Proposed Regulations
Regulations on the following four topics are proposed to complete the regime for electronic transactions implemented by the ETA:
- Credit Contracts Act: Choice of methods
- Credit Contracts Act: Time of Receipt
- National Parks Act 1980: sections 56G(2)(b)(ii) and 62(3)(a) Conservation Act 1986: section 26ZZM(2)(b)(ii)
- Tax Records
Credit Contracts Act: Choice of Methods
The Issue
Provisions in Part 2 of the Credit Contracts Act 1981 impose certain disclosure requirements that trigger a right to cancel a credit contract. The disclosures can be made by giving the documents to the debtor or by posting them to the debtor. The ETA will permit these disclosure requirements to be met using electronic methods, e.g. email.
There was some concern expressed that consumers could inadvertently sign a consent to receiving such notices electronically, e.g. because the consent was buried in the fine print of a lengthy form. If this was not in fact an effective method of communicating with consumers then protections provided by the Credit Contracts Act could be undermined.
Proposed Solution
To address this concern it is proposed that, as recommended by the Select Committee, a regulation be made under section 36 that stipulates that recipients of disclosure notices under the Credit Contracts Act:
- must have been given a clear choice between receiving such notices by post or electronically; and
- must have expressly consented to receiving the notices electronically.
In the absence of an express indication of choice, such notices will have to be physically delivered or sent by ordinary post.
Although the regulation will require a clear choice of methods and express consent, it will not preclude the ability to form credit contracts online, nor preclude an online facility for existing customers to expressly consent to receiving electronic notices.
Credit Contracts Act: Time of Receipt
The Issue
Under the Credit Contracts Act disclosures must be made no later than 15 working days after entering into a credit contract, or a variation of a credit contract. Where a disclosure notice is sent by post, disclosure is deemed to have been made four working days after the documents were posted. This enables lenders who post the disclosure documents to be certain of complying with their legal obligations, provided the notice is posted in time. This addresses the following concern: if the relevant time was actual receipt by the debtor, creditors would never be able to be certain of compliance using the option of sending the documents by post, and would be exposed to the risk of debtors claiming that the documents had not arrived on time, with no possibility of establishing the contrary.
Precisely the same issues arise if such notices are sent electronically. The deeming provision in the Credit Contracts Act clearly only applies to posted documents, and would not apply to electronic communications. Under the default rules in the ETA, electronic communications to debtors would in many cases be treated as received only when they come to the attention of the addressee (unless the parties agree otherwise) and this is not a fact that the sender can ascertain. So the risk associated with sending disclosures electronically would mean that this was not a viable option for lenders, even where borrowers agreed to receive the notices electronically.
Proposed Solution
The Select Committee recommended that in order to address this significant practical issue, and to avoid having two different rules with respect to time of receipt (i.e. one for paper notices and one for electronic notices), there should be a further regulation made under section 36. This will state that Credit Contracts Act disclosure notices sent electronically will be deemed to be received four working days after being sent. This makes sense for both ease of administration and for clarity.
National Parks Act 1980: Sections 56G(2)(b)(ii) and 62(3)(a) Conservation Act 1986: Section 26ZZM(2)(b)(ii)
The Issue
Section 56G(2)(b)(ii) of the National Parks Act 1980 deals with notices to owners in respect of a dog that has been found in a National Park and seized. The dog may be destroyed or otherwise disposed of unless the dog is claimed and any charges paid within 7 days of the receipt of the notice.
Section 62(3)(a) deals with the same issue with respect to any trespassing animal.
Section 26ZZM(2)(b)(ii) of the Conservation Act 1986 deals with the same issue with respect to dogs found in a controlled dog area as defined by the Act.
Concern has been expressed that because of the sensitivity associated with the destruction of animals that are personal pets, extra care needs to be taken when using electronic methods to meet the requirement of notice.
Proposed Solution
In line with the recommendation of the Select Committee, it is proposed that regulations made under section 36 stipulate that recipients:
- be given a clear choice between receiving such notices by post or electronically; and
- must have expressly consented to receive the notice electronically.
In the absence of an expressed indication of choice, there will be a presumption that such notices will have to be physically delivered or sent by ordinary post.
Tax Records
The Issue
Section 25 of the ETA permits information from source paper documents to be kept electronically, and the paper version destroyed.
The ETA requirements relate to information, rather than documents, so effectively the ETA allows for information to be retained in a different format, so long as the integrity of the information is maintained and the information is readily accessible so as to be usable for subsequent reference.
Section 17 provides that the integrity of information is maintained only if the information has remained complete and unaltered, other than the addition of any endorsement, or any immaterial change, that arises in the normal course of communication, storage, or display. The key point here is that these provisions relate to information contained in paper documents, not necessarily the documents themselves.
The Tax Administration Act 1994 (TAA) requires the keeping of sufficient records in English to enable the Commissioner of Inland Revenue (the Commissioner) to readily ascertain the amount of tax properly payable by that person. The Goods and Services Tax Act 1985 contains similar record keeping requirements.
It is not certain that retaining non-electronic information in electronic form will in every case meet the requirement of keeping sufficient records in English to enable the Commissioner to readily ascertain the amounts of tax properly payable by that person. The retention of the document itself may be necessary to meet this requirement in some cases.
Proposed Solution
The proposed solution is to provide a standard by regulation that will ensure that if non-electronic records are kept in an electronic form that meets that specified standard, then the requirement to keep those records is met.
The downside of specifying such a standard is that it is possible that in some cases the standard may be higher than might be necessary to meet the requirements of the TAA. This imposes a compliance cost. The cost is offset by taxpayers having certainty that they are meeting their record keeping obligations, and by being able to provide the Commissioner with adequate records if requested.
It is therefore proposed that a regulation be made under section 36 of the ETA to provide extra conditions that apply to electronic retention of paper-based records for the purposes of keeping records as required by the TAA.
Inland Revenue has identified the required standard as:
Where a source paper document is transferred into an electronic storage medium, the electronic document, when produced visually, must be in a format identical in all respects to the source paper document. Indexing references may also be present but must not obscure the image of the source paper document.
The ETA permits information from source paper documents to be kept electronically, and the paper version destroyed. The regulation will require that, in the case of information that is a record required to be kept for tax purposes, the document must be imaged so that an electronic image of the document is retained. In other words, the regulation will impose a requirement on taxpayers to preserve the original look and feel of the document as well as the information it contained.
The scope of the proposed regulation is as follows:
- The regulation will only apply to legal requirements to keep records for tax purposes.
- Under the TAA business tax-payers have an obligation to determine what records to keep - i.e. the set of business records required to be kept to enable the Commissioner to readily ascertain the amounts of tax properly payable. The regulation will apply to a subset of those records, which is the set of non-electronic source records where the taxpayer wishes to retain that information electronically and dispose of the non-electronic version. In other words, it only applies to records where the original is in non-electronic (paper) form.
- The regulation will specify that where a document originates in electronic form but is translated into paper form for a recipient (i.e. a printout is made), retention of the paper form by the originator of the document is not required - retention of the electronic form is sufficient.
- The regulation will specify that where information is received in paper form, but the same information is received in electronic form (e.g. bank statements might be sent in hard copy, but electronic copies might also be sent subsequently or concurrently) then so long as the electronic form is retained the hard copy form need not be retained.
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