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

Tēnā koe, Mr Speaker. E ngā mema o Te Whare nei, tēnā tātou katoa. I am pleased to take a call on the third and final reading of the Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Bill. Just so that we can recap, the purpose of the bill is to make amendments to the Student Loan Scheme Act 2011, the Income Tax Act 2007, the Goods and Services Tax Act 1985, and the Tax Administration Act 1994.

There are three components of this bill, which I would like to just briefly touch on in my contribution. The first one is student loan information. The bill intends to allow information on student loan borrowers living in Australia to be shared between the Inland Revenue Department (IRD) and the Australian Taxation Office, ensuring defaulters pay their outstanding loan balances. The provisions in the bill, once incorporated into the law of both countries, are intended to give IRD up-to-date contact details to track down defaulters. The provisions also, under this part of the bill, include streamlining the rules applying to borrowers who work overseas but are entitled to interest-free loans because they work for approved charitable organisations, and standardising the treatment of over-deductions from a borrower’s salary or wages.

In the Committee stage, my colleague Stuart Nash made some very good points on this particular part of the bill. Ensuring timeliness of registration is critical for our students who are living overseas. The clock needs to be shortened so we are not paying undue interest when registered charities are being accepted. He made some very good points on that, and I do hope that that has been picked up finally in the bill. The other part he talked about was the level of disclosure, particularly around the charities. I guess the point that my colleague was trying to make, given that “tax avoidance” and “tax havens” are terms that are being bandied around New Zealand, was about ensuring that the level of disclosure for our charities is consistent with other tax laws. I do support him on that point.

Moving to the other part of this bill, I note that it highlights new property investment rule changes. The bill provides for a new withholding tax on sales of residential property by people who live overseas and go on to sell the property within 2 years of purchase. The proposed residential land withholding tax is intended to act as a collection mechanism to the brightline test that applies to gains from the sale of residential property purchased on or after 1 October 2015 and sold within 2 years. This test has been introduced by the Taxation (Bright-line Test for Residential Land) Act 2015.

The tax will apply when the property being sold is located in New Zealand and defined as residential land under the brightline test provision and when the seller acquired the property on or after 1 October 2015 and owned the property for less than 2 years before selling it. The other part is about when the seller is an offshore person. The bill defines what is classified as an offshore person. It is a person or people who are not New Zealand citizens, people who do not hold residence class visas, and New Zealand citizens and residence class visa holders who have been away from New Zealand for a significant period of time—3 years in the case of New Zealand citizens.

We support this bill, but I want to say that, unfortunately, it is a lost opportunity. It is a glass half full. It may not be perfect but it is a start, which is something we seem to hear constantly from that side of the House. We should have addressed those relationships of students who are living in the UK, for example, and, of course, the GST that we did not cover in terms of assisting small businesses. It is a bill that we support but, like much of the legislation that that side of the House brings, it does not address the real heart of helping small businesses. None the less, it is my pleasure to say that we support the bill in its third and final reading. Thank you.

I take this opportunity to speak briefly on this bill and commend it to the House. As Meka Whaitiri has mentioned, it has a number of measures around GST and online services and also around residential land withholding tax. Those who have been following tax bills for some time will know that the residential land withholding tax changes are the third of three series of changes we have made around tax with regard to property.

The first thing that we required was an IRD number to be provided when property was sold and purchased by an overseas buyer or seller. Second was the brightline test, which required tax to be paid if the property had been bought and sold within 2 years and it was not a main home. The third change here is around residential land withholding tax for those who are offshore people.

It is interesting that we are talking about offshore buyers and sellers at the moment, because those who follow Twitter, as I do, will see that Land Information New Zealand has just released some data around foreign buyers. Of course, the Labour Party has been beating this up for many, many months. Apparently there are tens of thousands of people from overseas buying all our houses, and Labour is claiming—

💬 Hon Dr Nick Smith: 36 percent.

—as Dr Smith said—that 36 percent of people from overseas are buying our houses and that it is a huge number and it is a huge problem and something that we should all be crying about in our beds at night. The information from Land Information New Zealand that has just been released, which is now online, shows what number? What percentage of people who are overseas foreigners are buying houses? It is 3 percent.

💬 Scott Simpson: How many?

It is 3 percent. So the number of people buying houses in this country, that this bill actually targets, quite rightly, is nowhere near as high as what the Labour Party claims it is. It has been beating this up for months, probably years, in fact. In fact, it is opposing the Trans-Pacific Partnership (TPP) because of foreign buyers. Three percent of our houses in this country are being sold to foreigners. In Auckland, where we have got all the problems, apparently, it is 4 percent. So Labour is opposing the TPP because of 4 percent of houses being bought by foreigners. It has been claiming for months that foreigners are wrecking New Zealand in its anti-foreigner attacks. Labour is absolutely wrong. The data does not back it up. But, quite rightly, where people are buying and selling houses within 2 years and they are foreigners, we should be taxing them appropriately, and that is what this bill targets today.

As other members have said, the Labour Party will be supporting this piece of legislation. There is a maxim when it comes to taxation legislation: it should be transparent, it should be simple for people to understand, and it should have integrity.

If you go through the legislation, although there are, to be fair, the beginnings of some good work, which we support, it is noteworthy to look at some of its aspects. For instance, we looked at National dragging its feet in respect of applying GST to products bought from overseas, and we saw that after a lot of political hot air, the previous Minister of Revenue—I think it was either Mr McClay or Mr Dunne, I cannot recall which—said with a big hiss and a roar that he would go after online services in respect of GST. What did we come out with? Well, we came out with iTunes and Netflix. It is not a bad start, I have to say, but I would ask the Minister for Small Business, who I see is here, how many New Zealand businesses will be affected in a positive way because GST is charged on those particular online services. I doubt whether there will be many in the small business space. I recall, I think, the Retailers Association, which was pretty vehement and robust in its view that if you are going to do this you ought to do it correctly. There are a heck of a lot of other online services, of course, that will not attract GST under this bill, anyway.

What the Government has done is pick a bit of low-hanging fruit and trumpeted this as though it is some great taxation reform. To be fair, it is a good start, not a bad start. But if you are actually trying to get traction and assist small businesses in this country, I would have thought that a lot more thought and policy work would have gone into this, going well beyond iTunes and Netflix. I do not see too many small businesses down Lambton Quay—and I see a few members down the back of the National Party nodding—in the competitive space of iTunes and Netflix, jumping up and down and rejoicing today as we have the third reading of this bill because it is going to assist them with millions of dollars flowing into their bank accounts. I do not think so. I doubt whether there are many small businesses down Lambton Quay or Queen Street or in Porirua or anywhere else that will be rejoicing because, somehow, their revenue base is secured because the Government decided to have a crack at Netflix and iTunes in respect of GST.

There are other areas of online services and online purchases where the Government could have a major impact in levelling the playing field for domestic small businesses. Small businesses in New Zealand do not want a subsidy; they do not want something out of the box or some preferential treatment. What they are seeking here is a level playing field and a fair go, and it will be interesting to see how long it takes the Government, in its next tranche of tax legislation, to advance those particular issues.

I note that the last speaker, Jami-Lee Ross, was wont to go through the raft of changes the Inland Revenue Department (IRD) has made in respect of land purchases. He talked about the requirement for an IRD number—not exactly earth-shattering stuff—and the requirement for a brightline test of 2 years, where tax is accrued if you sell a second property, other than your family home, within 2 years. A number of us made the point in the Finance and Expenditure Committee, and we make the point again here today, that if you are getting 20 to 24 points per annum of capital gain on a property in Auckland, most property owners will not flip that property inside 2 years, because they are making such huge capital gains. In fact, one could argue that the best investment in New Zealand, in respect of capital gains returns, is a property owned in Auckland.

What that 2-year provision and the third provision around residential withholding tax may do is have some minor impact on the fringes of property speculation. But in terms of those people who are buying properties for investment, who are making—and there are a few business people across the aisle, like the Minister for Small Business; could he tell me, perhaps, of a better investment, with a better return than 20 to 24 points per annum? I do not know if there is such a thing. I see he is busy there, in a culinary sense, and may not be able to answer, but I cannot see an investment greater than that in this country. That 2-year hold—when Treasury, of course, recommended 5-plus years—is, again, a bit of window dressing by this Government in respect of trying to be seen to be doing something about what it now is coming to terms with and acknowledging, behind closed doors, as a housing crisis.

The last speaker talked about the Land Information office releasing figures, and about foreign-ownership figures of 3 percent—nationwide, I assume—and 4 percent in Auckland. What he forgot to say, of course, is that that is from the time that Land Information started collecting those figures, which is, what, 3 or 4 months ago? I am not sure of the exact time frame. In the last 3 or 4 months—even Nick Smith over there looks, in his own gregarious way, like he cannot argue with that one. If you actually go back, had we had those figures, as we demanded and requested for years in Opposition, saying that there should be a land register and a data collection system and that it should happen immediately when the Government came in, when everybody else admitted there was a housing crisis, apart from Nick Smith, in his own benign way in that fantasy world he lives in—in his world, in his environment, in his ecosystem, those sorts of crises do not exist.

Had we had that database—they do not call it a database; they do not even call it a register, because that would be conceding that they lost the political battle on that—over the last 6 years, we would have a robust set of figures. Feet put to the fire, they conceded and got Land Information and the IRD starting to collect that information over the last 3 or 4 months, and somehow, for the first tranche of the information to come out, Nick Smith gets up and trumpets it, as did the previous speaker, as some sort of deep, authoritative series of information. Well, if you know anything about statistics—and even Nick Smith might know something about—

💬 Brett Hudson: Feel the burn, Clayton.

It is Hudson and Halls down the back, chirping away.

If you know anything about statistics, you look at a trend. You do not look at a one-off snapshot, and you do not look at and see as authoritative and with integrity one snapshot from a new set of data the first time you take it.

💬 Brett Hudson: The facts are getting in the way, aren’t they, Clayton?

I cannot quite hear through the verbal garbage going on down the back of the House, but you do not take, in an authoritative way—if you know anything about statistics—the first snapshot in a new series of data. No, you look at a trend. Had we had that series of data 6 years ago, when members of this political party and others in the housing sector called for it so that we could measure these things, we would have a trend and we would have predicable information that we could do some analysis with. In the next 6 years, now that we have got this so-called register, I am sure that we will be able to build on this. But to come to the House today and say that the first snapshot that we have taken now gives us a sort of global reach in terms of projecting out what will happen in New Zealand in respect of overseas property purchases is a bit rich.

I say that we will support this piece of legislation, but I do hope that the new Minister of Revenue—I think the third that we have had in, what, 6 months or so—will have enough time in the chair to actually progress the online taxation issues, progress in a meaningful way those GST issues around internet charging, and go far further than the couple of bits of low-hanging, half-rotting fruit, in a taxation sense, that have been plucked and pulled and heaved off the tree so that the Government members can stand up and say “Hey, we’re on the side of small business. We are addressing and levelling the playing field for small business.”, when we all know that there ain’t too many small and medium sized businesses competing with Netflix and iTunes. It is not a bad start. We hope to see far more integrated and authoritative tax legislation as we progress in this financial year.

It is a pleasure to stand and rise as the last speaker in the debate on this bill. I will be commending the bill to the House because I think it is a very good piece of pragmatic legislation. I am delighted to hear that the Labour Opposition is supporting it. The bill has four main proposals in it, and perhaps the most important of them is the introduction of a residential land withholding tax, about which there has been an awful lot said in recent days, weeks, and months.

The statistics by Land Information New Zealand that have come out this afternoon put to bed, once and for all, the mischief-making that the Labour Party has been harping on about for months, in terms of people with Asian-sounding names. Those statistics are damning and they are a sad indictment on the current position of the Labour Party and its thinking on these matters. This is a good bill. It is a pragmatic piece of legislation, it covers off a number of areas, and I commend it to the House.