Taxation (Bright-line Test for Residential Land) Bill

on behalf of the Minister of Revenue: I move, That the Taxation (Bright-line Test for Residential Land) Bill be now read a second time. The proposals in this bill, together with those contained in the new Land Transfer Amendment Act, are designed to improve compliance with the tax rules on the sale of residential land. The changes were well signalled by the Government in Budget 2015 as part of a package of proposals to improve compliance with the current land sale rules and help to ensure that people pay their fair share of tax on gains from property sales.

To recap briefly, the main feature of this bill is a new, easy-to-enforce brightline test to supplement the current intention test in the Income Tax Act. The intention test makes gains from the sale of land taxable if it has been bought with the intention to sell for profit. The test can, however, be difficult to enforce due to its subjective nature. To deal with this problem, the bill proposes a new brightline test that will require income tax to be paid on any gains from residential property purchased and sold within 2 years. The only exceptions are an owner’s main home, inherited property, and property transferred in a relationship settlement. The proposed test applies to only the disposal of residential land. It does not apply to business premises or farmland.

For further clarity, the bill also defines certain terms such as “residential land” and what a person’s main home is, so taxpayers understand their income tax responsibilities when selling a property or residential land that is subject to the new test. It also clearly identifies the start and end of the 2-year brightline period. The period will generally start when a person obtains registered title for the property and ends when the person enters into an agreement to sell the property, with an additional rule for sales made off the plan. The proposed test will apply to gains from residential property acquired on or after 1 October 2015 and disposed of within 2 years.

Those are the main proposals in the bill. For completeness, other measures prevent circumvention of the new test, in particular through the use of companies or trusts. The result is a straightforward, easy-to-enforce rule that will help improve compliance with the land tax rules for land sales. In bringing the bill to its second reading, I would like to thank the Finance and Expenditure Committee for its consideration of the bill and its recommendations on points raised by submitters, which have helped improve the clarity and workability of the bill. I refer, for example, to new amendments to ensure that land use for a genuine farming business that may have had a bad year does not come within the brightline rule. This is consistent with the policy intention of the brightline test. I commend this bill to the House.

Thank you very much, Mr Assistant Speaker Tisch. I am sure, given—how do I say this diplomatically—the stature of Minister Woodhouse, who has just resumed his seat and, indeed, of the Assistant Speaker in the Chair, you will forgive my taking a moment to congratulate Michelle Payne, the winning jockey in the Melbourne Cup. She is the first woman to ride a winning horse in the Melbourne Cup in 155 years. I think it is a triumph worth noting.

💬 Hon Michael Woodhouse: It would never be me. I’m about 25 kilograms too heavy.

I am sure that Mr Woodhouse, if he looks for an alternative career in the coming years, could find himself there—I do not know. But it was a wonderful effort by Michelle Payne—[Interruption] No, that is right. But it was a wonderful effort by Michelle Payne to win that race—and, yes, I also note that the Labour Party’s racing spokesperson Kris Faafoi did manage to somehow or other fluke a win by betting on that horse. Obviously, drinks are on Kris this evening—thank you very much, Mr Faafoi. We could actually put that as an amendment to the bill—to include Kris Faafoi’s generous contribution to our evening entertainment.

To return to the matters at hand, the Labour Party believes that this piece of legislation is a political response by the National Government to a very serious issue of speculation in the housing market. It is an inadequate response. It is a response that is driven by trying to look as if the Government is doing something without actually taking on this issue. It is a token gesture where something far more serious and far-reaching was needed, and if any proof of that was needed, we learned in this process that officials have said that the implementation of this 2-year brightline test will raise an additional $5 million per annum. That is it—that is it. That is the extent of how much this will raise, and we heard time—

💬 Hon Phil Goff: And the extent of its effectiveness.

Of the effectiveness—that is right, Mr Goff. We heard time and time again in the Finance and Expenditure Committee, from every submitter bar one, that this legislation was inadequate, that it would capture the wrong people, that it was confused, and that it was incoherent. One of the senior partners at one of our largest tax accounting firms said he was “professionally confused” by the Government’s approach. That is one of the senior partners at one of our largest tax firms who said he was professionally confused by the Government.

Government members know that this is inadequate. Government members know that this is a political response, because we learnt that in the build-up to the Budget. When the Budget papers were released in July, we looked to what happened in the build-up to the Budget. There were no papers on this, because the Government rushed this through because it thought it had better look like it was doing something. And here we are in November passing the legislation for a bill that gets implemented on 1 October. It is completely hopeless. It is hopelessly implemented and it is hopelessly designed, and the Government really should hang its head in shame.

One of the core elements to emerge during the select committee process was exactly who would be captured by this legislation. Who would be captured? Is it the speculators whom we are really concerned about, who are driving up the cost of housing in our biggest city, Auckland, particularly? Today when we look at the price of houses in Auckland, we have Quotable Value telling us we have got an average house price of $980,000—essentially, a million-dollar average house price in Auckland—putting that out of reach for most first-home buyers. The data shows us that Auckland house prices have risen by $21,500 a month in this last year. There has been a 25 percent increase in the cost of houses in the last 18 months. This is an Auckland housing market out of control, affecting the financial stability of our country, and at the speculation end the Government arrives with a very damp bus ticket, because that is as good as this gets.

What the submitters told us was that if you are a person who is genuinely in there speculating, you will just wait out the 2 years. It is a 2-year brightline test. You will just say at the end of 2 years: “That’s right. I can now move on and continue with the behaviour that I would have indulged in.” The people who will be captured are the people who may have bought one property as an investment property and then something has happened in their lives. Something happens that means they have to sell it. Perhaps they lose a job, or somebody has to move, or somebody’s circumstances change, which means that they do not feel that they want to have that investment property any longer. They will be the people captured by this legislation. Every single submitter acknowledged that. Every single submitter came to the committee and said: “If you’re trying to get the real property speculators, you’ve got this wrong.” Two years is just a short amount of time to wait if you’re in that business. After 2 years and 1 day you are away.

No doubt Government members will get up and say that that is all right; speculators will be captured by the intention test. There is a logical flaw in that argument. The reason we are here debating this legislation is that the Government tells us the intention test does not work now. So why will it suddenly work at the end of a 2-year period? And it is not just the submitters who said this. When Treasury was asked for advice about this from the Government, it told the Government 2 years was inadequate. Actually, it said 3 years was inadequate, as well. It said it “should not be pursued as it is likely to yield very little revenue while generating significant behavioural distortions.”

Treasury went on to say it considered a 5-year period “would be the minimum at which the gains of taxing the income outweighs the costs that the test would incur through behavioural changes.” Treasury went on to say that if you look internationally, these kinds of rules and tests are applied and are useful at the 5-year mark, but that advice was ignored, because the Government was not really serious about this—because the Government was not really serious about dealing with speculation. It just wanted to look and appear as if it had done something. So that inadequacy around the length of time really does fundamentally undermine what the Government claims are its goals.

The other point that submitters to the select committee were at pains to make was that the legislation fails the basic test for tax law: to be clear and simple to implement. A number of submitters raised their concerns about the legislation being inconsistent with other aspects of property law in its definition and coverage. Why does this matter? It matters because that means that tax accountants—those who advise people, those who said that they were professionally confused by this legislation—will struggle to be able to interpret what it means, and loopholes will end up being created.

The legislation is beset with definitional difficulties, and in the Committee of the whole House stage we will work through these and, I hope, be able to improve the legislation that the Government has put up. But, obviously, there are concerns about the definition of “main home”, which arose from the previous legislation that this House passed. That definition of “main home” continues to be so subjective and so unrealistic and so easy—

💬 Chris Bishop: Oh, rubbish.

Well, it is. It is so easy to get around. Everybody acknowledges that, and by putting that in and bringing that through into this legislation, that adds to the question.

Minister Woodhouse mentioned the question of the dates of acquisition and disposal of land being the bookends of this process. That is inconsistent with other aspects of property law and, no doubt, will cause problems. There are difficulties around the definition of “residential land”, which we will come back to, and also the questions around farmland.

This legislation could have been the beginning of something useful for Parliament to do to take to the speculation that is driving up property prices and that is causing those ridiculous prices that I talked about earlier in this speech, but it has failed. It was rushed. It was ill conceived. The finance Minister, Bill English, got up in this House and said he did not even know if it was going to work. That is as good as it gets from the Government when it comes to cracking down on speculation, because it does not want to crack down on speculation; it is not in its interests.

This is a half-hearted attempt. It is a token gesture when something comprehensive was needed to ensure that we clamp down on speculation. Speculation in the Auckland housing market, driven both from within New Zealand and by those who are offshore, is putting home buying out of reach of many New Zealanders. That is the issue that we are actually debating today: the opportunity for young New Zealanders to live out the New Zealand dream of buying that house, of having that security, and of being a part of their community, and today the National Government has failed. It has lost the opportunity to do this. This is a token gesture when something meaningful was needed. It is a huge disappointment.

That last speech by Grant Robertson was by somebody who is completely out of his depth in the finance area and who should really just switch to being a lecturer in art history, because that seems to be about his level. He would have no idea about purchasing a property. Probably half his caucus would have no idea about purchasing a property. The speech was completely full of inaccuracies and it misled the New Zealand public, and I am going to put them straight now so that they know what is actually going on and do not listen to the waffle from the other side from somebody who has got no idea about finance. Everybody knows he is completely out of his depth and he is doing it to take down Andrew Little, to show how ineffective the Labour Party is.

Putting that aside, in New Zealand if somebody sells a property within 10 years there is an intention test, and that—

💬 Grant Robertson: It’s not working. That’s why you put the bill up.

Just listen—just listen. As the member over there might want to do, just listen and learn. The thing is there is an intention test, and that test has a 10-year rule: if someone buys or sells a property within 10 years that person can be subject to tax on that sale. And there is the test around the intention at the time of purchase. Looking at the Taxation (Bright-line Test for Residential Land) Bill, we are clarifying that intention test and saying that if somebody buys and sells within 2 years without it being their main home, then they are automatically deemed to be selling within a taxable range. So there is no change to the existing rules. That speculators, as that member said, were exempt from this is not true. That is not the case. Speculators are caught under the intention test. That is the very nature of their business—they are speculators. They buy and sell, speculating on property, therefore their intention is such, and therefore they are taxable. Some members on the other side need to listen to the rules around taxation, and not put out to the public some inaccuracies around speculative rules around land sales.

If we look at what that member was really saying, he was saying that it could have been the beginning of something useful. It was a political response, he called it. Well, I remember the Labour Party, when it was the last election, with something it thought was useful, and that was the capital gains tax—a full-blooded capital gains tax. That member wants that capital gains tax. He does not agree with their leader, and he is saying that it could have been the beginning of something useful. That would have been the full-blown capital gains tax that the Labour Party members went to the last election with and, subsequent to the last election, have thrown out. They have decided that they are not going to do it, because, one, it does not work, and, two, the public does not want it.

The members opposite should not go around this country misleading New Zealanders and saying that this piece of legislation does not catch speculators, because they are caught under the intention test already, in reality. This legislation deems those purchases and sales within that first 2 years as being taxable. That is the effect of this legislation. There is an exemption for your main home, and everybody would want to see that exemption. Even if you had the full-blown capital gains tax that the Labour Party talked about, it would have an exemption for the main home. There are also exemptions for certain changes in circumstances: for example, a marriage break-up—something like that, that has not been anticipated. If the matrimonial property agreement, for example, comes into force, then this legislation would not affect that situation. So there are exemptions there, but they are for circumstances that would not be foreseen in the natural course of somebody’s life and would not be the intention of that person at the time when they purchased the home.

This is an important part of the suite of legislation that is looking at housing issues. It is an important part of sending a signal to New Zealanders around the treatment of housing tax gains and losses. And it is an important part of sending the right message out there, and it should not be used by the Opposition in this Parliament for political gain. It should not be used by the Opposition to mislead the public of New Zealand. It does not enable speculators to get away without paying tax. It does not, as the last member said, create a situation that is unfair to New Zealanders. The real message from the previous member is that he is firmly in the camp of having a capital gains tax. He wants a full-blown capital gains tax. That is what that last speaker said in his speech. That is what you can take out of it. The New Zealand First Party members can laugh, but they actually agree with that. New Zealanders, beware: the Labour Party still wants a capital gains tax. Its finance spokesperson came into this House today and said that he wanted a capital gains tax. That is what he said in his speech. New Zealanders beware of that, because that is the true message of what he said in that last speech. Thank you.

I have had a lot to do with Grant Robertson, and I have read most of what he has written, and never once in his role as finance spokesperson has he ever said that Labour wants a capital gains tax. So let me put on the record now, for everyone listening, that Grant Robertson did not say Labour wants a capital gains tax. What he did say is that this is a very poor piece of legislation.

When you get the finance Minister admitting that he did not know what effect this legislation would have, we know that we are in trouble. There are a number of tests that define good legislation: fairness, but also ease of compliance; that it captures the right people; that it is hard to avoid. This test, this brightline test, just blows all this sort of stuff out of the water. It is a dreadful piece of legislation. It is a political piece of legislation, and David Bennett knows it.

This is a piece of legislation that is poll-driven, and it is not pragmatic. The reason I say that is that a number of submitters who understand the tax system a lot better than anyone who sits on the Finance and Expenditure Committee came and said: “This will not work, but we have some ideas that will make this a much better piece of legislation.” They were ignored. They were ignored, because this is what this Government wants to force through, and it is simply wrong. I think that the taxpayers actually expect more. The main criticism of this piece of legislation, from the experts, is that it is piecemeal, that it does not address the issue.

The last speaker talked about the intention test. We all know that the intention test is not working; it simply is not. What the intention test is—if an investor is buying a property for capital gain and they sell it, they have to pay tax. If they are buying it for rental yield and they sell it, they do not have to pay tax. It is about, literally, the intention of purchasing a property. But we all know, and certainly the members of the Inland Revenue Department know, that it is very, very difficult to enforce this intention test because all you need to do is you need to say: “Oh, well, shivers, I bought it for yield, but someone offered me a price I couldn’t turn down. I had no idea I was going to make a capital gain, and that was not my intention.” It is almost impossible to prove them wrong or to take a court case that the Inland Revenue Department will win. They know this because they have tried it. An investor would have to be a little bit of a fool to go and say to everyone “I’m buying this for a capital gain, but don’t tell anyone.”, and, then, when they make the capital gain, come and say: “Oh, no, it was about yield.” It is an extremely easy test to avoid.

We are supporting this legislation because we support anything that would have an impact on cooling down the market, even though—I must admit—this sort of legislation is not really designed, theoretically, to cool a market. What it is designed to do is bring taxpayers into the tax system who in fact are not in the system at this point in time. It is simply not fair that if people are buying and selling houses with the intention of making a capital gain—however difficult that is to prove—that they are not paying tax. That is what we need to sort out.

It is actually interesting. The Inland Revenue Department put forward two options. The first option was the 2-year brightline test, and that is what we are debating now. The second option that it debated in the regulatory impact statement was a 5-year option. The Inland Revenue Department admitted that that would actually make it fairer because it would capture a lot more people. What it said that the first option, the 2-year brightline test, would do, was: “This option creates an economic distortion as it creates a ‘lock-in’ effect. In other words, it creates an incentive for people to hold property for longer than two years to avoid the bright-line test.” The key word there is “avoid”.

What we are going to see, yet again, is people avoiding paying their fair share. All they need to do is hold on for 2 years. After 2 years and 1 day, they can sell the property. Of course, their intention was never to make a capital gain—it was about yield. They pay absolutely no tax on that property, yet someone who sells an investment property as a result of an unfortunate circumstance, like Mr Robertson outlined, is caught by this test. This is just not a good way to make tax legislation. There will be amendments to this bill, I have absolutely no doubt about that, in the future.

As we have talked about, the main home test is something that we debated substantially in the select committee. We went back and we asked for further definitions. We asked for a depth of information. It came out that the main home test was actually about the home you have the greatest connection with. There is no definition in law about what defines “greatest connection”. The classic case is actually that of a number of MPs ourselves. We could conceivably argue that we have a greater connection with our apartments, which we spend 2 or 3 or 4 nights a week in, than the family home. You could see how this is easily gamed. Taxpayers, especially property investors, are not stupid. They may say that their main home is the bach that is now worth $1 million versus the family home that is worth $250,000. How do they define that? “The bach has been in the home for a long time, it is part of my family, it is where I grew up, and it is where I feel the greatest connection.” Therefore, that is not the house that is caught in the 2-year brightline test. All I am highlighting here is that you could drive a bus through this piece of tax legislation—you could drive a bus through it, and that is not the way to make tax legislation.

The ASSISTANT SPEAKER (Lindsay Tisch): Order!

But that is not me saying that; that is people from Chartered Accountants Australia and New Zealand, the New Zealand Law Society, and KPMG. There are a number of experts who actually said—

The ASSISTANT SPEAKER (Lindsay Tisch)18020151103 18:00:03The ASSISTANT SPEAKER (Lindsay Tisch): I am sorry to interrupt the honourable member. The time has come for me to leave the Chair for the dinner break.

Sitting suspended from 6 p.m. to 7.30 p.m.

I think what I was saying is that the Parliament needs to consider tax legislation very carefully before it brings it into the House and certainly before it takes it out to the general public. The point that I was making is that there were a number of submitters, including Chartered Accountants Australia and New Zealand, the New Zealand Law Society, KPMG, etc., who actually came and presented to the select committee and told us that this was not good legislation. They told us that this legislation was piecemeal, that it would not solve the problems, that better enforcement of existing rules would be preferable to the brightline test, that the burden of proof already existed with the taxpayer, and that the brightline test would tax only those who are forced to sell the property due to circumstances outside of their control.

The bottom line, as I have mentioned and as Grant Robertson mentioned before me, is that we are supporting this legislation, but we are very critical of the fact that this could have been so much better. In fact, the Inland Revenue Department, as I mentioned, put forward two options for consideration when they were deliberating on this bill. The first one is the one that we are debating at the moment, which is a 2-year brightline test. The second one is a 5-year test, and we think that that would have captured by far a much higher percentage of investors who are seeking to make profits in this market without paying any tax and, in fact, distorting the property market.

There is no doubt that something needs to be done about the Auckland housing market. There is no doubt—

💬 Hon Maggie Barry: And we’re doing it.

—it is out of control at this point in time. But if the honourable member believes that putting a 2-year brightline test is going to solve the problems of the Auckland housing market, then I suggest that she should stop taking as much 1080 as she is and start getting with the picture, because it requires a lot more than this sort of rushed, poll-driven, political legislation as opposed to a pragmatic solution that would have dealt with the problem we are facing—

💬 Hon Maggie Barry: Where’s Maryan Street?

—in Auckland at this point in time. It is good to see that that member reads the left-wing blogs. I would have thought she had a lot better things to do than that.

Part of the problem at the moment is that we have a test called the intention test. This legislation just goes to show that the intention test is not working. This piece of legislation is sort of a tarpaulin that is supposed to cover over the inadequacies of the intention test. What that test is about is that if an investor buys a property with the express purpose of making a capital gain, then they have got to pay tax when they sell it. But if an investor buys a property with the intention of getting a rental yield, then when they sell that property they do not have to pay tax.

Even though Labour is supporting this legislation, I hope the House does not view this as support for the measures that the Government is taking to do something to address the major issues that are affecting the Auckland housing market. Thank you very much.

Look, it is a pleasure to take a call on this important bill, as part of the Government’s suite of measures to improve compliance with taxation law but also to deal with the issue of housing generally, and Auckland housing in particular. I was not on the Finance and Expenditure Committee, much to my chagrin, for the consideration of this important bill. I was doing other things at the various meetings we had on it, but I understand there was a robust discussion about this bill at the select committee, I think it would be fair to say. I think that as a committee we have landed generally in the right place on this bill, and I think that this is going to make a difference to the things that it is trying to do.

I want to briefly mention a couple of things in my remarks. The first is about one of the points of contention that came out during the select committee process, and it was adverted to by Mr Robertson in his remarks and then again by Mr Nash just a few moments ago. This is around the definition in the bill of the “main home”.

We heard some cantankerous and wild claims from Stuart Nash that MPs who come to Wellington and rent an apartment, buy an apartment, or buy a flat to be in Wellington while the House sits could classify this as the main home—that it was all about where you had the greatest connection to, and MPs could simply say “Oh well, I have got a great connection to my little Kelburn villa or my little Pētone cottage.”, or something like that. Then we also heard from Stuart Nash that MPs’ baches, or the baches generally of people—or cribs, as I understand they call them down south—could be classified as the main home. But, actually, if Mr Nash had bothered to read the bill or had bothered to read the piece of legislation, he would know that the main home is defined as the residence mainly used by the person as a residence and with which the person has the greatest connection.

I would suggest to the House that for MPs who come to Wellington for 9 days every month for 10 months of the year, that is not the main residence that people have in a city and they do not have the greatest connection, so it fails both limbs of the test. Likewise, in terms of a bach that someone might go to—as I am looking forward to doing at the end of year; heading away for the summer, heading away for a couple of weeks—that is not the main residence that people have, and, indeed, that is not, I would venture to suggest, the place that people have the greatest connection to.

There was a lot of hot air from Mr Nash, as is often the case, and a lot of hot air from Grant Robertson, who is a somewhat witty and good speaker. But, actually, when you look beneath the hot air, beneath the surface, there was not a lot of substance to that argument. It is true to say—

💬 Clare Curran: So where’s the substance? Give us the substance.

I have just given you 3 minutes of substance, Clare Curran, which is more than I think we have had from Clare Curran in 11 months of this year, I think it is fair to say. Anyway, I do want to address the issue of whether or not the test to do with “main home” is actually defined in the law at the moment, and it is true to say that it is not, but that is not unusual. We are making new law. That is what Parliament does. It makes new law. Oftentimes it will refer back to existing definitions and sometimes it will not, but I have actually taken the trouble to talk to the officials about this, and, actually, the phrase “with which the person has the greatest connection,” has been carefully chosen. Why? Because it reflects existing case law. So although it is true to say that this bill does not reflect existing statutory law because it is a new piece of legislation—it is like going back to Law 101, dealing with members opposite sometimes—it is true to say that this reflects existing case law. Judges in the courts will be applying this law, and obviously they will have reference to the existing case law that exists on this particular issue. So I think that deals with the issue of the “main home” definition.

Just in closing, what did Labour members say on this bill? What did Grant Robertson say? They said it was token. They said it was political to go into Parliament and advance a piece of legislation to make it political. Gee, what a shocker! They said it was half-hearted. They said it was half-measured. They said that we needed to go further and that something more must be done.

The only conclusion to draw from all of this, from Grant Robertson’s speech and from Stuart Nash’s speech, is that that Labour Party has yet to recant on its promises around a capital gains tax. The problem for the Labour Party is that Andrew Little won the leadership of the Labour Party, supported by three or four of his colleagues only, on the promise of getting rid of Labour’s capital gains tax policy. But now we find his colleagues Grant and Stuart—and no doubt Clare to come, and Kris Faafoi and Megan Woods and Rino Tirikatene, and maybe even the future Mayor of Auckland Phil Goff—are going to turn up and they are going to say: “This is a half-measure. We need to go further. We need to tax capital properly. We need to tax property. We need to attack speculators.” That is what they are going to say. They have not learnt the lessons of the last election or, indeed, the lessons of the 2011 election.

This is a good bill. It is a sensible bill, and I commend it to the House.

Tēnā koe, Mr Deputy Speaker. Yes, Mr Bishop, Parliament does make law, but it should make good law, not bad law like this bill. The Green Party is supporting the Taxation (Bright-line Test for Residential Land) Bill only because it is better than nothing and because we support the bill’s intention, which is to target speculators who are not meeting their income tax obligations and to ensure that the existing law on property sales is actually better enforced. But it has so many defects, which could have been corrected if the Government was not in such a rush to pass retrospective law and if it had not been in such a rush to push it through the Finance and Expenditure Committee with minimal time for submissions and minimal time for the select committee to consider the bill and actually improve it. So it is an example, Mr Bishop, of poorly made law that had the potential to be so much better.

It is another example of the National Party’s empty gesture approach to policy making and law making. National’s polling told it that it has a problem in Auckland with the housing bubble: that that is of major concern to voters, with the demand that speculators and offshore purchasers are putting on the Auckland housing market and how that is contributing to the soaring and unaffordable house prices in the city. So the Government stepped in to be seen to be doing something about it. But the step that it is taking is so small and ineffectual that it will not create real change. It will not cool the housing market in Auckland. It will not make houses more affordable. The Government had the opportunity to do so much more.

💬 Hon Maggie Barry: Rubbish!

In 2010 Treasury made strong representations, Minister Barry, to put in place a capital gains tax. National rejected that and so we have got this bill, which is another example of the Government just making a gesture and putting that into law.

If the Government had been serious, it would have done what the New Zealand Law Society suggested. If I could just quote from Stephen Tomlinson, the society spokesperson, he said that “the proposed test [in this bill] should not be enacted as it is unlikely to be effective in achieving its stated objective. If officials are concerned about difficulties in enforcing the existing land gain taxation provisions, then there should be a comprehensive review of those provisions, rather than the reform being made on a piece-meal basis.” That is what we are seeing with this bill and its companion bill. It is bad because it is retrospective law. The select committee had a very limited time to consider it. I think it called for submissions on 9 September, they closed on 17 September, and then the bill had to be reported back in mid-October. It is bad, too, because tax law should be simple, it should be coherent, and it should be comprehensive if it is going to be effective. But this bill is not those things, and many submitters said that it is overly complex and it is likely to lead to inconsistencies and difficulties in enforcement.

One of the first issues is that it applies only to residential land sales, with exceptions, obviously, for the owner’s main home, inherited property, and the transfer of property in a relationship settlement. But this application only to residential land sales is despite the fact that the existing tax rules around property speculation apply to all land. Most submitters agreed that it would be a much simpler, clearer piece of legislation if it applied to all land equally. It is also inconsistent with the intentions test that is in the existing law, because that applies to all land, not just residential land. So that is likely to create quite a significant problem for the Inland Revenue Department with enforcement and potentially creates a loophole. One of the other difficulties with this being confined to residential land is that by creating that loophole it may encourage speculation in non-residential land that is eventually used for subdivision.

One of the other issues is the 2-year period. Under the bill people must pay tax on any income they receive from the sale of residential land if they dispose of that land within 2 years. That holding period is far too short. It is quite likely that people will wait it out and then dispose of the land. Treasury recommended at least a 5-year holding period. Many OECD countries have a 5-year holding period. Yet again, the Government, in making legislation that is only a gesture, stuck on 2 years and did not go to the 5 years that was recommended by Treasury and applies elsewhere. And it is not fair when we have got nurses, teachers, plumbers—anybody who is paid for their work and receives a pay cheque pays tax. Why should it be any different for someone who receives income from buying and selling property? Why should they not have to pay tax if they sit on residential land for 2 years and then are able to sell it? They are earning income. They should be subject to tax in exactly the same way that other working people are.

💬 Alastair Scott: They’re taxable already.

Only by the intentions test, and that has been shown to be a problem, which is why we have got this bill.

💬 Alastair Scott: That’s why we’ve got the brightline test.

But the brightline test has got that 2-year holding period, and, as I have said before, that is too short. Other countries in the OECD have a 5-year period or longer.

So this bill is not really about addressing the housing crisis in Auckland. If the Government was serious about doing that, it would have adopted some of the Green Party’s solutions, which are to put in place a capital gains tax that exempts the family home, to restrict foreign ownership to reduce the inflationary impact that we are getting with foreign capital coming in, and to pass—

💬 Alastair Scott: What inflation?

He is saying: “What inflation?”. Why are we getting this huge increase in house prices in Auckland that is making them beyond the reach of most first-home buyers? If the National members are asking “What inflation in Auckland house prices?”, they obviously have got their heads in the sand on the issue. The Green Party would also ensure that we have a warrant of fitness for rental properties and much more protection of tenants in rental properties. We would significantly increase the State house stock, and we would ensure that our planning laws encouraged medium-density housing around public transport routes, instead of doing what the National Government is doing: encouraging more urban sprawl through the special housing areas and removing the provisions in the Resource Management Act to ensure that those subdivisions’ environmental effects are reduced. So this bill is too little, too late. It is retrospective, the process has been bad, and we are voting for it only because it is better than nothing.

Mr Bishop, I have held you in too high regard for such a long period of time—either that or your heart just was not in it tonight. It just fell flat, mate. I can understand why. I can understand why. This is a terrible piece of legislation. It really is. I was waiting at the start of the contribution from the Minister—

💬 David Seymour: So bad the Professor could tell.

Do not start, Seymour—you were saying the worst things about this during the select committee. I could not believe it. It was amazing. The Minister started off and I was waiting, I was listening, I was paying attention, looking for something I could comment on. But in the end, he just laid out the speech that was given to him and then spoke to the generalities and spoke to the executive summary about just how wonderful it all really is. And then I, at least, had the excitement of hearing Mr Bennett contribute to the debate. At least that was entertaining—it was not very good, but it was entertaining. His abuse of people never fails to entertain this House night after night. As the chairman of the Finance and Expenditure Committee, he will not mind if I do not refer from now on to a single word he said and instead refer to the experts who contributed to the select committee process.

💬 Hon Maggie Barry: Winston Peters.

Miss Maggie Barry, $918,000 is the average price of an Auckland house as of today, according to the data.

💬 Hon Maggie Barry: Did Winston tell you that?

So, you know, Miss Barry might be able to afford a property in Auckland, but new homeowners cannot. They are struggling. It is not even new homeowners any more—the reality is that it is harder and harder for everyday New Zealanders. This is intergenerational theft. She needs to acknowledge that, and National needs to acknowledge that and do something more meaningful and tangible than this vacuous and empty piece of legislation.

There were three minority reports written for the select committee report on this piece of legislation. I am sure there would have been a fourth, if Mr Seymour had been so inclined. But there were three, and that speaks to the majority that is written about in the select committee report. I am just going to take a snippet from the first reading of this bill to highlight New Zealand First’s stance. We would normally say to the House: “You’ve got it wrong. You’ve kind of missed the point. But what we’ll do is support it going through to the select committee, and let’s see if you take on what was contributed from the experts.”

What we found when the draft legislation originally came out was that there was nothing. There was absolutely nothing in this piece of legislation, which is so facile—I have said the word “vacuous” already—that it serves no point whatsoever. It will achieve none of the stated objectives so eloquently spoken to tonight by the National Government. This is another token gesture.

I will quote from some of the submitters, just to reinforce the point. This is not New Zealand First simply opposing legislation for the sake of it. Unlike Mr Seymour and the Government, we actually listened to the experts. Chartered Accountants Australia and New Zealand said, quite simply, that this is not sound tax policy. They recommend a stocktake or review and said that in the absence of this review the “overall package of reforms will lack the coherence it requires and will not provide taxpayers with an appropriate degree of certainty”. The New Zealand Law Society said that this legislation should not be enacted as it would not meet the stated policy objectives. One submitter, KPMG, stated categorically that the bill does not address many of their concerns. They further said that the brightline rule is not required, and that it should be sufficient for the Inland Revenue Department to enforce current legislation, which is what New Zealand First said right from the start. Chapman Tripp stated that there is no integrity in what is proposed and spoke specifically then about the avoidance rule for company or trust ownership structures. The New Zealand Property Investors’ Federation stated that there is no need for this bill. It will not change the value of house prices. It will not lower them. The federation then pointed out that it is possible that properties bought under a company or a trust ownership structure could circumvent the brightline test rule yet again. It noted that speculators will simply change their behaviour and that this is piecemeal, and the Government should simply enforce current legislation.

In my words, the Government should simply enforce the current capital gains tax, Mr Scott. National members and those sitting opposite deny there is one, but it is a tax that is enforceable, given circumstances where owners of property dispose of said property and make a financial gain on the sale of capital. It is a capital gains tax, and it simply needs to be enforced.

There is a real problem in Auckland, and it is not just local commentators. Commentators from around the world are taking time out to note the impact that the housing market is having. Let us hope that it is not too significant or bad, but if the pop of the housing bubble in Auckland comes about, it will not just affect those who have been buying homes in Auckland, speculating in property in Auckland, it will affect the whole New Zealand economy. This is the real problem, and this is why we need more than what is being offered by this Government tonight. These are empty words that will change nothing about the real problem that we have in the Auckland housing market.

The point is that this is a national issue, and the National Government refuses to do anything about it. I noticed on a news article tonight that Rotorua prices are increasing. For me, that feels good, being a Rotorua lad, and it is great to be a part of that. The difference is that the fundamentals in the Rotorua economy are improving, and people are making choices to not so much speculate in the Rotorua economy but to move there because of real job decisions and choices. So the market grows.

This is not what we are seeing in Auckland. We are seeing New Zealand speculators, and, more important and perhaps more disastrous, we are seeing overseas speculators coming in and compromising the lifestyle choices of everyday New Zealanders. That National does not want to bring this problem to a close, perhaps is a fair summary of this legislation. It does not seem to want to solve the problem. Is it that feel-good factor? National does not want its voters in Auckland to suddenly be worried about the prices of their homes, and so start to panic about what is going on there, and all of a sudden they are asking questions about what this National Government is or is not doing. It is an observation. Whether it is fair or not is another question.

Here is the lunacy of the situation, though. The current finance Minister said: “I am sure there will be discussions about how the brightline test actually falls. We would expect that. But people need to understand”—and this is where it gets good—“if it may be taxable under the brightline test, then it probably should be paying tax anyway, under existing law.” That was from the Minister of Finance. The irony of ironies is that I completely agree with him. He could not be more right, and yet the argument from that side of the House tonight is that it is not doing the job it was intended to do. Mr Robertson did speak to that with some eloquence, although I would suggest to Mr Robertson and to this National Government that there are fixes under the intention tax rule that would see it being enforced and applied in a fair and reasonable manner, so that we could actually fix the problem that we are observing in Auckland.

Ten minutes is simply not long enough to speak about all the problems in this legislation. People who simply buy property, do it up, and then flick it off are exempt. Trusts and companies are exempt. The definition of what is land or property falls within the purview of this legislation and is so vague as to be meaningless. New Zealand First has said it before and we will say it again. This legislation does not fix the housing problem in Auckland. We need something sound, we need something substantial, and we need it now. Thank you.

As an electorate MP in Auckland, I can tell the House quite safely that this bill is a moderate and reasonable measure that is enjoying support from New Zealanders in Auckland because they are seeing that this Government is taking steps to try to get on top of many of the issues that they facing when it comes to housing. This is a good change that is being put forward, because it is important that those who are speculating on property do pay an appropriate level of tax and those who are wishing to engage in buying and selling property within a short space of time pay their fair share of tax, and that is what this bill aims to do.

We have heard from parties opposite that this measure is not enough and that we need more. Mr Tabuteau said it is empty words. Ms Sage said it was an empty gesture. I just want to outline to the House all of the things we are actually doing. In no way can the Government’s response to housing in Auckland be described as an empty gesture. We have changed legislation to allow the fast tracking of consents in Auckland to increase the supply of housing, and 47,000 potential sections are available to be built on in Auckland. That is not an empty gesture. We have sped up the unitary plan process in Auckland and taken 7 years off the process’s time frame. That is not an empty gesture. It will lead to better planning law and it will lead to changes that will open up land in Auckland much faster. That will help with housing.

We have changed the law in order to require all people entering into a property transaction that is not for their main home to provide an IRD number so we can effectively track them properly, particularly those buying and selling property from overseas. We have increased considerably the enforcement ability of the Inland Revenue Department by increasing its budget by $33 million several Budgets ago, which has brought in $8 for every $1 that we have given the department to enforce the current law.

We are also giving the Inland Revenue Department an extra $30 million to undertake more enforcement. That is not an empty gesture. We are going to be introducing fairly soon a withholding tax on those who are buying property from offshore, so that we can ensure that we capture the appropriate tax that they should be paying properly and effectively. That is coming in soon. Finally, this particular change, this legislation, where we introduce the brightline test, will ensure that any person buying or selling within 2 years a home that is not their main home pays tax on that appropriately. This is a programme of housing responses that is reasonable, and it is necessary to tackle the housing issues.

When the people on the other side of the House come up with great ideas, they have to remember that many of the ideas, such as a capital gains tax, have not worked in other countries. The most important thing we can do to deal with housing is to increase the supply and ensure that those speculating are taxed properly. The Government’s housing response is in no way an empty gesture. It is very comprehensive, and those sitting on the other side should recognise that New Zealanders expect us to have a reasonable response, and that is exactly what we are delivering. It supplements all of the things we are doing already in the housing space. It is not the solution all by itself but combined with many of the factors and many of the other measures I have outlined here today, it will help housing in Auckland and it will help housing in New Zealand, and that is a good thing.

This is a 5-minute call from the Green Party. I call Kevin Hague.

Why, thank you, Mr Deputy Speaker, and thank you to that last speaker, Jami-Lee Ross, for listing the Government’s package addressing Auckland housing affordability issues. I guess that ultimately the arbiter of whether or not the Government’s response to housing affordability in Auckland has been adequate or not will be whether or not people can afford houses. I noticed on the television news this evening that the average house price in Auckland has hit a new high of $938,000. I think that at this point—perhaps half-time in the contest—most spectators would probably conclude that the Government is not winning, that actually at this point its package of housing measures has not been adequate.

Maybe this brightline test will be the thing that actually starts to turn that round, but right now that average house price is far beyond the resources of the vast majority of New Zealanders who need homes. That is because it is a housing bubble, in which the market value of housing assets greatly outstrips their real or tangible value, and these dynamics, and particularly the use of mark-to-market valuation—an essentially unlimited supply of credit—are the classic dynamics that drive further expansion of asset bubbles. Professor Jane Kelsey most recently has written about what she calls the FIRE economy, an economy based on finance, insurance, and real estate, which is a pretty good depiction of what much of the New Zealand economy is about. But she is not the only person who has commented on that fact—on the fact that the speculative economy, if you like, has absolutely dwarfed the real economy in this country. Of course, that directly harms many New Zealanders, and it also creates very substantial risk to the overall New Zealand economy, putting our country at risk.

A capital gains tax is certainly not a panacea for asset bubbles, but the lack of a capital gains tax certainly takes that FIRE economy and throws petrol on it because what this Government effectively says to speculators is: “Please speculate in housing, because you not only get these massive windfall profits but you also get them tax free, unlike any income that you might get from investment in the real economy, in productive industry, or in your labour.” So National’s problem is that it has railed against capital gains taxes, and it probably also believes the economic theory that, actually, Governments cannot deflate asset bubbles. So it has got those problems, but stacked up against that is the realpolitik of voters—and its voters—being unable to afford houses in Auckland. It has to be seen to be doing something. That is why we are now experiencing this half-hearted measure.

Jami-Lee Ross and other Government speakers have said that it is not a capital gains tax, and, indeed, it comes nowhere close to the kind of capital gains tax that the Green Party has advocated, that Treasury has advocated, and that all of the experts have advocated. Instead, it is a half-hearted measure. According to Treasury we should expect that this will yield something in the order of $5 million in increased revenue. Well, $5 million is better than nothing, and the Green Party will be supporting this bill again tonight. But let us put that $5 million and stack it up against all of that untaxed windfall profit that so many speculators have realised on the Auckland housing market. I echo the comment of my colleague Eugenie Sage: once again this is a Government responding to a real, serious problem with nothing more than gesture.

I call David Seymour—a 5-minute call.

The German Chancellor Bismarck said that those who like public policy and sausages should not observe either being made—and is this bill not a prime example of that. I regrettably support the Taxation (Bright-line Test for Residential Land) Bill because it is part of a Budget and part of a confidence and supply agreement, and I have been wholeheartedly convinced by the Opposition that it is certainly in the best interests of New Zealand for me to keep that agreement going. However, make no mistake, this bill is mediocre and poor public policy, and let us count the ways and the reasons that that is the case.

First of all, it stems from a misdiagnosis of the reason that house prices are high. It stems from the belief that it is the demand side that is the problem not the supply side, and that a capital gains tax can successfully quell housing prices. Well, you only need to ask the people of Sydney, Vancouver, Los Angeles, or London whether or not a capital gains tax has any noticeable effects on price levels in housing markets. In actual fact, in large markets such as the US and Canada, where we have a range of land-use planning policies and yet the same tax monetary and foreign investment policy nationwide, what we discover is that it is the supply elasticity of buildable land that affects house prices. So the first problem is total misdiagnosis of the problem it seeks to solve.

The second problem is that it is politically foolish because it is the acorn that may grow into the tree of a capital gains tax. We have actually heard from the Opposition members who, given the opportunity, say the first thing they would do is expand 2 years to 5 years. Who knows, maybe that would not be enough, then it is 10, and all of a sudden we more or less have a capital gains tax on residential housing.

Not only have we planted an acorn of a capital gains tax—which I can tell you, as an electorate MP, Jami-Lee Ross, people do not want on their homes—but it actually will not achieve any of the outcomes that it is supposed to achieve. Kevin Hague did actually give us a number that tells us that that is the case: $5 million of revenue is expected per year. I know real estate agents who make more than that in royalties each year. It will make so little revenue because it will capture so few transactions, and, as the Law Commission, as the accounting firms, and as the major law firms of New Zealand told the Finance and Expenditure Committee, the reason for that is that anybody engaging in so-called property speculation with any kind of scale can very easily arrange their affairs so that they do not sell the same house within 2 years of purchase. It will be that very small minority of people, having bought an extra investment property, who find themselves overextended and find themselves forced to make a sale and having to pay this tax when they are in dire financial straits. So it will not affect real so-called speculators, it will affect those unfortunate enough to find themselves caught within this brightline test.

In conclusion, this is a fundamental misdiagnosis of the problem with the housing market, in Auckland in particular. It is, in addition to that, a dangerous precedent that will grow into even worse public policy in time to come. It is executed in such a way that it will have absolutely zero effect, if there was to be any at all.

In closing, I would like to pay tribute to the submitters to the select committee: the Law Society, the law firms, and the accounting firms. In many countries such people would quietly welcome a more complex taxation system because, of course, it fattens their fees. In New Zealand we have an enormous amount to be thankful for, because at very short notice we received very high-quality submissions from the very people who would stand, in a narrow, self-interested way, to benefit from this bill, and for that I think we should all be very grateful. Thank you.

It is a pleasure to be talking on this bill, the Taxation (Bright-line Test for Residential Land) Bill. There have been a number of speeches just before about why we are doing this, and I agree with the previous speaker, David Seymour. What this Government is having to do is deal with a market failure. Essentially, there has been a shortfall in the number of houses being built, particularly in Auckland. During the global financial crisis, when we should have been building, on average, about 10,000 a year, only about 3,000 to 4,000 were being built. Consequently, we have got this shortfall in houses, and that has led to an increase in prices.

What this Government has been doing through its 104 special housing areas in Auckland is helping to provide an additional number of houses to the market, and also this bill is one of three where we are trying to deal in another dimension, which is to make sure that the proper incentives for investment in houses are appropriate. So this bill amends the Income Tax Act 2007 by inserting a new section that requires investors and property owners to pay income tax on properties that they buy, from the date of registration, and to pay it if they sell within 2 years of that date. There is a slightly different commencement date for people buying apartments, which is actually the date they enter into the agreement to buy rather than the actual date of registration.

There are three exemptions where this tax does not actually apply: firstly, if you are buying and selling your main home; secondly, if you are buying or selling within 2 years a property that you got through inheritance; and, thirdly, if you are entering into a matrimonial dispute and you have to sell your property. So there are three very clear exemptions. What we have also done is limit this to residential land, so that it does not apply to farmland and so that it does not apply to business land unless the use of that business land for residential purposes is greater than 50 percent.

What we want to do is make sure that we have got a good basis. We have tried to ensure that we are not capturing every normal New Zealander who is buying and selling a house, so the exemption also means that unless you are foreigner or a non-resident, you do not have to put in place any requirement to get income tax registration or anything like that. We simply want to make sure those holding, selling, and trading property within a period of 2 years have to pay income tax. It is exactly the same if you are trading shares on the stock market—you will be deemed to be a habitual investor, and it is the same rules. It is absolutely consistent, and with that I commend this bill to the House.

I agree with the initial comment by Andrew Bayly that the source of the massive housing crisis we have in Auckland at the moment lies back in the aftermath of the global financial crisis. By 2010 this country was building 3,000 houses a year, when at the start of the 21st century it was building 12,000 houses a year. This Government should have been putting in place a counter-cyclical programme so that the construction industry was not crushed, did not lay off its apprentices, and did not run down its materials and its supply of land. We should have gradually been building up, and Andrew Bayly is right about that. To deal with the supply side problem, this Government, after the global financial crisis, should have been acting in a counter-cyclical way.

But the fact of the matter is that we have before us tonight a bill that will barely touch the housing crisis in the Auckland region at the moment.

💬 Hon Maggie Barry: Much like that mayoral candidate.

Houses prices since 2009, Maggie Barry, have gone up by 83 percent, but in the last 3 or 4 years what was major inflation has become massive inflation. House prices in Auckland, Maggie Barry, went up by $150,000 in the last year—$150,000. That is $3,000 a week. What does that mean to the hard-working couple trying to save to get a home of their own? It means that they are not even earning as much as the amount that house prices go up by each week.

Because this Government has dealt with neither the demand problem nor the supply problem, we have a massive deficit of housing that has seen rents going up at three or four times the rate of overall inflation, and we have seen house prices go through the roof. The fact of the matter is that Auckland today is one of the top 10 least affordable cities in the world in which to buy a house—one of the top 10 least affordable cities in the world. We now have the lowest rate of homeownership in the lifetime of anyone in this House. It is the lowest in 64 years, and people have given up on the Kiwi dream of being able to buy their own home.

What have we got now? We finally have a bill that does one thing. It admits that there is a problem with speculation. After 6 years of denying that the problem of speculation had anything to do with the housing crisis, finally we have a bill that says: “My God! There are people speculating on housing and it’s pushing up the cost to the hard-working family.” But the bill then does not act in the way that it needs to act. This bill does not solve the housing crisis in New Zealand. It scarcely makes a difference. It is half-hearted.

💬 Hon Maggie Barry: Much like that member.

It is half-hearted, Maggie Barry, because National has, as part of its core support, speculators in property, and they are whom you stand for. The people on this side of the House stand for the couples, the families, and the individuals who are working hard to buy a home—not to speculate on it and then not pay tax on it, but to actually be able to live in it as a home. Those are the people whom we stand up for in this country—the people who want a house to call their home.

What does this bill do? I will tell you what it does. It makes an admission that the Income Tax Act 2007 is not working in requiring speculators to pay tax on their speculation. I pay tax on every dollar I earn, my kids pay tax on every dollar they earn, and speculators can make more than most members of Parliament make in a year in the sale of one of their properties and not pay tax on it—that is what this bill says.

The regulatory impact statement says that the current test is that you pay tax only if you buy the property with the intention to sell it. So you could say: “Oh, I bought this property cheap. It’s gone up. It’s doubled in value in the last 2 years. I wasn’t intending to sell it, but I am going to now, and that is not income. I won’t pay tax on it.” Tell that to the cleaners who work hard cleaning your offices tonight and who pay tax and can barely live on the income they have got. They are paying tax and the multimillion-dollar speculators are not. This bill does not solve that problem.

In fact, the submitters, the people who were praised by Jami-Lee Ross, I think it was, for putting the work in—what did they say about this bill? They said that it is ill-planned and it is ill-considered. It left one of the tax experts “professionally confused”. Treasury said it will not work and it will not be effective. The brightline test is quite a good test compared with section CB 6, I think it is, of the Income Tax Act because it is objective. But the bill says that you have the brightline test for 2 years, and all the speculator has got to do is hold on to that property for 2 years and 1 day, and then they are off the hook.

If we wanted this legislation to be effective, we would do what they do in other countries and make it last for a reasonable period of time. If you look at Italy and Japan, the threshold is 5 years. If you look at Finland, Germany, or Korea, it is 10 years. In France and Austria, it is over 30 years. If you want to deal with speculation and if you are genuine about it, then you make sure that that brightline test lasts for a much longer period. Then I would be convinced that this bill was a genuine effort by the Government to stop speculators making a fortune while families have their dreams crushed. This bill will not do that because the Government has decided not to do that, and there are a lot of other things that need to be done as well.

I was waiting to hear one member of the Government say why it benefits New Zealand to have people who do not live in this country, and who never intend to live in this country, buy up land here and speculate on it. How does that help the homebuyer in New Zealand? Why is it that Australia banned people who have never lived in Australia, and who do not intend to, from buying up existing residential property? Because a conservative Government in Australia recognised that that did not help the ordinary Australian. It will stand up for the ordinary Australian in a way this Government will not stand up for the ordinary Kiwi.

Why is it that Hong Kong and Singapore put a hefty stamp duty tax on foreign investment? If you did not want to ban it, put a 40 percent stamp duty on, and that would kick the speculators out. That would be one factor in keeping the prices down for the New Zealand purchaser. But this bill does not do that.

This bill does not address the supply side. When I go around the major residential builders in Auckland and ask “What can we do to get up the level of building so that we can actually make the supply meet the demand so people can afford to buy their own homes again?”, do you know what they say? They do not talk about the Resource Management Act. They do not talk about anything that Nick Smith is spending his time on. They say: “Give our industry confidence and give it certainty.”

If you were to do the partnership that Labour Governments have done in the past to solve the housing crises, then we would gear up. Then we would build and we would resolve it. [Interruption] Those members can scoff as much as they like. I live in an electorate where the houses were built with a partnership of a Labour Government and the building industry so that people had warm, dry, stable homes, and a generation of New Zealanders benefited from that. Why not do that again? If it is market failure, as Andrew Bayly rightly said, why not make sure that the State works in partnership with the private sector to address that market failure? Then you would resolve it.

At the moment, the situation facing homebuyers in Auckland has never been worse—never been worse. The best this Government can do is to come in with a pathetic little admission that speculators are part of the problem, and then implement a measure that its own Treasury officials say is ineffectual, will not work, and should be for 5 years, and that every submitter, bar one, to the select committee from the law firms and the accountancy firms said was ill-considered and ill-conceived and was more in answer to the focus groups than a genuine effort to solve the problems of this country.

I was not quite sure what the last speaker, Phil Goff, was getting at. I think he was trying to talk the Auckland house prices down and he was trying to reduce the rateable value of the assets that any Auckland Council may want to rate and raise revenues against, which I would have thought would be in conflict with any potential mayoralty aspirations. Nevertheless, try to tell that to the Aucklanders whose house prices he wishes to be reduced, halved, or reduced by a third. I am not sure what sort of discount he wants to achieve. Nevertheless, I can say that there are Aucklanders moving to the Wairarapa because there is opportunity there. There is opportunity in the Wairarapa, there is opportunity in Wellington, and there is opportunity in Christchurch. Not everyone has to live in Auckland. Not everyone is forced to live in Auckland. They can choose to live elsewhere, and there are lots of places that Aucklanders can go to.

💬 Mr DEPUTY SPEAKER: Wanganui. [Interruption]

Even Wanganui, Mr Deputy Speaker. There are lots of choices and there are lots of opportunities, so I suggest that if one cannot afford a home in Auckland, a home in Auckland that is going to cost close to a million bucks, one should look elsewhere.

I return to the bill. This bill, despite what the Opposition says, is not confusing. It is actually very simple. It deals with two aspects: residential property and the fact that it is purchased and sold within 2 years. That is it. That is all that we need to talk about. It is that simple. It is part of a suite of legislation that this Government is passing to contribute to freeing up land to be part of the housing zones that are being nominated. This is sensible legislation that supports that initiative. It is not based on Chinese-sounding names. We do not develop property or investment policy based on Chinese-sounding names, unlike Mr Twyford, supported by his leader, Andrew Little.

💬 Hon Member: Give it a rest.

“Give it a rest.” is being shouted from the other side, but, unfortunately, that is the policy of the Labour Opposition, alongside a capital gains tax. Some Labour members will not support a capital gains tax—I know that. But some of them will, and, unfortunately, they need to get their house in order to come out with some sort of united policy.

I just want to help Mr Nash with the concept of the house with the greatest connection. If Mr Nash is really that confused and if he is unsure about the house that he has the greatest connection with, I suggest he just goes and asks his wife, because I think that it is so obvious where one’s home of greatest connection is that there is no debate. To suggest that it is confusing and difficult to understand is a nonsense. I am very pleased to support this bill.

The question was put that the amendments recommended by the Finance and Expenditure Committee by majority be agreed to.