Section 4: Current and proposed levies

Proposed options for Companies Office levies and fees

Table 3 below summarises the proposed levy amounts and level of revenue forecast to be collected from each type.

Table 3: Summary of proposed levies

Companies Office (CO) levy

A CO levy of $15.00 is proposed, to be paid once annually by users of entity registers with their incorporation (registration) or annual return fee.

A proposed new CO levy would recover the shared costs (costs of operating the registry system that are not specific to any 1 register) that are currently allocated across existing Companies Office fees.

It is proposed that the CO levy will be paid annually by users of the entity registers.^[2] For users who incorporate a new entity on 1 of these registers, the levy will be charged alongside the incorporation or registration fee. The levy will be charged in following years alongside the fee for filing an annual return.

By charging users of the entity registers alongside these fees, most Companies Office users will contribute $15.00 once a year to funding shared services.

This levy allows for a more transparent distinction between the cost of providing specific services and the costs that are shared by all registers, so that users and consumers have an accurate understanding of what they are paying for.

What costs would the levy be applied to

Of the approximately $42 million expenditure to be recovered from third parties, approximately $11 million (25% of the budget) has been identified as shared costs that could be recovered by the levy.^[3] A proposed CO levy amount has been developed by dividing this cost by an estimated annual volume of 724,376 (representing registrations and annual return filing on the entity registers).

To determine what costs would be recovered from the CO levy, we considered the shared costs that make up the foundation of a registry system. The types of shared costs are:

• personnel costs for the Companies Office senior management team and education and information team;
• property leases and maintenance;
• depreciation;
• capital charge; and
• MBIE functional support.^[4]

How the levy revenue would be allocated to registers and impact fees

The revenue collected from entity register users will be applied to shared (system support) costs across the Companies Office registers, except for services which are recovered from other specific levies. The remaining direct costs to provide specific services within each register will be recovered by register fees proposed in Section 5.

Analysis of options considered for applying a levy

We considered other options for applying a registry system levy under the Companies Act:

• Charging the levy each time any user (of any of the registers) is required to pay a fee: this option is not proposed because it is not as equitable as charging alongside an annual return or filing fee. Requiring payment of the levy with all fees would see some users paying the levy more than once a year because they access more services requiring a fee. For example, a company may have to pay a levy when it first registers on the Companies register as well as paying the levy for being registered on the FSP register, and then for each time it subsequently registers a security interest on the PPSR.
• Not introducing a levy: this option is not proposed as it will not allow the Companies Office to separate the costs of providing specific services clearly and efficiently from shared costs, making it inequitable for smaller registers by continuing the current fee-based approach for each register. Smaller registers (like the Friendly Societies register and the Incorporated Societies register) and any new, smaller registers would not benefit from the advantage of economies of scale due to their low volumes, and as a result are likely to pay significantly higher fees. This option is unsustainable and does not meet the intent of amendments to the Companies Act in 2022 to provide for the benefits of a system approach to running registers by introducing a levy.

Table 4 shows how these 2 options do not meet all the principles of cost recovery when compared to the proposed approach of an annual levy on entity registers.

Table 4: Analysis of proposals for applying a CO levy against principles of cost recovery

New Zealand Business Number (NZBN) levy

A new NZBN levy of $12.00 is proposed, to be paid annually by entities with their registration or annual return fee. This levy will recover the cost of operating and administering the NZBN register.

The NZBN register was introduced by the New Zealand Business Number Act 2016 (NZBN Act) as a government initiative aimed at reducing costs for businesses that interact with government. An NZBN is a unique identifier with key information attached to it about a business that is searchable by the government, businesses, and the public.

The NZBN enables government agencies to readily identify an organisation and coordinate their services to reduce the time businesses spend interacting with government. It also enables the creation of innovative private sector Government-to-Business (G2B) and Business-to-Business (B2B) services including supplying, tendering or contracting to government.

Why entities are only now being charged a separate NZBN levy

When the NZBN Act was implemented, the Companies Office automatically allocated an NZBN to all corporate bodies in New Zealand, including state sector entities, and those registered on a Companies Office entity register (eg companies, incorporated societies and building societies).^[5]

Government provided a level of funding to the Companies Office for several years to cover the costs of the NZBN and encourage these bodies and entities to register an NZBN. The funding recognised that entities and bodies may have been discouraged from first using an NZBN if they had to pay a fee for its introduction, limiting the uptake of obtaining an NZBN. Once the register was established it was decided that costs would be recovered from third parties. Therefore, since 2017 NZBN register costs have been included within the Companies register fees set in regulations under the Companies Act.

In 2019 Parliament decided that the costs of administering the NZBN register should be met from a levy. This proposal implements that decision.^[6]

Who would pay the levy and when

The NZBN levy would be prescribed for entities who are eligible and have been assigned an NZBN.

It is proposed that the NZBN levy is paid annually by all corporate entities that are registered on a Companies Office entity register and have been allocated an NZBN.^[7] Like the proposed CO levy the NZBN levy will be charged alongside the relevant register fee for incorporation or registration, and then for each annual return.

Unincorporated or unregistered entities such as sole traders, partnerships or trusts will not pay the NZBN levy, on the basis that when the NZBN Act was introduced it was decided that costs for maintaining an NZBN register should not be recovered from this group of users. Their proportion of costs will continue to be funded by the Crown.

Cost of the NZBN register to be recovered

Table 5 shows the type and approximate amount of costs of the NZBN register to be recovered from an NZBN levy.

Table 5: NZBN Register costs

The NZBN levy amount has been derived by dividing the costs by an estimated annual volume of 724,376, representing registrations and annual returns filed on the entity registers who have an NZBN. Table 6 shows the proposed levy against the unit cost.

Table 6: Proposed NZBN levy

The NZBN levy has been set at $12.00 rather than the unit cost of $12.02.

Insolvency Practitioners (IP) levy

No change to the current IP levy of $1.00, with no change to who pays.

The Insolvency Practitioners Regulation Act 2019 introduced a ‘co-regulatory licensing regime’ to promote quality, expertise and integrity in the profession of insolvency practitioners (IP).^[8] The co-regulatory licensing regime means that frontline regulation of insolvency practitioners is carried out by accredited bodies, and that the Registrar of Companies has a role to monitor and report on the adequacy and effectiveness of the systems and processes of regulators.

An IP levy was introduced in September 2020 under the Insolvency Practitioners Regulations 2020 as an annual payment for users on the Companies register only, with a commitment to review the charges in the next full review of the Companies Office fees and levies.

Who will pay the levy and when

The IP levy will continue to be paid annually by companies (New Zealand and overseas) on the Companies register only.^[9] All companies receive the same benefit of operating in a business environment with an active oversight scheme that ensures compliance with the statutory duties of insolvency practitioners.

Costs recovered by the levy

Table 7 shows the type and amount of costs of the IP oversight scheme to be recovered from the existing levy.

Table 7: Costs of the IP oversight scheme

No change proposed to the levy amount

The proposed IP levy has been derived by dividing the cost by the annual volume of 700,247 (representing the number of companies who incorporate or would file an annual return). Table 8 on the next page shows the unit cost of the IP oversight regime.

Table 8: Proposed IP levy

Footnotes

[1] For a total budget of $42.854 million, which includes $0.811 million of Crown funding.

[2] Companies, incorporated societies, limited partnerships, friendly societies, credit unions and building societies registers.

[3] The costs that are related to the IP oversight scheme and the NZBN register will not be recovered from the CO levy as they are recovered from levies in their own right.

[4] Unlike the NZBN levy and IP levy which recover the costs of discrete functions, these shared costs do not have fixed unit costs. Instead, the CO levy is set, and the levy revenue is then applied to these shared costs.

[5] Section 10 of the NZBN Act prescribes entities eligible for an NZBN as corporate, public, or unincorporated entities, who do not already have an NZBN, are not ineligible for an NZBN (eg individuals not registered on the NZBN register as a sole trader or in their personal capacity as a consumer or employee).

[6] The New Zealand Business Number Funding (Validation and Authorisation) Act 2019.

[7] This includes companies, overseas companies, incorporated societies, limited partnerships, friendly societies, credit unions and building societies.

[8] The insolvency practitioners regime is co-regulated between MBIE and accredited industry bodies. This means that all insolvency practitioners are required to hold a licence from an accredited front-line regulator currently the New Zealand Institute of Chartered Accountants (NZICA).

[9] Companies who register under sections 12 and 336 (1) of the Companies Act and file an annual return under sections 214 (1) and 340(1).

< Section 3: The basis for setting fees and levies | Section 5: Proposed fees and total charges for all registers >