Land Transfer Amendment Bill, Tax Administration Amendment Bill

I move, That the Land Transfer Amendment Bill and the Tax Administration Amendment Bill be now read a third time. These bills were divided in the Committee stage from the Taxation (Land Information and Offshore Persons Information) Bill. These bills enable improved compliance with tax laws by allowing for the collection of information to ensure that people who buy and sell property for profit, including overseas buyers and short-term speculators, pay their fair share of tax. They are part of a suite of measures announced as part of Budget 2015 to bolster the tax rules on property transactions, including those by overseas buyers, and to help the Inland Revenue Department enforce them. Taken together, these measures will help the Inland Revenue Department to enforce tax rules, provide it with extra resources, and ensure that property investors and speculators pay their fair share of tax, whether they are from New Zealand or from overseas. Everyone here will agree that it is perfectly reasonable to expect that anyone who has an obligation to pay tax does so.

The Land Transfer Amendment Bill supports the new brightline test set out in another bill currently before the House. The brightline test supplements the Inland Revenue Department’s current intentions test. Under this test, gains from residential properties sold within 2 years of purchase will be taxed unless the property is the seller’s main home, inherited from a deceased person’s estate, or transferred as part of a relationship property settlement. The bill collects the information needed to support tax measures. It therefore, rightly, focuses on those who have or are likely to have tax obligations. Therefore, the bill provides an exemption from the need to provide tax numbers when you are buying or selling your home. Those people are not speculators and they have no tax obligations, so that information is not needed. There is no need for us to unfairly impact on New Zealand owner-occupiers who have worked hard and saved to buy a family home.

The bill acknowledges that some of us own more than one property, but only one of them can be the main home. To help people identify which is their main home in these circumstances, the bill includes a greatest connection test. This test is drawn from case law and will be supported by advice and guidance. Although it is not a register of foreign property-owners, it will help us better understand the residential property market and inform housing policy according.

To better understand who is buying and selling houses in New Zealand, the bill provides for the asking of two questions. First, whether a buyer or seller, or a member of their immediate family, is a New Zealand citizen or holds either a resident, work, or student visa. The second question is whether or not they intend to live at the property being transferred.

The Tax Administration Amendment Bill contains important measures to support New Zealand’s anti - money-laundering initiatives. To ensure that our anti - money-laundering rules apply to non-residents before they buy a property, the bill requires offshore persons to provide a bank account number in order to get a New Zealand IRD number. Both bills will apply only to contracts entered into on or after 1 October 2015. The information will have to be provided after 1 April 2016, irrespective of when the contract was entered into. This means that it will apply only to new contracts that have gone unconditional after the commencement date of 1 October. It will give people time to comply with the requirements of this bill.

New Zealanders have a right to know that everyone who should pay tax does pay tax. These bills will make sure that this happens. I commend these bills to the House.

Well, what better testament to a Government that is not straight-up with New Zealanders and is out of touch with New Zealanders could there be than this piece of legislation? It is the ultimate in window dressing. It is the ultimate in appearing to do something while doing as little as possible, or, as some colleagues have said, it is deliberately doing that—deliberately making sure that the regime put in place through this legislation will not work. That is probably the less charitable interpretation—that it is deliberately being put forward so that it will fail to achieve the goal that the Minister just told us she had, which is to get more information about who is buying and selling houses in New Zealand—or it could be just pure incompetence.

We saw this from the get-go with this piece of legislation. It was brought forward at the time of the Budget, when the Government was under significant pressure to do something about housing. What the Government realised was that there was nothing in the Budget on housing, and so at the last minute it had to come up with two ideas—two ideas to scratch the political itch, but not do too much lest it offend the Property Investors Association, or whoever else it is that National was worried about offending.

This piece of legislation should have been the legislation that did give New Zealanders accurate information about who is buying and selling houses, so that we can use that to make better public policy. Today, at the Finance and Expenditure Committee, the Reserve Bank Governor himself raised his concerns about the number of property purchases being made by speculators—the fact that it has increased over the last year from 33 percent to 41 percent, according to the Quotable Value data. It is a problem. Everybody in this House knows it is a problem. The piece of information missing is how big a problem, and these bills would have been the piece of legislation that could bring that information in front of New Zealanders and give us that information. But this Government has failed to do that. It was rushed. There was nothing in the pre-Budget documentation that was released in July about this piece of policy work because it has not been thought through properly.

Just how bad it was was revealed last night in this House, when my colleague Dr David Clark and I tabled information released to us by Land Information New Zealand that showed that the implementation date of 1 October—the commencement date of this legislation—means that for 3 months all information collected for the Landonline database will be done by pen and paper. It is not the 1960s; it is actually the 2010s, and the members on that side of the House are not ready. Land Information New Zealand, I suspect—and, actually, this is being generous—may not be ready by 1 December, either. So now we have this great advance in the information about who is buying and selling houses in New Zealand, and Land Information New Zealand has to do it with pen and paper because it is not ready. This is half-baked, poorly thought through, and it is not being straight-up with New Zealanders.

This legislation was a knee-jerk reaction to what is a significant problem. So what do we have left in front of us, then, in such poor lawmaking? We have an inching, grudging step by the Government in the right direction—the idea that people actually can contribute their IRD number.

An exemption was put in place by the Government. The exemption is for the main home. The justification for that exemption was outlined in the Government’s commentary on the original bill, and I want to quote from it: “… the majority of us accept that not making such an exemption for the main home would greatly increase the volume of information to be managed by Land Information New Zealand at the Inland Revenue Department, and could lead to people worrying needlessly that the transaction will be taxable, even though in most cases it would not be.” That is complete rubbish. Virtually everybody in New Zealand buying their main home already has an IRD number. It is a simple moment for the conveyancing lawyer, a new box on the form—there it is, IRD number written in, information provided—but, instead, a giant loophole has been set up in this law by the National Government by exempting the main home.

It then made that exemption even worse by using the definition for “main home” to be the place with which people have the “greatest connection”. Again, in the Government’s own commentary on the bill it said: “We note that the term ‘greatest connection’ is not used in New Zealand tax law at present. … We recognise that there could be some confusion about the rules,”. This is the Government’s own law, and it is saying in the commentary on the legislation that was brought before this House that there is going to be confusion. That is not the point of making law—do I need to say that to the Government benches? The point of making law is to clear up confusion, not create confusion, but that is what it has managed to do with this exemption.

We had it clarified for us by Alistair Scott, the member for Wairarapa. He clarified that the greatest connection for him was the feeling. He said that the main home was where the heart was. He said that in the House last night—the main home is where the heart is. So not only do we have confusion; we have the Hallmark card guide to lawmaking: take it from the vibe, the feeling—that is where you main home is.

This is a complete farce. The exemption for the main home is unnecessary, it creates a loophole, it means we do not have the kind of data that we should, and the definition of that being the place where someone has the greatest connection is, as the Government itself acknowledges, confused and is poor law. Mark my words: we will be back here changing that and correcting that because the definition simply will not be adequate.

But having had such deep concern about the bureaucracy and the added compliance of people having to provide an IRD number for their main home purchase, at the other end of this legislation the Government has managed to put in unnecessary compliance by asking offshore persons making purchases to provide both a bank account number and an IRD number. The advice that was given to the Ministers by the Inland Revenue Department was that this was of limited benefit because the Inland Revenue Department has the power to require relevant identity verification upon application for an IRD number. So that was the advice that the Inland Revenue Department gave to the Government—it does not need the bank account number. Interestingly, the Inland Revenue Department also said that it should not exempt the main home, either. Two pieces of very sensible advice from the Inland Revenue Department, ignored by the Government.

It is interesting because I suspect that Todd McClay, and possibly Louise Upston, actually went to their Cabinet colleagues and said: “Listen, we’ve had this advice from the Inland Revenue Department. We think it’s pretty sensible. We’re going to go through with it.” That is what I think probably happened here, but then they were rolled. They were rolled at Cabinet by those who thought: “We’d better be a bit careful about those property investors who support us. We’d better watch out for them.” So they rolled over and ignored the Inland Revenue Department’s advice, and now we have a situation where we have unnecessary bureaucracy on one hand and a failure to get the correct information on the other.

New Zealanders do deserve to know more about who is buying and selling property in this country. Speculators, be they both onshore and offshore, are forcing young New Zealanders out of being able to buy their first home. That core element of the New Zealand dream, of being able to get in there and buy your piece of property, is now priced far out of the capability of many people. In Auckland we have a house price to income ratio of 9:1—of 9:1. That puts Auckland in amongst the top 10 most expensive housing markets in the world. That is the situation we are facing here at the moment. That is what happens when property speculation runs riot.

We need good quality information so that we can make the judgments about what public policy response we should have and how we can crack down on speculators, but this Government does not want to know about that. This Government has put up the weakest possible law that it could in this area. It is hopeless. It is one small, tiny step towards what we should be doing and, therefore, we will vote for it because it is one small, tiny step towards what we should be doing, but we could be doing so much better than this. We could be giving New Zealanders the information that they need. We could be creating a system that is low on compliance and high on quality of data, but that is not what this legislation is.

It is good to see that the Labour Party members are voting for this legislation. It is quite different from what they have done for the last—when they were in Government for 9 years they did nothing in this area, absolutely nothing. This Government has done something, and it is more than the Labour Party ever will do. The Labour Party sat there for 9 years in Government and never even thought about doing anything like this.

The property market has not just created itself; it has been going on for many years. The Auckland property market has had major increases in prices under the Labour Government, and it did nothing—did nothing at all. Then Labour members have the gall to come into this House and say that this legislation is not enough, when they did nothing. That is the nature of the Labour Party in this area. They did nothing, zero, squat.

But then what would the Labour Party have done? The Labour Party one day wanted to have a capital gains tax, and took it to the election, and then its leader said no, no capital gains tax. So what are the Labour Party members going to do? The Labour Party has still got nothing. Labour members have got nothing that they would do now. Their plan was for a capital gains tax, and then they threw it away. Andrew Little threw it away after the election. He threw away the capital gains tax. So the Labour Party has got nothing. Labour did nothing, and will always do nothing because it has got no plans in this area.

Phil Twyford is sitting there. I want to see Phil Twyford get up and talk about the new housing policy that David Clark mentioned last night. David Clark told us this week that you have to live in New Zealand to own a home. David Clark’s policy is that if somebody—

💬 Mr DEPUTY SPEAKER: Come to the bill.

—is not living in New Zealand, they do not have the ability to own their own home. They have to sell it. That is the Labour Party policy. That is what David Clark said in this House this week. He is about nothing—

💬 Sue Moroney: I raise a point of order, Mr Speaker. I think that we are about, oh, 2½ minutes into this speech, and we have not heard anything about the legislation yet. Could you bring the speaker back to the purpose of the legislation, please?

💬 Mr DEPUTY SPEAKER: You have made your point of order. Please take your seat. I call David Bennett, and ask him to remember that he is speaking on the legislation arising from the Taxation (Land Information and Offshore Persons Information) Bill.

Yes, Mr Deputy Speaker. That bill is a very important bill because what we are doing in that bill is we are asking for IRD numbers and getting people to register. Opposition members said that that was too little, too late. Well, they did nothing when they had the chance, and they do nothing now, because they have thrown away all their policies in this area, apart from the new policy that David Clark came out with, and that is that you have to live in New Zealand to own a home. That is the Labour Party members’ approach to this bill when they talk about it doing much more in this area. This is a good bill. It is actually part of a suite of measures in this area, and we commend it to the House.

I do take the focus of the last member’s speech on my every utterance on this bill to date as some kind of flattery. It is, I guess, the only area that he is going to find some substance to speak about, because we have heard nothing from that member about the bill.

But on to the bill, because I think that it is important. It is important that we understand what this bill does and does not do, because as a Parliament we are going to be required—I have little doubt—to come back and fix this mess. The history is there of bills such as this one, that have not got the systems in place behind them to deliver, and then require further parliamentary legislation.

We know that it is a flawed bill. We know that it is not going to capture all the information that would actually be useful to capture, and a widening of its scope would also require a visit back to Parliament. We know that each bill that goes through Parliament, from memory, costs over $1 million in terms of staff time, in terms of the researchers—in terms of all of those things. It seems kind of crazy that we as a Parliament would put something through like this—that the Government would be so out of touch with New Zealand that it would put something through like this, without recognising that it could have done a much better job. It seems arrogant to take that approach, but that is what we are seeing more and more from this Government.

We do support the policy objective of gathering information on offshore residential homebuyers, but, because of the loopholes in this legislation, we think that it will not prove particularly effective in gathering data that will be of use for making policy decisions in the future. We know that Auckland house prices are out of control. They rank on world unaffordability tables, and we know that something needs to be done. But here is a Government designing window dressing measures, rather than actually addressing the nub of the problem: to bring those house prices down, to ensure that New Zealand families can afford homes in their own country so that that Kiwi dream of homeownership is kept alive, to earn decent wages, and the other things that have been undermined by this Government.

The register of buyers, as it is proposed by the Government, proposes exemptions for the main home. It will increase compliance costs and create loopholes in the way that this is defined, and in the data collection measures. Let us for a minute consider what this new “greatest connection” test might mean. I suspect that we will hear soon from Alastair Scott again about the feeling—you know, “the vibe”; maybe “home is where the heart is”—and we will ask ourselves, if Alastair Scott finally bought a house in his own electorate, would his feeling be in that house, or in the house that he lives in in Wellington? I know from talking to Kieran McAnulty, who runs in the Wairarapa as Labour’s candidate—a very strong candidate—that his heart is there, where he lives, in the Wairarapa. He has run a strong campaign against Mr Scott, who is seen as being a candidate from elsewhere, and it is very hard to believe that the sense of connection is so great when he chooses to live somewhere else—I mean it really is hard to understand.

💬 Mr DEPUTY SPEAKER: Maybe it is your turn to come to the bill.

Thank you, Mr Deputy Speaker. But, joking aside, I think this is a very serious issue. It is not defined in law what the “greatest connection” to a property means.

We are here creating unclear law. We are creating law that is going to require the courts to address it, or Parliament to fix it. That is crazy stuff from our Parliament; that is crazy stuff from this Government, which is really focused on the window dressing and not on actually delivering a solution that will make a difference for New Zealanders, for Aucklanders facing those crazy house prices, and for the New Zealand economy where, in real value, wages have dropped. Wages are in recession right now, in the last quarter, if you look at it that way. This is an economy that has stalled. It is an economy with a Government that has not managed it; has not diversified it. We have got multiple problems, and yet we have this kind of half measure—this kind of watered-down measure—as a proposal.

We know it was rushed through, we know it was announced at the last minute, and that is why there are so many inadequacies in the legislation. I refer here, especially, to the material that was tabled last night in the House that outlines the period of time in diagrammatic form from Land Information New Zealand that it is expected that these records of buyers will be recorded by hand—handwriting; there will be officials handwriting for 3 months.

I would also like to point out a point that was not raised. In the fine print here it says “Even under ideal conditions, LINZ cannot guarantee with this legislation passing in August”—and we are already beyond August—“that the desired changes can be efficiently and effectively implemented by 1 October.” This scenario we have been presented with—with officials writing this foreign buyer register by hand—is an extremely optimistic scenario. It says that. It says in the points to note underneath the scenario that has been drawn up by officials: “The dates and the time frames in this time line are based on the best-case scenario and are highly dependent on a range of parties agreeing to work at a very fast pace.” I do not hesitate to say that that also requires nothing to go wrong in the process.

This is a rushed process. The Government knew it was under pressure. It introduced some half-baked measures to make it look like it was doing something on housing, but, of course, whomever it was trying not to offend—the property speculators in Auckland that it is associated with—it did not want to offend them, and it did not want to put through legislation that actually made a difference, and here we are in the Parliament now, passing cynical legislation.

In my view, it does not achieve what it ought to achieve, and it costs the taxpayer money to put it into place. It will increase compliance costs, and not produce the outcome that was its originally stated purpose. It does create some small bit of information, and that is why we will be forced to support it—because it is a small, tiny step in the right direction—but it is needlessly weak. These half measures could be made so much better if a proper bill was adopted. If the Treasury advice was taken on how this package was put together, it would have been way more effective. The Government departments were very clear that the Government was not achieving the things that it had verbally said it wanted to achieve, and we know that we are going to have to revisit it. It is from a Government that has been more and more often afraid or deliberately not straight-up with New Zealanders, and we on this side of the House recognise that that is not a long-term strategy.

I want to also highlight some of the quotes from recent times that point to just what a rushed piece of legislation it is. John Key said: “We are not hostile to the idea of a register, we just don’t think it takes you very far.” John Key said: “I genuinely don’t know. We haven’t asked for any work on a register.” John Key said: “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.” He said: “I wouldn’t want to say never do anything forever, because that would be a bit silly.” He said: “We are not sort of absolutely resolute that it’s such a terrible idea. We just think that we have fairly good information already.” Well, if the Prime Minister believes that, why on earth are we here again today? If he believes that the information is good, why would we be here again today? Of course, the answer is that this is a politically driven bill; it is not designed to actually solve the problem that we have been given.

Nick Smith—again, some wonderful quotes from Nick Smith. A register would be “a distraction” that would cost “mega millions without doing a thing to tackle house price inflation.”—this is Nick Smith, of course, before the legislation. It is a real shame he is not here making a speech to explain how he has come to his current position. He is probably out researching housing sites in cemeteries in Auckland. Or maybe he is out looking—

💬 Phil Twyford: Power stations.

—for power stations to build them next to. It is hard to know. Nick Smith also said “This is just about politics. It would be a waste of public money.”, and here we are doing it.

This Government is at sixes and sevens. It is so obvious, when you look back at the quotes, that this is a politically inspired move, not a solution to a public policy problem. Then—Nick Smith again: “I do stand by my statement that a register would be a waste of money.” We have Nick Smith saying it over and over again. I could go on. There are so many quotes. Let us have one more—let us have one more: “It is a non-issue. It has not changed in the 5 years that we’ve been in Government. Let us focus on the things that matter.” That is Nick Smith arguing why we should not be here today. But here we are, working a bill through the House that officials have said will not work anyway.

It is a bill that is a political solution to a public policy problem. We will be back here to fix it. It is a damned shame that this Government has not seen fit to actually—actually—address the Auckland housing crisis. It has not seen fit to look after the interests of the economy by tackling that problem as well. It is a Government that is out of ideas, I am afraid; out of touch, and arrogant enough that it thinks it can put this through Parliament without any protest. Well, New Zealanders are getting wise to this Government, and I think that when we come back here, they will not be happy.

In responding to Dr Clark’s comments and his reasons to perhaps postpone the passing of this legislation as far as—and rending handwriting as some sort of impediment to slow the progress of this bill down just demonstrates his attitude to what is simply work. If it is too hard, just do not do it. I suspect that that is his attitude to work—if it is too hard, do not do it. This bill will pass, whether some articles need to be handwritten or not.

This bill is around gathering information, relevant information, and the information that relates to people owning their own homes is not relevant. It is not relevant. We are after real information on who is buying and selling property with a view to making a profit. This bill is supporting what is already legislation, which is about taxing people who buy a property with the intention to sell for a profit. That is all it is doing, but this bill is the gathering of the information. So what we are going to end up with is real information, real facts, and real numbers around who is buying and selling property in New Zealand. It is not going to be made up. It is not going to be created or sought from a friendly real estate agent. It is not going to be statistically incorrect—that is Mr Twyford’s plan, to gather information. He just makes it up. He asks a friendly real estate agent and blames the Chinese—anyone with a Chinese name—for housing speculation. This bill allows us to gather real data so that we can make informed decisions and reinforce the existing legislation around taxing property speculation fairly.

This bill is part of a suite of legislation that exempts the family home. There is simply no point in gathering information regarding the family home, given that the family home is an exemption to the taxation rules. This is a very good part of a comprehensive suite of legislation dealing with offshore ownership of property, and I commend it to the House.

The Green Party is interested in creating an economy that is cleaner, greener, and works for all New Zealanders, not just those who are already doing really well. To that end, we need a simpler, fairer tax system, and we need to ensure that there are not loopholes like the ones that have been partially driving the out-of-control housing market in Auckland.

There are multiple factors at play in Auckland. One of them is the fact that we treat tax on capital very differently than we do the tax on income that you get from—well, we treat it differently than on labour. So people go to work—they are a nurse or a doctor—and earn a pay cheque. An engineer, a teacher—whatever they are, they have to pay tax on their income. But if one person buys a house and later sells it and makes $100,000, as is regularly happening right now in Auckland, no tax is paid on that income.

There is an intention test where we say: “Well, if the house was purchased specifically with the intention of making a profit, then you should pay tax on it. But if you don’t have that intention, one doesn’t pay tax on that.” So now the Government is trying to ensure that people who are buying and selling within a short period of time will be subject to that tax if it is not their main home, and so there are several bills that are going to enable this to happen. One is the Taxation (Bright-line Test for Residential Land) Bill, which is currently before a select committee. That means that anyone who buys or sells property within 2 years for investment purposes will be subject to tax.

But in order to carry this out, we needed information. The Inland Revenue Department, in its regulatory impact statement on the original bill, the Taxation (Land Information and Offshore Persons Information) Bill, states: “Although we do have provisions that impose income tax on certain property transactions, and also on rental income earned from property, it is very difficult to assess compliance because there is no linkage between the property sales transaction data and tax identification.”

So this bill exists to now require a tax identification number if the person is from overseas or an IRD number here in New Zealand on all property transactions, except it does not. It would be really useful if it did, because it would give us a lot of data and there are no real compliance costs associated with it. In the regulatory impact statement, it says “Collecting an IRD number and linking that to the LINZ property sales transaction data would maybe take an extra 1 to 4 minutes for conveyancers.”, and it may, I think, add $1 to $4 to the cost of the transaction. It is a transaction that obviously costs a lot more than that. So it is a tiny percentage overall. But it would be incredibly useful and actually simplify our ability and the officials’ ability at the Inland Revenue Department and at Land Information New Zealand to understand who is buying and selling properties.

What happened here—and I am really disappointed about this process. It was, as other members have said, a truncated process, and maybe it is for that reason that this bill has been changed, I think, through the process—or, at least, it does not reflect the advice provided by officials in the regulatory impact statement to exclude the main home from the IRD number.

It is really hard to explain how unbelievable it is that the Government has made the exemption for the IRD number. Yes, we understand, OK, that you are making an exemption for the main home in respect of the brightline test, but why would you do that with the IRD number, especially when, in the regulatory impact statement, the Inland Revenue Department says that its preferred option would be for it to apply to all property sales transactions? There are no additional compliance costs. That is something the Minister and members from the Government have claimed—that somehow requiring the IRD number for people buying and selling their main home would add compliance costs—but the regulatory impact statement says that the compliance costs would be maybe an additional minute of work for conveyancers, for maybe an additional $1 to $4.

When the regulatory impact statement laid out the options, requiring IRD numbers and tax identification numbers to be provided to Land Information New Zealand for all property transactions was the preferred option. It said it “would enhance Inland Revenue’s abilities to enforce the income tax obligations of those who buy and sell New Zealand real property”. It would also “help prevent non-residents from evading foreign tax on their New Zealand land sale or purchase by ensuring that the foreign tax authority can match the transaction with the taxpayer.”

So it is a good idea. It makes sense. Yet for some reason when the bill came to the Finance and Expenditure Committee and when it came to the Committee stage it had this bizarre exemption for the main home. Submitters certainly did not suggest that the main home should be exempted. We heard from Chartered Accountants Australia and New Zealand, which said that, actually, this main home exemption does not make sense; it adds complexity to the rules and it means that we will have less complete information. We heard from Ernst and Young that the exemption should not be made and that it made it more complex. And here in the regulatory impact statement we see that it was the Inland Revenue Department’s preferred option to just keep it simple: get the IRD number and tax identification number for all property transactions.

It makes sense, right? But no, this Government, for whatever reason, has chosen to make the rules more complicated. There is no reason to think there would be any additional compliance costs. As noted above, in the regulatory impact statement it says: “A conveyancer is likely to spend an additional 1-5 minutes entering information into Landonline, resulting in an additional cost of between $4 and $20 for purchaser and seller.” I know that under option 3—that is the option that the Government has adopted, which was not recommended by officials and which was not particularly recommended by submitters, who are experts in this area—compliance costs will be at the lower end of the scale for those exempted, but it makes the rules more complicated and it means that we have less information. So the benefits of collecting the information, which is the whole purpose of the legislation and is the purpose of the policy that the Government is implementing, are reduced under this option.

Under the brightline test there is a limit to how many times one can claim the main home exemption within 2 years. One can only do it twice, because, as it says in the regulatory impact statement: “some individuals who are purchasing their main home could still be subject to tax if they have a regular pattern of buying, improving, and selling their main home.” So the way to solve that is the brightline test, which says that one is no longer exempt from the brightline test if it is one’s third time buying and selling one’s main home within 2 years. But, of course, how would we know that? How are officials supposed to know whether the buyer or seller has done it three times if they have not had the IRD number linked to the property transaction for the first two?

It is a silly rule. It is a silly law. It adds complexity. It does not reduce compliance costs, and yet for some reason the Government voted against my Supplementary Order Paper 121, which I introduced yesterday, that would have removed the exemption for the main home from this legislation. Unfortunately, ACT’s David Seymour voted against my Supplementary Order Paper, even though it was right in line with what submitters recommended, the charted accountants recommended, Ernst and Young recommended, and the officials recommended.

So, obviously, the Green Party is going to be supporting the legislation, but it is really a shame. It is a shame that lawmaking has come to this in this country—that the National Government gives us so little time to scrutinise legislation to actually make good law. It cannot agree with other parties in the House that are simply trying to make better law. It has got nothing to do with any ideological perspective. We just want to accept the advice of officials and that of submitters and get good information to make it easier for us to enforce tax law. Instead, very typically of this National Government, you have crazy exemptions that do not make sense, that nobody recommended, and that have no good, solid, factual basis for their arguments. Yet those members come in here and say “Oh, it’s going to be less administration if we don’t require people to supply their IRD number.”, which takes about 30 seconds. So I am just sorry. I am sorry that yesterday, in the Committee stage, we could not get some cross-party agreement on what would have vastly improved this bill—very, very sorry. Thanks.

Let us be clear, Mr Bishop, who is shaking his head and grinning at me, that this is a poor, poor response from this Government. The Government is singing from a song sheet, but when you look at the legislation arising from the Taxation (Land Information and Offshore Persons Information) Bill there is nothing in it. There is no substance, and you are told by your own experts that it will achieve absolutely nothing, even in combination with the other piece of legislation that was supposed to address the issue. Let us be clear. This is in response to what we all know to be a very serious housing price bubble in the Auckland property market. It is still ongoing. It has been growing almost exponentially month after month, and even—some of the calculations are telling us—day after day. It is moving at a staggering speed, and the problem for New Zealand First is that we already have this problem of Generation Rent and this is just increasing it day by day. It is a huge problem, and this legislation is doing nothing about it. Real New Zealanders are worried, and the National Party knows that its support base is worried. Here we now have a piece of legislation that, unfortunately, does not address the issue but will be spun out in the media, and the people of New Zealand will be placated and told that something is being done. But it is not. It is absolutely not.

Although I am reticent to do this and am always reluctant to hold my colleagues on this side of the House to account, I can, unfortunately, say that over the last few days the Labour and the Green members have spoken more eloquently against this piece of legislation than I have. They have spoken about it being a waste of the piece of paper it is written on, and about how hollow it is and how full of loopholes it is, and, yet, here we are and New Zealand First is the only party in the House opposing this absolute waste of time, presented to us in the House by this National Government. I say to my colleagues on this side of the House, I have believed every word that you have said. You have said it eloquently. Stand behind your convictions and actually show New Zealanders what this piece of legislation is—that it is a waste of time.

New Zealand First does support an initiative to increase tax, especially on overseas speculators, as outlined by the Minister for Land Information in her opening address. But the legislation does not actually do this. It has been rushed through with limited consultation and limited opportunity for New Zealanders to have their say. The legislation does not achieve this. The Government has been advised by its own experts that this legislation—even combined with the brightline, or “dim-line” bill, as I am so wont to call it—will achieve absolutely nothing. It will not achieve anything. We have been told that by the Government’s own experts. Land Information New Zealand also told this Government that it is not ready. It is not ready to process the data. It does not have the software. It does not have the information and communications technology to process this information, and, as has been so eloquently pointed out by members on this side of the House, it literally means that it will be writing out this information by hand. It just seems like a waste of time, when we know from the Government’s own experts that this piece of legislation will not increase tax take and will not put any kind of stymie on overseas speculation in the market.

The main home exclusion—we were told that New Zealanders would worry needlessly about having to present their IRD number, and, yet, of other parts of the legislation it was said “Well, we’ll have to tell New Zealanders what this means.”, but the Government is not willing to tell them about it now. New Zealanders will not worry needlessly. It does not add complexity. It would be a straightforward tick of a box to add this information for all home purchases so that we can actually create a comprehensive land transfer database that produces meaningful information. In terms of the main home exclusion, we were told about the greatest connection test. The Minister in her opening address told us that they were going to use case law to help them implement it. Yet, the Government’s own legal experts advised this Minister and the Finance and Expenditure Committee that there is no precedent in New Zealand law for this term—absolutely no precedent in case law in New Zealand. It makes no sense whatsoever, and the confusion has already begun on that side of the House. The main home should not be exempt from this data collection. We want meaningful data. We can turn that into useful information.

Let me just highlight a couple of points that I have spoken about earlier, in relation to this combined piece of legislation. There are exclusions. A speculator who buys a piece of rural land—you know, the rural lot; a couple of acres that has a few sheep on it—but who then decides to rent it out and then, for whatever reason, they decide to sell it within the 2-year brightline period is not included in this. Living in the property, doing it up, and then selling it within the 2-year brightline period—it does not matter if you have got the information; you are not included in the tax provisions of that legislation. Speculators will not be identified. Then I put this to the Minister, actually: what are the provisions within this law, or even other pieces of legislation, for the actual collection of the tax burden required of those overseas speculators who did not actually manage to fall through the multitude of loopholes? Where is it that we will be able to actually go and collect that tax? It has been suggested to this Government that those people pay a bond on the purchase of their homes. Although I would not agree to overseas speculators buying homes in New Zealand at all, I think that you would not be able to implement that. It just makes no sense. We want to develop meaningful information.

I just want to address something that Mr Bennett said earlier in the piece about Labour’s shifting on capital gains. The problem with this piece of legislation is that what it is doing is actually adding another level of complexity to current and existing legislation. Without doubt, categorically, this Government has in place already a capital gains tax. It just chooses not to implement it, it chooses not to ask its appropriate ministry to implement it, and it chooses to call it by another name—I do not know what. But the law says that if you make a gain on the sale of your property, you will pay a tax on that. If that is not a capital gains tax, I do not know what is. This Government simply chooses not to enforce it and here we are not only creating loopholes but adding more levels of complexity. It seems to be a contradiction in terms, but this Government in its absolute—I do not want to say it—has managed to do that. New Zealand First, unlike the rest of the side of this House, cannot support this legislation, even though its intent is something New Zealand First would like to see. It is truly a waste of this House’s time. Thank you.

“Professor” Tabuteau is a new member, as I am. We are both new to this House—just coming up to our 1-year anniversary as members of this Parliament. But even I know that this Government has a very proud record of enforcing our existing tax law that, as Mr Tabuteau, rightly, points out, says that if you buy and sell property with the purpose of making a profit, you pay tax on it. Actually, as a Government we have significantly enhanced the ability of the Inland Revenue Department, both through funding and the logistical operations that sit behind that funding, to go after people who do that. So the allegation he made right at the end of his speech is completely incorrect.

In my brief contribution to the debate this afternoon I want to focus on just a couple of points of contention that have come up so far in the discussion just before from Mr Robertson and from Miss Genter from the Greens. The first issue I want to just briefly canvass is this issue of why the main home is exempted from the requirement for people to supply their Inland Revenue Department information when a property transaction takes place. Miss Genter was very perplexed by this. She spent basically her entire speech with this quizzical, kind of querulous look on her face, and she kept saying: “I don’t understand why the Government’s doing this. It makes no sense. It makes no sense. Why are they doing this? Why are they doing this?”.

Well, there are a couple of good reasons why the Government has done this, and, actually, those reasons have been pointed out in the first reading debate, in the second reading debate, during the Committee of the whole House, and, indeed, in the third reading debate. Here they are again. The first and the most fundamental reason is that this legislation is companion legislation to the Taxation (Bright-line Test for Residential Land) Bill, which was sent to the Finance and Expenditure Committee only a couple of days ago. The brightline test will not apply to people who are buying and selling the main home. It is just not necessary for people who are buying and selling a main home, which means, in the vast bulk of circumstances in New Zealand, ordinary people buying and selling the family home, moving from one suburb to another, and moving from one city to another—not buying and selling investment properties, but buying and selling their main home. The brightline test does not apply to them and it is not necessary for them to rock up every time they make a property transaction and supply their information to the Inland Revenue Department.

That would lead to—and this is the second reason—having information supplied to Land Information New Zealand and to the Inland Revenue Department on hundreds and thousands of transactions. There are real concerns about how those organisations would be able to cope with that information and it is just simply not necessary. It would also mean that a lot of people would needlessly worry when they supply that information that they may be taxed on that transaction, when in the vast bulk of circumstances they are not going to be taxed on that transaction. That is the reason for the main home being exempted from the requirement to supply the IRD number.

The second issue I want to briefly canvass is this issue of what the term “greatest connection” means. We heard some slightly strange assertions made by Grant Robertson before in the House and, indeed, I have been reading back through the Hansard of the first and second reading debates and members consistently misrepresent this position. Grant Robertson said that this is an invention—that this is a new term and it is an invention. Well, that is a little bit trite, I have to say, because I suppose that new law—all new law, all bills that are not on the statute book already—and new phrases and new words that do not exist already on the statute book, by definition, are all inventions. I mean, that is actually the way Parliament makes law. We put a bill before Parliament and if it does not exist on the statute book already, then I guess it is an invention. So OK, maybe it is an invention but, you know, that is actually Parliament. Grant has been here a while, so it is slightly strange that he does not know that.

Then we heard in relation to this the allegation that there is no case law behind it, it is just an invention, the Government has just come up with this out of the middle of nowhere, there is no case law behind it, and it is absolutely unprecedented. Well, yes, it does not exist on the statute book already, but what Mr Robertson is ignoring—and members have consistently ignored this point—is that we heard advice in the Finance and Expenditure Committee that the phrase “greatest connection”, although it does not exist literally on the statute book now, has been carefully crafted to reflect existing case law that underlies that test. I have actually checked this with officials. There is a plethora of case law that will be used by the courts and used by the Inland Revenue Department to interpret this section. So it is not true for members opposite to say that there is no case law—it is not true for members to say that there is no case law. There is case law and it will be used.

Then we heard from Mr Robertson that people will interpret this differently and it is really going to be a disaster. Dr Clark went so far as to say: “I think that people like property speculators will interpret the ‘main home’ and the ‘greatest connection’ as the one where they make the most amount of money.” Well, if speculators do that, if speculators try to game the law by saying that the house that they are buying and selling is where they have the greatest connection to and therefore is the main home and therefore exempt from the legislation, they will very quickly find, I suspect, that the Inland Revenue Department will come down on them like a ton of bricks, because that is not going to be a way of getting around the legislation. They will very quickly find that that is not a particularly smart thing to do. That suggestion is just really redolent of the inaccuracies from Dr Clark and others in their contributions today.

Finally, there is the suggestion that the Inland Revenue Department has suggested one thing and the Government has taken a different course. Well, actually, we do not have Government by the bureaucracy in this country. I made this point in my second reading speech. It was very rich, sitting here, to hear Julie Anne Genter saying: “Well, the IRD says this and the IRD says that, and Treasury says this.” Look, Labour and the Greens have been ignoring Treasury advice about the economy for pretty much the entire time that Treasury has been in existence. Dr Cullen used to come down to the House all the time and talk about ideological burps and how the Labour-led Government could not follow Treasury advice, and all sorts of things. Labour members made a virtue out of not following it, so it was bit strange to hear them lauding the work of the officials and lauding the work of the bureaucracy, saying: “Oh my God! You must do this. The Government has been advised to do this and shame on the Government for not following their advice.” If they were true to their word, then Labour and Green Party policies would certainly be in a lot different shape if they did actually follow the official advice on a range of matters.

Look, the point is that we do not have Government by the bureaucracy in this country. Ministers and Governments are entitled to take a different course. That is exactly what we have done. You weigh up the competing options. That is why we have Parliament; that is why we have Cabinet. This is good legislation and I commend it to House.

I call Eugenie Sage—5 minutes.

Well, Mr Bishop was indeed trying too hard and waxing lyrical. There is certainly a difference when Government takes a policy issue and does not take the advice of the public sector, but here this is a technical issue of tax law and the strong advice of the Inland Revenue Department and submitters was that this notion of “greatest connection” is too subjective and is going to cause confusion.

If he had read some of the submissions—and I would just like to quote from Ernst and Young: “We are not aware of that term being used in any relevant New Zealand revenue legislation, so there is not any existing or accepted understanding of how it should be interpreted and applied. It is therefore open to various interpretations, assessment approaches and subjectivity where the relevant party has other residential land. Alternatives which come to mind include considering connection based on relative values, relative net worth, days spent there, history, sentiment or other connections with the specific location, region or New Zealand as a whole compared with residential land in any other jurisdiction.”

When you have got that amount of potential for confusion and subjectivity and when you are dealing with tax law, it is not good law. We are supporting this because, as Mr Bennett said, something is better than nothing, but there is a great deal—

💬 Denis O’Rourke: It is nothing!

—and I recognise the comments that New Zealand First made, but there is a need for a clear register of overseas land purchasers. The Government and the public have invested significantly in Landonline. It was described as a world first when we digitised paper land records and enabled the electronic filing of land titles and survey documents back in 2003. That came at substantial cost—$141 million, I think—and there was a substantial cost blowout. So when there has been that amount of public money invested in maintaining the land title database and when, as other speakers have noted, it would take a minute or so of a conveyancer’s time to file the necessary transactions, why can we not have good law that provides good, solid information so that we have then got the information to inform good policy-making to control the overseas speculation in New Zealand property that is driving up house prices?

Instead, with this legislation the Government, with this main home exemption and the failure to take the good technical advice of not only the Inland Revenue Department but also of submitters like Ernst and Young and others who have got specialist advice in tax law administration—by failing to take that advice, we are not getting a good information base to drive good policy-making decisions. So that is one of our objections. The other one is the very wide regulation-making powers in the legislation to make some other property transfers exempt from the information requirements if it is impractical or if it involves high compliance costs, and to make regulations around what are non-notifiable transactions. That potentially leads to further loss of transparency in the transactions that are noted.

So we will support this legislation because it is a tiny step to having a register of land and house purchasers, and the extent to which overseas purchasers are involved in that, but Parliament should be making good law. The National Party in Government should have taken the advice of those who know about the technical administration and not had things like this main home exemption. We will support the legislation, but it has a number of defects and I suspect we will be back here remedying those. Thank you.

I call David Seymour—5 minutes.

I rise on behalf of the ACT Party in support of this legislation. I just want to reflect a bit on the road that brought us to making this legislation. We do have in New Zealand very high house price to income ratios. In Auckland, where I am from, it is a ratio of almost nine between the median house price and the median income. When you have a problem in a political marketplace, sure enough a whole range of different remedies are provided. We saw a remedy from Mr Twyford, which was to blame people with Chinese-sounding names. It might interest the member to know that I have had reports of Chinese real estate agents on the North Shore who are using Labour’s data to demonstrate that they really do have lots of demand from Chinese buyers. So sometimes in politics you create unintended consequences, but you do have to admire the entrepreneurship in particular of real estate agents and new New Zealanders, if that is who they happen to be.

Of course, it is not just that the Labour Party has indulged in this demand side issue so far as the housing market is concerned; it also decided to engage in xenophobic racism. The New Zealand First Party, of course, has made it its stock-in-trade. Jacinda Ardern is horrified at what the party has done to her opportunities to compete in Auckland Central, and, of course, the Green Party only last week—

The ASSISTANT SPEAKER (Lindsay Tisch): Order! The member must come back to the content of the legislation.

I have one more sentence, Mr Assistant Speaker. Only last week Julie Anne Genter of all people, that doyenne of liberalism, also said that the problem is foreign capital. So we find ourselves here today trying to find a way to measure just how many of these nasty foreigners are on the demand side of this housing market. So the Government has found it necessary to do something to at least placate the howling masses on the other side of the House.

💬 Phil Twyford: Is that the point of this bill?

That is the reality, Mr Twyford.

💬 Phil Twyford: Is that what you think of it?

Yes, it is. Let us tell it like it is, Mr Twyford. Yes, of course, there are all sorts of loopholes that will never be properly policed. It will be very difficult to decide whether a lifestyle block is truly being farmed economically. It will be very difficult to decide what a person’s greatest connection to—

💬 Fletcher Tabuteau: What is a loophole?

You are just shocked because you have never seen a politician tell the truth before, especially in your party.

The ASSISTANT SPEAKER (Lindsay Tisch): No.

Sorry, Mr Assistant Speaker.

The ASSISTANT SPEAKER (Lindsay Tisch): The member will sit. To make an allegation like that is unparliamentary and I will ask the member to withdraw and apologise for it.

I withdraw and apologise. We also have to consider in this case the costs and benefits of regulation. We heard from a member earlier: “Let’s have more compliance costs. Let’s have more administration. It’s only a few dollars more.” Well, I actually believe that given the unsavoury political prerogatives created by some of the simpler Opposition members and, more latterly, by the usually sophisticated ones, this legislation strikes the right balance of allowing people who wish to buy and sell homes to go about their business most of the time but only when they get into a very large quantity of on-selling or speculation, as some may call it. They find themselves so far over a so-called brightline that their activity will end up being recorded, will clearly be in contravention of the law. So the worst extreme of what some people are concerned about as speculation, will finally find itself reined in with minimal costs to compliance on the part of every other Kiwi who is fair-minded, who actually welcomes foreigners and the fact that we are a multicultural nation, and who wants to go about their business without being caught up in excessive compliance costs.

With that, I commend this legislation to the House.

I am not going to spend too long talking about this legislation arising from the Taxation (Land Information and Offshore Persons Information) Bill this afternoon. But it is a little bit of a shame that we have got a number of speakers talking this afternoon who obviously have not spoken in the previous debate nor, in fact, have listened very carefully to what has gone on during the course of this legislation, as it has worked its way through the House. At the end of the day this legislation is about protecting New Zealand’s tax base and making sure that every person pays their fair share of tax. The underlying theme is that if you are trading in residential property, then you have to pay tax. I heard one speaker just a moment ago describe it as a capital gains tax. It is not a capital gains tax; it is a reinforcement of existing tax laws. The best analogy is that if you buy and sell shares with a view to making money on them, you will have to pay income tax. It is exactly the same for this.

There are a number of exemptions to this legislation. As I said, it is focused on residential property. The exemptions are if it relates to your main house—and I am going to come back to the definition around “connection” in a minute; if it is inherited property; or if it is subject to a matrimonial dispute. You will note that we have excluded farmland and we have also excluded land a business occupies that may also have a residential component to it. That property would be excluded unless the residential component occupied more than 50 percent of it. A previous speaker just read out a definition of “connection” that she had picked up from Ernst and Young. Unfortunately, she should have picked up the preamble to the bill. I just want to reinforce what this definition of “greatest connection” means, in relation to the main house. Of course this becomes pertinent only if someone has more than two houses—it becomes pertinent only if someone has more than two houses. [Interruption]

The ASSISTANT SPEAKER (Lindsay Tisch): I am sorry to interrupt, but could the member move to another microphone. There is some static. [Interruption] Please continue, but I say to those who are controlling the sound that there is some static coming through.

In relation to greatest connection, that is where their personal property was kept, relates to the time they occupied each dwelling, where their immediate family lived, where their social ties were the strongest, where their business interests were located, and there are a number of these other issues. So it is quite a clear test.

As I said before, and I do not want to speak for too long, the provision around this legislation should also be seen in light of the Taxation (Bright-line Test for Residential Land) Bill, which is also going to come into play on 1 October, around the brightline test. There is a third bill that is going to come through to the House that is also about how we ensure that people overseas pay withholding tax, so we can also apply some control around it and, if they do need to pay tax, we have suitable money set aside to be able to meet those legitimate claims that they should be paying for. I think this is great legislation. It has been pragmatic in the way it has been implemented and applied. Also, as a final point, it meets our anti - money-laundering obligations as a country. I commend the legislation to the House. Thank you.

This legislation, as David Seymour explained most candidly to the House just a little while ago, is the National Government’s political response to the overwhelming public concern about the effect of offshore money pumping up the Auckland housing market. I thought it was the first useful contribution that I had heard from the National Party’s auxiliary Epsom brand for some time in this House. I want to say thank you to David Seymour for that very candid explanation—something that we have not heard from his National Government colleagues throughout this entire debate.

This legislation is a classic of its kind—a classic of its kind. It is what the National Government does constantly. For the past 3 years National Government Ministers Bill English, Nick Smith, and the Prime Minister himself have denied that speculators are a problem in the Auckland housing market, in spite of the Reserve Bank Governor and deputy governor repeatedly raising the problem of speculators pumping up Auckland house prices. The National Government has denied, denied, and denied that foreign money is a problem, and its members have repeatedly accused anyone in this House, including myself, of being racist and xenophobic because we have raised the problem of non-resident foreign buyers bidding up the price of houses and outbidding Kiwi first-home buyers.

But finally, finally, in the lead-up to the Budget, they cracked—they cracked. And why? Because their polls were telling them that 82 percent—82 percent—of New Zealanders want to see a full, proper, comprehensive register of foreign property buyers; 82 percent. And 72 percent of New Zealanders support a ban on foreign buyers buying existing houses in New Zealand. That is the Labour Party policy. It is the policy of the Australian Federal Government, and 77 percent of New Zealanders support it. In fact, 54 percent of National Party voters want to see a ban on foreign buyers buying existing houses. It is the policy of the Australian Government. It is also the policy of the UK Prime Minister, David Cameron. David Cameron wants to see a register of foreign property ownership in the UK. He does not want to see corrupt foreign money pumping up the price of houses in the UK.

This legislation finally takes a little baby step in the direction of collecting a little bit of data. But it is not a register, it is not comprehensive, and it is not going to create a searchable database of foreign property owners. The public listening at home to the objections and interjections from the National Government members will know very well by now that the National Government wants to make this an issue of race. The National Government members want to make it an issue of race, and one speaker after another in this debate has got up and mischaracterised the policies of the Labour Party, of New Zealand First, and of the Green Party, because all of the major Opposition parties in this Parliament want to see a full, comprehensive, and publicly searchable register of foreign property buyers. All of the Opposition parties in this House want to see a ban on foreign property ownership of existing houses. That is our policy.

Repeatedly, the Government has tried to say that Labour is opposed to new migrants buying houses. Well, that is not our policy—that is not our policy. It never has been and it never will be. In this debate, the National Government members have tried to say that this is an issue of race and that we do not want to see people of a particular race buying houses in New Zealand. Well, that is not our policy. It never has been and it never will be. Our policy is to look after the interests of New Zealanders, not the interests of foreign property speculators. We are the party that stands beside young Kiwi first-home buyers; that is the party that stands behind foreign property speculators.

The reason why the National Government does not want to see effective legislation and does not want to see a register of foreign property buyers is that it does not want the flow of foreign money into its party coffers to dry up. That is why it will not touch this issue except with this pathetic, superficial charade of a bill that pretends to do something for political reasons, as David Seymour confessed to this House. But it will not do anything substantial to tackle the problem.

💬 Chris Bishop: I raise a point of order, Mr Assistant Speaker. Mr Twyford just made an unparliamentary remark about the motives of the Government in passing this piece of legislation. There are various Speakers’ rulings—

The ASSISTANT SPEAKER (Lindsay Tisch): I have the Speakers’ rulings open in front of me, and I am noting very carefully what is being said.

Thank you, Mr Assistant Speaker—

💬 David Seymour: I raise a point of order, Mr Assistant Speaker. If I could assist, I am fairly certain it is Standing Order 120 that says it is wrong to impute a motive on to a member—

The ASSISTANT SPEAKER (Lindsay Tisch): Order! The member will sit. This is a robust debate and these are debating points. I am listening very carefully to the content. I have the Speakers’ rulings open, and I know the page and I know the line number.

Protecting affordable homeownership is a proper and legitimate goal for the New Zealand Government, but not according to the members on the National Government benches. The movement of hot money across national borders is a problem that Governments all across the world are grappling with. It is about the instability of markets, and it is about protecting important social and economic goals like access to affordable homeownership. But that does not mean anything to the National Government.

Putting New Zealand’s tiny real estate market into a global market place is a fool’s errand. It is a recipe for what is already happening under the policies of this National Government—that is, New Zealanders are standing by and watching housing and land being sold out from under their feet. That is why Malaysia, Singapore, Hong Kong, and Australia have all enacted policies in the past few years to limit the effects of foreign property speculation in their real estate markets. That is why Beijing and Shanghai do not allow non-residents to buy houses in those cities. Is that racist? Is it racist when Beijing and Shanghai prohibit non-residents from buying houses in their cities? Of course it is not racist. That is their Government looking after their local citizens by protecting affordable homeownership. That is what it is about.

There is a particular issue with foreign direct investment from the People’s Republic of China, and we need to be able to discuss it without the pathetic and juvenile trivialisation of this issue by MPs like David Seymour and Jami-Lee Ross. Juwai.com, the preeminent Chinese website that markets international real estate to Chinese citizens in China, has estimated that $15 billion of private investment from the People’s Republic of China is heading towards the New Zealand real estate market in the next 5 years—$15 billion from China, which it predicts will be invested in the New Zealand real estate market. We need to be able to talk about this. This is about managing the stability of our markets in the face of huge volumes of international investment that will serve only to pump up the price of real estate and deny young Kiwi families their dream of affordable homeownership.

The National Government is in denial. It does not want to know that—it does not want to know it. It is not only because that party benefits politically from the donations of property—

The ASSISTANT SPEAKER (Lindsay Tisch): Order! Now you have crossed the line, and you will withdraw those comments. You cannot say that someone has benefited, and I will refer the member to Speaker’s ruling 56/4. I ask the member to withdraw that comment and to move back now, in the last few minutes, to the content of the bill and not something that may be hypothetical.

It is not the only—

The ASSISTANT SPEAKER (Lindsay Tisch): I asked you to withdraw the comment.

Oh, sorry. I withdraw that comment.

💬 David Seymour: I raise a point of order, Mr Assistant Speaker. Immediately after you resumed your seat Ruth Dyson repeated exactly the same allegation, and by the same standard, I think she too should withdraw and apologise.

The ASSISTANT SPEAKER (Lindsay Tisch): Well, I did not hear that, but did the member make an unparliamentary comment?

💬 Hon Ruth Dyson: I’m happy to tell you what I said.

The ASSISTANT SPEAKER (Lindsay Tisch): No. [Interruption] Order! The point has been made that while I was adjudicating on this, there was an interjection. The question is: was there an unparliamentary interjection? The answer is either yes or no, so that is what I am asking.

💬 Hon Ruth Dyson: I certainly did interject, and I do not believe that it was outside of the Standing Orders. That is my view.

The ASSISTANT SPEAKER (Lindsay Tisch): I will take your word for it.

The point has been well made in this debate by members on this side of the Chamber that this bill is inadequate. It will not capture the information that is needed. It has a giant loophole at its heart—that is the main home exemption—and the very definition of “main home” contains another loophole that will make this bill worse than useless.

The point I made earlier that so upset members on the other side of the House is not the only reason why the National Government does not want to tackle seriously the effects of foreign money in the Auckland housing market. Those members do not want to touch the effect of foreign money in the Auckland housing market also because they like it that foreign money is pumping up house prices, because there is nothing else going on in the economy. After the Christchurch rebuild has come off its peak and after the dairy slump, National’s housing bubble in Auckland is the only thing that is left going on in the economy. The last thing that the National Government wants to do is turn off the tap of foreign money, which is driving up Auckland house prices and denying an entire generation of young Kiwi families the chance to own a home of their own.

The Prime Minister was incredibly candid the other day on Newstalk ZB when he said that he thinks there are some Aucklanders who are very happy with rising house prices. He made it very clear that that is National’s political strategy. It wants to harvest the votes of homeowners who think they are getting rich. They do not give a damn about the half of Aucklanders who rent or the whole generation of young people who will never ever own a home of their own in Auckland under this Government’s policies.

Members, just before we continue, we are operating on an emergency sound system. I understand that the sound quality is not good outside the House, so just be mindful of that. I do apologise to the House, and I apologise to any member and to those who may be listening and watching the telecast on TV. I apologise for that.

That bit of information that you gave us then, Mr Assistant Speaker, that people outside of the House cannot hear this information as well as they need to, will actually help the Labour Party, because that last speech from Mr Twyford was atrocious. He spent his whole time saying that Labour members are not interested in race—that was the first 5 minutes of his speech. The other 5 minutes of his speech was purely about Chinese people. Mr Twyford cannot on the one hand say that Labour members are not interested in race-based policies when it comes to this issue, when he is the man who released a list of names that are just Chinese-sounding. In the other half of his speech he talked about Chinese people and Chinese investors.

I would say that this is a very important piece of legislation, and it is good legislation. It is well-thought-out legislation. Before it was brought to the House it went through full public consultation. But, more important, when it comes to tax policy in this country we have a very long process and precedent in place where we engage with the tax advisory community before we bring legislation forward, so that we can seek their views. They give us input, and they do so freely and willingly. These are tax experts in New Zealand who come from all parts of the world. We are interested in good tax policy and we are interested in the assistance they give us. We are not interested in where they have come from, unlike Mr Twyford in everything he says when it comes to housing in Auckland and New Zealand.

So this legislation was brought to the House well-thought-out. It does a number of things. We have an expectation on this side of the House that where tax is owed, people should pay it. But we also want to make sure that it is easy to pay tax and that the Inland Revenue Department can use the resources, the scarce resources, we give it on behalf of the taxpayer to target those who choose not to pay tax. We do not want to burden everyday New Zealanders who meet their obligations.

This legislation is one of three measures announced around the time of the Budget by our Prime Minister. The first is the collection of IRD numbers when a property transaction takes place. I will come to that in a moment. The second is the brightline test, which has gone through the House this week, that will clarify a tax obligation. These two pieces of legislation go hand in hand. If you take only one of them, you are seeing only half of the picture. It is very important to look at the two together. The third is a withholding regime upon overseas people when they sell a property and they have made a gain—and more legislation will come to the House; we are consulting on that at the moment—whereby some of that gain will be withheld in lieu of their tax obligation.

So in this piece of legislation everybody but those who have a principal residence in New Zealand must provide their IRD number when they purchase a property. That is the first thing. The second thing is that if they are an overseas person, they must get an IRD number before a transaction can go through. As of 1 October of this year they must have a New Zealand bank account before they can get that IRD number, and for that New Zealand bank account to be given to them they have to go through the suite of anti - money-laundering legislation that is in place in New Zealand and that the banks have an obligation to enforce.

That overseas person must also give the equivalent of their tax number from the tax jurisdiction they are based in. So if they are in Australia, or London, or Fiji, or, for the purposes of Mr Twyford, if they are in Beijing in China, they must provide us with that information. The reason for that is that—actually, as with anybody who has a tax obligation in New Zealand—we expect them to pay their fair share of tax. We also have arrangements in place with a number of countries in the world where they should be paying tax. This information that we collect will be able to be shared with that overseas tax jurisdiction to make sure they are paying their fair share of tax.

The one exception to that—and I know that earlier in the debate, in other stages, this was an issue of some contention, at least for the Opposition—is that there is a group of New Zealanders who will not have to provide their IRD number. They are the people who are buying a principal residence—their own home, their own residence where they themselves live, or, in many cases, live with their family.

The brightline test imposes no tax obligation upon those New Zealanders. So I would challenge members of the Opposition and say that actually we would be burdening them, for no reason, with providing an IRD number when there is no tax obligation as a consequence of the purchase and sale of that property. Under the brightline test if you purchase a principal residence and you sell it within 2 years, irrespective of a gain, there is no tax consequence. So why is the Opposition saying we should collect information from these New Zealanders when they will not face a tax obligation? Should we collect information on them upon taxi rides even though they do not pay any tax personally? Why would we do that? It does not make sense.

But what we have done for that very small group of people who may look to avoid their tax obligation is given tens of millions of dollars to the Inland Revenue Department to enforce compliance around property tax. They will be very good at that. In fact, as we go back, the last Government, towards the end of the Labour Government, started this by giving the department some money. Back then they must have had some concerns, not about Mr Twyford’s concerns—Chinese people buying and selling property in New Zealand—but about people meeting a tax obligation they have. They started it back then. We are continuing with this so that the Inland Revenue Department can focus on those who are not meeting their obligation. Target them, and leave alone all the other law-abiding citizens of New Zealand who have no tax obligation when they purchase a principal residence—leave them alone.

To other members of the House who say that we should actually just collect that information, well, some would argue that, but I do not, because I actually trust New Zealanders to meet their obligation to the tax department. But where they do not, we are giving the Inland Revenue Department resources to focus on that.

The final thing I would say to you, Mr Assistant Speaker, is that I agree with Mr Twyford, at least to the degree that I could sense he might have been genuine. This is not about race. It is not actually about where people come from. This is good tax policy. It is about people paying the tax that is due in New Zealand, under the tax laws that are set in New Zealand. We do that so that the Government can afford to provide the many services New Zealanders demand and deserve. I would say to Mr Twyford that it is not good enough just to say that it is not about race and then only talk about one race all of the time. Others outside of here—if the sound has come back on—will judge him for that. This is good tax policy, and I am proud to recommend it to the House.