Taxation (Land Information and Offshore Persons Information) Bill

I move, That the Taxation (Land Information and Offshore Persons Information) Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill. At the appropriate time I intend to move that the bill be reported to the House by Monday, 17 August 2015, and that the committee have authority to meet at any time while the House is sitting, except during oral questions, during any evening on a day on which there has been a sitting of the House, and on a Friday in a week in which there has been a sitting of the House, despite Standing Orders 191 and 194(1)(b) and (c).

This bill will authorise some of the measures announced in Budget 2015. The package of measures will ensure that people buying and selling residential property for profit, including overseas buyers and short-term speculators, pay their fair share of tax. It will not unfairly impact on New Zealand owner-occupiers who have worked hard to buy their family home, but it will help enforce the perfectly reasonable and fair expectation that anyone who has obligations to pay tax in relation to their property should pay that tax. That is, in fact, the current tax law, and it applies equally to New Zealanders and overseas buyers. However, this law has been difficult to enforce, and that is what we are here to change.

This Government is committed to ensuring fairness by pursuing those attempting to avoid paying tax. This bill will give the Inland Revenue Department the information it needs to enforce the rules. From 1 October all offshore investors and New Zealand residents buying or selling property that is not their main home must provide a New Zealand IRD number as part of the land registration process. If a person is resident, for tax purposes, in another jurisdiction, they will also have to provide the tax identification number, or TIN, issued to them by that country. This will help the Inland Revenue Department identify people who are trading property for the purposes of making gains in the New Zealand market, and it will allow us to provide information to overseas tax authorities in line with existing New Zealand legislation, ensuring taxpayers’ compliance with tax obligations both in New Zealand and overseas.

Under this legislation, conveyancers will collect tax information from purchasers and vendors of property, as part of the conveyancing processes prescribed by the Land Transfer Act 1952. Property vendors and purchasers will be required to provide their IRD number and, if applicable, the equivalent overseas IRD number, and, in doing so, prepare and sign a statement affirming that the information they have given is correct. Conveyancers will be required to provide this declared tax information before certifying the property transfer. Conveyancers will not be required to certify the accuracy of the information provided. The onus will be on the purchasers and vendors to provide accurate information.

Although those buying or selling their main home are exempt from the tax information requirement, the legislation will require trustees to provide the trust’s IRD number. People have a choice regarding whether they hold property through a trust, and we think it is preferable from a simplicity and integrity perspective that trusts always provide an IRD number. All of this tax information will go to Land Information New Zealand, or LINZ, which in turn will provide the information to the Inland Revenue Department. Tax information provided to Land Information New Zealand is personal information. It will not form part of the land transfer register administered by Land Information New Zealand, and individual taxpayer information will not be publicly available.

However, the bill does make provision for the publication by Land Information New Zealand of aggregated information relating to the tax residency of persons undertaking property transactions—for example, statistics describing the relative number of transactions by persons who are tax resident in other countries compared with those who are not. This will not be the same as a register of foreign ownership, because there are many New Zealand citizens who are tax residents of other countries, but they are not foreigners. But the collated tax residency information will provide a useful additional layer of information to inform debate about property ownership in New Zealand.

We are serious about these measures, and for those who knowingly supply false or misleading tax information there will be stiff penalties. Under the bill it is an offence to intentionally provide false or misleading tax information. Any person convicted of this will be liable for a fine not exceeding $25,000 for a first-time offence or $50,000 for subsequent offences. Regulations will be made to describe land transfers and parties that are exempt from providing tax information, in addition to the main home tax exemption. Such exemptions will be made only where the requirement to comply is impractical or involves high compliance costs or where there is a low risk of tax avoidance.

Here is another key point: this legislation will mean that before being issued an IRD number, offshore persons will need to have a New Zealand bank account. This means that any offshore person looking to obtain an IRD number will first be subject to New Zealand’s anti - money-laundering rules. To prevent offshore individuals from circumventing the rules by using a New Zealand company or trust, the offshore person definition also includes look-through rules from the Overseas Investment Act, to treat as offshore New Zealand trusts or companies that are owned or controlled 25 percent or more by offshore individuals. The bill also obliges a person other than an individual to provide a bank account number in the event that they become an overseas person at a later date. That prevents a situation whereby, for example, shares in a New Zealand company with an IRD number are sold to an offshore person to avoid the application of the rule.

This Government is committed to ensuring fairness by pursuing those attempting to avoid paying tax. The public will have an opportunity to comment on the legislation through the select committee process. However, in order to have this regime in operation by 1 October, a shorter than usual select committee time frame is necessary.

In particular, it is imperative that we align the implementation of these measures with the brightline test announced by the Government in Budget 2015. The brightline test will require income tax to be paid if a residential property other than the seller’s main home is bought or sold within 2 years. The brightline test will apply to properties bought on or after 1 October. The early report-back date will ensure that we can have in place the regulations that are necessary to support this legislation by 1 October. As I mentioned a moment ago, these regulations will describe land transfers and parties that are exempt from providing tax information in addition to the main home exemption.

The measures being introduced by this bill will assist with the enforcement of tax compliance rules without unfairly impacting investors buying with a long-term view of renting their property to tenants or New Zealand owner-occupiers who have worked hard to buy their family home. I commend the bill to the House.

I will say from the outset that the Labour Party will support this bill to the select committee. But could I just point out that if there was ever an example of a Government dragged kicking and screaming to the point of reality where it had to do something—no, sorry, not do something, but be seen to do something—in respect of corralling property speculation, this is it. The truth about this is that this is a total rush job. I will provide a bit of evidence of that. The first is that the Minister Louise Upston, who is putting forward this bill, was not involved in any of the actual policy development. How do we know that? Because she was not told until 28 April, which is when she said she was told about this proposal verbally, and it was announced on 17 May. We know this because she said that in answer to a parliamentary question. The question read: “Was she”—that is, the Minister—“made aware prior to its announcement that the Government was going to implement new IRD number requirements for non-resident purchasers of New Zealand homes, if so, on what date and how was she informed?”. The answer: “I was informed of the proposals verbally on 28 April 2015.” This was a hash job and I have got to say that I do feel a bit sorry for the Minister Louise Upston. It is sort of the Nick Smith effect. You know, there is somebody else who is carted in—even Todd McClay; same deal—to be the person with the shovel following the elephant trying to clean the mess up.

The second evidence of a hash job and a rush job is if you look at the regulatory impact statements. The Inland Revenue Department says it was unable to estimate compliance costs or consult with potentially affected parties because of “time constraints”—that is, this Government has done nothing about an overseas buyer register for years and now panics at the last minute because it has got to be seen to be doing something because of the sustained pressure provided by the community and this Opposition to alert these people to the housing crisis that exists and the speculatory impact in relation to that housing crisis. The feet of the Government members are finally put to the fire, so what do they do? They rush this out—they rush it out. We will support it to the select committee because we have maintained that there should be—for instance, dealing with the overseas buyer issue—a register of overseas buyers. But we want to make sure it is real and it is effective.

But, of course, the Minister gets up and perpetuates the myth in respect of what is a register. You know, it looks like a register, it sounds like a register, and smells like a register; therefore, it is a register. But she perpetuates a myth, of course, that was first kicked off in the select committee last week by the Minister of Revenue. He said that this is not a register. He said: “It is a collection of information.” So it is not a register; it is a collection of information. I suppose if we look at the Oxford Dictionary, we could call it a database, we could call it a record, we could call it an inventory—we could call it anything you like. But I have got to say that the average Joe out on the street, who is an intelligent human being, as they are, will see it for what it is—it is a register. I just say to the Minister: look, give up. Why have this paltry argument? For years the Government has said it was too expensive. In fact, it was Nick Smith, the fiasco Minister, the “Minister of Fiascos”, who said that a register would be a “distraction”. Well, let us call it a collection of data. He said that a collection of data might be a distraction that would cost “mega-millions” without doing a thing to tackle housing inflation.

He went on in his own inimitable and stable way to say the following: “This is just about politics. It would be a waste of public money when we would be trying to work out whether it was 1.2 percent or 1.4 percent.” Then we have the Prime Minister, who said: “We are not hostile to the idea of a register. We just don’t think it takes you very far.” So calling it a register, or collection of information, or something else—I mean, Minister, fair go. I know that you have been dropped in it. I know that you were told at the last minute that this was going to happen. They said: “Louise, step up to the plate. We need you to take one for the team. We need you to take a hit.” I feel sorry for the Minister because this is becoming a pattern for Todd McClay, for Peter Dunne, for the whole Government, for Nick Smith—including the people of New Zealand. But let us call it what it is. I am pleased that Government members finally have had the road to Damascus experience, trying to dress it up as their own idea, and they are actually going to monitor and have a register of foreign buyers so we can ascertain some evidence around this, even though it denied that.

The Inland Revenue Department makes another series of interesting recommendations—and I will be interested in how the select committee deals with this. For instance, it recommended to the Government that it not exempt main homes from the register—that is, the “register”—because it would not reduce compliance costs for purchasers of a main home as almost all would have a New Zealand Inland Revenue Department number anyway. So, for example, a person could buy a main home and then a few months later make it not into their main home but the Inland Revenue Department number has no way of tracking this. So I will be interested in the select committee process to actually tease that out. The bill says that a person selling their third main home in a 2-year period would have to provide an Inland Revenue Department number on sale. But that is going to be very hard to police if the number is not collected at each sale of the main home, I would have thought.

I am sure Chris Bishop, who is a pretty intelligent bloke and sits on Finance and Expenditure Committee, will be able to get up and rebut all of the points I have made and provide an answer to a pretty practical question, which that is. But that provides, again, evidence of a bill that has been rushed, that has not been thought out, and that has just been hashed together because the Government has to be seen to do something.

It is interesting that the Minister talks about the brightline test and a 2-year hold on property. Well, if you have a look in Auckland, the number of those who sell property inside the 2-year bracket equates to 15 percent, if you have a look at the publicly available figures. What the Government has done with this is somehow proposed to the New Zealand people, or built up the perception, that if you do not get in by 1 October, the brightline test, of course, comes into play, but then after the brightline test, 2 years and 1 day, the perception is that it is all free and it is all dandy, when the reality is that the basic intent test—the intent test, for instance, that has existed since time immemorial—will kick in after that 2-year period.

I ask the Minister a couple of quick questions. If a person buys after 1 October and says to their lawyer: “Well, we want to buy a second property in Queenstown. Why? Because at some stage in the future I might move from Auckland to Queenstown and get a job or retire there, or my partner might want to go there and move town.” Then in 2 years and 1 day they sell the property and the Inland Revenue Department comes and knocks on the door, balaclava-clad. It is going to knock on every door of people in the country, with thermal imaging equipment or whatever. It is going to knock on every door and say: “You sold that. What was your intent?”. The seller says: “Well, my intent was to move down there.” The Inland Revenue Department says: “Well, you haven’t moved down there. OK. Why?”. The seller says: “The wife changed her mind.” or “The husband his mind.” What is the Inland Revenue Department going to do then? It is going to take every New Zealander to court to try to prove that their intent was otherwise?

💬 Alastair Scott: No, they’re not. Read the legislation.

I would argue, basically, having talked to some tax experts—not the vintner at the back—that you could actually shoot peas through the Government’s proposed brightline test and its 2-year hold. Coming back to this particular bill, we will support it to the select committee. We actually want to see the detail. We congratulate the Government on finally—finally—actually admitting that there is a need for an overseas register. We think there are a number of holes in terms of the overseas register and the domestic requirement, and we do have sympathy for the Minister who is proposing this, given she was told a week or so beforehand. She has been told to come down here, take the hit, and argue that a register is not a register; it is a collection, an inventory, or a set of data. My advice to Louise Upston is to raise the white flag and let us get on with trying to produce a decent bill out of this rushed and hashed sort of cosmetic performance that the Government has put on for us today.

It is great to follow from that bush lawyer, Clayton Cosgrove, who tells us everything about the taxation system, which we had no idea of! I just want to go back to a moment in Labour’s history. There is a moment in Labour’s history that everybody should be aware of when they look at this debate, and this is a moment from last year, actually—18 November. It is a very, very important date for the Labour Party.

I just want to read a couple of quotes. The first quote is: “I’ve made a judgment that the superannuation policy and the capital gains tax policy have been problems for us and are two reasons why a lot of people have not voted for us, and therefore we need to review them.” That is the first quote. The second quote, from the same person, is: “We will have a review process. We will go through that. I will argue my case in the forums of the party, but my firm view”—that is, his firm view—“is that we should not go into the 2017 election with those policies on our slate.”

That was Andrew Little on 18 November. That is why the Labour Party does not know what to do with this bill—because the Labour Party members previously had been talking about taxing property. They wanted taxes on all kinds of properties, for anything and everything, and now, when it comes to actually looking at doing some constructive legislation in this area, they do not want to be part of it, because Andrew Little has pulled away from that. They know that Andrew Little does not want this legislation, and so the Labour Party is trying to get out of it. This legislation is actually really good for New Zealanders. It is good for the tax system, and will provide more information—

💬 Hon Clayton Cosgrove: I raise a point of order, Mr Speaker. It is a simple matter of information. We did say we are supporting the bill. The member may want to listen to us.

💬 Mr DEPUTY SPEAKER: It is not a point of order.

That is the bush lawyer’s attempt at being funny, but about all he can do is raise points of order because that is all he knows. It is a great thing when you get the Labour Party members having to raise points of order, because that shows that they do not understand what is going on. They have to resort to points of order to try to get their message through.

This bill is actually quite good for our tax system. It brings in two of the Budget property tax proposals that will come into effect. The first is that buyers and sellers of property will be required to provide their IRD numbers at the time of the property transfer. That means that those who are tax residents in another country will also have to provide a tax identification number from their home jurisdiction, and there will be an exemption for New Zealand residents’ main home. That basically covers most New Zealand purchasers who will be purchasing their main home, but if you have got subsequent purchases or if you are an international purchaser you will have to provide some form of identification, whether that is a New Zealand IRD number or a tax identification number from the home jurisdiction.

The second thing that this bill does is ensure that our anti - money-laundering rules apply. We will require overseas people to have a New Zealand bank account to get a New Zealand IRD number. This will also apply to New Zealanders who have been out of the country for 3 or more years. So, effectively, this is an attempt to get that money to go through, get transferred through, a New Zealand bank so there is a record there. That will enable us to be able to delve more deeply into the source of that money should there be any issues around money-laundering.

Further legislative changes are also in the pipeline, and the Government is to soon release a public consultation document seeking views on the introduction of a brightline test on 1 October this year. Under this new test, gains from residential properties sold within 2 years of the purchase will be taxed. Unlike what the previous speaker, Clayton Cosgrove, said, there will be people who will try to gain from any tax system, as you would expect, but there is a set rule—

💬 Phil Twyford: That member knows all about that.

—and that 2 years is the set rule. What did you say?

💬 Phil Twyford: That member knows all about that.

No, I do not know all about that, and that member better watch what he says, because that member would have no idea about the tax system, either. This is the member who actually is Labour’s housing policy spokesperson. Why did he not lead off this debate? [Interruption] If housing is so important to the Labour Party, why are you not leading off this debate? This member would have no idea of housing, and so I would like to see him in this debate come out with the Andrew Little policy around housing, as well. That would be lovely to see.

💬 Mr DEPUTY SPEAKER: Let us get back to the bill.

Yes. Under this new test, gains from residential properties sold within 2 years of purchase will be taxed, unless the property is the seller’s main home, as we talked about before—that is the main exemption for New Zealanders; if it is their main home, they will not be taxed, or of it is inherited from a deceased’s estate, or is transferred as part of a relationship property settlement. So that covers the examples where there may be inherited property or there was a relationship breakdown.

Most people in New Zealand do the right thing—they pay their tax. This legislation will not have any impact on them, because there is already a test out there in our tax system around the intention of purchase. If you intend to purchase and sell within 10 years, then that is taxable. That is something that has been around forever and a day. Many New Zealanders pay their tax under that system quite conveniently, and they do it without any pressure. There are some whom the Inland Revenue Department has to pressure to do so, and it investigates them, but this bill will give a very sensible rule, a very open and just rule, so that people know that if you buy or sell within 2 years, then you can look forward to being under the tax system. That is what you would expect, because if you had a long-term purchase intention—

💬 Iain Lees-Galloway: Two years and 1 day isn’t that long to wait.

Two years is what?

💬 Iain Lees-Galloway: Two years and 1 day isn’t that long to wait.

Two years and 1 day—so that is the Labour Party trying to game the system. That is what it does. It will try to game the system. But for anything under 2 years you would expect to pay the tax, because your intention would not necessarily have been to hold that property long term, and that is no different from the current system now, whereas if you have an intention to sell, then you would be taxable within 10 years. So this just puts into the market a time frame that makes it very obvious that if you buy or sell within 10 years, then you are within the legislation and therefore are more likely to be treated as taxable.

The tighter tax rules are also expected to take some of the heat out of the Auckland market. We hear stories constantly about people buying and selling properties in very short periods of time, to make exponential profits.

💬 Phil Twyford: It’s called a housing crisis. I have yet to hear those words tumble from the member’s mouth.

The member who could not actually do the first speech for the Labour Party is interrupting again. It would be great to see that member do a speech and actually say what he thinks, rather than what the other members are telling him to say.

This bill includes those two measures that we have already talked about, which will help the Inland Revenue Department enforce tax obligations. When the property is transferred, the Inland Revenue Department number will be collected by conveyancers, provided to Land Information New Zealand as part of the conveyancing process, and then forwarded on to the Inland Revenue Department. As part of that process, the conveyancing of any property, there will be that transfer of information, so that the Inland Revenue Department has the information to then record it. People who are tax residents overseas will also be required to provide that.

When we look at offshore persons, as defined in the bill, they need a New Zealand bank account before getting an Inland Revenue Department number. That is important as we want to make sure there is no tax evasion, and as it is a predicative offence for money-laundering we have got to be careful that we have rules around that so that we can give the enforcement agencies the most strength that they will need to enforce the rules around money-laundering. That will bolster the effectiveness of both the tax system and also the anti - money-laundering regime.

This bill is an important part of an approach to taxation in New Zealand. It is not a great change from the system that already exists, in the sense that if you buy or sell a property within 10 years and your intention was to sell, then you are taxable. This provides a test that is easy and convenient, and it is something that all purchasers will be well aware of. If you buy or sell within 2 years, then you will automatically be considered to have the intention of resale basically, and therefore that would be taxable.

The test itself, when it comes out in October, will be interesting in terms of how it will be done. There are always opportunities within the tax system where people try to take advantage of it, but a set date of 2 years gives guidance to New Zealanders that buying or selling within that period of time will inflict some taxation. It also creates the information that we will have on overseas purchasers, and it will help to counter any money-laundering. So this is an important piece of legislation. It is contrary to Labour Party policy. Labour is supporting it only as far as its referral to the select committee. We look forward to Labour members having a moment of change of heart and actually supporting it all the way through the House. Thank you.

It is always a pleasure to follow the member David Bennett. He is a man whose rhetorical skills allow him to make even a taxation bill coma-inducing. I want, if I could, to begin by just putting on to the record some words of welcome to the eight members of the Myanmar Young Leaders Programme who are in the gallery today and will be around Parliament for a couple of days this week. They are eight young leaders who have come from various backgrounds in Myanmar, who are in New Zealand for a 6-month period learning about our democracy and our system of government. Many members around the House today have interacted with them and spent time with them. So I want to welcome those visitors and say how pleased we are to have them here in the New Zealand Parliament.

The Taxation (Land Information and Offshore Persons Information) Bill applies the 2-year so-called brightline test that the Government announced as one of its two Budget housing policies. What it does is it requires anybody who buys and sells a residential property within a 2-year period to pay income tax on it. Furthermore, it requires all purchasers of residential property, including offshore speculators, to provide the Inland Revenue Department with a New Zealand bank account and to register with the department and get an IRD number. I think it is a curious thing for a Government that has spent the last few years denying, denying, denying—first, that speculators are even a problem in the Auckland housing market, and, secondly, that offshore speculators are even worth gathering information on.

I have lost count of the number of times I have stood in this House and heard the housing Minister Nick Smith get up and say: “Oh, it’s the oldest trick in the book—the oldest trick in the book—to blame the foreigner.” I cannot count the number of times Nick Smith has said that, in rubbishing the views of 85 percent—according to the most recent opinion survey—of New Zealanders who think that offshore speculators should not be allowed to buy residential property in New Zealand because they are driving up house prices out of the reach of ordinary New Zealanders. This Government has been in denial, complete denial, that it is even a problem. Government members have stood here, in this House, and accused us on the Opposition benches of xenophobia because we have had the audacity to suggest that offshore speculators should not be allowed to buy and sell New Zealand homes for capital gain and make a profit—make a killing—at the expense of young, hard-working Kiwi first-home buyers.

It has been very clear not only to us but to the rest of New Zealand that this National Government stands fairly and squarely on the side of speculators, both domestic and foreign. It does not stand on the side of hard-working, young Kiwi first-home buyers. We have heard the most incredibly litany of excuses, Mr Deputy Speaker. I agree—it is funny. I cannot believe the Government policy. I share your mirth.

💬 Mr DEPUTY SPEAKER: Do not bring me into the debate, Mr Twyford.

All right—thank you, Mr Deputy Speaker. I will not. We have heard Nick Smith say that a register would be a distraction that would cost mega-millions without doing a thing to tackle house price inflation. And yet, as my colleague Clayton Cosgrove points out, the requirement for offshore speculators to register with the Inland Revenue Department and provide a bank account is, as the Minister himself has conceded, all about gathering information. What is that, if not a register? The Minister of Finance is on the record saying that the point of this policy is to gather information. After Government members had rubbished the idea for 2 years and had said consistently in this Parliament that foreign speculators are not a problem, we got this very curious backflip in the Budget with the announcement of this policy and this bill.

So why, I hear members ask, did the Government do such a backflip? Well, it is a very consistent pattern that we have seen time and time again from this Government. It denies and denies and denies it is a problem until the polls get to a certain point and Steven Joyce says to Cabinet: “Look, we better do something about this. The overnight groups are pretty worrying on this. Clearly, we’re losing support in Auckland.” In fact, we know that 85 percent, according to the most recent poll—the most recent poll says that 85 percent—of New Zealanders want to see foreign buyers banned from buying housing in New Zealand. So deny, deny, deny, the polls get to a certain point, and then the Government does a little backflip, but it is just the bare minimum to make it look as if it is doing something—just the bare minimum.

💬 Denis O’Rourke: Not even that.

No, not even the bare minimum. How would you describe it?

💬 Denis O’Rourke: I would say it was utterly inadequate.

Well, it is. It is completely inadequate. In fact, the Government’s own senior tax adviser, John Shewan, was in the paper a couple of days after this policy was announced saying it would not do a thing to deter speculators and it would not have any impact at all on Auckland house prices—

💬 Todd Barclay: I’d believe him over Denis O’Rourke.

—which, by the way, Mr Barclay, went up $115,000 in the last 12 months on your Government’s watch. That is $115,000. The average Auckland house price is now in the region of $830,000. Under this Government the dream of affordable homeownership has completely gone down the gurgler. It is gone. It is a “gone-burger”.

So the question is—as inadequate as this bill is, as hopeless as it is—whether this bill will make a difference. After all, we are voting for it, so it is a fair question to ask whether it will make a difference, whether it will have any impact. I have already quoted John Shewan, one of the most senior tax advisers whom the Government usually listens to, saying that it will not have much impact. Based on Treasury analysis from the last 3 years our modelling shows that at best the so-called 2-year brightline test will capture about 1,000 speculators. It will pull 1,000 speculators into the Inland Revenue Department’s dragnet. The same modelling suggests that it might bring in $18 million—$18 million—in extra revenue. That is pathetic, given the tens of thousands of houses that are sold every year in Auckland. It is a tiny fraction. So I think you have to conclude that it will not do much, but it is better than nothing—but not by much. It is better than nothing, but not by much. On those grounds we will support it, because at least it is something.

Why does this matter? Why is it an important issue? Why do 85 percent of New Zealanders think that this is a problem and that the Government should regulate to ban offshore speculators? The reason is that the Auckland housing market under this Government has been allowed to get completely out of control. The other day I learnt about a house in Massey in west Auckland that was bought 4 months ago for $385,000. The purchaser slapped a coat of paint on that house and sold it 4 months later for $588,000. That is what is happening every day in the Auckland housing market. The census data showed there were 22,000 houses vacant on census night. If you take out the houses that were in between tenants, if you take out the houses that were in the process of being bought and sold on that night, that would mean that there were about 15,000 to 16,000 houses vacant. These are what Aucklanders call “ghost houses”. I am not talking about Nick Smith’s ghost housing policy; I am talking about ghost houses that are lying vacant in Auckland because the speculators, many of them offshore, simply cannot be bothered renting them out to tenants because they are making such a killing under this National Government just by sitting on those houses for capital gain. That is how bad it has got in Auckland.

I want to point to a story that appeared in the New Zealand Herald this week, reported on by Anne Gibson. The pre-eminent international Chinese website, Juwai.com, markets international real estate in countries like New Zealand to Chinese investors. Juwai.com reported that based on the Chinese Government’s progressive dismantling of foreign exchange controls, which is something the Chinese Government is committed to doing—has already begun and is committed to doing over the next 10 years—it predicted that $15 billion of Chinese investment will be heading the way of the New Zealand real estate market over the next few years. New Zealand is set to get more than 3 percent of all the Chinese investment. There is a tsunami of Chinese investment coming into the Auckland real estate market. This Government is in denial. This measure will not make the slightest bit of difference, but we will vote for it going to the select committee because at least it is a tiny step in the right direction.

If Phil Twyford thinks that a speech like that is going to help him fill the deputy leader’s spot in the Labour Party, I would suggest he actually does a Next Magazine NZ photoshoot in black and white polka dots, because he would probably have more chance of getting there if he does that.

I am happy to stand on behalf of the Government as a National member of Parliament to support this bill because it sits alongside a whole suite of measures that this Government has to try to tackle housing affordability and assist New Zealanders to get into their first home. The Opposition is trying to make big speeches about this bill and say that it will do nothing and that it is not going to help Aucklanders get into homes, or help New Zealanders get into homes at all. The fact of the matter is that this is part of a large number of changes. In fact, it is not a new tax that the Government is considering. It is, in fact, an enforcement and a clarification of existing tax rules. This bill allows the Inland Revenue Department and Land Information New Zealand to provide greater clarification and to enforce in a much better way the existing tax rules that are in place. When Opposition members want to stand up and say that this bill will do nothing—one, they are false; and, two, when they do look at this bill they must look at it in the context of all of the housing changes this Government has been making and will continue to make to make housing more affordable for New Zealanders. I have to say that whenever I listen to speeches from the Labour Party about housing, I am left wondering what they actually stand for. Does the Labour Party actually ever offer any policy? Does the Labour Party actually ever offer any solutions to those who are looking to buy their first homes or to those who are looking to see housing become more affordable in Auckland?

On Tuesday night next week I am going to be very proud to stand alongside Nick Smith in my electorate when he talks to first-home buyers about initiatives this Government has under way to support first-home buyers and help them get into houses. I would like to hear Phil Twyford actually offer solutions. I would like to hear Clayton Cosgrove do something other than his grumpy old man routine, and actually talk about solutions for New Zealanders. The only solution we have heard from the Labour Party was to build 100,000 houses at a cost of $300,000 a house when the cost of buying a section in Auckland is more than the cost of the house it was proposing to sell to people. Labour also likes to attack the Government on our plans to open up Crown land for housing development in Auckland. But if Labour members felt they could identify and build 100,000 houses in 10 years, how were they expecting to do it? They cannot stand on the one point and say that they oppose the Government opening up Crown land for housing, but at the same time say that they were going to offer and build 100,000 houses themselves. It simply does not add up.

I am glad that the Opposition is supporting this bill. It should support this bill, because New Zealanders do want to see greater clarification around the existing tax rules. I have to say, though, that when Opposition members say that we have done nothing to try and tax speculators, they are, again, wrong, because in Budget 2010 the Government allocated $33 million to the enforcement of the existing tax rules around property. That $33 million investment in greater enforcement has actually led to a quarter of a billion dollars in additional tax coming in, and, off the back of that, the Government has also allocated a further $30 million in Budget 2015. So absolutely we believe that those who are property speculators and are not complying with their tax obligations should be targeted. That is exactly what we are doing. Alongside the enforcement measures that we are taking, we are also making it easier for New Zealanders to understand the rules and ensure that they are complying with them. The brightline test of 2 years, which will enable New Zealanders to know exactly when they are trading property within that 2-year period, will help them ensure that they comply with their tax obligations. This bill, which provides the ability and also requirements on top for New Zealanders to provide better information, is important.

I would like to say to Mr Phil Twyford that there is something I do want to stand alongside with Nick Smith and also support, and that is the fact that Phil Twyford is actually xenophobic when he goes out into Auckland and whips up the anti-foreign sentiment. He did not like the Minister talking about him and his views as being xenophobic, but he should not be ashamed to be called xenophobic, because that is what he actually has been doing. Labour members would rather go out into Auckland and go and harass my constituents—harass my constituents—who just want to go about their own business and buy and sell properties. Labour wants to target those people. That member wants to harass anyone who does not look like him and say that they should not be purchasing properties. When he does go out to the media and he does go out and talk to Aucklanders and tries to whip up the anti-foreigner sentiment, he forgets that New Zealand, and Auckland, is such a multicultural place. The reason why he is doing this is that it is cheap politics. He has got nothing else to talk about—

The ASSISTANT SPEAKER (Lindsay Tisch): Come back to the bill.

Labour should actually be supporting the initiatives we have got under way.

This policy change and this bill will actually help us to ensure that we can enforce our current tax measures and that we can ensure that those who wish to property speculate—there is greater enforcement around it. It stands alongside our special housing area policies, which are leading to tens of thousands of houses being built in New Zealand. It stands alongside the HomeStart scheme, which is seeing 90,000 New Zealanders being able to get and access a deposit to be able to afford their first homes. It stands alongside our scheme such as opening up Crown land to develop on, and it stands alongside schemes such as those that we have in Tāmaki to build 7,500 houses on properties that currently have 2,500 houses.

We are a Government that is doing what is necessary to help New Zealanders get into their first homes. House prices doubled under Labour in the time it was in office. Labour members cannot claim to be holier than thou and say they have all the answers when their track record is so poor. New Zealanders know that we are working on this issue and we are tackling it. New Zealanders know that housing will, over time, become more affordable for them. We are standing behind first-home buyers. We are working to assist them.

I rise on behalf of the Green Party to speak on the Taxation (Land Information and Offshore Persons Information) Bill. The Green Party will be supporting this bill, as weak as it is, because it is a very, very small step in the right direction. The problem that this bill and a number of other Government policies are attempting to grapple with is what is going on in the housing market, but in particular what is going on in the Auckland housing market. So I think it is important to get a few facts on the table about what has happened in the housing market.

In terms of median house prices in Auckland, in 1999, when the previous Labour Government came to office, the median house price in Auckland was $230,000. When it left in 2008, basically it was about $450,000. So it is certainly true that there was a very significant increase in house prices during that period—about $220,000, or nearly a doubling. It was a very significant problem and the Greens spoke out about it at the time and the key problems around it. However, what we have seen since then is that although prices stayed flat for a little bit, they have since accelerated dramatically from $450,000—the Auckland median house price when this Government into office—to now about $750,000.

So what we saw under the Labour Government was an increase in the median house price of about $220,000, and what we have seen under National is an increase in the Auckland median house price of about $300,000. It is a dramatic change in housing affordability in New Zealand because, of course, salaries have not increased to keep up with those kinds of increases by any stretch of the imagination. But, perhaps just as significantly, in the last year we have seen a $125,000 increase in the median house price in Auckland. I mean, that is a dramatic change. A $125,000 increase in the median price for a house in Auckland in 1 year is an incredible change; it is about a 20 percent increase. This is a housing market that is completely out of control. This is a market that is completely on fire and it is a danger to our economy and it is a danger to our society.

The reason why it is such a problem is that it is driving up the price of housing whether you are buying house or whether you are renting. If you are not facing the full increase yet in the cost of your rental, you will in time, or people will in time face the increase in their rentals. Rents are already going up, but they are going to go up further because of the big increase in prices. It also means that people are spending more money on housing, whether it is on rent or whether it is on a mortgage. They are having to spend more money on housing and they have less money for all the other things that are expensive.

It is driving financial instability. The Reserve Bank has identified, as have the OECD and others, what is going on in the completely insane Auckland housing market as one of the key reasons for concern in terms of financial instability in New Zealand at the moment. Of course, it is keeping interest rates higher than they need to be because the Reserve Bank is worried that if they drop the OCR—the official cash rate—it will fuel the insane fire that is going on in Auckland in terms of housing prices. This bill, in its own small way, is an attempt to deal with that.

We know that the drivers of what is going on in the Auckland housing market are pretty straightforward and have been well established for many years. They are similar to the drivers that happened during the last insane period, 2002 to 2007, and so they have not really changed that much, though perhaps the different elements have changed. The first driver is the tax-free gains. Basically, because we do not have a capital gains tax on investment properties, it means you can make tax-free gains. The Government is introducing some measures to try to place some limits around that with this 2-year rule, and it will have some effect, but it is pretty marginal. So the tax-free gains on investment properties will remain in terms of pushing up demand.

The other part of the demand side is coming from migration. There is a big surge of migration into New Zealand, a lot of which is, actually, not particularly within the ability of the Government to control because it is caused by a lot of New Zealanders and Australians who have rights to move in and out. So there is not so much the Government can do about that.

Then, in terms of the demand side, we have the offshore demand. This has been a problem in the past but it is now a really, really big problem. This bill, in its own way, tries to deal with some of the offshore demand by requiring foreign buyers to actually give their identity, essentially, and have a New Zealand bank account and a New Zealand tax number. So there are certain measures within this bill to try to deal with this, but there is no way that this bill is going to deal with the huge surge in demand coming out of Mainland China.

The previous speaker, Jami-Lee Ross, said it was xenophobic to identify the big surge in demand coming out from Mainland China. That is just ridiculous. It is just a straight analysis. Normally I would not quote Fran O’Sullivan because although Fran, I think, is a person of integrity, I disagree with her on many occasions. What she said was that what is happening now is that as the Chinese Government lifts some of the restrictions on capital outflows, there is a huge surge of demand coming into the Auckland housing market. And it is not just Auckland; it is going on all around the world, and it is coming out of Mainland China. The estimate is somewhere around over $10 billion in the years ahead in terms of the demand side for property in New Zealand, particularly concentrated in Auckland in New Zealand.

So we are seeing this huge surge on the demand side of the equation in terms of offshore demand for housing in Auckland. That is one of the key drivers, and this bill really is not going to deal with this problem because it is of a massive scale. The Financial Times now says that Mainland China is the biggest of the foreign buyers in the US market, the UK market, and the Australian market. The Financial Times is not renowned for its xenophobia—quite the contrary. Fran O’Sullivan is not renowned for her xenophobia—quite the contrary—and neither are the Greens; we take a global perspective. And when you take a global perspective you can see that there are very large capital flows going into housing markets in Australia, New Zealand, the United States, the United Kingdom, and Canada, and that a big part of it is coming out of Mainland China. That is just the reality of it. That is why Hong Kong has introduced restraints on the capital inflow from Mainland China into the housing market in Hong Kong. Singapore has done the same and Australia has done the same. All around the world everyone is trying to grapple with this problem, and, in its own small way, this bill does a tiny, tiny bit to try to address that as well, but there is so much more that needs to be done.

Then there is the lack of supply. The Government has talked a lot about the lack of supply, and it is a fair point. There is a need for more supply. But let us just be clear: there is no way you can beat this thing by increasing supply. It is just not possible. The kind of huge surge in the demand side that is coming into the housing market in Auckland will not be beaten by housing supply; you actually need to place some constraints on demand, and, particularly, the offshore demand. You certainly cannot beat it on the supply side through urban sprawl, which is the Government’s strategy. If you think you can outrun this demand-side surge and that you can outrun it on the supply side through more sprawl in South Auckland on the urban fringes, you are kidding yourself. You cannot build enough houses fast enough to beat this thing and to outrun the demand side. It is just not possible. I think you do need to increase supply, but in different ways to what the Government thinks.

In terms of the solutions, we do need restrictions on foreign buyers. The Greens have been saying this for a decade. It is pretty plain; everyone says it now, because it is very plain that what is happening is this huge offshore demand going into the Auckland housing market. It is not just a New Zealand problem; it is a global problem. It is just the reality of the world we live in now. China has a heap of capital. There is a bunch of people in China who, fair enough, are looking for safe investments in housing and other markets. That is a perfectly reasonable thing for them to want to do, but it has huge impacts on our housing market, and it has huge impacts on the affordability of housing in our country and the financial stability of New Zealand.

We need a capital gains tax on investment properties—a proper one. It is not very complicated. Every other OECD country has one. We also need to deal with the issue of supply. What we need is quality medium-density housing with good public transport, walking, and cycling. The Government’s idea that it can beat this thing through subsidised motorways and subsidised urban sprawl, where we have all these houses built on the urban fringes—which the Government thinks will somehow beat the demand side—is wrong. It has not worked anywhere in the world. It is not going to work in Auckland. It is a failed strategy.

We actually need a compact urban form. Auckland needs to go up, not out. That is just the reality, and the sooner we admit that and face that the better we will be. The Government’s attempt to sprawl Auckland and force it out by sprawling and more sprawling will not solve the supply side.

The final thing I would like to say is that we need to ask ourselves what the purpose of housing is. Housing is not just a place to make money. It is where people live. It is the collective responsibility of the people in this House to make sure that decent housing is affordable, that it is quality, that it is energy-efficient, that people can afford to live in it—it is not just the cost of building it; it is the cost of running it—and that the transport costs associated with it are not unbearable, as they are with the urban sprawl motorway strategy of the Government, where you have to drive your car for miles to get to your job.

It is about saying that housing is a market—and we do need to consider it as a market—but that it has these other social purposes as well, and Government policy needs to reflect that. This bill is a tiny step in the right direction, but the issue around housing and housing affordability, and particularly housing quality and compact urban form, is one that the Government has completely failed to get its head around.

As we know, this bill focuses on getting better information from all people dealing in land, especially overseas buyers, and that is a good thing. New Zealand First welcomes it. We will support the bill as far as the select committee at least. The bill inserts two requirements into the Acts it amends: one for a New Zealand IRD number, and another for an overseas tax number for those who are currently tax resident in other jurisdictions. The IRD number does not apply to a New Zealand individual buying or selling their main home unless they are selling their third main home within a 2-year period. It should include that information from the first home, because it is just information. It does not actually affect anyone purchasing or selling homes in itself. It needs to be complete information, and so that needs to be changed in the bill, and I hope it is during the select committee process.

This process is easy. It is not an expensive process. As we know, the information will be collected from property vendors and purchasers by conveyancers, who will then provide it to Land Information New Zealand, who then pass it on to the Inland Revenue Department and to the Government generally. That is a far cry from what Nick Smith used to say about all this being far too expensive and far too difficult to do. Now we see the Government doing it, and that is good. The turn-round is fine; as long the Government keeps adopting New Zealand First policy we will be happy. But this measure will provide a mechanism only for collecting the information during the conveyancing process. It will not form part of the land transfer register and it will not be publicly available. It should be publicly available; there are not any reasons to prevent that that I am aware of. We all should have access to that information, to the raw data, to produce and use the statistics to inform the public about what is going on.

New section 156F, added to the Land Transfer Act by clause 4, permits the Chief Executive of Land Information New Zealand to release or give tax information to any person who requests it, provided that the information is given in aggregate form only and in a manner that prevents any person, estate in land, or transaction from being identified. They should be able to do that as of right. It should not require discretion on behalf of the Chief Executive of Land Information New Zealand. There is no need for the protection provided, as landownership is a public information right and privacy is simply not relevant.

This bill and the information it will cause to become available are what New Zealand First has been asking for for several years. It creates, in fact, a register of overseas ownership, which is what we have been asking for, and it would be that in everything but name—everything but name—if it were publicly available, which it needs to be. It is necessary for the public to know the scale of the impact of overseas buyers of homes and farms, whether as part of immigration or by overseas speculators. For housing, we know that at least 9 percent of the demand is from net migration, and that is from an independent source in the book, which many of you will have read, Generation Rent by Shamubeel Eaqub. It is a good book that I hope the people opposite will take notice of. It is significant.

He says: “A 100,000 population increase in 1961 would have needed just 15,900 homes, while today it is 25,600, and that is, of course, because of differences in residential densities.” In his conclusion on the effect of buyers from overseas he says: “Some of the strong growth in housing demand in places like Auckland is coming from changes in net migration.”, and he says: “Given that between 2012 and 2014 the demand for housing rose from around 9,000 units to some 25,000 to 30,000, net migration must have increased the housing demand significantly.” So that gives us an indication of the scale of the issue, which this Government is doing nothing about. New Zealand First has always said it is a significant issue, and National has denied it and continues to deny it. But it is, in fact, actually undeniable now, and the vast majority of the people out there in the public actually know that.

This bill is a minor step in the right direction to uncover the facts about overseas buyers and homeownership. New Zealand First will support it. It will not be enough. The Government needs to acknowledge the problem of overseas ownership and net migration and not just tax issues. Then it needs to curb immigration and prohibit overseas ownership of homes and farms altogether. As well, it needs to make sure that people pay their fair share of tax, whether they be in New Zealand or overseas. The tax administration amendments are wider than just tax compliance in land dealings. They are intended to promote the enforcement of tax obligations of offshore people generally. In essence, a person that is not a citizen or permanent resident will be an offshore person and subject to the bank account requirements. It introduces a 2-year brightline, but we think that 2 years is far too short. We know what will happen. Very little will happen, in fact. People will just wait out the 2-year period. Easy to do—such a short period, so it will really, in the end, have little or no effect. Nevertheless, New Zealand First supports it as a small step in the right direction, but it is a minor measure and much more is needed.

In fact, taking the larger view, if the Income Tax Act were properly enforced and were broad enough a capital gains tax would never be needed in this country. It is high time that the income tax rules were generally reviewed to catch everyone who uses homeownership for a business purpose. They do not do that; that is a big defect in the system in New Zealand. This Government has been far too slow about all this, and it leaves a massive gap that actually encourages speculation, and nobody should be surprised, as a result, by what is happening in Auckland with house prices.

Although these measures in this bill are good as far as they go, the point is they do not go nearly far enough, and I have indicated already where the Government needs to go next. New Zealand First now waits for those next steps to be taken. Information alone is valuable, but not enough. Overseas ownership needs to be prohibited. Current overseas ownership needs to be properly and fully revealed, and not protected in the ways that I have mentioned. Most of all, I believe, the Income Tax Act net needs to be broadened. If that happens, everyone would then pay their fair share of tax. Ultimately, the need to curb the increase of house prices and to broaden the tax rules are what the process should be all about. This bill takes an extremely minor step in the right direction, and it is actually a shame that the Government does not have the guts to adopt the rest of New Zealand First policy.

Clearly, with Ria Bond’s move from the backrooms of New Zealand First into the front lines, the research unit quality has declined. Contrary to what the previous speaker, Denis O’Rourke, just said, this bill does not actually introduce the brightline test that has been talked about on investment property sales. It does not do that. That has been signalled, but that is coming in a consultation document later. So nice try, Denis. Read the bill better next time or get your staff to read it better.

This is a good bill, can I say. This is a good bill and an important bill. It is slightly mistitled, though, I have to say. It is titled the Taxation (Land Information and Offshore Persons Information) Bill, but it really should just be titled the “Make Phil Twyford Really, Really, Really, Really Angry Bill”. In fact, I may well move an amendment at the Committee of the whole House stage for that very purpose.

I want to talk about the context in which the bill arrives at the House, before I move on to the substantive parts, because the context is important. I think, actually, despite the heat and the light—mainly heat—that comes from members opposite on this issue, I actually think there is reasonable consensus in the House that we have a housing affordability issue in this country and it is something that we need to deal with. There is actually consensus on that. There is actually also consensus on why we need to deal with it. It is an equity issue for New Zealanders because homeownership is important, particularly for young New Zealanders, and National is the party of homeownership and backs getting Kiwis into homes.

There is also an economic effect and, as Phil Twyford rightly points out—

💬 Phil Twyford: Lowest homeownership in 60 years.

Listen up, Phil. I am actually complimenting you—at the start of my speech anyway. There is actually an economic effect from the housing issue that we have, which is that interest rates are higher than they otherwise would be and, arguably, there is a financial stability effect as well, if you talk to the Reserve Bank of New Zealand. One of the things that often does not get mentioned is the effect on the Government’s books of house prices rising very quickly. As Russel Norman rightly pointed out, that does flow through to rents eventually, and that is an effect on the Government’s books through income-related rents and, of course, the accommodation subsidy. So there is actually consensus that we need to do something about this issue.

And if you actually look at the issue, there is reasonable consensus about some of what we need to do. For example, we need to free up more land supply—there is reasonable consensus on that. Actually, despite the anger and the fury and the venom directed by Mr Twyford and members opposite towards my colleague the Hon Nick Smith on the issue of better utilising the large amounts of Crown land that the Government owns in Auckland for housing, actually the Labour Party agrees with that because its KiwiBuild policy is predicated on that exact point. So there is consensus about better utilising Crown land. There is consensus about freeing up land supply.

And we even heard from Russel Norman that he now accepts that supply is an issue—that this is fundamentally a supply and demand problem. We did actually hear some sort of concession on that. He says: “Well, we just need to increase density inside Auckland.” I would say that is true. We do need to build up but we also need to build out. It is a little bit ridiculous that New Zealand is one of the least densely populated countries in the world. We do not utilise as much land as we could do. There is no reason why we cannot utilise more land and that is exactly what the Government is trying to do through our special housing areas. It is within that context that this bill is advanced and it is an important context.

Also, before I move on, I want to mention the Productivity Commission report that was released the other day. It was actually a very, very useful study and one that I think is going to illuminate the debate about housing in New Zealand for years to come, and it was actually good to see some acknowledgment by members opposite of the comprehensive nature of that report when that came out. I have to say it was a little bit in stark contrast to the response from Carmel Sepuloni to the Productivity Commission report about services, which was to sort of go back to trite clichés about neo-liberal dogma and vouchers, and that sort of thing. So it is good to see the Labour Party actually endorsing some rational economics for once. It is within that context that the bill has been brought forward.

It is an omnibus bill—slightly unusual for New Zealand legislation that it is an omnibus bill, but introduced under the Standing Order 263(a), I believe. There are two important things that Mr English signalled in the Budget that this bill implements. Firstly, buyers and sellers are being required to provide IRD numbers at the time a property is transferred, and that tax information is to be collected by conveyancers and provided to Land Information New Zealand as part of the conveyancing process, and then forwarded to the Inland Revenue Department. People who are tax resident in another jurisdiction will also be required to provide their foreign equivalent of an IRD number. That is the first change.

Secondly, the bill requires offshore persons, defined in the bill, to have a New Zealand bank account before they obtain a New Zealand IRD number. This ensures that offshore persons are subject to our anti - money-laundering rules. Tax evasion, as my colleague David Bennett rightly pointed out—he is no longer in the Chamber, unfortunately, but as he rightly pointed out—tax evasion is a predicate offence for money-laundering. So having greater certainty of the identity of the taxpayer will bolster the effectiveness of the compliance system as well as the anti - money-laundering regime generally. Of course, people who are not offshore persons buying or selling their main home will be exempt from having to provide that tax information, and that is to protect families in their main home.

💬 Denis O’Rourke: It doesn’t do that. It doesn’t do any such thing.

These changes are useful changes. They will improve the information that the Government has, and they will improve the compliance that people have to make with the Income Tax Act 2007. People often forget—including Mr Denis O’Rourke and members opposite—that the current Income Tax Act 2007 contains provisions that impose income tax on certain property transactions. But we are concerned that compliance, in particular by non-residents, is relatively low, so that is the context in which this bill is being introduced and will be examined by the Finance and Expenditure Committee.

As a member of that committee, I am looking forward to examining that bill in detail. Often with tax bills, they are reasonably complex. They are technical in nature. In fact, on the Finance and Expenditure Committee we are dealing with a current bill that deals with the cashing out of research and development tax credits, which is highly complex. We have gone through that bill in quite some detail, and I am looking forward to doing so on this bill as well.

You often hear a lot of anger and venom from members opposite about housing in this country. Phil Twyford is probably the worst offender, but we are still waiting for Phil Twyford to apologise to this House, and actually to the social housing sector as well, for misleading the social housing sector before the election. Phil turned up to the Social Housing Annual Conference and told them that the Labour Party was committed to income-related rents, to capital grants, and to stock transfers—to stock transfers. He is grinning away. Now he turns up in the House and he rails away about privatising social housing and privatising State housing. Well, the Labour Party before the election was committed to stock transfers. He said that “we know that you can build good quality homes at affordable prices, and you can leverage private sector investment.” Well, when is Phil Twyford going to stand up in this House and apologise for misleading the social housing sector? I am awaiting it with bated breath, but I do not think it is going to happen.

Where is the Labour Party when it comes to these sort of tax policies? Having taken a comprehensive capital gains tax to the 2011 election and to the 2014 election, and having been comprehensively drubbed, where is it now on capital gains? Well, we do not know. It is pretty clear that Phil Twyford wants to introduce a comprehensive one, but his leader won the leadership—with four of his colleagues voting for him—on the basis that the Labour Party would not have a comprehensive capital gains tax. So the Labour Party is completely all over the place on this issue. We are looking forward to the next speech from the Labour Party, which will no doubt announce a different policy altogether on property taxation or property more generally.

This is an important bill. It does make small changes. They are technical. They are important for the Government’s wider programme of improving housing affordability in this country. Because of that, I commend the bill to the House.

I call Julie Anne Genter. This is a 5-minute call.

I rise to speak on behalf of the Green Party. We will be supporting this bill. I think the best way to characterise it is too little, too late. It is a move by the Government slightly in the right direction, and we are very happy to see that, but, fundamentally, it is not going to be enough to deal with the out-of-control housing crisis in Auckland, which is posing great risks to our economy, to the stability of our financial sector, and also to our ability to ensure that every New Zealander has that fundamental right to have access to a warm, healthy, dry home, and not just any home—not a home in the middle of nowhere—but a home where they can access education, jobs, and recreation as part of a neighbourhood.

I have heard the Government members admit that there is a housing crisis in Auckland, and my colleague Dr Russel Norman outlined just how much house prices have increased in recent years under the National Government. I would say that what the situation in Auckland demonstrates is that National has really lost touch with ordinary New Zealanders and that it is failing to lead on the issues that are most important to New Zealand. It is particularly failing to deal with the long-term issues. Its thinking is very much: “How can we please voters in the short term?”, but it is absolutely failing to deal with the long-term issues like climate change and inequality, both of which are affected by housing policy and tax policy.

Government members have mentioned that they would like to hear solutions, so I would like to outline the Green Party’s solutions to the housing crisis, which would also help reduce the growing wealth inequality in New Zealand and would also reduce climate pollution, which is essential if we want to survive and thrive in the future. It is very, very simple. Firstly, we have to deal with the demand issue. I know that the Government likes to pretend it is entirely an issue of supply, but if you listen to the Reserve Bank, the OECD, Westpac, or any number of bank economists, they will admit that it is a demand problem—it is not just the Green Party recommending that we deal with the demand problem. We know that it is a demand problem because 41 percent of new house sales in Auckland are to investors, not to first-home buyers. So when you have nearly half of your house sales going to investors, there is clearly a demand problem, and, as the Reserve Bank pointed out, what we need to do is close the tax loopholes on housing.

There is no reason why income from house price increases should not be treated like any other income. People who go out there and earn a pay cheque pay tax on their earnings. If you are very, very rich and you can buy and sell houses at your whim, and make hundreds and thousands of dollars in short periods of time, why should you not pay tax just like the people out there working hard, 40-hour weeks, for their pay cheques—probably more than 40-hour weeks, really? So closing the tax loophole on housing—that is a recommendation from the OECD, the Reserve Bank, Westpac, and the Green Party has been calling for it for a very, very long time.

My colleague pointed out the impact of capital flowing in from overseas, and particularly from Mainland China. Making that statement is not a statement of xenophobia. We are not opposed to immigration; we are just acknowledging that if you have got capital flowing in from overseas, and there is no limit on who can purchase property here in New Zealand, it has an impact on the value of house prices. Again, we know this because in Auckland the ratio of median house price to income is now at eight. There are only about six or seven cities in the world where it is higher than that. The highest is Hong Kong, where it is 12:1. Virtually every city where the ratio is higher is one that is seeing massive inflows from China, so that would be Sydney, London, Vancouver, and Singapore, and all of them have taken steps to try to curb the negative impact of these capital inflows on their housing markets, and it is absolutely legitimate to do that. As an immigrant to New Zealand, I can say that the Green Party is not against immigration, but if you are going to buy a property here in New Zealand, you should be a resident or citizen, and that is what the Green Party would ensure.

There is a lack of protection for renters here in New Zealand, and that impacts the demand. One of the reasons why there is such huge pressure to buy homes is that you have no security of tenure and there is no requirement for landlords to ensure that the places they are renting out are actually warm, healthy, dry, and energy efficient. If we fix that problem, it affects demands at both sides. It gets out those lazy landlords who are just sitting there waiting for capital gains, who are not willing to look after their properties—they get out of the market—and it takes the pressure off people looking to buy houses, because they have more security renting.

There is a supply issue, but, of course, the Government’s approach of deregulating and reducing environmental protection and planning, and greenfields, is not going to solve the housing affordability problem; it just means that we are going to end up with a lot of low-value housing, far away from jobs, which is going to increase pollution, and it is going to increase costs to households. The Productivity Commission draft report made a number of recommendations that reduce the barriers to a compact city. The Green Party has been advocating for those measures for a very, very long time. The Green Party has the smart, innovative solutions that are going to deliver for New Zealand affordable housing, action on climate change, and a happier, healthier lifestyle, and it is going to be better for our economy.

I call Peeni Henare—a 5-minute call.

One of the favourite pastimes of our beautiful country is sitting by the fire playing Monopoly on a cold winter’s evening. By the sounds of the kinds of policies and the kinds of bills that the National Government is currently putting through, it is clear that the Government is playing the game of Monopoly with the Kiwi dream. What it is doing, basically, is saying to all Kiwis—to all Kiwis who aspire to the Kiwi dream—that there is “no passing Go”.

Can I pick up on one of the points made by the member across the House, Mr Jami Lee-Ross, about having no ideas? Well, it is quite the contrary; we do have some brilliant ideas, and what we are growing tired of is sharing those ideas, only for this Government to take them and turn Coke into Diet Coke, or the Kiwi dream into a nightmare. So the point of this, actually, is to ask what the full plan of this Government is to ensure that Kiwis can have affordable homes and live the Kiwi dream. I mentioned in my maiden speech in this House that I was afraid that the backyards of our homes in Tāmaki-makau-rau would be turned into the playgrounds of land speculators and foreign investors. Well, this particular bill here is a Clayton’s attempt at trying to curb that offshore investment in properties in New Zealand, which has driven up the house prices in Tāmaki-makau-rau, as all of my colleagues on this side of the House have mentioned already.

Tāmaki-makau-rau, as you will be well aware, Mr Deputy Speaker, is obviously a big city, and it does need to grow, but I do want to pick up also the point of the member Dr Russel Norman, who talked about urban sprawl. At the moment, I am reminded of a group that goes by the acronym “SOUL”—Save Our Unique Landscape—which because of the haphazard approach of this Government to housing development, is currently fighting a battle in Auckland, Tāmaki-makau-rau, near the airport, in fact, in the hope of trying to save its community; a community that has been forgotten by this Government for a long time now. The Government is now looking just to run the community almost out of its own homes and to build a whole heap of new homes, with no clear plan to allow our people, Kiwis, and also the people of the community of Ihumātao into those homes. This, of course, is of concern to me.

I want to talk a little bit about the Inland Revenue Department’s position on this particular bill. My colleague the Hon Clayton Cosgrove spoke about this and about the Inland Revenue Department’s advice on this particular bill a little bit earlier. In respect of one of the problems, and we have noticed it with a series of fumbled passes by the Inland Revenue Department, the department rightly points out the difficulty of being able to enforce or police what this bill is intending to do regarding a register—and let us face it, that is what it is: a register of offshore investors or property-buyers in this country. Although the department mentioned that it would be relatively easy to police this here in New Zealand, one of the fears—and it is a reality—is about its ability to enforce this law offshore, for those people for whom this particular bill is intended. This is not only an uphill battle but also a near impossibility. It is these kinds of things that raise concerns on this side of the House. It also adds to the conversation that this matter has been poorly consulted on by this Government. We have already heard on that side of the House that it hopes that as this bill progresses, it will get the opportunity to hear more on it. Well, my thinking is: why does National not do the homework properly first so as to ensure that it does not waste the precious time of this House?

Having said that, Labour will be voting for this particular bill now and encouraging it to go through to the select committee. I want to encourage one and all to make sure that they have their voices heard on this particular bill, and that they tell this Government that it can no longer play Monopoly with the future of this country and with the dreams of our people here in New Zealand to own a home, particularly of our young people. Kia ora.

It is a pleasure to be talking on the Taxation (Land Information and Offshore Persons Information) Bill. This bill provides wide-ranging measures and controls to ensure that people involved in land transactions are well informed of their obligations and responsibilities. Its provisions give the means for all transactions to comply with our tax laws, which should result in improving the fairness in the property market. I do want to note that it is part of a much wider range of packages that the Government has been introducing to address housing issues and to make sure that Kiwis can buy their own home, get it, and get on the property ladder. Those measures include the HomeStart loans package, a valuable contribution and a very generous package that the Government has introduced. It is going to also include the Resource Management Act reforms that will be introduced during the term of this Government. Also, significant work has been done around increasing the housing supply, including the 84 special housing areas that we have got in Auckland, which is a particular area of interest.

I do also want to reiterate some of the points that I have said in this House before: in my very own electorate, in the Hunua electorate, I can point to 10,000 sections coming on to the market over the next 6 years, so the substantial effort that have been made to address the housing supply is just one of a number of measures that we have put in place. Just turning to the bill, I think this is a very smart piece of legislation. First of all, it reinforces the tax obligations that people buying and selling properties need to adhere to. Secondly, it deals with the perception, which has been perpetuated by the Opposition, that wholesale numbers of foreign people have been coming into New Zealand and buying and selling our properties. All they have talked about is how we should be putting in place a register, but these measures that have been introduced today are much more comprehensive than that. The objective of this bill is, essentially, confirming the value that this Government places on homeownership and creating the right environment for people to own a home and to build strong communities.

As we have heard earlier, this year the Government will introduce a brightline test really to just confirm those tax liabilities on residential homes, particularly when they are resold. The gains from residential properties that are sold within 2 years are going to be very clear—crystal clear, in fact. Unless that property is the seller’s main home; or, secondly, inherited as part of a deceased estate; or, thirdly, has been transferred as part of a relationship property settlement—commonly referred to as a divorce—then if you sell your home within 2 years, at that point it is assumed that you are essentially a trader. So we have clearly separated out areas that we believe there should be no tax paid on the residential property and that is fair. But if you do not fit within those three criteria, then you will be subject to tax changes, and, in my personal view, I believe that is a very balanced approach. The objective, of course, is to ensure that tax on property is paid when it is effectively due and also to ensure that property speculators are actually paying their full amount of tax. These brightline tests will obviously be subject to review by the select committee but that clarity in my view is absolutely essential and will be a key element of its success.

I just want to note that this requirement to pay tax, particularly if you are deemed to be a trader, is part of the existing tax rules. I have heard some of the Opposition members claim that it is a new tax and all that sort of stuff. It is not. The corollary is that if you buy and sell shares on the stock exchange, you are also subject to the same tax rules. This is what we are trying to do around housing. The bill will obviously assist the Inland Revenue Department to reinforce tax obligations. First of all, if you are a buyer or a seller you will be required to provide an IRD number at the time of doing the property transaction. This will be part of the conveyancing process so it will involve an independent part of that process and those details will be forwarded to the Inland Revenue Department. Tax residents from another country will also be required to provide a foreign-equivalent of their IRD number and I think that is a very smart move. But I just do note that if you are a New Zealand resident buying and selling your main home or buying what you intend to be your main home, you will be exempt from that process.

Secondly, offshore persons will be obliged to have a New Zealand bank account, and you have to do that prior to getting an IRD number. That is a wonderful second part of what is being proposed, because not only will that deal with the international anti-laundering laws that New Zealand is a party to, but it will really start to bite in terms of making sure that we have got appropriate information on those foreign people buying New Zealand residential homes. I do not know when you last opened a bank account but, interestingly, I asked someone this morning to just—

The ASSISTANT SPEAKER (Lindsay Tisch): Can I just remind the member that the member is bringing me into the debate all the time. It is best to use the third person by saying “When one opens a bank account” or “one does something” as opposed to saying “you”. I have not opened a bank account recently.

Thank you, Mr Assistant Speaker. So if one opens a bank account it is very, very difficult and it takes some time. When you go into the bank not only do you have to provide a photo ID or a passport, but also you have got to provide in many cases some form of proof of residential address, such as a New Zealand utilities bill. Getting the bank to capture that information is the way to make sure that with regard to people who want to get round the system and not be part of the New Zealand laws, that information is automatically accounted for and captured by an independent body. The bill also ensures that we deal with people who are essentially cash buyers coming into the New Zealand market who may not want or need to borrow money. It circumvents that by forcing them to actually open a bank account. The other part of it is that there is a requirement for those people to actually get an IRD number, and until that information is provided to the bank, the bank assumes that you are on the highest tax rate. I also note that the Minister talked about investigating the introduction of withholding tax on people selling property for non-residents. I think that that is another important thing that the select committee will turn its mind to.

I want to now just talk about the areas where the exemption will not apply, and that is if the home is being bought by a trust or even if a New Zealand resident or someone like that has been acquiring homes but buying and selling them two or three times during the course of the initial 2 years. Those are not grounds for exemption under these rules, and this will ensure that overseas buyers and speculators are, again, captured by the provisions that have been proposed under this bill. A part of the measures also deals with the issue of trusts. Obviously, there is concern about not only New Zealanders but foreigners using trusts to hide their interests. As we heard from the Minister today, if you use a trust, you will be required to provide your IRD number, and if anyone holds an interest of 25 percent or more in that trust and they are a foreign resident, then they will be automatically captured under these rules. I am glad that the Minister has been proposing that and also what she talked about earlier—that it is easier to set up a trust than to subsequently vest that into new ownership, and if there are any subsequent transactions, again, that is going to be captured in this bill. Again, those are excellent provisions.

The last thing I want to turn my mind to is the Land Information New Zealand requirement. That is an important further step in capturing that information and having an independent party to record that information. To me, this bill is an excellent start towards dealing with this whole issue. I commend the bill to the House.

Given the splits and divisions in the National Party, I am amazed that this bill has actually got this far into the House. Given the level of property ownership across the National Party, there must be many who have been uneasy about bringing this bill to the House. The reality of the property market is that the highest common denominator drags up the value for everyone else. “Everyone else” in this case is the poor New Zealanders who are trying to get on to the property ladder in Auckland and simply have not been able to afford to do so.

This is not a “road to Damascus” but rather a “street to Damascus” piece of legislation. It is hardly a bandage; more like a band-aid for a major issue facing not only New Zealand but Australia, Hong Kong, and Singapore, who have all moved to make significant changes in legislation to stop what they see as a flood of foreign investment into their property markets. Well, this is the best that the National Government can do.

It cannot even decide whether it is for a register of foreign investors or not. We have got the Prime Minister on record saying things like “We are not sort of absolutely resolute that it’s such a terrible idea. We just think that we have fairly good information already.” But then we are told that this piece of legislation is actually not for a register, but it is for gathering information: “It’s quite a tricky thing, the register. It’s not quite as straightforward as people think, so we’re not afraid of a register.”—that is the Prime Minister. Is it for registering foreign owners of property in this country or is it not? It is a pathetic piece of legislation, but in the absence of anything else, the Opposition will support it to the select committee.

The Government is trying to portray this view that it has got new-found empathy for poor New Zealanders trying to have a home. These are Kiwis who need, who deserve, and who want a home—somewhere to bring up their families in security. The laws as they are around rental properties, and the exposure that those people have from landlords who want to flick on their property, means that we have over 50 percent of the people in Auckland living in rental properties and living in insecurity. That is not good enough. The Labour Party was founded on the basis that we put people into secure homes and offer them a job and some security for the future. This bill is pathetic.

As I say, it must have been an interesting caucus, trying to work out whether it should put this bill up or not, given the statements of denial, time and time and time again, from Ministers across the House—they do not need a register; they do not need to address the issue. If there is one person or perhaps two people who should be credited with this piece of legislation, one is Phil Twyford, who has been pushing and pushing—

💬 Hon Maurice Williamson: So it’s Phil’s pathetic legislation?

—and the other person is Fran O’Sullivan. Fran O’Sullivan very clearly laid it out in a column yesterday in the New Zealand Herald—and clearly the National Party members have probably read this. Even Mr Williamson would have read this. I mean, she is quite—asking the question of whether we are prepared for the new wave, and it is only just the new wave, of $6.6 trillion in the hands of Chinese investors who want to go out around the world and invest in property. That is $6.6 trillion. It has been estimated that we might get 3.3 percent of that, and that is $11 billion coming into New Zealand that is likely to further overinflate the property market without any guarantee—any guarantee—of new homes and houses being built. This is a dilemma of monumental proportions and the Government has put up a band-aid piece of legislation.

In Australia they have moved, in Hong Kong they have moved, and in Singapore they have moved to protect their people. We are not xenophobic on this side of the House, but we are patriotic. We are here for Kiwis. We are not picking on the Chinese, other than to say that due to their hard work and organisation—I have to remind people that it is not a capitalist country over there; it is a communist one, actually. Due to their success they have trillions of dollars of capital that they want to invest. The question is: will that money coming into New Zealand help Kiwis or not? Does Mr Williamson think that we need a register, or not? What do his people in Auckland think about having to compete with foreign money when they go to an auction to try to buy a home for their family? That is what it is about. So what we have got here is a piece of legislation that moves towards a register.

The question I have of the Government, and it will be asked in the select committee I am sure, is will this be extended to farmland? Will this be extended to farmland? Because the Government has put up the argument time and time again that it is far too complex. Oh, we cannot have a register. It would be too costly. Well, I say to the Government that if it got a PC with a bit of grunt, it could have a register of all the foreign-owned properties up and down this country, both residential and commercial, and farmland as well.

There have been pathetic excuses. Why? Because the Government’s mates, the funders of the National Party, the real estate agents, and the people who have been doing very, very well out of this have not wanted to move in this area. As that investment comes in, it drags up the value of the property market. There is not much more in the way of new houses and new capacity coming on stream at the bottom of the market. The developers, who we are told want to rush out and build more houses, have a vested interest in slowly developing the properties that they have, not to flood the market with properties, to ensure that there is indeed an ongoing shortage and people are forced to pay more and more. If it is the foreign investors who come in and help prop up that valuation, it is at the expense of ordinary hard-working Kiwis who want to have a home.

We will, as I say, support this legislation to the select committee, but I could go back to some wisdom, as I said, from Fran O’Sullivan, who must take some credit. Her timing was perfect. She put the column out yesterday, and we have legislation in the House today. But I have to say that it is my colleague Phil Twyford who has been pushing the Government, who has been holding its feet to the fire, and who has been pointing out to the public of New Zealand that the status quo is simply unsustainable. Can I quote Fran O’Sullivan, who has not been a great fan of Labour, but who does put up some very honest opinion: “Almost to the point of absurdity, the NZ Government has been careful not to single out Chinese investment.” The only reason I refer to it is the quantum of investment dollars sitting there, looking for a home. We will have a register, or whatever the Government wants to call it, for all foreign investors, and that is the way it should be. But let us not be naive about the amount of money that wants to come to a country that does not have an effective capital gains tax, and that leaves the door open because it does not have a proper register of ownership. That is why the Government should move and take some real action to protect New Zealanders and their families.

The Labour Party will support this legislation to the select committee, but I can put on record the fact that we will scrutinise every part of it, to try to ensure that what is passed is effective in protecting New Zealanders, young Kiwis, and their dream that they too can one day own their own home, because if we do not take more moves, if we do not do anything effective, then we will be flooded out by a wave of foreign investment. We only have to go to Australia or to Hong Kong or to Singapore to ask them why they have made these moves, and implement in a similar way protections for us. We are not xenophobic, but we are patriotic.

I was a little surprised to listen to the contribution of the last speaker, Damien O’Connor, and hear his rail against foreign capital, given that he has been around long enough and should know that this country is desperate for foreign capital. But that is another story—that is another story. Today I would like to talk about the bill before the House, the Taxation (Land Information and Offshore Persons Information) Bill.

This bill is not a silver bullet. This bill does not bring in a register. This bill is part of a comprehensive housing package that enables and encourages homeownership, which is so important to the people of New Zealand. It increases the equity and the fairness around taxation. It is part of a suite that is reducing demand. This bill focuses on the demand side of the housing market and we also have a suite of policies that increase the supply side. Those are the two things that matter. Those are the two things that determine the price of a house: the aggregate demand and the aggregate supply. One of the things we have done to date, despite the Opposition’s assertions that we have done nothing, is that we have introduced 100 special housing areas across the country, including 84 in Auckland—

💬 Phil Twyford: How many houses?

There are 40,000 new homes and sections, as part of those special housing areas. We have almost doubled the number of housing consents since 2011. We have increased the building work to over $14 billion. That is 21 percent up on last year, so things are heading in the right direction. There are eight housing accords agreed with local councils—Auckland Council, Christchurch City Council, Wellington City Council, Tauranga City Council, Western Bay of Plenty District Council, Queenstown Lakes District Council, Tasman District Council, and Nelson City Council. There is plenty of action, there is plenty of initiative, there is plenty of policy, which are all contributing to the housing issue. Ninety thousand people are expected to benefit from the KiwiSaver HomeStart loans scheme. An increase in another part of the policy is the KiwiSaver access to the $20,000 maximum grant. That is a relatively new policy. Those in KiwiSaver are able to access and withdraw their total amount, including the tax credits but excluding the $1,000 kick-start. So there is a lot going on in this housing space. The Reserve Bank of New Zealand is also contributing by introducing loan-to-value ratios, which will affect the demand side. That is part of the demand side. It is not Government led; it is Reserve Bank led.

From the other side we have a lot of criticism but no real alternative policy, except, of course, for the KiwiBuild programme—the KiwiBuild programme that is going to solve the country’s home-supply issue. Apparently, 100,000 homes will be built by a Labour Government. Where will it build them? How will it build them? Who will pay for those 100,000 houses that are proposed in the KiwiBuild programme? They will be designed by Grant Robertson to his liking, and the colour scheme, no doubt, will be chosen by Phil Twyford. Such is the central control of these people over here because they are sanctimonious, in that they do not understand that those in the private sector are quite willing and able and capable of choosing where they want to live, how they want to live, and the design of the house that they want to live in. In previous contributions Mr Robertson has even suggested that the Government’s Superannuation Fund get involved in the New Zealand housing market and build some of those houses. Of course it would just be a disaster having Mr Robertson involved in the governance of the Government’s Superannuation Fund, which is already well weighted into the New Zealand market and, of course, giving an outstanding performance. In fact, it is the highest performing Government superannuation fund on the planet. Imagine if Grant Robertson got hold of it—just imagine.

The Greens’ option is also to create a fund to subsidise young people who would like to build their first home in Meadowbank, Ponsonby, or Parnell. But who would be paying for that? Who would be subsidising those first-home buyers in Auckland? Well, I tell you that asking Wairarapa taxpayers to fund a housing scheme suggested by the Greens to allow first-home buyers to build houses in Auckland would be offensive to them.

This bill strengthens existing taxation law. Just to clarify for Mr Cosgrove’s benefit what the existing law says, it says that if you purchase something—whether it is a house or, in fact, anything, as my colleague Mr Bayly pointed out, like shares or widgets—for the purpose of resale, that profit or loss is assessable. So that is the current state of play. The example Mr Cosgrove gave of an Auckland family buying a place in Queenstown with the intention of moving down there but who for some unforeseen circumstance was not able to go to Queenstown demonstrates his total lack of understanding of what the current legislation is. It is the intention at the time of purchase, Mr Cosgrove; that is key. So this legislation strengthens what is already current legislation. It does this because the current legislation is difficult to measure. It is difficult to gauge what people are doing, without the available information. It is an honesty system. The taxation system in New Zealand is based on trust and, of course, people abuse that trust at times.

This legislation is aimed at strengthening the ability of the Inland Revenue Department to capture what is trading income. So, first of all, the legislation is proposing that the IRD number is collected and notified when the sale or the purchase of a house takes place. Second, the bill requires offshore people to have as well an IRD number, a bank account. This will strengthen the laws that already exist around money-laundering, and that is a good thing. There will be exemptions. The family home is, essentially, exempt—unless, of course, that family home is sitting in a trust, in which case it would not be exempt. The home exemption falls away if the family home is purchased and resold, purchased and resold more than a couple of times. That is because that family home is not really there for the purpose of living in as a family home; it is obviously there for the purpose of trading, and should therefore be captured by the bill.

There are further developments in the pipeline, including the brightline test. Some of the Opposition members suggest it is in this bill. It is not. There is a brightline test assuming a 2-year period is the appropriate period of time to hold a home before it is taxable. There are withholding tax proposals coming forward later on this year. This bill strengthens the existing law. It clarifies the assessability of income that is already determined in the Income Tax Act. It tightens law around money-laundering. I look forward to supporting this bill and supporting further legislation around withholding tax and the brightline 2-year determination. I support this bill and commend it to the House.

Bill read a first time.

Bill referred to the Finance and Expenditure Committee.

I move, That the Taxation (Land Information and Offshore Persons Information) Bill be reported to the House by Monday, 17 August 2015, and that the committee have authority to meet at any time while the House is sitting (except during oral questions), during any evening on a day on which there has been a sitting of the House, and on a Friday in a week in which there has been a sitting of the House, despite Standing Orders 191 and 194(1)(b) and (c). The measures introduced by this legislation are to be implemented by 1 October 2015. To ensure the legislation can be passed through all stages by 1 October, a shorter-than-usual select committee process is necessary.

As I said during my speech, this bill will authorise some of the measures announced as part of Budget 2015. This package of measures will ensure that people buying and selling residential property for profit, including overseas buyers and short-term speculators, pay their fair share of tax. In particular, it will be important to align implementation of these measures with the brightline test announced by the Government in Budget 2015. The brightline test will require income tax to be paid if a residential property other than the main home is bought and sold within 2 years, and the brightline test will apply to properties bought on or after 1 October. The early report-back date will allow us to put in place regulations that are necessary to support this legislation by 1 October. These regulations will describe land transfers and parties that are exempt from providing tax information, in addition to the main home exemption. Such exemptions will only be made where the requirement to comply is impractical or involves high compliance costs, or where there is a low risk of tax avoidance.

I did not hear in that contribution from the Minister for Land Information any kind of convincing explanation for why the select committee period for this bill should, basically, be cut in half. This is a bill—in spite of the fact that it is a bill that is disappointing in its potential impact, as we have been saying for the last couple of hours of the debate—that still has some complexity. I would have thought that this bill deserves, and needs, proper scrutiny and review at select committee. Other than the Government’s bad planning, I have yet to hear any reason why the select committee process should be cut in half. Unfortunately, this is typical of this Government, riding roughshod over the democratic process and particularly over the importance of select committee scrutiny of its bills.

We saw the same kind of contempt for process this morning in the Vote Foreign Affairs and Trade estimates hearing, when we saw, basically, collusion between the Minister and the committee chair—

The ASSISTANT SPEAKER (Lindsay Tisch): Order! This is a very narrow debate—the member will sit—and I will refer the member to Standing Order 290(3). It says there that “Any debate on the question for a motion under this Standing Order is restricted to the special powers or instruction set out in the motion. It may not extend to the principles, objects, or provisions of the bill to which the motion relates.”, so talking about the select committee process is not part of this debate.

Thank you, Mr Assistant Speaker. What I would submit is that by cutting the select committee review period in half, what the Government is doing is denying a lot of people—members of the public who have a big interest in this bill and the issues that this bill purports to address—their opportunity to have a proper say; there is no doubt about that.

Think about the people who will have strong views about this bill. There are approximately 300,000 people who own rental property in this country. They are going to have a lot to say about this bill. Almost every city and region around this country has a branch of the Property Investors Association. They will all have strong views about this. Think about the real estate companies—Barfoot and Thompson, Harcourts, Harveys—or somebody like Shamubeel Eaqub, the eminent economist who recently published the book Generation Rent explicitly dealing with the kinds of issues that this bill purports to represent. He is the kind of expert opinion the select committee should be getting in to submit on this bill—and, in fact, organisations like Generation Zero, which is an articulate voice for the interests of young people in this country who feel themselves shut out of the property market because of the rampant, out-of-control speculation.

These groups want to see a bill that actually has some real impact on property speculators. They are going to want to come along, and they will have things to say about this bill. I have no doubt in my mind that they will have views about whether or not simply requiring property purchasers and offshore speculators, for example, to provide a bank account number and register with the Inland Revenue Department constitutes, in itself, a substantive, serious, and credible response.

We have seen far too much poor legislation rushed through this House. And what happens? Every time, it comes back to this House, and we have seen that in the last day or so with the exclusive economic zone legislation that Nick Smith made a complete hash of. This House, at huge taxpayer expense, has to come back and clean up the mess that is left by legislation. It is my fear that this bill has been so rushed—it was a last-minute, cobbled-together, poll-driven panic before the Budget, and we know that because Louise Upston did not know about it until a few days before the announcement. The Minister who is responsible for shepherding this bill through—and it is her officials who will be responsible for servicing any of the work that is done on this bill as it goes through the select committee process—did not even know about it until a few days before the announcement. So she had no say in it. It was imposed on her as a panicked political measure, and I think that this House deserves better.

This is an issue, as so many people have said in this debate, that people feel incredibly strongly about all over New Zealand: the fact that we have a housing crisis that is out of control. It is of intense public interest. So for the Minister to stand up and say that this taxation bill deserves only half the normal period of scrutiny is, I think, shabby.

In spite of the fact that we have argued consistently that this is a half measure, and we have quoted the commentators and the analysts who have said publicly that they do not believe it is going to make much difference to the problem of property speculation, there are issues of some complexity in the drafting of this bill. You only need to look at what the Inland Revenue Department said. These are matters of complexity that go right to the heart of the fact—

The ASSISTANT SPEAKER (Lindsay Tisch): You can mention that, but you cannot get into the detail of the bill. That is the point that I made earlier.

OK, I am just saying that the Inland Revenue Department, the Government’s own advisers on tax matters, recommended—and I want to quote what the Inland Revenue Department said about it, because these are the very issues that will have to be dealt with at the select committee—to the Government that it not exempt main homes from the register because it will not reduce compliance costs for the purchasers of a main home, as almost all of those people will already have an IRD number anyway. What the Inland Revenue Department said is that it would make the rules more complicated for purchases and conveyances and create loopholes. So, for example, a person could buy a main home—

The ASSISTANT SPEAKER (Lindsay Tisch): Order! I have explained to the member that there is a truncated report-back period. You were doing well up until you started to get into the detail of the bill. That is what you cannot actually get into. It is a very restricted debate, and that is, really, where you need to focus. It is limited in its content and you need to concentrate, as you were doing, on the reasons and the pros or cons for a truncated report-back period. You cannot get into the detail of what is in the bill and what the Inland Revenue Department is saying.

💬 Hon David Parker: I raise a point of order, Mr Speaker. With respect, I agree that you cannot discuss the pros and cons of the detail of the bill, but you can discuss that the bill is so detailed that it ought to have a proper select committee process.

The ASSISTANT SPEAKER (Lindsay Tisch): I agree with that. That is why I said to the member that in his first 8 minutes he has been on track and that he must relate it back to the motion and the reasons and the pros and cons for the select committee process being truncated. When you start to specifically get into what the Inland Revenue Department is saying, it is fine to say that the Inland Revenue Department has concerns and so on and that is the reason why you need to have a longer time for people to have the opportunity to submit. That sort of thing is fine, but you were starting to get into the detail.

Actually, in what you just said, Mr Assistant Speaker, I think you have accurately summarised my argument. What I was simply seeking to do by quoting the Inland Revenue Department was to make the point that my colleague the Hon David Parker underlined, and that is that there are matters of complexity in this bill that mean that it is not justifiable for the Government to cut the normal select committee period in half.

The Inland Revenue Department has made a number of comments in the regulatory impact statements that suggest that the select committee will have some serious work to do. The Government made some choices as it scrambled together this measure in the few days before the Budget announcement, but it is clear that some of those choices were arguable. There are a number of issues that the Inland Revenue Department has advised the Government on, which I was just beginning to relay, but the Government chose not to accept the Inland Revenue Department’s advice. For example, the Inland Revenue Department said that the requirement to have a New Zealand bank account to obtain a New Zealand IRD number is unnecessary for individuals and of limited benefit because the Inland Revenue Department already has the power to require that.

I am not arguing the pros and cons of the bill. I am simply saying that there is sufficient complexity and matters of real debate and argument contained in this bill, so that it is going to take weeks and weeks of proper select committee scrutiny to tease these matters out. Expert advice will be needed, and there is no question in my mind that not only members of the public and organisations that have a keen interest in fixing the housing crisis and dealing with the scourge of property speculation but also those with expert opinions—tax lawyers and tax advisers—will want to come in and have their say. We have had enough in this House of Ministers like Nick Smith rushing half-baked measures through. We need good, thoughtful, ordered approaches with real solutions to the housing crisis and we deserve a better select committee scrutiny than we are being given.

The Green Party, although supporting this bill, again also shares Labour’s view in that we do not support the truncation of the select committee process. Our understanding is that these set time frames we have for the consideration of legislation are there for a reason. They are not dependent on the bills or the need of the Government; they are there to ensure proper scrutiny and the ability of New Zealanders to be able to properly, with warning, participate in this democratic process. Those principles stand in the instance of this piece of legislation. This is not, as has already been outlined, the smallest piece of legislation that has ever been in front of this House. It is not a piece of legislation without complexity. We support it, but we support good legislative process and scrutiny as well.

It has already been indicated to the public and to this House that there are some concerns about this piece of legislation, and based on those indications we believe that time must be given for the public to be able to choose whether to participate and to comment—and for the full range of people, too, because organisations often are very busy and individuals are very busy and very pressured in their lives these days. Giving people a short time frame often means that they cannot participate, because they just cannot make time to make it happen in that shortened period. We believe their voices are important.

We want this House to make the best possible legislation, particularly when it is legislation we are being told is a critical component of helping solve our housing crisis. We need to get this stuff right. We need to make sure that people are involved in ensuring we get the right decisions and the right laws. So although we support the legislation we do not support a shortening of the select committee process.

I rise to make a small contribution on behalf of New Zealand First. We cannot support the shortening of the democratic process with regard to input by the citizens of New Zealand into a bill, particularly a bill as substantial as this.

As has been mentioned already by other Opposition colleagues, it has been suggested by the Government that this is part of a silver bullet solution to quite a substantial problem facing the New Zealand public. With regard to that, we believe that it is easier for the Government to shift its implementation date than to actually suggest that the citizens of New Zealand shift their whole lives to fit their democratic rights and democratic opportunities into a shortened period of time so that it suits the Government.

It also, in our view, smacks somewhat of arrogance or a suggestion that Government members already think they have got it right and so there is no need to listen to people, that they go through the motions but there is really no need to listen to the people out there in New Zealand who have a vested interest in this legislation. It is their legislation. It is their law. We merely sit here for a short period of time and participate in bringing forward these ideas. So from the New Zealand First perspective we absolutely cannot support any shortening of the democratic process, particularly around something as important and as vital as this piece of legislation.

Does the bill really do what the Government says it is going to do? Is it really an answer in any way, shape, or form to a crisis that we currently face? I think Jan Logie made a particularly good point in terms of the shortened time period. Organisations are working out there now to just survive in this environment let alone be asked to stop everything and hurry up and submit on this bill if they want to because the Government has a 1 October implementation date, which it wrote into legislation, and it now needs everybody else to hurry up and get there.

The individual citizens of New Zealand work from day to day. They actually have lives and things they are doing that they are being asked to put on hold to participate in this process. We need to give them an appropriate amount of time to do that. So, again, New Zealand First would suggest—along with all other Opposition parties, I am picking—that the Government allows the process that has been set down, quite rightly and with very valid reasons, to take its course as opposed to attempting to shut down any debate from the New Zealand public and keep it quiet so that the Government can push through what it thinks is going to hide, in our view, what is really going on out there. Kia ora.

There exists already within the Standing Orders the right for the Government to truncate to less than the normal 6 months the period for report back from the select committee. We are having this special debate today because the Government is truncating the report back to an unusual, and normally unreasonable, extent. The reasons why the Standing Orders were changed, with unanimous acclaim across Parliament, in order to have this sort of debate when that happens is because it means truncating one of the few protections that we have in our unicameral parliamentary system against rushed and inappropriate legislation being passed. We have one House of Parliament. We do not have an Upper House that considers legislation again, as most Western democracies do, including Australia, Canada, Great Britain, and the United States, to name but a few. We are more reliant upon the processes that we run through this single House of Parliament than are other countries that have more than one House. That is one of the reasons that lie behind this rule.

Why do we have these rules? One of the greatest protections against inappropriate change by Government that we have in society is, actually, time. Once civil society sees the detail of a change that is proposed, it takes time for it to get its head around the change and to respond to it. So you have to give civil society time to come up with its views on whether what is being proposed is good or bad and on how it might be improved. The normal select committee process, which allows 6 months, then results in select committees normally giving submitters 6 weeks after the date of advertising to reply with their written submissions on the legislation. So there is normally 6 weeks of advertising in all the major daily papers.

What happens in that 6-week period? And why is it 6 weeks? Generally, it is 6 weeks because most—not all but most—of the most valuable submissions that come to select committees come from reputable organisations that are themselves representatives of large groups of interested New Zealanders. Those organisations are volunteer organisations, generally; they are not paid bodies. They are bodies like the New Zealand Law Society, the Institute of Chartered Accountants of New Zealand, and the Child Poverty Action Group. All of these groups and the people who provide the services and write the reports that are going in as submissions are volunteers normally and are doing so in their spare time.

Not only that, normally they are organisations that are responsible to membership-based organisations, and so they cannot just do things off their own bat; they have to seek the authority of the organisation that they are representing. Often these organisations meet only monthly. So the organisations need a month to make a decision, and at least 6 weeks, including that month, in order to go through their normal monthly cycle, to decide to make a submission, and to decide what should be in the submission. If you do not allow that 6-week period following advertising, you are, effectively, severely frustrating the ability of civil society to participate in the law-making process. We all, I think, on all sides of this House agree that select committees make for better legislation as a consequence of those processes. So when we have the Government truncating these processes, that is actually what it is attacking. It is attacking the democratic process of making good legislation, in a country that already has very scant protections because of its unicameral Parliament, where just about all of the power is already held by the executive wing—the Government wing—which controls the agenda and can push things through if it wants to.

Against that background, I have to reflect on whether this is an appropriate case for truncating those time frames, given the consequences that I have outlined. That is why the Labour Party opposes this severe truncation, not just the shortening of the process , which can happen within the Standing Orders, but also because it breaches a rule that this Parliament agrees is the standard rule. That means that we should have this debate. That is where we do actually have to come back not to a debate about the merits of this bill but to a debate about the complexity of this bill and the issues that it addresses.

This bill changes fundamentally the rule about whether you should tax capital gains on housing. It introduces some arbitrary periods. Will submitters want to get their heads around the issue of whether there are some important tax principles being changed; and if they are being changed, whether they are being changed properly? Whether they are in favour of those changes or opposed to those changes, they should have time to get their heads around whether they are right. This is a fundamental change. The Labour Party might say that it disagrees with the detail of those changes, compared with how the Government sees it, but I think that we would both agree that they are actually very significant and complex changes. So that is one area that submitters should really have the full amount of time to get their heads around and submit on.

Then there are the questions that Government members raised about what they say is the sophisticated way the bill deals with the issue of trusts. From our experience in this House with the register of pecuniary interests that we have to comply with, we know that the rules around trusts are still not right. Even after those rules, those laws that apply to us as parliamentarians, have been around for over 6 years now, I think—it is probably 9 years even—and with many iterations, actually, they are still not right. I would like to think I know a bit about—

💬 Jono Naylor: Something.

—about something, including about trusts, and in the example of our pecuniary interests, we have still not got that right, in terms of who, effectively, exercises control of trusts, and that includes the people who have got the right to appoint or change trustees. We have not got that right in our own rules. I doubt that we have got that right in this legislation. I do know that, because I have not had time to consider this yet, but, by God, that is an area of complexity that we have not been able to get right for ourselves after 9 years. Yet we are expected to believe that everyone will get their heads around this, that the Government, through the Inland Revenue Department, has got it right first time and that that line has been drawn properly. Well, I think that is another example of complexity that deserves further consideration.

The changes relating to the Land Transfer Act: I am someone who has called, for some time, to use the point of control that arises when you cannot take title to a property—you can take equitable title but you cannot take legal title to a property—until you have transferred it at the Land Registry Office. You can impose rules on lawyers to say that they cannot transact anything until they are certifying that something is being done. So I have long thought that with that right and the documents that surround the sorts of notices that are given to the valuation department and the rating authorities, there is an opportunity there to gather data. I think that there are some practical ways there to gather data. But are we going far enough? Again, it is an appropriate question: are we doing it properly and are we going far enough? My understanding is that there is a proper argument to be had that we need to measure what is already in overseas ownership, not just what those purchases that are transacted after the date of this legislation are going to be, so that we have a decent idea of what has already happened.

There are proper, more fundamental debates to be had here in a country that has moved to the point where more than half of all people over the age of 15 now live in rented accommodation. There is a proper debate to be had from people who are worried about this, as to whether this is an adequate response. Those people should have time to form a view and make submissions. Then there are all of the issues around details. Even if the policy is right, is the detail implementing the policy properly? We see time and again where that goes wrong. Obviously, if this was not a rushed initiative, as other people have said, this would have been introduced at the time of the Budget, because it was the most significant announcement at the time of the Budget. The fact that it was not introduced at the time of the Budget is because it was not ready. We had all sorts of other less relevant information passed under urgency. It shows it was not ready. It is rushed; therefore, the dangers are even higher than they normally are. This select committee period ought not to be truncated.

I am very happy to take a brief call on this referral motion—a debate that we have in Parliament relatively rarely these days, and I think that is a good thing. In fact, up until 4 years ago we never would have had the debate on these matters. I think it is important when they do come up that we canvass whether in fact it is valid to have an earlier report-back date, but also whether the powers that a select committee is being given—because in addition to truncating the report-back date this motion also gives the committee additional powers—it is worth us considering whether those additional powers are warranted.

I was involved in the review of the Standing Orders in 2011, which made this change to the Standing Orders. A lot of thought was given to whether these motions should indeed be debatable. I want to quote briefly from the report as to the reasons that change was made, because I think they summarise some of the arguments against voting in favour of the motion: “The truncation of the select committee process can have serious implications for legislative quality and confidence in the legislative process. … [I]t also affects the public perception of Parliament, especially when submitters are required to prepare submissions in a short time and hearings are compressed.” That was the unanimous view of the committee, so it was not just one party arguing it; that was the view of the whole Parliament—that we wanted to avoid wherever possible the truncation of the select committee process. The report goes on to say that, although 6 months is the default, it can be reduced to 4 months without debate—but the report did not want 6 months to necessarily be a constraint, either. That was actually the finding of the report: that the select committee process should take as long as the select committee process should take.

What is important in that is that we do not have a minimum select committee time frame, either. So, although a bill is referred to a select committee by the House, there is absolutely nothing to stop that committee reporting back early where the legislation can be adequately dealt with in a shortened period of time, without the need for the House to mandate that it must report back within a shortened period of time. As my colleague David Parker has pointed out, this bill has some complexity, and so it should take the time that is necessary for it to deal with those issues. It can report it back early now, without the need for this referral motion, if it finds that, in fact, it does not need any additional time.

The Standing Orders Committee noted that the Government should exercise due restraint when considering the truncation of the select committee process, and the reason these motions are debatable now when they previously were not is for exactly that reason. If it takes up additional House time, then it is going to discourage the Government from using them, and that is important.

The other point that I want to make is around the powers that the select committee is being given. One of the powers that it is being given, if this motion is passed, is the power to meet while the House is sitting. My colleagues Phil Twyford and David Parker have talked about the complexity of the bill and the need for people submitting to be able to get their heads around the bill before they put their submissions before the select committee. There is also a need for the members on that select committee to be able to get their heads around those issues of complexity as well—

💬 Hon David Parker: And time for submissions.

—and time for them to adequately hear the submissions that are sent before them. The power to meet while the House is sitting actually, in my view, makes the select committee process much more complex and much more complicated for the members, and it does, actually, in some ways inhibit the ability of the members to constructively engage, because it means that they are going to be balancing other priorities. Members will find themselves having to speak in the House, leaving select committees, and coming and going from select committee hearings.

One of the things that I find select committee submitters do often complain about is that they feel like they were rushed through the process and they were not actually listened to, and I think that that is heightened where they see members coming and going from the meeting during the time that they are making their submissions, because they feel that they are not being given the respect that they deserve. I actually think that is a valid criticism. When select committees meet while the House is sitting the odds of that happening are much higher than if the select committee meets during its regular time. I think that there is a case for that to happen sometimes, and we do that regularly with an extended sitting of the House where we are doing Treaty settlement bills, for example, but those bills are non-contentious in the sense that they are well supported around the House, and so we will allow select committees to meet during that time because we can arrange for the swaps, and so on, to happen so that the select committee work is still covered.

Again, it is not a case of saying it should never happen, but we should be very cautious about hearing controversial issues in a select committee—and this will almost certainly be controversial—when the House is sitting and when members have other work responsibilities that they are trying to balance. It will infringe upon their ability to adequately engage with the detail of the submissions and the detail of the legislation—which, of course, I am not going to go into here because I am not allowed to—but, you know, it is important that the members of the committee do engage in the detail and do get their heads around it, and that is why making sure that they have adequate time to do that is very important.

I want to, finally, quote again from the Standing Orders Committee in concluding my remarks, because I think that this really sums up the nature of the whole issue: “Reducing the number of bills that are subject to shorter deadlines for select committee consideration will be an effective way of enhancing legislative scrutiny and thus improving the quality of legislation in New Zealand.” We have a job as members of Parliament to scrutinise the legislation that comes before us. Truncated select committee processes are a barrier to that happening. We also have a responsibility to ensure that the legislation is quality legislation, lest we find ourselves back here, as we regularly have in recent times, correcting legislation that was pushed through in a hurry, that was not done properly, that did not get the scrutiny it deserved, and that therefore stood in need of correction. We can avoid those things by making sure that we follow the principle that the Standing Orders Committee was articulating, of giving the bills all of the scrutiny that they deserve, and that means not truncating and constraining the power of the select committee but giving it the time that it needs.