the submission be accepted.

Issue: Clarification of cross-reference in new section 14F

Clause 74

Submission

(New Zealand Law Society)

It should be clarified that new section 14F applies only to communications delivered by personal delivery, post, fax and electronic means. As the section is presently drafted, it could arguably be interpreted to apply to both written and oral communication due to the cross-reference to new section 14B (2).

Comment

Officials note the potential for uncertainty caused by the cross-reference and agree to a simple clarification of the intention for the section to apply, in line with its title, only to communications delivered by personal delivery, post, fax and electronic means.

Recommendation

That the submission be accepted.

Issue: Minor legislative drafting errors

Clauses 155, 159 to 162 and 164

Submission

(EY)

Several minor drafting errors are described in the submission, including some which do not form part of the amendments in this Bill. The suggested amendments relate to the following sections of the Tax Administration Act:

i. section 28, submission suggests that the section is missing the subject and that either including “any payer” or deleting the word “from” would resolve this issue; [not in Bill]

ii. section 106(1C), submission suggests that the section incorrectly refers to “provides” and should be changed to “does not provide”; [not in Bill]

iii. section 108B(1)(a), submission suggests there is no need to amend the use of the semi-colon as is provides both for situations where a further extension is agreed and where no such further extension is agreed;

iv. sections 126(1); 130(1) and(2); 136(6), (12) and (14); submission suggests these amendments are not required given that the sections are either no longer operative (that is, the time limits have lapsed) or apply in retrospect;

v. section 137(1)(a), submission suggests that the change from “requesting” to “seeking” is unhelpful as the term is undefined under the framework;

vi. sections 137(11) and 138R(8), submission questions whether it is intended that the delivery method be limited to registered post or whether personal delivery could be used.

The submitter raises one other concern with amending section 8(2E) of the Goods and Services Tax Act, as this section is no longer able to be used as the time period had lapsed.

Comment

Officials are grateful to the submitter for highlighting these drafting concerns and agree that clarifications of all of the sections should be made, except for the submissions referred to above at iii), v) and vi).

In submission iii), officials consider the use of the colon, as short-hand for the phrase “all or any of the following”, in section 108B currently leads to confusion, as sub-paragraph (b) refers to sub-paragraph (a). Therefore it is not possible to read the two sub-paragraphs as being separated by the phrase “all or any of the following” given that logically an extension of 12 months under sub-paragraph a) must first be obtained, in order for a further 6-month extension to be obtained under sub-paragraph (b). Officials consider the insertion of “and” between the two sub-paragraphs is sufficiently clear and that a 12-month period applies first and then a possible further 6 months.

In submission v), officials consider that the amendment is necessary to ensure that there is no confusion caused by the requirement for this section to be satisfied with a “notice” that either requires or “requests” for the objection to be heard by the Taxation Review Authority (TRA). Inclusion of the terms “notice” and “request” within the communication framework at different levels of communication formality means that they are therefore inconsistent in this context. To ensure that the section operates as intended, requiring the objector to communicate by notice, the term “request” (which is less formal than a notice) must be amended. Officials consider that the action intended by this provision is to either require or seek a hearing before the TRA. The term “seek” does not need to be defined for the operation of this section as the desired action must be communicated via a notice, which is a defined method of communication.

In submission vi), officials note that proposed new section 14D allows for both personal delivery and registered post. Therefore the proposed amendments to sections 137 (11) and 138 R(8) would allow for both methods of delivery.

Recommendation

That the submission be accepted, subject to officials’ comments.

ACCEPTING ELECTRONIC SIGNATURES

Clauses 72, 73 and 105

Issue: Support for the amendment

Submission

(Chartered Accountants Australia and New Zealand, KPMG)

The submitters support the amendment to allow for documents to be “signed” with an electronic signature.

Comment

Officials note submitters’ support for the proposed amendment.

Recommendation

That the submission be noted.

Issue: Commissioner’s express consent

Submission

(EY)

The Electronic Transactions Act requires that the recipient consents to receiving the electronic signature. While it may be arguable that such consent is implicit in the legislation or should be able to be inferred from the Commissioner’s general conduct, we consider express statutory provision to that effect would be desirable.

Comment

This amendment is intended to provide the necessary consent for the use of valid electronic signatures on information provided to the Commissioner for taxpayers who comply with the Commissioner’s published guidelines. The guidelines will set out the criteria and technical requirements for the use of valid signatures as well as the nature of, and circumstances in which, the Commissioner accepts information under an electronic signature. Once developed, the guidelines will provide the detail of the circumstances in which electronic signature use is expressly consented to by the Commissioner. The criteria will be set by the Commissioner following consultation with interested parties.

Recommendation

That the submission be declined.

Issue: Legislation should cover more than just electronic signatures

Submission

(Chartered Accountants Australia and New Zealand, KPMG)

Other unique identifiers such as encryption keys and biometric signatures should be accepted as a means of validating documents. This change needs to be future-proofed so that forms of consent (digital signatures) are also acceptable once the appropriate technology has been designed and tested. The proposal should be future-proofed to accommodate fast evolving communications technology.

Comment

The proposal is intended to be flexible to allow for the Commissioner to respond to new technologies. For this reason the proposed new section does not list all of the acceptable technologies or ways in which the technologies can be used; this detail will be covered in the guidelines. The term “electronic signature” is defined in the Electronic Transactions Act as a method used to identify a person and to indicate that person’s approval of that information. This definition is very broad and therefore electronic signatures can arguably range from a name typed into a document, a pin number, the ticking of an internet check box or even a scanned image of a hand-written signature. The combination of the broad definition of “electronic signature” and the requirement for guidelines, will allow the Commissioner to approve the use of new technologies and to accept the use of new forms of electronic consent, by adding to the guidelines without the need for further legislative change.

Recommendation

That the submission be noted.

Issue: Express reference to “income tax” and “GST returns” under electronic signature

Submission

(Chartered Accountants Australia and New Zealand, EY)

For the purposes of removing doubt, explicit provision should be made for taxpayers to file income tax and GST returns under electronic signature.

Comment

As stated in the Commentary to the Bill, because of the legal significance of a signature it is important that the use of electronic signatures is secure and reliable for both taxpayers and Inland Revenue. To ensure that the necessary processes and systems requirements have been developed to allow for the secure and reliable use of electronic signatures it is important to phase in their use across the variety of communications received by the Commissioner. Therefore the proposed new section provides the over-arching consent for the use of electronic signatures and the guidance will provide the necessary detail as to which communications (for example, income tax or GST returns) and which technologies will be acceptable over time. To include some communications explicitly in the proposed new section with others allowed in the guidelines could result in confusion and uncertainty. Furthermore, the explicit inclusion of some communications undermines the desired flexibility of this section, which aims to future-proof the legislation. If technologies change or tax administration changes there could be a need to reconsider the specific inclusion of these communications, which could require further legislative changes.

Recommendation

That the submission be declined.