Decisions for the Immigration Bill
changes to the “reasonable excuse” defence for employers
- The “reasonable excuse defence” in the 1987 Act of holding a signed IR330 tax code declaration form has resulted in an inability to prosecute employers who employ a non-citizen without entitlement to work. Because of this, as a part of the Immigration Act review, the Cabinet Business Committee (CBC) (with the power to act) agreed to change the defence [CBC Min (06) 20/14]. In the Bill, an employer has a defence for employing a non-citizen without entitlement to work if they do not know that the non-citizen is not entitled, and
- This does not change the general nature of the offence from the status quo. It changes the defence for an employer the Department is seeking to prosecute.
take reasonable precautions and exercise due diligence to ascertain whether the non-citizen was entitled to do the work.
Submissions on the “reasonable excuse” defence
- In response to the Immigration Act review: Discussion paper, 65 percent of organisations and 80 percent of individuals considered that there should be a stronger basis for employer responsibilities. Fifty-five percent supported the removal of the IR330 form as a defence. In submissions on the Bill, Business New Zealand (Business NZ) and its stakeholder agencies submitted in support of the retention of the IR330 tax code declaration form.
- Along with a concern over the potential compliance cost of meeting the new defence, Business NZ expressed concern that employers may only ask for evidence of entitlement to work from people who appear to be non-citizens and that this may lead to a form of de facto racial profiling by employers. Submitters proposed linking work entitlement to a tax file number issued by the Inland Revenue Department (IRD). This proposal assumes that IRD would verify a non-citizen’s entitlement to work prior to issuing a tax file number.
Tax codes and work entitlement
- The Department and IRD explored the tax file number proposal. There is no automatic link between work entitlement and the issue of a tax file number. Non-citizens have to hold tax file numbers in many circumstances where they may not have entitlement to work, for example, non-citizens earning investment income.
- A link between work entitlement and a tax file number would be unlikely to be effective for the key reason that obtaining a tax file number is not mandatory. Employees can choose a “non-declaration” tax rate of 45% instead of providing a tax file number . Any link to the tax system may also create an incentive for non-citizen employees to avoid paying tax, threatening voluntary compliance with, and the integrity of, the tax system. The proposal to link work entitlement and tax file numbers raises also questions about information disclosure which would need to be considered in a privacy context.
Reducing compliance costs
- CBC was advised that changing the defence was not intended to make the employment process more difficult. Guidance will be developed by the Department in consultation with employers and employer organisations [CBC Min (06) 20/14]. The Department has met with Business NZ to discuss this. Business NZ’s starting position is that any obligation to check entitlement to work should sit with the IRD, but both agencies have agreed to work together to implement the change to the defence in a way that:
- has the least impact on employers, and
- minimises the risk of discrimination by employers.
- Both agencies recognise that many employers already have effective employment process in place. Often these processes require employees to supply a passport, birth certificate, or document which indicates their immigration status. These processes could be adapted to meet the new defence. Simple adaptation of current practice is a key goal for the Department and Business NZ.
- To reduce compliance costs, CBC agreed to enable the Department to disclose certain immigration status information to prospective employers. Implementation planning for the new legislation includes the development of an online system to enable prospective employers to check entitlement to work. The system will provide relevant information about a non-citizen’s entitlement to work and any relevant conditions. Alternative methods of checking will also be available (e.g. via fax or phone). Chart Two, on the next page, provides a basic outline of this process.
Chart Two: basic outline for checking entitlement to work
- Communication and support provided to employers is the key to the success of the new provision. Employers will be aware of the changes and what is needed to ensure compliance. No change to the Bill is recommended.