Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Bill

I move, That the Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Bill be now read a third time. For the benefit of the members, I will briefly recap the three main items contained in this bill.

This bill proposes a new tax, a residential land withholding tax, as a means for collecting tax under the brightline test on the sale of New Zealand residential land by offshore vendors. Members will recall that this new tax is the third component of the Government’s suite of changes to address tax compliance in the property market. The brightline test introduced earlier ensures that the gains on property bought and sold within 2 years are taxable. This new tax is aimed at offshore vendors because it can be difficult for the Inland Revenue Department to collect tax from the proceeds of such sales from foreign owners with no or limited presence in New Zealand. The new residential land withholding tax will, therefore, be collected by the conveyancing agent from the offshore seller at the point of sale and becomes payable from 1 July 2016. There will be an exemption for disposals of inherited property as well as relief for property transfers as part of a relationship agreement. The residential land withholding tax supports the effectiveness of the brightline test and contributes to the integrity of the tax system.

I now turn to the GST measure in this bill. The strength of our GST rules is that the tax is applied equally and with very few exceptions. This helps to ensure that the tax is fair, efficient, and simple. However, GST is not currently collected on most cross-border services and intangibles, including internet downloads and online services. Therefore, this bill proposes that GST be applied to cross-border remote services and intangibles, including e-books, music, videos, and software purchased from offshore websites, supplied by offshore suppliers to New Zealand resident consumers by requiring the offshore supplier to register and return GST on these supplies. This would come into force on 1 October 2016. New Zealand is not alone in seeking to address the issue, and the proposals are in alignment with the OECD guidelines and similar rules that apply in other countries, including the European Union. The proposals in this bill also align with Australia’s proposed rules. The proposed amendments are sound measures that will address the non-taxation of cross-border purchases of intangibles, maintain the broad base of New Zealand’s GST system, and also help to level the playing field for domestic and offshore suppliers.

The third item in this bill aims to help ensure that student loan borrowers living in Australia meet their loan obligations. Most student loan borrowers do the right thing and repay their student loans, but borrowers living overseas have a lower rate of compliance than those living in New Zealand. Not surprisingly, keeping in contact with borrowers is an important way to keep borrowers engaged with their loan obligations. This bill, therefore, contains a proposal to allow current contact information on student loan borrowers living in Australia to be shared between the Inland Revenue Department and the Australian Taxation Office.

In bringing this bill to its third reading I thank the policy officials and drafters who worked on the detail of the bill, the organisations and individuals who made submissions on the proposed legislation, and the Finance and Expenditure Committee for its consideration and recommendations. I commend this bill to the House.

The Minister of Revenue outlined a couple of points there that I think will require clarification. First of all, he talked about the GST on online services. He said that what this bill does is it levels the playing field. If only it did level the playing field it would be a fantastic piece of legislation that we could support wholeheartedly. We are supporting this piece of legislation but only because it is better than nothing. There could have been so much more that the Government did with this legislation because the real tale here is that New Zealand consumers are buying so much more over the internet than purely online services. What about all the retail stores? You could have gone hard on the retail stores, Minister.

💬 Hon Michael Woodhouse: Work in progress, Mr Nash—work in progress.

Work in progress—we hear this the whole time. Why bring dribs and drabs into the House? Why not do this all at once? Why not just say: “OK, we understand the issue.” As the Minister said, the OECD understands the issue. The OECD is working incredibly hard on this, with a whole lot of other issues in terms of global tax problems, but the OECD has said this is a major problem. Other jurisdictions are implementing such rules, but we are doing this in such a piecemeal way.

The issue that really needs to be addressed is not so much the online services, and at least we have started somewhere, but it is the clothes, it is the books—and I am not talking about e-books—it is the shoes, and it is things that New Zealanders are now going online to buy because this is the 21st century. This is what 21st century commerce looks like. What this does is to immediately give overseas suppliers a 12.5 percent competitive advantage over New Zealanders. People may say: “Oh no, well, you know they have got to post them to New Zealand. Therefore, that is more than 12.5 percent.” That is not right. That argument does not hold water because New Zealand retailers have imported things themselves.

💬 Hon Michael Woodhouse: 15 percent now, Stuart. Keep up.

Fifteen percent—there you go, it is even worse. It is even worse. That is interesting because the reason I said 12.5 percent is that I have this line that keeps playing in my mind the whole time. When John Key stood in front of the cameras in 2008 and said “No new taxes.”, he then implemented a new GST tax, and he has got a new tax here. So I just keep thinking that, no, no, Mr Key does know what he is talking about, but Mr Key is so out of touch that he keeps implementing these new taxes and keeps hammering middle New Zealand—hammering middle New Zealand.

We have got to remember that a whole lot of the retailers who own shops selling stuff on main street to Kiwis are middle New Zealanders. They are struggling at the moment, and the reason they are struggling is that their main competition is not the bloke the next street over and not the bloke the next city over but the faceless person on the computer over in some other country, who has a 15 percent competitive advantage already. We should have closed this down. I would have thought that if this Government was working for middle New Zealand, what it would have said is: “We understand there is a problem here. Let us level the playing field.”

The Minister has said that it is a work in progress. We hear this too often. What does it mean and when is it going to be here? And why did you not just deal with the issue in one chunk? Why deal with it in a piecemeal way that just sends the wrong message? I just think it is a missed opportunity—there is no doubt about that.

Let us have a look at the residential land withholding tax. It was good to hear the Minister say that this is a new tax. We all heard him, and it is a new tax. It is one of those new taxes that Mr Key said he would never bring in, but it is a new tax. But the Minister did say that this brings integrity to the tax base. It does not bring integrity to the tax base. This is the problem. In New Zealand tax law there is something called the intent test. This test is about the intention of the investor when they buy a house. If the investor buys the house to make a rental yield, then there is no tax in it. If they buy a house to make a capital gain, then they pay. But it is not working, and this is the reason why we have had to introduce this new tax, which is a withholding tax to ensure that people who are buying properties for capital gain actually pay the tax that is due to the New Zealand tax system.

The interesting thing is that the Inland Revenue Department (IRD) believes that the rorts going on are worth—I am not too sure; the Minister will know—I think it is about $250 million to $300 million to our tax base. These are people who are buying properties, under the law, for capital gain, but just not paying capital gains tax. I think I am right in saying, and, again, the Minister can correct me if I am wrong, that the IRD has prosecuted one person—one person—in the last 5 years under the intent test. The reason it has prosecuted only one person—and let us be honest, various Governments, including Labour, gave the IRD a significant amount of money to chase these guys—is that it is incredibly difficult to prove intent. In fact, all you have to do is say to your lawyer, say to your accountant, and say to all your mates: “I buy this house with the intent of making a rental yield.” Then, 18 months later, you sell it for a massive capital gain and the IRD says “Are you sure you bought this for that intent?”, and you reply: “Absolutely. Ask my accountant and ask my lawyer. Thank you very much for the $200,000—but it was all intent. They offered me a price I could not refuse. Oh well, never mind.”

We have to do something about this. There is a real problem with overseas speculators purchasing houses in the New Zealand market. It is distorting the market. It means that New Zealanders are being priced out of the market. What we do know is a lot of this overseas speculation results in houses remaining empty. We are marketed overseas as not having a capital gains tax—that is how the New Zealand housing market is sold to overseas investors—so we have stuck in a 2-year brightline test. The IRD wanted 5 years, and the reason why it wanted 5 years is that it did a scenario analysis. It wanted 5 years because it knows that you can hold on for 2 years and 1 day and sell it and you are fine—there is no problem whatsoever. It did not think—and I agree with them—that 2 years was long enough. I do not think 2 years is long enough. We are supporting this bill because at least it is better than nothing, but it could have been so much better.

The interesting thing is that if you watch the faces of the Nats on the other side of the Chamber who were on the Finance and Expenditure Committee, they know that this is not very good at all, because these guys are smart—they know how business runs, and they know that this is just a rort. I do not blame the Minister—I do not blame the Minister. He came in and he was given a hospital pass. This Minister was given a whole lot of hospital passes, actually; it is quite interesting. He must be wringing his hands. But he inherited this bill. I would like to think that this Minister would have said: “No, no, 2 years does not work—5 years.” The Minister whom he replaced is off around the world—we never see him—so he is not held to account, whereas this Minister has got to implement this bill, which everyone knows really just does not address the problem in any way, shape, or form. In fact, the interesting thing about this is that even the Minister of Finance himself said: “Well, I do not know how much money this is going to bring in. I do not know whether this is going to make a difference.” Why are we wasting everyone’s time when the Minister of Finance himself has said: “I do not know whether this is going to make a difference.”?

Surely, when we talk about the integrity of the tax system, we have to introduce legislation that actually does make a difference. That is what we are about over here, but not those guys, who have tended to forget about middle New Zealand and about how middle New Zealanders are struggling to afford a house and how they see these overseas speculators coming in, cutting the guts out of the Auckland housing market, and just pricing it way out of reach. It is just not right.

The other thing that I will talk about are two missed opportunities relating to GST. “Online services” should have included charging GST on everything imported. The other thing is the residential land withholding tax—it could have been so much better.

Student loan stuff: we all agree that if a student borrows money from the Government they are under a contractual obligation to repay it. We have set up a deal with Australia, but why Australia? We all know that there are a whole lot of Kiwis who go to the UK. Why did we not do this with the UK? Why did we not say that these are the top four countries that New Zealand students go to and abscond from their obligations?

If we had done this, then that would have brought integrity to the tax system, and that is what we need. We need a tax system that is seen not just by New Zealanders but by everyone overseas as having integrity. I am just really concerned that what this is going to do is put another piece of piecemeal legislation on our books that we are going to have to come back and revise, I would say, within 18 months to 2 years. We heard the Minister say: “Oh, we will deal with the other issues later.” That is just not good enough. I can tell you that in the Finance and Expenditure Committee, if we had had a bill that dealt with all GST on all imported goods, we would have supported it. We would have gone hard.

We are supporting this bill, but it really is a bill of missed opportunity for charging GST on imported goods, which would have helped our retailers. And for the residential land withholding tax we should have done something better to help New Zealanders, and also for student loans. Thank you very much.

It is amazing: when it comes to a tax bill, the Labour Party is all about “could have, should have”, and “want to” and “do more”. It is all about doing more, is it not? Well, let us have a look at that speaker, Mr Stuart Nash. He is the member who is the Labour spokesperson on revenue and he does not even know the GST rate. What is the difference between 12.5 percent and 15 percent? Tell us the difference. What is it? Mr Nash, what is the New Zealand GST rate? This is the man who wants to be the revenue spokesperson, and he does not even know what the GST rate in New Zealand is. It is not hard. It is 15 percent. It is not 12.5 percent; it is 15 percent.

But I will give him credit—you know, everybody can make one mistake, but Mr Nash has made a number of mistakes in the tax policy. Let us remember the last big mistake Mr Nash made, and that was when he wanted to tax farmers on their gross income. He did not want to have any businesses taxed on net income. A business does not need net income; if a business earns this amount of money it should be taxed on that amount of money. It does not matter about the expenses—they are not relevant, are they, Mr Nash? That was the other great piece of financial advice that we got from the revenue spokesperson from the Labour Opposition.

So we have seen two great pieces of information from Mr Nash. One is what the New Zealand tax rates would be in GST—maybe Labour is going to drop GST. Maybe that is what it is going to do. But what we know from the third fact is that the Labour Party wants to increase New Zealand’s taxes. The Labour Party will go into the next election without any definite policy around the promises that it will make, and it will be increasing New Zealanders’ tax rates to over 40 percent. You can guarantee that. New Zealand’s high-income earners will be paying over 40 percent, maybe over 50 percent, under Labour. That is what it intends to do.

But there is more. There is one more thing—

💬 Andrew Bayly: There’s more?

There is one more thing. That member’s leader has gone out this year and made it very clear that there would be no capital gains tax under a Labour Government. Every time we hear a speech from the Labour Party around taxation, Mr Stuart Nash and Mr Grant Robertson always hark back to the need to increase taxes on the sale of property. Those two members want a capital gains tax—

💬 Stuart Nash: No, we should implement the law.

—and he says: “No”. He says: “No”. Well, look at his words today: “We have to do something about this.” He wants a capital gains tax. Those are his exact words. New Zealanders, beware, the man wants to reduce GST if he could—if he actually knew the number—the man wants to tax you on your gross income, the man wants to tax you at 40 to 50 percent, and the man wants to bring in a capital gains tax. What a great revenue spokesperson, in the mould of the Phil Twyford and David Cunliffe model of Labour Party spokespeople. Thank you.

For those who still have some ability to hear after Mr Bennett’s speech, can I just make the point that Stuart Nash made a small error when he mentioned the GST rate, and the reason he made that error was that he made the mistake of believing John Key. He made the mistake of believing John Key, who told New Zealanders there would be no increase in GST. It was his “read my lips” moment. He said “Read my lips: there’ll be no increase in GST.”, and what did he do when he got into power? He increased GST to 15 percent. This is the same John Key who, when David Bennett gets up and says “Oh, be fearful of what new taxes might arrive.”—well, look in the mirror, Mr Bennett. Actually, do not look in the mirror—a very dangerous exercise if you are David Bennett.

Look across the caucus, Mr Bennett, and you will see the new taxes that the National Government has brought in. Let us just run through the new taxes that it has brought in. Firstly, we have, effectively, with the brightline test, a new tax, albeit a tax that is going to be completely ineffective in the job that it was asked to do of trying to control the out-of-control speculation in our property market. In fact, the Finance and Expenditure Committee, during the process of this bill, heard that the brightline test will probably bring in—what was it—around $5 million.

💬 Fletcher Tabuteau: If that.

Maybe $5 million, if that. The Government was told by Treasury to make it a 5-year brightline test. It has made it only a 2-year one, so it is a new tax, albeit an ineffective one as well. Then we have also got the border tax that was brought in by the National Government in the last Budget—the tax on all passengers coming over the border. But, of course, there were “no new taxes”—that was what David Bennett told us. Then we have also had the levy on telecommunication providers, and we had John Key speculating about another new tax: the land tax. So John Key has now introduced a fourth tax, and then this bill creates the fifth new tax from the National Government. So for David Bennett to stand up in front of this House and say “Be fearful about people making promises about increasing taxes.”, he needs to own the fact that his Government has broken the promise that it made to New Zealanders on that score.

On this bill, there are two or three things that I want to say. The first of those is that we will be supporting this legislation, as we have done with other pieces of tax legislation brought forward by this Government, because it takes steps—timid steps—towards dealing with some of the issues that are affecting our taxation system. In particular, it is one of the new taxes: the introduction of GST on online services. As other colleagues have said during this debate, the goal stated by the Inland Revenue Department (IRD) and by the Government was to create a level playing field—to create a level playing field—when it comes to taxation.

Some companies in New Zealand will be delighted when this bill passes. I am thinking here particularly of Spark, which will be looking and saying: “This is great. We are going to be able to put our offering in terms of Lightbox on the same footing as Netflix.” Absolutely terrific. Well done—put a tick in that box. But if Simon Bridges goes down to Unity Books in Wellington and he makes sure that he buys the—

💬 Phil Twyford: Good to see you here tonight, Mr Bridges.

Well, you know, he would go down there. He wants to get the complete set of Nancy Drew novels, because that is what Simon has been looking for all these years. They are good books, do not get me wrong—they are good books—but he has gone down there to get the complete set of Nancy Drew novels. He fancies himself as a bit of a detective. He is going down there to do that.

When he goes down there to do that, he might stop for a minute and think: “Hang on, can I order these as an e-book? Can I order these as an e-book for my Kindle?”. That is what Simon Bridges might be thinking. When he goes and says “Right, I am going to get the Nancy Drew novels as an e-book on my Kindle.”, the charge will apply. But then if he decides to order hard-copy books—because we know he likes to have them beside his bed at night, piled up there, the Nancy Drew books. We all want them, do we not? Yes, that is right, but Simon Bridges particularly wants them. If he goes and buys those and gets them imported over here, there will be no GST there—no GST there, but there will be at Unity Books.

That is the problem: the level playing field has not been created. For the main street booksellers, it has not been created. Some of the best submissions we got in this committee were from Retail New Zealand and members of Retail New Zealand, who came and said: “We’re finding it hard to compete. We want some support from the Government. We understand and we accept the logic of a level playing field, but that did not happen.”

So there is no level playing field for those main street retailers, who cannot ensure that GST is charged on imported goods coming overseas. So by all means charge GST on intangibles. That is a step forward, but the Government has missed out here when it comes to truly creating a level playing field.

The other matter I want to refer to is the introduction of a residential land withholding tax. It has been mentioned before by my colleague Stuart Nash that this fits into the broader tax programme that the Government brought in in terms of the brightline test and the other issues that we will soon see some information from around the requirement for people to have a bank account and an IRD number when, from offshore, they are purchasing property. Very soon we will have that information about the impact of foreign buyers. John Key is softening up the New Zealand public—it is suspicious that he might actually know how many people are going to be identified in that list of foreign buyers. He is concerned about the New Zealand public’s reaction to that, and so might he be, and that is why he has raised the idea of a land tax.

But, as a package, this is weak. It is not really going to deal with the speculation that is pushing house prices up, making them utterly unaffordable. It is pushing up the house price to income ratio to 10:1 in Auckland—one of the highest in the world. Property values are going up by $100,000 this year, out of reach of most New Zealanders. The National Government continues to act in the interests of the speculators and act in the interests of those who are not part of the productive economy, those at the very top, but not act in the interests of the majority of New Zealanders—the New Zealanders who want to get into the property market. These measures are inadequate when it comes to trying to deal to that.

They are part of a tax work programme. The residential land withholding tax is part of a tax work programme that the Government had put to it by the IRD through 2014 and 2015. It accepted the residential land withholding tax, but what is not here is action to crack down on those who avoid their tax and those who evade their tax. That has sat in the very same work programme as the residential land withholding tax and the Government has ignored the advice that the IRD has given it.

It is worse than that. The IRD started a programme of work to review the taxation of foreign trusts. It started that programme of work in 2013 and 2014, along with the residential land withholding tax, and it was going swimmingly until about November 2014, when a report went to the Minister of Revenue that said: “We’re going to be with you on this review of taxation in December 2015.” And right there, at the end of November 2014, along came John Key and his personal trust adviser, Ken Whitney. They intervened. They intervened, they got to Todd McClay, and Todd McClay got to the officials, and all of a sudden—all of a sudden—the work programme that the IRD had, where it said that the review of foreign taxation rules was a key focus, was gone. Respected officials from the IRD who had worked hard on legislation like this were forced to write to their colleagues that the Minister had stopped the review of foreign trusts.

What we should be seeing is legislation coming to this House that cracks down on those multinational companies that do not pay their fair share, that restores New Zealand’s reputation as a place of integrity when it comes to tax, and that gets rid of our reputation as a tax haven in respect of foreign trusts. That is the legislation that should be in front of the House today. That is the work that was in the work programme of the IRD until Todd McClay got his riding instructions from the Prime Minister’s trusted adviser to get rid of that.

This legislation is a missed opportunity. This should have been about our tax system being robust and being ready for the 21st century, supporting our main street retailers, and restoring our reputation, and it fails on all counts. The National Government is out of touch, in my view, when it comes to the impact of taxation and how to make the best of taxation to support a productive economy in New Zealand. This is a piecemeal, tokenistic effort from the Government. It is one that the Labour Party supports, but reluctantly so.

As members probably know, I have just returned from a little trip up north, skiing around the North Pole. It is an absolute pleasure to be back in the House with all my wonderful colleagues and, of course, the members of the Opposition. Just before I talk a little on this bill, I want to compliment the Labour Opposition because, contrary to all the talk that we have just heard, it actually supports this bill. It supports this bill and the good work that has gone into it. And it is a good bill.

As the Hon Michael Woodhouse said, it has three elements to it. One is around finalising the residential land withholding tax for foreigners, the second is GST on intangibles, but the third element is around student loans. And I thought I might just talk about this because in all the previous speeches no one has actually mentioned that aspect. So the student loans—it is interesting that back in September last year there were about 725,000 students owing money to the Government, of which 15 percent were offshore. What this bill is about is making sure that those people living offshore who have a student loan meet their commitments. It is estimated that there is about $3.2 billion owed by students living offshore, and this bill is about making sure that they do meet their commitments.

What we have agreed through the Australian tax office is that it can share information around contact details with the New Zealand tax office so that we can make sure that people are meeting their obligations. This is another way of not actually increasing taxes but actually making sure that the Government receives the revenue it should, and making sure that it can apply that money to meeting our social commitments and all the other good things around education, health, and infrastructure that everyone wants to see take place in New Zealand. So I think it is an excellent bill. I am glad to support it, and I thank the officials for all their help. Thank you very much.

As the previous speaker, Andrew Bayly, pointed out, some of the Opposition parties, including Labour and the Green Party, are supporting this bill, and that is because it is relatively uncontroversial. I do think the officials did good work, but the changes that it makes are not fundamentally going to change New Zealand for the better. I think that is the story of this National Government—ultimately, it does not have the courage to take on the big issues that we are facing in the 21st century. It is not doing anything about climate change. It is not doing anything about reducing growing inequality in New Zealand. It is not doing anything to tackle the housing crisis.

In this bill, there is a tiny bit that is related to the brightline test, which is National’s too little, too late measure—a very mini - capital gains tax—which it has tried to use to curb the out-of-control house price inflation in Auckland. But, of course, there are huge problems with the brightline test bill. This bill implements the residential land withholding tax, which is a method of collection for anyone who has little or no connection with New Zealand who buys or sells property within 2 years and, therefore, has to pay the tax on any profits they make. The real issue is that we do not have fair taxation on property. Anyone who holds on to a property for longer than 2 years will not have to pay any tax on it, and that is the reason we have this incredibly unbalanced housing market in Auckland right now, where the vast majority of new mortgage lending is going to property investors, not to first-time homebuyers.

We do have a problem, undoubtedly, with a lot of foreign capital coming in, because there is no restriction on the ability of foreigners to purchase property here in New Zealand. We are going to find out for the first time—after many years of asking for data on this, the Government finally acquiesced and realised that we do have to collect data on it in order to understand what the impact is. This is not because we in the Green Party are opposed to immigrants or to people from other countries coming to New Zealand. Obviously, as an immigrant, I can say that we are absolutely supportive of immigration, but having a whole lot of foreign capital coming into New Zealand and bidding up the value of our properties is not good for those people who want to live in New Zealand. That is why we think that the sale of property should be limited to residents and citizens of New Zealand. If someone is willing to take the steps to become a resident or to become a citizen, then, why not?

Of course we should allow those people to come to New Zealand and make their home here, but that is quite a different proposition to what is happening at the moment and what is driving up house prices in Auckland. That is a consequence of a shortage of supply, which the Government is doing nothing about, and it is also a consequence of the fact that our tax laws favour investment in property, which is very inefficient for our economy on a number of levels. It is bad for first-home buyers and renters, but it is also just bad more generally for the economy, for growing a smarter, more diversified economy. If we have a lot of people investing in property—just buying and selling each other existing houses—that does not do anything to make us better off.

💬 Hon Simon Bridges: Yes, it does.

Interesting assertion from the Minister Simon Bridges there that it does make us better off—just a group of people buying and selling houses. It is interesting.

The other part of this bill is extending GST to online services, and we can agree with that. That is rectifying an uneven playing field so that New Zealand purveyors of services are no longer disadvantaged by online service providers who do not have to pay GST here in New Zealand, and that is fair enough. At the Finance and Expenditure Committee we heard a lot of submissions in favour of this change, but we also heard submissions in favour of making the changes so the same thing would apply to goods that are bought online—that GST should apply to goods that are being purchased online from outside New Zealand. That is not impossible—many other jurisdictions are doing it. There really is no reason why New Zealand should be lagging behind so far.

So we support those aspects of bill—that is, the residential land withholding tax, which will now apply to brightline test properties that owe tax because they have been bought and sold within 2 years. But in both of these cases, this legislation does not go far enough. With the brightline test it should have been at least 5 years, not 2 years. Five years is what Treasury recommended. Most other OECD countries have a withholding period of 5 to 10 years. I was just speaking with parliamentarians from France who said their withholding period is 30 years. So you pay tax on your property if it is not your family home, and when one buys and sells a property and makes profit on it, one has to pay tax. I think that is fair enough. I think that makes sense. But, unfortunately, this National Government has not shown us the leadership and courage to do what is right in this situation.

The final aspect of this bill is enabling information sharing with Australia on student loans. The previous speaker, Andrew Bayly, also spoke about this. Effectively, what the Government is doing here is taking steps to make it easier to track down people who have student loans who are living overseas who may owe us money, and, look, fair enough. People took out a loan; they made a commitment to pay it back. The Green Party disagrees with the student loan scheme. We think it probably makes a lot more sense to invest in education and to have a knowledge-based economy, not to load up students with a lot of debt, which will make it much more difficult for them to be entrepreneurs, to start up businesses, and to take risks when they finish their education with this big debt hanging over their head, and will make it incredibly difficult for them to buy a house as well, particularly if they live in Auckland.

This younger generation is seriously disadvantaged compared with previous generations who did not have student loans and did not have out-of-control house prices. We do not support the student loan scheme such as it is, but we could understand and accept this particular change that is enabling information sharing. But I would also say that the Government needs to apply this principle much more widely. I mean, we would get a lot more money from multinationals that are currently avoiding paying tax in New Zealand, if the Government would actually take action on that, than we are from student loan defaulters who live in Australia.

Speaking of information sharing, obviously we have a special relationship with Australia, because that is the case with New Zealand foreign trusts as well. With New Zealand foreign trusts we do provide additional information to Australia when the settlor is resident in Australia. We do not even collect the information when the settlor is resident in another country, which makes it impossible for us to honour our tax treaties—our double tax arrangements with other countries—because there is no way that a country with which we have such a treaty could ask us for the information about how many New Zealand foreign trusts have a settlor resident in their country who may be using a New Zealand foreign trust to avoid paying tax or, perhaps, for even more nefarious activities. The total secrecy surrounding the New Zealand foreign trust regime makes it very attractive to those who are involved in criminal activities or who simply want to avoid paying tax. There is no doubt that it is only the ultra-wealthy who are involved in setting up New Zealand foreign trusts in New Zealand. Nobody with less than $5 million would find it worthwhile to do such a thing.

So although the Green Party is supporting the bill, I came to Parliament because I believe that New Zealand can be a better country. It can be a country that is responding to the challenges of the 21st century, investing in smart solutions and a smart Green economy that is actually going to lead to real prosperity for all New Zealanders, not just the top 10 percent—the mates of this National Government. We want a fair, smart Green economy that is good for everyone, and we know that that can be achieved.

It is always a pleasure to stand on an evening such as this one to be speaking for the only party in the House opposing token gestures and waste-of-time legislation that achieves nothing. You think I am just using my own words, but those are quotes from most of the accounting firms in New Zealand.

I will get to the detail of that soon, but, first of all, I would like to acknowledge the Minister Michael Woodhouse. What a detailed, comprehensive, and lengthy contribution he gave to the House tonight. It was certainly, certainly, appreciated by the members on this side of the House.

💬 Andrew Bayly: And you probably learnt a bit.

It was elucidating, Mr Bayly. Mr Bayly, it most certainly was. As for Mr Bennett, it is always a pleasure to see Mr Bennett stand up and make a contribution in this House. I will tell you why. It is because every word he says makes any National supporter question why on earth they are supporting the National Party, when Mr Bennett speaks—on just about anything, actually. His contribution, as always, as the chairman of the Finance and Expenditure Committee actually spoke about nothing to do with the legislation at hand tonight. It was wonderful—it was wonderful! I was sitting there, and Mr Bayley said that he would speak to the student loans element of the legislation. So I was sitting there with bated breath, and then he stopped. It was 30 seconds of build-up, and then huge disappointment because nothing actually came of it.

But can I speak to this omnibus bill. I just want to say that there seems to be no rational reason why these very disparate parts of legislation are joined together in one piece of legislation. They are very distinct. Had the Government done its job properly and actually submitted legislation on those parts, New Zealand First would actually have been standing here tonight, and on whatever other nights it would have taken, to support two-thirds of the legislation. We think that in all parts the Government has not gone far enough, but, actually, in two parts it is almost there. So let me speak to those piece by piece.

GST on online services—I have actually had to go out, because of the nature of this omnibus bill, to retailers and small businesses and explain our stance on this legislation. We absolutely support the necessity to level the playing field for New Zealand business. It is an absolute necessity. We have gone out there, and we have talked to business.

I have said it in this House before that the Government’s apathy has been hurting New Zealand small business for the last 9 years. We have seen businesses close up shop. We have seen businesses dismiss staff, get rid of staff, because they literally cannot compete on what is supposed to be an even playing field. That 15 percent may not sound like a lot to you and me, but it is when you are talking margins of certainly less than that of most small retail operations—the margins on most of the products in those shops are minuscule. So having to have that 15 percent disadvantage has been holding back New Zealand retailers for a long time. I am sure the members on the other side will agree that as the internet capabilities expand and as New Zealand consumers become more savvy in their buying habits, they see that difference, and their buying behaviour reacts to the advantage afforded to foreign corporates, essentially. Why has this Government, which small businesses see as an advocate and a spokesperson for them, taken 9 years to get to this point? Can I say that it is a half measure at best.

I will just try to find a quote here from several of the contributors who spoke to the Finance and Expenditure Committee: “The bill further delays addressing the issue of low-value goods, which is a longstanding and significant problem that disadvantages domestic retailers and has negative repercussions for the whole economy.” This spills out not just to our retailers but to the whole economy. We are talking about closed shops and staff members being fired from these small businesses for lack of a fair, competitive playing field for New Zealand businesses. There is no dispute about the fact that that level playing field has been tilted to the advantage of the foreign corporates. It just makes no sense whatsoever. What New Zealand First says is that if that had been a piece of legislation unto itself, we think it is a step in the right direction.

We think the arguments against a full implementation for intangible and tangible goods do not make sense in terms of customs funding. They do not stack up. Given the likes of Amazon and other online retailers being ready and geared up to implement our GST at the click of a button, we think that it could have done it straight away, and maybe 95 percent of those goods could have had GST placed on them and the level playing field would have been a meaningful one in terms of The Famous Five—the book or the e-book. It is a half measure and, as submitters noted, it does not go far enough and we are just going to wait for years more for that playing field to be levelled. It is just not acceptable and it is not right.

New Zealand First cannot support the residential land withholding tax legislation. The brightline test is actually a new capital gains tax on top of an existing capital gains tax that everyone on that side refuses to call a capital gains tax for some bizarre reason. Mr Nash spoke eloquently about the intent of the existing legislation, and that is the reality of it. New Zealand First would argue that the empowerment and adequate resourcing of the Inland Revenue Department (IRD) to enforce existing legislation would have been a huge step in the right direction of addressing the issue of ludicrous housing prices in the Auckland market. We have seen it.

So this is the third part of the supposed triumvirate of brightline legislation. We have seen the implementation of the first two parts, and what we have seen already in the Auckland market is that there was a slow-down. There was an initial reaction to those first two pieces of legislation, and the market actually slowed down for a very brief period. But those foreign investors saw what the requirements were and said: “Don’t worry about it. Let’s go back full swing. It’s not going to affect us, we can get around this—no worries whatsoever.”

So the housing market in Auckland continues to spiral out of control and what we are seeing is that spillover outside that super-city region down into Hamilton, down into Tauranga, and even into Rotorua, my home electorate. So it is a non-attempt—a non-attempt—from this Government to deal with a very, very real issue. We cannot support such a token gesture. Empowering the IRD, like I said, would have addressed most of the issue and would have had a meaningful impact on the continuing problem, especially in Auckland.

This bill is flawed. It is half measures in all parts and, as such, New Zealand First cannot support such a waste of time for this House. It is a token gesture to allow for managed spin. It is a spin campaign so that this Government can say it is doing something, which it absolutely is not. It is not dealing with a very real issue with meaningful legislation. We cannot support this bill. Thank you.

Thank you, Mr Assistant Speaker, for pushing the bell 2 minutes ago. It got me up and listening for the last 2 minutes, at least, of that rather unfortunate contribution. But can I just clarify one thing for Mr Tabuteau: this is not a capital gains tax. This is a tax that taxes people who are trading in properties. So it is just like you are trading in sheep or in wool or in beef or in marbles. If you traded in marbles you would be taxed on the gain of the tradeable income that you gain from the tradeable item. This is all that the Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Bill is clarifying. It is clarifying and determining the fact that these people are trading in property, and therefore they are taxed, and this is the withholding tax part of that to deal with foreign vendors. So there is quite a difference between a capital gains tax and tax on income derived from trading.

The second part I would to address is this. Miss Julie Anne Genter got it partly right when she said that New Zealand is short of capital. It does need foreign capital. It does need capital investment from offshore. But then she does not want it. She does not want it because she does not want foreigners to invest in this country.

💬 Julie Anne Genter: Not in property.

Well, what is the difference between property and shares, bonds, farms, logs, sheep, or beef? These are all things that foreigners are able to invest in, but for some reason they are not able to invest in houses, according to the Opposition. The Opposition members across all parties are talking about a level playing field, and I guess that means that they want everyone to be the same, unfortunately. That would be the ideal: for everyone to be the same, everyone to earn the same amount and to be equally—

💬 Hon Simon Bridges: Because they’re communists.

Exactly—exactly. Of course, they brought up the idea of a universal income. They have got the idea of a universal income where everyone does get paid the same amount—it is about $11,000 a year. It is about $11,000 a year, or 200 bucks a week, so that we can all be the same. But they forget to tell us who is going to pay for this universal benefit idea.

There are a lot of issues that have been brought up tonight, but, focusing on the bill, I commend this bill to the House.

The next call is a split call. Gareth Hughes—5 minutes.

If there is one thing that has baffled me in my political career, it is staggering speeches like that. For some reason, National members can still, with straight faces, go to the people of New Zealand and say that they are good economic managers. This is despite all of the voluminous evidence, the staggering amounts of data, and parliamentary contributions like that. This is a quote that will go down in that member Alastair Scott’s history; I hope he raises it in his valedictory speech. The member asked this House: “What is the difference between investing in property and shares, factories, etc.?”. He should go and talk to some New Zealand businessmen, New Zealand businesswomen, and investors, and they might be able to tell him. The difference, of course, is that a dollar invested in a house is not a dollar invested in growing the economy, developing the regions, or creating employment. It is a dollar invested in a house.

This is what the Green Party wants to see: a prosperous New Zealand that is investing in its economy, that is investing in factories, and that is investing in innovation. But this is the problem—and if you look at the data, just this year the median Auckland house has appreciated in value by $100,000. That is more than the average Kiwi can earn in a year or two—$100,000. And that is because with all the economic signals under this Government—under, no doubt, conscientious members like that, with contributions like that—that is exactly what we will see: a New Zealand that is entirely imbalanced when it comes to the economy and people investing in speculating and not investing in productivity.

I was also going to criticise the member for not talking about the speeches and talking about other parties, so I had better make sure I actually talk about this bill, which is the Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Bill.

💬 Hon Member: We need an acronym for that.

We do need an acronym for this one. It has got three main parts, which my colleague Julie Anne Genter very competently discussed, such as the online purchases goods and services tax, the new brightline withholding tax, and then, of course, the new information-sharing provisions relating to the student loan scheme.

This is the part that I would like to touch on, because this year we have seen some milestones. We have seen an economy underperforming and we have seen the rapid, unsustainable, out-of-control housing crisis—particularly in Auckland, but in other centres as well—but we also passed a milestone, which is $15 billion in national student loan debt. Fifteen billion dollars is a huge sum. It is a figure on the Government’s books, written down on bits of paper, but you must remember, this is a figure worn like a millstone around the necks of hundreds of thousands of real New Zealanders—hundreds of thousands of real New Zealanders, with their own letters in the mail and emails from the Inland Revenue Department explaining how many thousands or tens of thousands, or, in some cases, hundreds of thousands, of dollars of student loan debt they have. Fifteen billion dollars is the real story that Kiwis face. This bill is all around one side of it, which is how the Crown accesses the information relating to New Zealanders offshore, whether or not they are fulfilling their contractual repayment obligations.

This is the problem, because when you come to the student loan crisis, that $15 billion, this Government is more focused on token scare tactics, such as the arrest at the border of the single, potentially offshore New Zealand resident from a New Zealand dependency. That single act alone was of dubious legality. The fact is that the Government is focused more on scaring New Zealanders with student loans who are offshore than on working out sustainable, pragmatic, practical solutions. This Government could instead be focusing on making it easier for New Zealanders offshore to pay their student loan repayment obligations.

The fact is that I believe carrots work so much better than sticks, and when you see the real crisis that is affecting New Zealanders with student loans you have to question, decades on from the establishment of this scheme, whether there is, in fact, a better way. This is what the Green Party stands for: an affordable, world-class, high-quality tertiary education system and more affordable education where the costs of a more educated, prosperous knowledge economy is not all borne on the shoulders of students. That is exactly what is happening at the moment as the Government reduces, in real terms, funding for tertiary education but also, in real terms, increases the costs faced by students with their fees by 20 percent. The Green Party believes in a more affordable, world-class tertiary education—

I am sorry to interrupt the honourable member. The time has come for me to leave the Chair.

Debate interrupted.

The House adjourned at 10 p.m.