Taking the Michael

Let’s talk about tax.

Or more particularly let’s talk about the current Minister of Revenue Hon Michael Woodhouse.


There were lots of cool things I got to do when I was at the Treasury. My particular fave though was getting to coordinate the legislation that went through on Budget Night under urgency. I probs didn’t have to be there the whole time but through a combination of excessive diligence and deep love of the atmosphere in the House I was.

Urgency can go to 10pm on a Thursday and midnight on a Friday. So you can imagine it can get pretty surreal at times. And pretty much the only people who are there the whole time are the respective chief whips – or is that chieves whip – and an overly conscientious Treasury legislation coordinator. Although the formers and the latter NEVER interact.

It was in my first year of doing this gig that I noticed the Government Chief Whip Michael Woodhouse. There was just something about him that I liked. Whether it was the way he said: New Zealand National Party – twelve thousand million, Maori Party three, Act 1, United Future 1; or the way he seemed to be part of the National Party team while also not being part of some of the rougher baracking; I couldn’t say. Regardless the man impressed me.

Fast forward to him joining the Cabinet and becoming Hon Mike. He was Minister in charge of the changes to workplace safety. Now your correspondent with her left leaning tendencies was not best pleased with the final outcome but in her view Hon Mike took one for the team. Let me explain.

The original Bill was one that was widely consulted on and had agreeement of Business and the CTU. That would not have happened without Hon Mike’s ministerial sanction and support. Cabinet as well but a Minister has to take a paper to Cabinet and that would have been MW or a predecessor.

As an aside this would have been a great piece of work to have been an official on – at the beginning anyway. A chance to make the world a better place and a form of redeemption after Pike River. Although I understand that the Forestry death toll was also uppermost in the heads of those involved in this work. Regardless at times like this there is nothing better than being a Public Servant.

As a further aside I really do hope there were some juniors on this work. As watching how this piece of work turned from a ‘hands across the water’ bipartisan love fest into a partisan bureaucrat’s nightmare would seriously season a junior official and be the stuff of a Treasury senior analyst interview. Either that or send them screaming into the waiting arms of the private sector. And as I tell my children, and anyone who will listen, good experiences are not always pleasant ones.

But back to the topic and enter backbench revolt stage left. Hon Mike and his officials were then scrambling to make the best of a bad job. And it wasn’t pretty – worm and lavender farmers but not dairy farmers – geez.  Big ups to Sue Moroney for spotting that – shows an attention to detail that politicans are often not big on. But here’s the thing  – in all the resulting fallout all of it landed on Mr Woodhouse. Not the PM, not the Cabinet, not the National Party – all on Hon Mike. I was so impressed.

For his sterling work on this he was then ‘rewarded’ with the Revenue portfolio. Since Michael Cullen handed it on, it has been a pretty junior Ministerial position – often outside Cabinet. This continues to surprise me as it can be one of the harder gigs. For everyone else, they have to make decisions on giving stuff to people or not giving stuff to people. The MoR has to make decisions on taking people’s stuff off them in the first place. And none of them go quietly.

So how is the boy going?

  1. Took some of the crap on foreign trusts. Tick. Didn’t manage to shield the PM this time – but geez there are limits to anyone’s powers on that one.
  2. Commissioned and got the Shewan report through Cabinet. Tick.
  3. Got the changes to the non-resident withholding rules which make foreign capital pay tax on interest income in a way they haven’t done in decades – through Cabinet and into a bill. Tick.
  4. Plans to extend the scope of withholding taxes generally. Tick.
  5. When proposed to give away money – it was at least intelligent. Tick.
  6. Plans to do other base maintenance – On verra.

Now some could argue this stuff should have happened years ago. And maybe it could but Hon Mike wasn’t in charge then. So for an interim ranking I’ll give him the same ranking I always got at the Treasury as a Principal Advisor  -‘meets expectations’. Because like the Treasury my expectations are always very high.

For the final review and ranking we will have the benefit of the  2017 tax expenditure statement which will show just how good a gatekeeper he is. More that statement on Friday.

Namaste

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2 responses

  1. Interested in your thoughts on Woodhouse’s latest proposal (text below is from the Taxpayer’s Union). It was reminding me of Muldoon’s fiscal regulator proposal – the idea that the govt should be able to vary income tax rates, without Parliament – for macro-stabilization purposes (only this one is, in principle, even more offensive).

    Proposed law the biggest threat to taxpayers’ rights in a generation

    The Government has just introduced a last minute addition to a tax bill before Parliament which, if implemented, would give the Government the power to amend tax laws without any consultation or parliamentary scrutiny. The proposed amendment is to the Tax Administration Act, which sets out important taxpayer rights, including secrecy, and the appeals process when the IRD have treated a taxpayer unfairly. The amendment would grant the Minister of Revenue power to make changes to the Act by regulation, avoiding Parliamentary and public scrutiny. Worse, according to advice we have seen, prepared by the IRD, the proposed law would even allow a Minister to change tax law with retrospective effect!

    Tax expert, Robin Oliver (pictured), who is incidentally a former head of policy at Inland Revenue, says the proposal is akin to the regulatory powers under the infamous Economic Stabilisation Act 1948. Rob Muldoon used to say he could do anything under the regulatory powers of that Act provided he could hang his hat on economic stabilisation – and he did. The proposal seems to allow a government to do anything tax-wise provided it can hang its hat on “Inland Revenue’s business transformation programme”.

    We have called on the Minister to withdraw the proposal and have been backed by Labour’s Revenue spokesperson Stuart Nash and Newstalk ZB’s Barry Soper.

    Proper scrutiny of tax laws is of utmost importance in a democratic society. We cannot think of another proposal in the last 30 years that is such a threat to fundamental common law principles and New Zealanders’ taxpayers rights.

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    1. Thank you for your question Michael.

      I think the first thing to have in mind as it isn’t tax laws in general – it is the Tax Administration Act. That is the law that governs the machinery of how the tax system works filing, returns etc. But there are also some pretty important things in there like – timebar – the limits on the ability for the Commissioner to reassess taxes.

      All the key stuff like tax rates, who is taxed and how is in the Income Tax Act which isn’t impacted by this amendment.

      The TAA contains a discretion – section 6A – https://www.ird.govt.nz/resources/c/e/cea79f80445d30c38ff5ef73c2f44a51/is1007.pdf which gives the Commissioner the ability to manage her resources – which can include not collecting tax – in the most overall efficient way. They must have felt that wasn’t sufficient for what they were facing.

      We also have double tax agreements that do override the underlying tax legislation and are permanent that also come in via the executive rather than parliament. They too face the scrutiny of the Regulations Review Committee.

      I think that this provision has been brought in like this again emphasises the importance of Business Transformation to the government and to Inland Revenue.

      I thought the RIS was pretty fair and it is clear that Woodhouse and IR have really tried to take the edges off it. http://taxpolicy.ird.govt.nz/sites/default/files/2016-ris-sop-190-bteirm-bill.doc. The RIS also discusses the use of urgency which I allude to in the post and could be used for these issues as there is always a tax bill. In those cases scrutiny can involve the Parliament getting the bills and RISes on the same day as first/second and third reading speeches need to be made.

      As the acting CPC says – with that as a counter factual it all looks pretty good.

      I don’t know if this is confidence and supply but I would assume the govt has the numbers. In that case what I would hope for was guidance from the dept – as with the 6A statement – as to how they are going to use it. Because it could also have the potential to be taxpayer friendly/fiscally unfriendly. It is largely timing but timing does matter in tax.

      But all these questions, challenges and scrutiny are good and will put further pressure on its use.

      I note it is an SOP to the Business Tax bill which has yet to go to FEC. They could have SOPed the other bill which I think has left FEC.

      So I really do think they are trying.

      But do I like it? Not really.
      Am I close enough to the issues to really understand its necessity?No
      Would I like further guidance on how it will be used? Yes
      Do I think it is the worst thing that could have happened to the tax system? No

      So there you are – my views on the matter.

      Andrea

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