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Inland Revenue

Tax Policy

Committee procedure

The membership of the committee, the procedures for beginning this inquiry and hearing evidence, and the terms of reference for our inquiry are set out in Appendix A. A list of submissions received is set out in Appendix B.

During the course of the inquiry, we encountered several issues relating to procedures for committee inquiries in general. We wish to draw these issues to the attention of the House.

Natural justice provisions applied

Several submitters, when describing their experiences with the department made serious allegations against the department and individual officers. Examples of these ranged from general comments about the professionalism of officers and the manner in which they dealt with the submitters, to serious allegations of misconduct or conflicts of interest. We considered that in order for the inquiry to be requisitely thorough it was necessary for us to receive submissions containing such allegations without requiring that they be removed.

We had an obligation, where a person was named and where an allegation had the potential to seriously damage that person’s reputation, to apply the provisions of natural justice. There are set procedures for providing an opportunity for those against whom allegations are made to respond[1]. In essence the person concerned is informed of the allegation and given an opportunity to respond. The Commissioner of Inland Revenue (the Commissioner) took the opportunity to respond in writing on behalf of officers of the department who had allegations made against them.

The department was provided with all publicly released submissions and provided written responses to many submissions prior to oral evidence being heard.

Allegation of criminal wrongdoing not pursued

Committees are prohibited from investigating an allegation of crime against a named individual without the express authority of the House. One submitter alleged that an officer of the department altered a document which was subsequently used in Court to commence bankruptcy proceedings against the submitter. It was alleged a letter had been altered to include advice regarding the appeal options available to the submitter. This information, it was alleged, was missing from the original document and would have provided grounds for the submitter to appeal a departmental decision, which may have prevented the subsequent bankruptcy. We subsequently received evidence from the officer concerned who denied all knowledge of the second document. The prohibition on us under Standing Order 206 means that we cannot take this issue any further. However, we understand this matter has been referred to the Police.

Statutory secrecy and select committee powers

We had to consider whether the committee’s powers to call for persons, papers and records[2] could override the statutory secrecy provisions contained in the TAA. This is a broad power derived from section 242 (1) of the Legislature Act 1908. The public interest embodied in these powers is that committees should have the power to call for all information that is relevant to the matter they are considering.

We also had to consider the principles of natural justice in relation to the department’s right to respond to allegations made in the submissions. We recognised that it was just as important for the department to counter inaccurate or incorrect information. At issue was the extent to which the department could disclose information which is covered by the secrecy provisions of the TAA. A further question about the application of the secrecy provisions to the department’s employees making submissions in their personal capacity was also a concern for us.

The effect of section 81 (1) of the TAA is to impose a statutory duty on departmental officers to maintain the secrecy of all matters related to the Inland Revenue Acts. The only exceptions to this “fundamental obligation” are communications “for the purpose of carrying into effect” the Inland Revenue Acts. Section 81 (3) specifically prohibits officers from the requirement to produce or divulge anything to a court or tribunal “except where it is necessary to do so for the purpose of carrying into effect” the Inland Revenue Acts. However, the Solicitor-General’s advice is that this section can have no relevance to a select committee which is neither a court or a tribunal.

Since 1995 there has been imposed on the department a legislative responsibility to protect the integrity of the tax system (this is contained in section 6 of the TAA). This responsibility specifically includes the rights of taxpayers to have their individual affairs kept confidential. This confidentiality has long been recognised as an important element for the effective working of the tax system.

Against this background we recognised the primary area of potential difficulty was the ability of the department to respond to individual taxpayer complaints and allegations of misconduct.

Advice of the Solicitor-General and the Clerk of the House of Representatives

The advice of both the Solicitor-General and the Clerk of the House of Representatives was that as a principle the secrecy provisions should prevail and that no person can look to the committee to be released from his or her statutory obligations. In effect, the committee has an obligation to obey the law. It is up to the committee to determine a way to reconcile its desire for information with any secrecy provisions that might apply.

The Commissioner is still bound by the duty of non-disclosure in respect of taxpayer confidentiality. We agreed that while we were not strictly bound by the law to observe the secrecy provisions, we still had an obligation to take account of them. However, the Commissioner could obviously comment on matters which had already been placed in the public arena by submitters. The secrecy obligation can only apply to that which is secret.

We concluded it was the responsibility of the Chairperson to guide witnesses away from issues considered irrelevant to the inquiry, being outside our terms of reference, or which could cause difficulties in terms of the secrecy provisions. As a rule of thumb we adopted the principle that the department would be asked to respond to submissions in a way that corrected errors of fact or omission or to requests for information on a general or policy level without revealing taxpayer specific details. In this way we found that we were able to receive responses to the allegations made in submissions and our requests to the department for information without unduly compromising the secrecy provisions. The option of hearing and receiving evidence in private and secret was always open to us and we availed ourselves of this option during the course of the inquiry.

Adverse findings

This report contains findings with respect to the conduct of the Commissioner and the department which we have identified as being adverse pursuant to Standing Order 245. These findings were forwarded in draft form to the Commissioner to give him an opportunity to make a submission to us on them. The Commissioner made a submission to us on the findings which we took into account before presenting this report.


1 These are contained in Standing Order 226.

2 Standing Order 203 provides committees with these powers.