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Supplementary Order Paper - Taxation (Annual Rates for 2020-21, Feasibility Expenditure, and Remedial Matters) Bill (Consistent) (Sections 14, 21) [2021] NZBORARp 8 (17 March 2021)
Last Updated: 24 March 2021
17 March 2021
LEGAL ADVICE
LPA 01 01 24
Hon David Parker, Attorney-General
Consistency with the New Zealand Bill of Rights Act 1990: Taxation (Annual Rates
for 2020-21, Feasibility Expenditure, and Remedial
Matters) Bill Supplementary
Order Paper
Purpose
- The
Minister of Revenue is seeking to present the House with a Supplementary Order
Paper (SOP) on the Taxation (Annual Rates for 2020-21,
Feasibility Expenditure,
and Remedial Matters) Bill (the Bill). The Bill was vetted prior to its
introduction in 2020 and found to
be consistent with the New Zealand Bill of
Rights Act 1990 (Bill of Rights Act).
- There
is no statutory requirement for SOPs moved after a Bill’s introduction to
be formally vetted for consistency with the
Bill of Rights Act, however it is
possible for you to present a paper to the House (Standing Order 381(1)). You
have requested advice
on the consistency of this SOP with the Bill of Rights
Act. Therefore, we have considered whether the SOP is consistent with the
rights
and freedoms affirmed in the Bill of Rights Act.
- We
have not yet received a final version of the SOP. This advice has been prepared
in relation to the latest version of the SOP (IRD
22553-/1.31). We will provide
you with further advice if the final version of the SOP includes amendments that
affect the conclusions
in this advice. We understand that sensitive policy
matters will be incorporated in a further version of the SOP. Advice on the
consistency
of these matters with the Bill of Rights Act will be provided at a
later date.
- We
have concluded that the SOP appears to be consistent with the right to freedom
of expression, and right to be secure against unreasonable
search and seizure,
as affirmed in ss 14 and 21 of the Bill of Rights Act. We set out our analysis
below.
Summary
- The
SOP amends the Tax Administration Act 1994 (the principal Act), the Income Tax
Act 2007, the KiwiSaver Act 2006 and the Unclaimed
Money Act 1971. These
amendments fall into three categories: policies progressed as part of the
Government’s COVID-19 response,
changes to policies already included in
the Bill, and remedial and technical amendments.
- Our
advice focuses on cl 69C, which is one of the remedial and technical amendments
to the principal Act. We have not identified any
Bill of Rights Act concerns
arising from the other proposals in the SOP.
- Clause
69C amends s 17H of the principal Act to expand its application to an
information demand made under s 17GB. A demand made under
s 17GB (a s 17GB
demand) is a demand for information the Commissioner of Inland Revenue
(Commissioner) considers relevant for a purpose
relating to the development of
policy for the improvement or reform of the tax system. It is proposed under cl
69C that where a person
does not fully comply
with this demand, the
Commissioner can apply to the District Court, under s 17H of the principal Act,
for a court order requiring
the person to provide the information. This is in
addition to the Commissioner’s existing power to prosecute an individual
for non- compliance with a s 17GB demand (s 143(1)(b)).
- We
understand that the objectives for including cl 69C in the SOP are to ensure the
Commissioner can obtain the information it seeks
and to align s 17GB with
existing information-gathering provisions.
- We
have considered the cumulative impact of cl 69C with existing mechanisms to
compel an individual to provide the information demanded.
In our view, cl 69C
engages the right to freedom of expression (s 14) and the right to be secure
against unreasonable search or seizure
(s 21). While we consider the impact of
having two avenues to prosecute an individual for non-provision of information
appears excessive,
we have concluded that cl 69C appears to be consistent with
ss 14 and 21 of the Bill of Rights Act.
The SOP
- As
set out in the Explanatory note to the SOP, the amendments to the principal Act
are to be remedial and technical amendments to
correct cross-references in
provisions of the principal Act to include references to s 17GB.
- Section
s 17GB was inserted into the principal Act on 7 December 2020 by the Taxation
(Income Tax Rate and Other Amendments) Act 2020.
As noted above, s 17GB provides
that the Commissioner may compel information from a person for a purpose
relating to tax policy development.
Failure to comply with a s 17GB demand is a
criminal offence (s 143(1)(b)). A person is liable upon conviction to a fine not
exceeding
$4,000 for the first offence, with increasing fines for subsequent
offences.
- The
Taxation (Income Tax Rate and Other Amendments) Bill was vetted prior to its
introduction and proposed s 17GB appeared to be inconsistent
with the right to
freedom of expression and the right to be secure against unreasonable search and
seizure (ss 14 and 21 of the Bill
of Rights Act). Your report on the Taxation
(Income Tax Rate and Other Amendments) Bill, presented to the House of
Representatives
under s 7 of the Bill of Rights Act, recommended a change to the
Bill which you considered would ensure proposed s 17GB would be
consistent with
the Bill of Rights Act. This change was
implemented.1
- Our
analysis focuses on cl 69C of the SOP. Clause 69C amends s 17H of the principal
Act so that it would apply to s 17GB demands.
Section 17H currently provides (as
relevant):
17H Court may make order for provision of
information
Applying to Court for orders
(1) When a person does not fully comply with an information demand ..., the
Commissioner may apply to the District Court for an order
requiring the person
to provide the information or the tax return, as applicable.
1 Section 17GB(2) and (3), as enacted,
provide that the Commissioner must not use, as evidence in proceedings against a
person, information
provided by that person in response to a demand for
information for purposes relating to the development of policy for the
improvement
or reform of the tax system, cannot be subsequently admissible in
proceedings against the person who provided the information.
Application as alternative remedy
(2) The Commissioner may make an application under subsection (1) as well as, or
instead of, prosecuting the person.
...
Court review
(5) The Court may—
- (a) order the
information to be provided to the Court; and
- (b) review the
information to determine—
- (i) whether to
make an order requiring the person to provide the information to the
Commissioner; and
- (ii) whether
the information is the subject of legal professional privilege ...;
and
- (iii) whether
the information is contained in a tax advice document, and if so, whether it is
required to be disclosed under section
20E,
20F, or
20G.2
Court
orders
(6) The Court may order the person named in the application to provide the
information, or a part of the information, to the Commissioner
if and to the
extent to which the Court is satisfied that the information—
- (a) is likely
to be relevant for a purpose relating to the administration or enforcement of a
revenue law or a matter arising from,
or connected with, a function lawfully
conferred on the Commissioner; and
- (b) is not the
subject of legal professional privilege....
...
- Under
s 143G of the principal Act, failure to comply with a court order is a criminal
offence and the individual is liable on conviction
to imprisonment for a period
not exceeding 3 months or a fine not exceeding $1,000 for each
offence.
Consistency of cl 69C with the Bill of Rights Act
Section 14 – Freedom of expression
- Section
14 of the Bill of Rights Act affirms that everyone has the right to freedom of
expression, including the freedom to seek,
receive, and impart information and
opinions of any kind in any form. The right has been interpreted as including
the right not to
be compelled to say certain things or to provide certain
information.3
2 Section 20E, 20F and 20G relate to the
disclosure of tax advice documents, which under s 20B do not need to be
disclosed.
3 See, for example, Slaight Communications v
Davidson 59 DLR (4th) 416; Wooley v Maynard [1977] USSC 59; 430 US 705 (1977). The
Court of Appeal has confirmed that every person has a general common law right
to refuse to answer questions posed by
an official: Taylor v New Zealand
Poultry Board [1984] 1 NZLR 349 (CA); Paul Rishworth et al. The New
Zealand Bill of Rights (Oxford University Press, Melbourne, 2003) considers
this right to have been affirmed by s 14 of the Bill of Rights Act; Butler &
Butler The New Zealand Bill of Rights Act: A Commentary (LexisNexis New
Zealand Limited, Wellington, 2015, 2nd ed) at
[13.27.1]; Crown Law Office Criminal Cases Review Commission Bill –
Advice on Consistency with the New Zealand Bill of Rights Act 1990 (14
September 2018); Hon Christopher Finlayson Report of the Attorney-General
under the New Zealand Bill of Rights Act 1990 on the Alcohol Reform Bill (8
November 2010).
- We
consider that cl 69C prima facie limits the freedom of expression as it
means that an individual can be compelled, at the demand of the court, to
provide the information
under s 17GB and a person commits an offence if they do
not comply with the court order.
- Where
a provision is found to limit a right or freedom, it may nevertheless be
consistent with the Bill of Rights Act if it can be
considered a reasonable
limit that is demonstrably justified in terms of s 5 of that Act. The s 5
inquiry may be approached as follows:4
- (a) does the
provision serve an objective sufficiently important to justify some limitation
of the right or freedom?
(b) if so, then:
- (i) is the
limit rationally connected with the objective?
- (ii) does the
limit impair the right or freedom no more than is reasonably necessary for
sufficient achievement of the objective?
- (iii) is the
limit in due proportion to the importance of the
objective?
Does the provision serve an objective
sufficiently important to justify some limitation of the right or freedom, and
is the limit
rationally connected with the objective?
- We
understand there to be two objectives for the inclusion of cl 69C in the
SOP:
- (a) so that the
Commissioner can obtain the desired information it seeks for the purposes
outlined in s 17GB (tax policy development)
where the individual has not
complied with the s 17GB demand. This recognises that a prosecution for failing
to provide information
under s 143(1)(b) would not necessarily provide the
Commissioner with the desired information; and
- (b) to align s
17GB with existing information-gathering powers in the principal
Act.
- We
consider that these objectives are sufficiently important to justify some
limitation on the right, and further, that cl 69C appears
rationally connected
with these objectives.
Does the provision impair the right no
more than is reasonably necessary and is it in due proportion to the
objective?
- Our
concern is around the impact of extending s 17H to apply to s 17GB demands. As
such, our consideration of the consistency of cl
69C has focused on
proportionality.
- The
effect of cl 69C is that there are two avenues to criminally prosecute a person
for failing to provide information (for policy
development purposes): failing to
comply with a s 17GB demand, and for failing to comply with a court order under
s 17H. We acknowledge
that this possibility exists in respect of other
information-gathering provisions in the principal
Act.5
4 See Hansen v R [2007] NZSC 7,
[2007] 3 NZLR 1 (SC).
5 For example, s 17B. Section 17B is a general
information-gathering power giving the Commissioner power to require a person to
provide
any information the Commissioner considers necessary or relevant for any
purpose relating to the administration or enforcement of
an Inland Revenue Act,
or the administration or enforcement of any matter arising from, or connected
with, a function lawfully conferred
on the Commissioner.
- However,
it is not clear to us why recourse to both avenues is necessary in this context,
where the information demand relates to
information for a tax development policy
purpose. In our view, the ability to apply for a court order in and of itself
provides an
effective mechanism and appropriate safeguard to meet the objective
of ensuring the Commissioner can access the required information
because:
- (a) Under s 17H
of the principal Act, an individual can challenge the scope of the information
demand and the Court may review the
information in respect of the demand made,
and order the person to provide the information (or part of the information) if
and to
the extent to which the Court is satisfied it is relevant for an
administration or enforcement of a revenue law purpose, or a function
lawfully
conferred on the Commissioner (s 17H(6)). The protections for privilege and tax
advice documents also apply.6 We consider that the
extension for failing to comply with a court order, punishable by imprisonment,
is justified in these circumstances
because the offence reflects the importance
of the court’s ability to enforce an order it makes (i.e. the offence
essentially
is contempt of a court order).
- (b) In
comparison, there is no opportunity for a person to challenge the scope of the s
17GB demand if prosecuted by the Commissioner
for failing to provide the
information under the demand (a strict liability offence). The only defence
available is where the information
was not in the person’s knowledge,
possession or control (s 143(2)).
- In
considering whether the availability of both is a disproportionate response to
the objectives, we approach the proposal presuming
that, as a responsible
prosecutor, the Commissioner would not exercise their powers oppressively. We
also take into account that,
if the purpose is to obtain information, the
Commissioner is more likely to seek a court order than to prosecute the
individual for
non-compliance with a s 17GB demand as it does not necessarily
result in provision of the information. Therefore, we consider the
risk that an
individual would be prosecuted under both provisions appears to be
negligible.
- In
our view, a further consideration is the fact that the courts can protect
defendants from improper or oppressive prosecutorial
conduct, should such avenue
be pursued by the Commissioner.
- For
all these reasons, we consider cl 69C is in due proportion to the importance of
the objectives sought to be achieved and, therefore,
that cl 69C appears to be
consistent with the right to freedom of expression (s
14).
Section 21 – Right to be secure against unreasonable
search or seizure
- We
have also considered the amendment under cl 69C in light of s 21 of the Bill of
Rights Act, which affirms the right to be secure
against unreasonable search and
seizure, whether of the person, property, correspondence or otherwise. We
consider that a court order
compelling an individual to provide information can
constitute a search for the purpose of s 21.
6 Clauses 69D and 69E-69G amend provisions
in the principal Act relating to legally privileged information and tax advice
documents.
The effect is that the protections for legally privileged information
and relevant tax advice documents would extend to information
demanded under s
17GB.
- We
have focused our analysis on s 14, as it has broad application. However, we
consider the same arguments apply to both sections
and therefore that cl 69C
appears to be a reasonable search power in terms of s 21 of the Bill of Rights
Act.
Conclusion
- We
have concluded that cl 69C the SOP appears to be consistent with the right to
freedom of expression and the right to be secure
against unreasonable search and
seizure affirmed in ss 14 and 21 of the Bill of Rights Act.
Jeff Orr
Chief Legal Counsel Office of Legal Counsel
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