Y2K: NZ left behind again

By Bruce McClintock

Australia took its second step ahead of New Zealand when it recently introduced "Good Samaritan" legislation to encourage open disclosure of Y2K information.

This time, there will be a direct effect on New Zealand businesses.

Last year, the Australian Government took its first step by supporting tax deductibility of Y2K expenditure. In contrast, our IRD issued the second of its rulings on Y2K costs, stating they would be on capital and not revenue accounts.

In lay terms, their reasoning was that the problem is a feature of the software rather than a "bug."

Despite wide criticism of the IRD's approach, our Government did not step in and help. By failing to act, New Zealand was out of step on tax relief with its major trading partners. Canada, the United Kingdom, the United States, and Australia all offered tax relief, either through deductions on Y2K expenses or an accelerated depreciation regime.

New Zealand is out of step again, this time on the most pressing problem now facing Y2K programmes.

Right now, New Zealand businesses need open communications on Y2K problems. Many suppliers of date-dependent equipment or systems have a good idea of the problems and where they will get to by end of the year.

However, communicating that information can be tricky. If the information is wrong, the supplier may be liable for misleading customers. If it is late, the supplier may be pinged for holding it back. The two objectives - accuracy and timeliness - sometimes conflict. Add the problem of getting the information out to the right people and you get information blockage.

Good Samaritan legislation gives protection to good faith disclosures, even if they are inaccurate, as long as they are not recklessly made. Although there are critics - why encourage false information? - they do not include suppliers who are anxious to communicate and customers who are starved of information.

New Zealand tilts the playing field. Australian companies will be free to disclose away. They will retain the goodwill of their customers and do it safely. New Zealand companies, often in the same markets, will continue to have one hand tied behind their backs.

* Bruce McClintock is a Technology Partner with Russell McVeagh. He advises on year 2000 issues.