Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill

I move, That the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill be now read a first time.

I nominate the Finance and Expenditure Committee to consider this bill. I’m also making an assumption that that applause was not for this tax bill that is about to be introduced to the House, but it does deliver a number of very important pieces of policy. The bill delivers benefits to the New Zealand taxpayer across the spectrum of the tax and transfer system. For the benefit of members, I will give a brief introduction to some of these proposals.

First, GST. The headline item in this bill is a proposal that offshore websites and other suppliers of low-value imported goods are required to register for GST and then collect GST and pay that to the Inland Revenue Department. Members will remember that this is the second phase of GST reforms which began with a similar requirement for offshore suppliers of remote services. These reforms ensure our tax system reflects our changing world.

It is increasingly common for people to use the internet for a wide range of purchases, whether it be to watch a movie through a streaming service or to buy a new pair of shoes. As this practice becomes more and more common, it means the Government is being denied the GST it should be collecting on those purchases. The consequences of not collecting GST on online purchases are that domestic retailers are at a competitive disadvantage, as they are required to charge GST on goods that they sell, and, in competition with big overseas retailing giants, many small businesses face an unfair barrier to competitiveness. So this is clearly a problem that needs to be sorted in the interests of fairness and equity.

There are a number of ways this could be addressed, but we always need to be mindful of compliance costs and the need for simplicity. This bill therefore proposes that from 1 October 2019, offshore suppliers will need to register for GST when their supplies of goods and services into New Zealand exceed NZ$60,000 per year. This means they will collect and return New Zealand GST on imported goods valued at or below $1,000 supplied to New Zealand consumers. GST on imported goods valued at above $1,000 will continue to be collected by customs when those goods enter New Zealand. In certain circumstances, market places and re-deliverers may also be required to register.

People importing goods and consignments valued at or below $1,000 will no longer pay customs tariffs or border security and biosecurity fees, which will simplify compliance and administration costs at the border. This proposal levels the playing field by ensuring GST applies to purchases from offshore websites in much the same way that it applies to local retailers. We’ve consulted the public on these proposals, and this is the best and fairest option, we believe, to address the issue. It’s not an issue that is unique to New Zealand, of course. As an example, most recently, Australia has enacted legislation covering similar measures to what this Government is now proposing today. Australia’s new rules have been successfully applied since 1 July 2018.

💬 Te Reo: another development is that the bill addresses the growing interest in using Te Reo Māori as an everyday language, including by businesses.

💬 Fletcher Tabuteau: Well done.

Thank you. It has long been inland revenue’s operational practice to allow tax records to be kept in Te Reo Māori. While this is a good thing, it is not formally recognised in the legislation that taxpayers could hold their records in Te Reo. Instead, they are allowed to do so at the discretion of a Government department. This bill therefore enshrines the right to keep tax records in Te Reo Māori in legislation.

Rental loss ring-fencing: currently, investors with loss-making rental properties have part of the cost of their mortgages subsidised by reduced tax on their other income sources, helping them to outbid owner-occupiers for properties, yet these investors often make tax-free capital gains when these properties are sold. This bill proposes to address this unfairness by introducing new rules which would mean that owners of residential rental properties will no longer be able to offset rental losses against their other income such as salary and wages. This proposal will make the tax system fairer and help level the playing field between property speculators and investors and homebuyers, therefore improving housing affordability for homebuyers and bringing a little bit of fairness and equity into the system.

Child support—Madam Assistant Speaker, let me now turn to a different matter. A humane and effective justice system is one of the Government’s objectives for New Zealand, and the tax system has a role to play in promoting it. We’re proposing to give the Commissioner of Inland Revenue the discretion to consider other information in order to grant the victim of a sex offence permanent exemption from paying child support. In some cases, the person offended against finds themselves in a situation of having to pay child support for a child born as a result of sexual violence. This is wrong and unfair, and there are four letters that have come across my desk in my time as Minister which really are manifestly unfair. This will address that, and it’s fantastic.

Since 2006, a permanent exemption from paying child support has existed for such a parent, but to qualify for that exemption, the rules as they stand require that the offender must have been convicted. The truth is that for a variety of reasons, very few sex offence cases are reported and even fewer result in a conviction. The result is that since 2006, only two individuals have been granted an exemption from payment. The proposal therefore is to loosen that requirement and allow the Commissioner of Inland Revenue to be able to consider other information when deciding to grant an exemption. I’d like to acknowledge the work of my New Zealand Police officials who were consulted and who supported inland revenue in the development of this compassionate proposal. This will make a difference in a few cases where a manifest injustice has been committed.

Student loans: there are also proposals aimed at making life a little easier for some student loan borrowers. The IRD is working towards a future where most people will not have to do anything in order to meet their tax obligations, and their tax refunds, for instance, will be completely automatic. This happy state of affairs is thanks to a system of taxation called withholding taxes, where tax is deducted at source, but some student loan borrowers earn income from which student loan repayment deductions are not made—for example, when they work over the holidays. It means that the borrower ends up with an amount to pay at the end of the year and often may be required to make an interim payment the following year.

As the payments are quite often not as prompt as they should be, the borrowers are more likely to fall into debt and therefore incur late interest payments. That’s one of those sorts of cascading waterfalls that just end in a bad situation. We are therefore proposing that student loan deductions be made from scheduler, election-day, and casual agricultural income. These borrowers will find that their end-of-year repayment obligations will be smaller or not required, and fewer will be required to make interim instalment payments. As these repayments would be on time, fewer would go into debt and incur interest.

The bill also tidies up an anomaly where student loan borrowers based in New Zealand do not pay interest but, because of the limitations of the IRD’s outgoing technology platform, interest has to be initially charged and then reversed out to make the loan interest free. This baffling situation caused confusion and consternation for borrowers. The switch from the old technology platform to the new one allows us to rectify this, and we’re proposing that only overseas-based student loan borrowers be charged loan interest, rather than charging interest to all borrowers.

The measures in this bill bring benefits to different sectors of our community. The tax system must collect the revenue we need to build vital services, but we must do so in a careful manner to avoid imposing undue costs. The tax system can also help to support businesses by providing the environment that nurtures growth. This is a good bill for New Zealand, and I am proud to commend it to the House. Thank you.

Thank you, Mr Assistant Speaker. Well, this House should be in no doubt that this is a Government that wants to tax New Zealanders more. This is a Government that promised New Zealand no new taxes, and here we are, with a second tax bill that is imposing more taxes on New Zealanders. In fact, $2.4 billion in additional taxes in the first year of this Government—$2.4 billion that this Labour-led Government thinks that it can spend better than New Zealanders.

This bill absolutely shows the real spots of this particular leopard. The first thing this bill does, of course, is confirm the annual tax rates. Well, I can tell this House and New Zealand that this bill confirms that every New Zealand taxpayer is paying more tax now than they should be and than they need to be.

In 2017, the National Government legislated that the income tax thresholds should go up, recognising that they hadn’t been increased since 2010, because if you’re not increasing tax thresholds in keeping with how the cost of living is going up and the Consumers Price Index is going up, you’re taking more money every single year by stealth. So National made it very clear that the bottom threshold of $14,000, at which New Zealanders paid only 10.5 percent, should go to $22,000. Then we made it clear that the next threshold should go from $48,000 to $52,000. Now, those changes—which should be in place right now but were repealed by this Government, and have been confirmed by this legislation—made it clear that the average taxpayer is paying over $1,000 a year more tax than they need to and than they should. This legislation confirms those rates. Those rates are out of date, they are unfair, and they only remain because Labour cancelled those changes to fund the New Zealand First slush fund, the fees-free tertiary policy, and a raft of other wasteful expenditure. I can tell this House that passing this bill locks New Zealanders in to another year of outdated tax threshold changes that they shouldn’t be paying and that this Government, frankly, is too focused on how much money they can spend, and they assume every New Zealander is a personal ATM for them to help themselves to their pockets.

One of the matters in this bill that I particularly want to focus on, other than the annual rates, which are egregious and are too high, is, of course, the ring-fencing of losses on residential rental properties. Now, again, this is one of the new taxes that this Government have brought in, helping themselves to more of New Zealanders’ money. By the way, we all know there’s a whole lot more coming because they’ve got Michael Cullen and his band of merry men beavering away, coming up to recommend a capital gains tax so that they can have another dive into the pockets of hard-working New Zealanders. This is a group of people who think that hard-working Kiwis get up and go to work every day just to fund their spending—just to fund the Government’s spending—because in the view of this Labour - Greens - New Zealand First Government, Government should have more of your money and you should have less.

Well, on this side of the House, we think New Zealanders deserve to keep what they earn, and we want to see that money in their pocket because they know how to do more with it and better. You want to talk about well-being? Let people keep more of what they earn. The best way you’re going to do that is to keep tax rates low, but not this Government—no, no. They’re putting them up, hand over fist, because they assume anyone who makes a profit is a filthy capitalist and should be punished. Well, actually, people who work hard in this country deserve to keep those taxes.

Now, let’s just look at this ring-fencing of losses on residential rental properties. We have been telling this Government over many months that the changes they are putting in place are going to lift rents, because it’s pretty simple. For anyone who knows even Economics 101, if you put more costs into a sector and if you make the return on that sector less attractive, you will reduce supply and you will increase costs. We said that to the Government. We said, “If you ban letting fees, you’ll see rents go up.” We said, “If you bring in a five-year brightline test, you’ll see rents go up.” We said, “If you bring in a whole raft of new, expensive regulations for landlords, you’ll see rents go up.” And do you know what’s happened over the last 12 months?

💬 Hon Members: Rents have gone up.

Rents have gone up $30 a week, on average, because this is a Government that has no idea how this sector works, and they’ve just assumed landlords are just another group of people you can punish at will, because it’s all about fairness to tenants. Well, how are the tenants better off when they’re paying higher rents than they have paid before? How are the tenants better off when they are having to pay more and more on the cost of living because this Government keeps loading up costs?

Well, this is interesting, because you’ve got Treasury and the IRD both telling the Government that this is what will happen. They’ve said to the Government in the regulatory impact statement, as they have on other changes, that rents will go up, and what’s happened? Rents have gone up.

So what have we got from the Government today? “Well, let’s put more costs on landlords. That’ll help. So let’s put $190 million a year on the landlords of New Zealand.”—who, by the way, are mums and dads. They’re mums and dads who have worked hard and are trying to put a bit of money aside for their retirement—$190 million. Now, if that’s spread over every rental property in New Zealand, just for an example, that’s about $300 a year more that tenants are going to pay. But, interestingly enough, if you just look at the 40 percent of rental properties which the IRD say are loss-making, that’s about $750 a year that will pass through to the tenants of those properties. If anybody on the Government benches seriously thinks this is just going to evaporate in thin air and not be passed through to tenants, I’m sorry, but they’re in lala land.

I would love to see the Minister have the bravery to stand in this House and be very clear that if rents go up, he will cancel this tax, but he won’t. He will simply deny, of course, that it will ever happen, and then when rents invariably go up, either he will duck and dive and dodge or he will come up with some other explanation. But let’s be really clear: putting $190 million of extra tax every year on landlords is going to put rents up and it will lift the cost of living further.

Now, here’s what really interesting: no other asset class in New Zealand has its losses ring-fenced. So the Hon Stuart Nash, in his contribution—all he could say in defence of ring-fencing losses was, “Well, it’s about bringing fairness to the tax system.” Has anyone noticed in this House that when the Government starts talking about fairness, it’s because they don’t have one single, logical reason for doing it—so “Let’s just talk about fairness.” Well, if it’s fair to ring-fence losses on residential rental properties, why is it perfectly fair not to ring-fence them everywhere else? Why is it perfectly fair, for example, that you’ll soon be able to buy a good-looking racehorse which doesn’t make any income and which creates losses, and you can set that off against your income as an orthopaedic surgeon—that’s absolutely fine. That’s fair. But you buy a rental property and, somehow, you’re an evil speculator to be punished, and that must be ring-fenced.

So if, Mr Nash, this is about fairness, why only residential rental properties? I can tell you the answer. The answer is because this is a Government that hates landlords. They hate landlords. They think that anybody who owns a second property is wrong and should be punished, but what they miss is that this is going to hurt tenants. It is the tenants who will suffer the costs as their rents go up further.

The cost of living is already under pressure, thanks to the increased taxes of this Government. They’ve got less money in their pocket already, thanks to the extra taxes of this Government. And now, as a result of this legislation, $190 million every year is going to go into the Government coffers at the expense of the tenants in New Zealand. That is not fairness. That is not looking after tenants. That is a cash grab from a power-hungry, cash-hungry, big-spending Government that can’t control itself and wants to punish the hard-working New Zealanders as a result. This bill is a travesty, and we won’t be supporting it.

Very pleased to stand up in vigorous support of the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill. I want to commend Minister Stuart Nash for the introduction of this bill and the many good policies within it. He could work on some names for these bills that roll a bit more easily off the tongue, though.

This is a Minister who is very active, and what we see within this bill, in addition to the annual process that we go through of setting the annual tax rates—and these will be for 2019-20, so they will have to be confirmed within that tax year in order to ensure that that revenue is appropriated lawfully—are a number of other very important policy initiatives. I want to talk through some of those in a moment. Before I move on to doing that, though, I do just want to respond very briefly to some of the comments from the Hon Amy Adams, because what we really had in that address was about 8½ minutes of a deeply ideological rant against tax, a rant that was entirely devoid of any understanding of the fact that, in fact, all of the public and social institutions that New Zealanders rely upon—our public health system, our public education, system, our justice system, our transport—are reliant on a fair and decent taxation system.

So what we had was the Opposition spokesperson on finance—interestingly enough, not the spokesperson on revenue—standing up and calling the Government’s tax take wasteful. Well, she thinks that $750 million spent on fixing up our neglected hospitals this year is wasteful. She thinks that the investment in over 30 new schools that was announced this year is wasteful. She thinks that the winter energy payment that has been provided to over-65s in this country so that our pensioners can keep the heater on through the winter is wasteful. She thinks that investment in 6,400 new State homes for some of the most needy families in our country, who are victims of the housing crisis unacknowledged under that previous Government—she thinks that the tax revenue collected in support of decent housing for those families is wasteful.

It really goes to underscore the difference between this side of the House and that side of the House. This side of the House actually believes in the public provision of decent housing, of health, of education, and of putting the resources into those public goods to ensure that the people of this country can live dignified lives. After nine years of neglect under that lot, I thought they might have had a bit more reflection on the benefits of that public investment, but on the evidence of Amy Adams’ speech, that is not the case.

This bill does confirm the annual tax rates for the 2019-20 tax year. It is just worth pointing out again that this Government made very different choices to the previous Government. The Government did choose not to proceed with the tax cuts that were legislated for but not implemented by the previous National Government. They held them out there as an election sweetener. They could have, in fact, implemented them during their term of Government, but they chose not to. The choice this Government made was to retain the current tax rate so that we could invest in housing, health, and education for all New Zealanders, rather than tax cuts that would disproportionately benefit the wealthy few—once again, the difference between this side of the House and that side of the House.

This bill makes other important changes, including the application of GST supplies of low-value imported goods, and this has been a change which has been a while coming. It’s a bill that’s supported in many parts of our economy, including from Retail New Zealand, and it’s actually work that was started under the previous Minister of Revenue, the Hon Judith Collins, and I acknowledge her in the House today. She was an active Minister of Revenue, at least in comparison to her predecessors—well, that wasn’t a particularly high bar to clear. She did begin the work in this area, and it’s been continued on by the Hon Stuart Nash.

This is important, because within our tax system what we do all seek is fairness and equity, and this is about ensuring that those goods which are purchased from offshore are not purchased at an advantage compared to those goods which may be purchased from within New Zealand. So we have retailers within New Zealand who currently are disadvantaged because the cost of GST does have to be tacked on to those goods, and it doesn’t get added to the cost of those goods imported from outside. In past years this wasn’t such a big issue, but it’s really the explosion of online purchases which does make this a more significant issue in our economy, and within this bill we are moving decisively to rectify that and create a level playing field.

Other colleagues will speak on the importance of taking action on the ring-fencing of residential rental losses. But, fundamentally, this is about ensuring that once again we get back to having a functional housing market that is driven by the needs of people and not the needs of speculators. At the moment we have a situation whereby people who are speculating in housing have a tax advantage that gives them a leg-up over first-home buyers, the mums and dads that we actually want to support to buy their first home. That’s why this change is important.

I just want to speak very briefly on one more important change within this bill, which is the proposal that allows the Commissioner of Inland Revenue to use her discretion in cases where a victim of a sex offence becomes liable for child support payments. I want to acknowledge this is something that Stuart Nash, the Minister, I know feels passionately about. He’s been driving this change. It’s about justice and decency within our tax system for a small group of people who otherwise face a great injustice, and I certainly commend that change along with the others in this bill. I look forward to receiving the bill on the Finance and Expenditure Committee and working with colleagues on that bill in the months to come. Thank you, Mr Assistant Speaker.

Thank you, Mr Assistant Speaker. Well, a big sing-out and shout-out to Michael Wood, who’s resumed his seat. Thanks for the acknowledgement, Michael Wood.

I found the revenue portfolio to be a very interesting one, and I’m sure it’s testing the Hon Stuart Nash. It’s certainly one which I think is often underestimated because of the fact that our tax system, for it to work, needs a highly organised administration in the revenue department and also it needs to have tax laws that are easy to operate and easy to administer.

So this bill is one which the National Party will be opposing. There are parts of the bill which we can agree with, but the majority—particularly those around increasing tax rates and also the ring-fencing of losses for residential properties that are rented out—are things that we cannot support.

I think it’s really important to remember that the current Government, in Opposition, were very loud about the need to attack speculators of land, and we’ve heard Mr Wood refer to the speculators of land, whom he sees as taking properties that first-home buyers could buy and, therefore, keeping them out of the market. Well, these so-called speculators of properties that first-home buyers might otherwise want to buy are actually, generally, landlords to—guess what?—people who would one day like to become first-home buyers. It’s these landlords that this bill is attacking when it goes after the ring-fencing of losses, which, basically, means that it will become even less attractive for one to become a landlord. What we’re seeing at the moment with these sorts of measures as are contained in this bill is a constant and dedicated attack from the Government against landlords.

So these are the very people who provide the rental accommodation for people who don’t want to or who can’t yet buy their own home. So by taking more landlords out of the market, it’s not that we’re freeing up properties; what we’re doing is we’re actually having fewer properties available for rent, which is why this Government is currently staggering under the biggest increase in State rental waiting lists that we have seen in my lifetime, and certainly in the last, probably, hundred years—that includes Winston Peters’ lifetime. And I actually think it is really important that we and this House understand that there are consequences to what seems like a really good sound bite. The sound bite of going after speculators and stopping them from taking homes that first-home buyers could buy is a great sound bite, but the consequences are that there are fewer homes available for people to rent.

We hear today the Government saying, “Well, you know, it’s such a shame that rentals have gone up in price—that the market is moving.” And the reason the market is moving up in the costs of rentals for people who want to rent properties—this is one of the reasons for it. It’s not only that the Government has taken steps to remove the cost of letting fees being charged to tenants directly, but it’s these sorts of ring-fencing losses contained in this bill that actually make being a landlord significantly less attractive to somebody who has perhaps saved up all their life and has got themselves in a position where they can buy something they want for what they call their retirement income.

Residential rental properties: at the moment, a landlord is lucky to get more than a 4 percent return if we take away the cost of interest, the cost of rates, the cost of maintenance, and the cost of everything else, of having downtime—4 to 5 percent is all that people will generally expect to get on one of those rental properties. That’s barely enough to pay the costs. We already have landlords saying, “We used to be able to say, ‘Well, we’ll get some capital gain.’ ” Well, that’s been taken away. We’ve got a Government that’s now hell-bent on taxing in every way that they can—to do what? I can tell that member who has resumed his seat, Michael Wood, who told us about what he said the Hon Amy Adams was apparently all against—well, I’ll tell you what: we’re against $700,000 a day being spent on inquiries to tell the Government what to do. I would have thought it’d be a lot cheaper for the people of New Zealand to expect this Government just to do its job. If they really need to ask some advice on something, make it something worthwhile, and a few of those inquiries are, but they can’t be when there are 210, I think, at the moment. There may even be more by now, and they’ve been in Government for only a year.

So when I see taxes being spent on things like that, I’m with the Hon Amy Adams. I’m with her saying “Hang on, there’s a bit of waste going on here.” When I look at the billions of dollars being given to our colleague over the way, the Hon Shane Jones, to splash around the particular parts of the country where New Zealand First think there might be some votes for them, I have to say I think that that’s possibly a bit of wastage going on. Some of it, no doubt, is needed, but when I look and consider that we’ve had—what was it?—$160,000 worth of seedlings chopped up and mulched because nobody worked out that the land wasn’t ready for them to be planted into, I’d say that’s a bit of wastage. I’d also say, too, with these tax bills and this particular issue, that paying the head of KiwiBuild to stay at home—so far for 6½ weeks—is probably a bit of wastage. I’m just questioning how much the salary is. How much is the salary? How long is the contract for? Is it a three-year contract? Is it a five-year contract? Is it a salary of $300,000 a year? How much is the taxpayer going to be up for, because that’s what this money—these taxes—is going for.

💬 Alastair Scott: Student fees—they’re wasted.

I look at student fees—the first year of student tertiary fees now being completely funded by the taxpayer. I’d say, is this fair? Well, maybe not, actually, when we consider that 70 percent of a university student’s fee for a year was already funded by the taxpayer before this came in, this new fees-free policy for the first year. Many people, when I’m around the country talking to people, and particularly in my electorate, in Papakura, say to me, “Well, if you’re going to give it to somebody for free, why wouldn’t you give it for the last year, once they’ve got their degree—give them a refund?” Why wouldn’t you do that? Why wouldn’t you say to them, “Hey, thank you for finishing.”? Wouldn’t you put an incentive in there?

💬 Kieran McAnulty: Does the member support that?

And the answer is, coming from the other side—somebody is calling out, I’m not sure of the name; somebody will tell me—that, actually, you said something about “Well, because they need some money.” or something. Well, there are student allowances, there are interest-free loans—there’s almost everything.

And what about the plumbers? We need more plumbers, we need more builders, we need more electricians, we need more gib-stoppers, we need more people who do things—something this Government doesn’t seem to understand. None of this bill is about helping people to do things; it’s all about taking away from anybody who actually wants to supply housing to people who need to rent it, taking away from people who were getting $1,060, on average. The average earner and their tax cuts—“Take that away because we don’t want people having their own money.” Why can’t people have more of their own money? Everything in here is all about taking more money from hard-working New Zealanders who are trying to save up for their retirement—hard-working New Zealanders—and spending it on things that this Government thinks it’s best able to spend money on.

I say to this Government that there has to be an end to constantly taxing everything that moves. There has to be an end to this, because people are getting sick and tired of it. They’ve already got fuel taxes, basically, for Africa, frankly, and in Auckland, fuel taxes for Phil Goff and Phil Twyford to sort themselves out and try and get themselves something built—fuel taxes and other taxes going in to pay for a trolley up Dominion Road that nobody so far, apart from Jacinda Ardern, wants to ride on. Nobody’s asking the taxpayers, “Is that a fair use of your money?” We on this side will continue to stand up for taxpayers and we are going to hold this Government to account, and we will not agree if we don’t agree that it’s in the best interests of New Zealand. This party will stand up against further tax increases and further attacks on landlords, who are, by the way, providing the houses and the housing for people that this Government has left behind and will not provide for them because they simply can’t.

Thanks, Mr Assistant Speaker, for this opportunity to speak on this legislation. I’d first like to address some of the nonsense put up by the Opposition this afternoon, using this legislation as some kind of mouthpiece on their ideological fantasies and talking about this Government as if we were not doing exactly what we set out to do. We are fixing the problems of nine years of apathy, where a party on the opposite side of the House refused to do anything in case it affected their poll ratings. They didn’t want to be seen to be doing anything that was controversial for fear of upsetting those focus group polling numbers. This is the same Opposition party, when they were in Government, that decided—talking about houses and ring-fencing losses—to not only get rid of our Government housing stock for those most in need but they refused to build or upgrade any more, and then they accuse this side of the House for the increase in costs for rental properties. Go figure, Opposition—when you take supply away, it puts pressure on the market, and prices are going to increase.

That is the legacy from the Opposition over there. That is what we’re dealing with now as a Government. I commend not only this Minister in charge of this good and sensible piece of legislation but, for example, the Minister of Housing and Urban Development, who’s trying incredibly hard to work with industry.

💬 Alastair Scott: Trying, is that—trying. He’s trying.

Well, here’s a fact for you guys: he’s built more houses in his time now than you did in the last three years. How’s that for a factoid, right? Apologies if I brought you into the debate, Mr Assistant Speaker.

As for those who spoke about ring-fencing losses on rental properties, I think those speakers were quite selective in their interpretation of what this might mean for rental property owners. Already, rental property owners are able to ring-fence losses into future incomes so that they tie any losses now to that rental and are able to offset against profits into the future so that they can compensate themselves, as it were, for the creation of that rental property that is being used by people who need rental properties. That is being done now, and that is what is in this legislation right now, so that rental property owners are able to use ring-fenced property deductions from one year against residential income in future years on their property. So that is in this legislation. I’ve seen it first-hand being done in the market already, and, yes, long may it continue. So, look, there are so many things that were said on the other side that were just—well, “annoying” is a polite way to put it.

But to this piece of legislation, I’d like to commend the Minister. It’s quite a hefty bill; it covers a wide range of issues, not least the fact that we’re setting the annual tax rates and they will remain the same. This bill will improve and speed up administration of Working for Families, student loans, and child support administration processes, and it outlines how, as I said, the ring-fencing of rental properties is set out going forward. It ensures that a transaction involving the sale and compulsory buy-back of pre-1990 property forest land emission units is treated as a loan for tax purposes. The Minister pointed out—and I commend him for this—that it is a practice currently, but, actually, what we’re formalising in this legislation is the use of Te Reo Māori in terms of record-keeping for the purposes of this legislation and IRD communications. I think that’s fantastic, recognising one of New Zealand’s official languages. Yes, it will put challenges on the system, I’m sure, but I know of a few good accountants in Rotorua who are already doing great work in this space.

The area I wanted to focus on today is around GST on goods. Back in, I think it was, mid to late 2016, we debated—

💬 Andrew Bayly: Who’s “we”?

Parliament, Mr Bayly. Thank you for your—how about you be quiet, eh mate? We were debating the tax on services, the remote—I don’t know, what does everyone call it? The “Internet of Things”—you know, buying services online, like movies and that kind of thing.

So at the time, what New Zealand and businesses were telling that side of the House when they were in Government was “Yeah, that’s a good start, but it’s only half the issue. You’re not addressing the real problem.” That side of the House were not addressing the real problem or the bulk of the problem, the majority of the problem, with the fact that our New Zealand-owned businesses, our retailers especially, have been competing against international big business for quite a number of years with this kind of built-in disadvantage around GST. That just made business incredibly hard, and those supposed advocates for business on that side of the House there were told repeatedly by advocate groups, individual businesses—I know business owners went into their offices repeatedly to try and tell them the message “That’s only half the issue. We need to do something about the goods side of the goods and services equation.”

This is what this legislation is doing. It’s complicated and it’s going to take quite a bit to enforce at the margins. Actually, to be fair to IRD, what they’ve presented to the Minister and what the Minister has worked through is quite a good, comprehensive piece of work where the bulk of those purchases will be identified and be able to be taxed. So not only is that a good thing for the Government in terms of a small increase in GST returns but, primarily, this was always about evening the playing field for New Zealand businesses.

💬 Mark Patterson: Fairness for Kiwi businesses.

Yes, fairness for Kiwi businesses—exactly.

So that’s all I really wanted to focus on in my contribution in the House today. We will have plenty of opportunity to discuss other aspects of the legislation, but it is a sensible bill that does everything that we set out to. There are a few minor and technical fixes as well, which I’m sure others will touch on, but going forward, this is absolutely good for business, good for transparency and efficiency in our tax system, and I do commend it to the House. Thank you.

Thank you, Mr Assistant Speaker. It’s a pleasure to be talking on the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill, first reading. I agree with Mr Michael Wood that the name could have been improved.

I think this is a case of “quack, quack, quack”—sorry, “tax, tax, tax”. This is a Government that all it wants to do is rapaciously grab more money from hard-working New Zealanders—hard-working New Zealanders. Even though it came into power saying it would not put any more taxes on, do you know what the result is? The result is $2.3 billion so far and this piece of legislation is going to add another $200 million to that total. It’s outrageous. It’s all about taxing hard-working mums and dads and I don’t believe that is in the best interests of New Zealand.

I am just going to say that the speaker who just sat down started off very well, I thought—Mr Tabuteau—but he sort of drifted off. I thought he’d lost interest in his speech, but I think the salient and pertinent point he was talking about was the Amazon tax—the Amazon tax. Of course, this is our bill. This part of it was designed by the Hon Judith Collins, actually. Actually, it was our piece of legislation, so I took heart that Mr Tabuteau was actually commending the National Government for thinking and doing the hard work, designing a good system so that this Government now in power can nick it and impose it and put it in place.

And, yes, he’s right. It is about making it fair for shop owners in New Zealand. It’s about making sure that they can survive increasingly digital procurement arrangements. And, of course, what it does is it lifts the threshold from $400 to $1,000 per item, and any international supplier or foreign supplier now has to register for GST if they supply more than $60,000 of goods and services a year to New Zealand people. I think that’s good. The big issue I’m going to be asking the Minister is how he’s going to undertake the compliance of this, as it’s quite a big issue, and I think if you’re going to put in legislation, you need to make sure that you have the right compliance framework to monitor it, otherwise it just becomes a sham. I think that will be one of the issues we will be following up with the Minister on this aspect of this bill.

The other one is around ring-fencing. As some people talked about, although some less clearly than others, what the bill proposes to do is to ring-fence—i.e., stop the ability to offset tax losses against other income. When you think about it, 40 percent of the housing stock in New Zealand is owned by mums and dads—40 percent of the housing stock is owned by mums and dads—and what this bill does is cut to the core of it. Many of them have a house, a rental, where they have rented it out to people often more vulnerable or not in a position to buy a house. They spend the money upgrading that house under the healthy homes guarantee that’s been imposed and all the other things that go with it to provide a nice house for those people, and what happens is that they can offset some of the interest costs and other costs associated with renting that property.

What this bill does—and Mr Tabuteau didn’t actually highlight the key issue—is it says that you may only claim up to the maximum income that you receive on that property a year. So if your rental income’s $30,000, you can’t claim deductions of more than $30,000. Then there’s the ability to carry forward, which he referred to. But what he didn’t refer to is the black hole that happens. The black hole is if you don’t make further profits in the future or, in fact, if you sell that property in the future, that is black hole expenditure that you cannot claim back for, and what this is—what this bill is doing—is another nail in the coffin for people wanting to rent houses to vulnerable New Zealanders.

It’s interesting. I’ve been to a couple of property management firms in the last few months, and one of them told me they’ve got a portfolio of 3,000 homes they own, and over 10 percent of their houses—i.e., 300 of those 3,000 homes; the property owners, the mums and dads—are saying “This environment imposed by the Labour - New Zealand First Government is too difficult.” and they are selling their properties. I went to another one recently in Pukekohe—same issue: over 10 percent were selling their properties.

What’s happening is that we are seeing people selling their properties, making it harder for vulnerable New Zealanders to find properties that they can rent and live in and be happy in, because, simply, the property owners are selling them. That is why this is not a good bill and that is why we will not be supporting this bill. We will be looking to have the strong and hard conversations during the course of the select committee, but it is a bad bill from that perspective.

Kia ora, Mr Assistant Speaker. Ngā mihi nui ki a koutou. Kia ora. I rise to support this legislation. But, look, I’m worried about the National Party—I really am—because what we’ve seen just in the last week is a party that isn’t competing on leadership. It’s not competing on policy, it’s not competing on solutions—in fact, they’re looking to some of the worst political actors around the world. What we’re seeing is a party that’s not embracing intellectual integrity. We’re seeing ridiculous statements in the House. Just in the last 10 minutes, we heard Judith Collins say this Government is taxing everything that moves. That’s patently ridiculous. We see Amy Adams saying the Government hates landlords. That’s patently ridiculous. It’s a party that’s dog-whistling on international migration, and that’s jumping the shark and avoiding a cross-party solution on medicinal cannabis by coming up with these ideas of legalisation by stealth. There is no intellectual integrity from this party. It’s the fake news we decry, but we’re seeing it on this side of the House.

When it comes to tax, I wish this party just had the intellectual honesty to point to the evidence. The OECD says we are a low-tax country—in fact, we’re ranked 25th in terms of our tax to GDP ratio. This isn’t a country that taxes everything that moves—in fact, we’re a low-tax country, a country where the burden falls on the bulk of New Zealand workers. Now, remember, it was the last Government that was quite prepared to lower the tax rate for the rich. You know, you look across the Ditch: a top tax rate of 45 percent. Look at the United Kingdom under a Conservative Government: a top tax rate of 45 percent.

The last Government lowered it to 33 percent, so the highest earners, including many in this House, got a tax break. But what did they do to the poorest, most vulnerable Kiwis? They saw an increase in the regressive GST tax.

I’m not going to be lectured here on tax from this party that doesn’t have the intellectual honesty to tell the truth, to point to the experts, or to point to the research, because what we know is that the result of their policy decision was to see rubbish running down the walls of Middlemore, our schools in a funding crisis, and a lack of investment in infrastructure for our country to go forward. So that’s my challenge to the National Party: put aside the fake news, put aside the slogans and making stuff up, and let’s have a debate about the actual issues.

That’s why I’m proud to support this legislation, because there are five key highlights—five key benefits—for everyday New Zealanders and the New Zealand economy. Now, the first is the GST changes for low-value items, for products less than $1,000. I was only five when the Goods and Services Tax Act was written back in 1986. Then, Kiwis weren’t importing low-value items, so it made sense, because the cost of compliance would have been ridiculously high for someone importing a product of, you know, $400 or $800. What we do know is that thanks to the internet economy that’s come along since then, Kiwis are importing a huge amount of products from overseas, so it makes sense not to have a tax break for that. What we know is it is going to raise about $80 million to $140 million a year. That gives you a sense of the scale of how many products Kiwis are now importing under that threshold. This makes a huge amount of sense. It’s going to help those 60,000-plus workers in our retail sector. It’s going to be great news for them.

When it comes to our rental market, the ring-fencing of losses for residential properties really redresses the tax benefit that those investors have. Really, it’s a subsidy, right? It’s the renters who are paying more in their income tax to make up for the tax benefits the landlords get when they do the losses. Now, it’s not going the whole hog—in fact, it’s only making sure that the losses are only up to the income for the year—but what it is going to mean is we’re going to redress the uneven playing field to make sure that those first-home buyers aren’t being pulled down. This is a Government focused on giving first-home buyers a leg-up, so a level playing field is going to help those first-home buyers. This is so important for young New Zealanders because what we have seen after nine years of National, a party that ignored the housing crisis and that said it wasn’t a housing crisis—it was selling State houses in the middle of a housing crisis—is the dream of Kiwi homeownership, particularly for young New Zealanders, fade away. This is a Government which is acting, which is making a difference, and it’s by doing it in a fair, reasonable manner.

Now, the third thing—and I think this is a great step forward, and I hope it acts as a precedent in other legislation and Government department practices—is it enshrines the use of Te Reo language in the Inland Revenue Department records. Now, this is updating the Tax Administration Act 1994 and the Goods and Services Tax Act 1985. I think this is a wonderful step forward, and I’d love to see the day where a citizen can walk into any Government department and any record the Government takes can be given in Te Reo Māori—a great legacy, a taonga which exists here and nowhere else. This is a fantastic step forward.

When it comes to student loans—again, I don’t want to keep playing politics and taking it back to the problems of the last Government, but they did have nine years to sort out the problem of the IRD’s antiquated, old-fashioned technology. Now, they spent $1.5 billion, I believe it was. They absolutely mismanaged the process. It took much longer than needed, and it cost lots more than was needed, but what it meant was that every year, the hundreds of thousands of Kiwis with student loans would get a letter in the mail saying how much interest they had to pay on their student loan. That was despite the policy of this country changing all the way back in the mid-2000s—2006, I believe—and still, on every New Zealand student loan recipient’s bill, it had the interest. Now, this was incredibly, I think, distressing for people, who couldn’t understand why on earth the interest was there. Now, it was wiped subsequently, but simply because of antiquated technology, we were giving Kiwis confusing and, frankly, troubling information. So it’s wonderful now that thanks to modern IT systems, we can literally do what the Government’s policy is, which is to not apply interest on student loans—a fantastic step forward for reasonableness and common sense.

Now, lastly, this won’t affect many Kiwis, but for those it does affect, it affects them in a deeply personal and visceral way. What the bill does is exempt child support payments for those who had a baby and were a victim of sexual offences. Now, there have only been two cases in the last 12 years, because a conviction had to be levied for those exemptions to be applied by the Commissioner of Inland Revenue. What this is doing now is giving the commissioner the discretion to apply it without a conviction but where it’s not reasonably in doubt. This is a tremendous step forward, because we know that the scourge of sexual violence and abuse which, sadly, afflicts our country—often these cases don’t go to the police, and often they don’t go to court. So this is a very positive step forward for a few people, but it will be deeply felt and it will deeply benefit them.

So, look, this is a bill which the Green Party wholeheartedly supports. What we want to do is have a fair tax system which sees New Zealand have enough money to invest in education, to invest in housing, and to invest in the services we have, and also one that respects the first language of New Zealand, Te Reo Māori, and that gives students a fair go. So, all in all, this is a fantastic bill, and I just urge the National Party to be honest, to be measured. What we don’t want to see is the type of politics which is afflicting other countries. Let’s have a debate about the issues and the facts, not about some of the made-up stuff.

Well, I’m not going to say the name of the bill, because it’s so long it would take the first couple of minutes of my speech, but as a taxpayer of long standing—probably of the longest standing of any taxpayer in the House at the moment—I think I need to comment on a couple of comments by the Government.

Firstly, on the last one. Gareth Hughes often makes very measured speeches; he talked a lot of nonsense in the first minute of that one. But I also want to pick up a couple of points Michael Wood made in respect of the speech of the Hon Amy Adams. He talked about her being ideologically opposed to tax, and then went on to criticise the National Party, or the Opposition, for its lack of care and whatever else. Well, I think that’s a gross misstatement on his behalf, and we certainly aren’t opposed to tax and people paying their share or taking their responsibility in respect of paying tax. I think that was an offensive thing to say, and particularly to the Hon Amy Adams, who is, of course, our finance spokesperson. I think it was quite unnecessary.

I want to talk about the bill and the fact that it’s a fair and it’s an unfair bill, so you could rename it, in fact, the “Fair and Unfair Bill”. There are some parts of this bill which I think are eminently fair and do some very good things. One of them is the fact that we’re trying to even the playing field a little bit with respect to tax on imports, or, as Mr Bayly called it, the Amazon tax. I think that’s a very good system. It’s trying to level the playing field with respect to our retailers and the ability to import things without paying GST. If we can get to the post with that and perhaps even, in due course, get it to a lower level than it currently is being able to be set at, it would be wonderful, but, of course, that’s an international issue and a very complicated one. But I do think that’s a very fair part of this tax bill, and I think it’s well worthwhile.

Now I want to talk about a couple of things that I think are unfair—and I think it is the ideological difference between the two sides of the House—and that is that we think people are better at spending their money themselves, and the Government clearly think that they are better at spending our money for us. That always will be an ideological debate, and one that’s worth having at all times. So I agree with Mr Hughes on that point, that we certainly do need to have a debate on the sensible and un-sensible bits of this discussion, because it is a major difference between, I guess, the National Party and the Government.

The other thing I want to talk about very briefly is the rental losses situation, and the reason I want to raise it is because it’s really a sign of a Government interfering—well, you could say it’s a Government interfering—in a process to try and alter behaviour. Now, the problem with that—and we’ve seen it many times in the past in New Zealand, where you get involved in trying to influence behaviour—is that you sometimes influence that behaviour in a negative manner. When you think about the changes to this taxation around rental losses, it could have the impact of distorting the market, and not in the manner that the Government intends—we don’t know that—but it also could have an impact on changing the investment market in New Zealand. Now, that might not necessarily be for the better. So it is dangerous for Governments to get involved in this kind of, I guess, singling out one area for different treatment from another area, because it will change the behaviour of investors. I think that our rental market in New Zealand has been very well served by landlords, and the other thing, of course, when you start to put pressure on landlords, is that it makes it very difficult for them to upgrade the properties in a manner that they clearly need to, in some cases. So I think we’ve got to be careful how we manage that part of the thing.

The other thing I want to talk briefly about, because it’s only a very small part of this bill but becomes part of every taxation bill that the House considers, is the changes to the IRD. The changes they’re making—I think they’re great, if they work. The challenge we’ve got with some of the changes to the IRD—there are two I want to identify very quickly. One is that there are hundreds of thousands of New Zealanders who are going to suddenly be required to correspond with the IRD, in one form or another, who have never had any association with the IRD before. I’ve got great concerns about that, because I think it would be intimidating for people. People will not grasp that very easily, and I think it’s going to be a great challenge for the IRD to ensure that where they do need to transact with those people, they do it in a manner that those people can get a grip on, because I think that is a concern.

The other thing that I think is also of great concern—and particularly in rural New Zealand—is that a lot of these transactions are done through the internet and through technology. That is very challenging for some parts of New Zealand still, and very challenging for the demographic that I come from, interestingly: the kind of over-65s. A lot of us have challenges with that. So there are a few things that I don’t think are entirely good.

That’s my contribution. I think it’s kind of unfair in some ways, this bill, and it’s grossly unfair in others. Thank you.

This is a split call—five minutes.

E Te Māngai o Te Whare, tēnā koe. He tū poto tēnei ki te kōrero e pā ana ki tēnei pire, kātahi anō ka uru mai ki roto i Te Whare Pāremata nei. E hiahia ana ahau ki te kōrero mō tētahi wāhanga o tēnei pire, arā ko te wāhanga mō Te Reo Māori.

Ki ahau nei tino pai tēnei wāhanga hou, tēnei kaupapa hou, i roto i tēnei pire. He aha ai? Nā te mea ka whakauru atu Te Reo Māori i roto i te ture. Kua roa te wā Te Tari Taake e whakaari ana kia tono atu, kia tuku atu ngā rīpoata, ngā whakamau nama, i roto i Te Reo Māori, mēnā e whakaae ana te kaikomihana. Engari ko tēnei, ko te whāinga kia uru atu tēnei ki roto i te ture, hei ture. Ka taea e te tangata, te kai, a te tangata, kaiutu tāke te tono atu, te whakamau nama i roto i Te Reo Māori. Nō reira ko te kaupapa i roto i tēnei pire, ka tīni ngā ture e rua, kia taea ai ngā tāngata, ngā pakihi, ngā kamupene, ngā umanga anō hoki ō rātou whakamau nama. Nā, he mea nui tēnei nā te mea kua roa te wā Te Reo Māori e noho ana he reo motuhake, he reo e whakamana ana i te ture i roto i tēnei whenua o Aotearoa. Engari kua roa te wā, āhua 20 tau, Te Whare, ā, Te Tari Taake e whakaae ana, engari kāhore anō kia ture.

Ā, nō reira e tino tautoko ana ahau i tēnei tūāhuatanga. He aha ai? Nā te mea he reo motuhake o tēnei whenua. Tuarua, he nui ake ngā kaikōrero, ngā tāngata e mōhio ana ki te kōrero Māori i roto i Aotearoa nei. Tēnā pea he hiahia nō rātou ki te tuku ō rātou pepa, ō rātou whakamau nama ki Te Tari Taake i roto i Te Reo Māori. Ā, kua kite ahau i runga i te kāinga, i te pouaka whakaata i ngā wiki kua pahure ake nei, te maha o ngā pakihi Māori e hokohoko ana ō rātou taonga mō te Kirihimete i tēnei wā. Nō reira e whakaaro ana ahau tēnā pea he hiahia nō rātou ki te tuku ō rātou pepa ki Te Tari Taake i roto i Te Reo Māori. Koirā te tūmanako me kī. He aha ai? Kia ora ai te reo, kia kaha Te Reo Māori.

Nō reira he tū poto tēnei ki te tautoko mārika i tēnei wāhanga i roto i tēnei pire. Tēnā koe.

[I will stand briefly to speak about this bill, which has just entered into this Parliament. I want to speak about a particular clause of this bill, namely the clause about the Māori language.

In my view this new clause is excellent, this new initiative, in this bill. Why? Because it inserts the Māori language into the law. The Inland Revenue Department has long proposed to request, to send out reports and bills in the Māori language if agreed to by the commissioner. However, this, the goal is to include it in the law, as law. People, the taxpayer, will be able to apply for and be billed in the Māori language. Therefore, the initiative in this bill will change both laws and will enable people, businesses, companies, and agencies to get their bills in the Māori language. So, this is important because the Māori language has long been a special language, a language which is recognised in law in this land of New Zealand. However, it has long been—approximately 20 years—that the Inland Revenue Department has been agreeable, but it has not yet become law.

So, accordingly, I strongly support this aspect. Why? Because it is a unique language of this land. Secondly, there are more speakers and people who know how to speak Māori in New Zealand. Perhaps they have a desire to send their papers, their bills, to the Inland Revenue Department in the Māori language. And I’ve seen at home on television in recent weeks that many Māori businesses are selling their goods for Christmas at this time. Consequently, I am wondering whether they wish to send their papers to the Inland Revenue Department in the Māori language. That is the hope indeed. Why? So that the language thrives, and so that the Māori language is strong.

Accordingly, this was a short speech to unequivocally support this clause in this bill. Thank you.]

Thank you, Mr Assistant Speaker. It’s with pleasure that I stand and oppose this bill. This bill should be called the “Increasing the Cost of Living Bill”—increasing the cost of living for all New Zealanders—because that’s what it does.

I just want to point to a couple of points. First point: it increases the taxes that Kiwis pay. That’s what it does. It sets the tax rates, and, as we’ve heard before, if National was in Government, the tax rates would be lower. The tax rates would be lower, enabling taxpayers to have more money—their money—in their pockets to do as they wish, to spend as they see fit. By implementing this bill, by supporting it, what we’re doing is endorsing an increase in the rate of tax. We’re endorsing money to be taken out of taxpayers’ pockets for the purposes of this tax and spend Government. We know that it goes on wasteful projects, and I’d be here all night if I started, but, obviously, the most obvious and blinding one is the free tertiary education fees—total, total waste of money.

Now, the Government doesn’t understand how investors, and property investors particularly, think. What this bill does is it disincentivises investment in housing. It punishes people who wish to build a house for the purposes of rental. They say they’re speculators—that’s a bad word—but we are short of capital in the housing market. We need more capital in the housing market, not less. We need more international capital into the housing market. I grant the Government that they do allow foreigners to buy apartments off the plans. They’ve realised, finally, that we do need international capital in the housing market—or in the apartment market, specifically—which, of course, increases supply, which is, of course, what we want to occur.

This bill taxes the landlord. It treats the landlord differently from any other investor. It does not allow the landlord to deduct costs against income across any number of investments. So if we’re going to ring-fence landlords and their rental properties, why not ring-fence farmers or orchardists or any other investments? What we’re doing here is we’re picking on—

💬 Andrew Bayly: It’s coming.

Well, it is coming, actually, in the form of a capital gains tax—again, a tax that will tax capital—and that’s exactly the thing that we do not want to have. We want to incentivise capital investment in New Zealand. We want to incentivise capital investment in the residential property market, and, by ring-fencing, it’s only going to increase the cost to the investor to participate in that market. They will demand a higher rental to compensate them for the negative cash-flow that this bill is going to give, and it’s estimated to be 300 bucks per household—another $300 per household just because this Government does not understand the investor’s thinking, the way they think. We’ve seen it already—they’ve banned letting fees, not understanding that that directly increases the cost of rent to the tenant. They say they support tenants, they want to support the housing market, but all they’re doing is setting up barriers and regulations and disincentives and taxes to create a lesser, smaller housing market.

I mean, here’s another example showing you how little they understand about the housing market. The Government builds houses in Wānaka that no one wants to bid for. They don’t even want to ballot. No one wants to put a name in a ballot. There are four houses sold out of 20 in Wānaka, built by that Government, that no one wants. So it demonstrates that this Government does not understand how an investor thinks, does not understand what will drive increased housing supply, and that is why I will be voting against this bill.

Kia ora, Mr Assistant Speaker. Thank you. It was interesting to hear yet another ideologically charged speech from the member for Wairarapa based in Ōhāriu. This really is no more than a straightening out of the rules around GST and rental properties. We know we have a brightline rule in place, and what that rule means is that gains on houses are taxed if they are sold within a particular period of time. If at the same time we allow the cross-subsidisation of income in other areas, we simply encourage gaming. So what this is, the ring-fencing of losses on rental properties, is no more—

ASSISTANT SPEAKER (Adrian Rurawhe): Sorry for interrupting the member, but it has come time for me to leave the Chair for the dinner break.

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

💬 Matt Doocey: I raise a point of order, Mr Speaker. As you’ll be well aware—[Minister enters Chamber] Thank you very much, Mr Assistant Speaker.

ASSISTANT SPEAKER (Adrian Rurawhe): That was close, wasn’t it?

Tēnā koe, Mr Assistant Speaker. As I was saying before the dinner break, really this is ironing out some wrinkles. The members for the other side protest that this is, in fact, new tax. It’s not. What it’s doing is really just closing some loopholes that some of the smarter taxpayers have been using to minimise their obligations and deprive the New Zealand people of the money they need for the projects that this Government is undertaking.

Really, when we look at the ring-fencing of losses in respect of residential properties, the fact of the matter is that it’s entirely inappropriate on the one hand for us to have a brightline test and at the same time have tax losses which are being used to offset against other income. So what we have here is an entirely sensible approach. Let’s just remember this is not saying that losses cannot be claimed. It’s not even saying that losses can’t be claimed across years.

In fact, if the members of the other side read the bill, they would see that the losses can always be claimed against the property even when it’s sold. So that is the ultimate point at which these losses can be claimed, if, indeed, there is an overall loss in the business enterprise of the residential property, and the legislation allows for a portfolio approach where you club all your properties together or a property-by-property approach. That’s entirely up to the taxpayer to manage their own taxation affairs. So what we have here is really just saying that, look, a few taxpayers have been gaming the system in a way which is entirely inappropriate. They have been minimising their taxes in a way where it’s not appropriate because there’s no long-run evening out, and that’s really what we’re achieving here—nothing more and nothing less.

Of course, the same is the case in respect of the GST reforms. What we’ve seen is a massive growth in small cross-border transactions. We all know—some people have referred to it as the Amazon tax, but it’s not just a tax on large suppliers. There are many suppliers all around the world, and anyone who makes the GST threshold of $60,000 of turnover in New Zealand will be expected to register for GST. What we’ve seen is about a tripling over the past few years of the amount of transactions that meet this threshold. What that has meant, and quite unfairly, is people in New Zealand, retailers in New Zealand, hard-working mums and dads in New Zealand, have been paying GST as part of the prices of their goods, whereas someone overseas in Australia, the United States, or elsewhere has been able to sell their goods tax-free—an entirely inappropriate tax advantage. That means that New Zealand businesses aren’t getting a fair crack; they’re bearing more of the tax burden than they should.

So, once again, this is a sensible ironing-out of what is essentially a loophole. Previously, it was thought the costs of collecting the tax probably outweighed the benefits of it because the internet business was so small. But what Minister Nash has identified and, in fact, what I understand the previous Government was looking at is the fact that the amount of this tax is now sufficiently significant to warrant the taxation, the Inland Revenue Department putting resources into it, and, of course, it will have the collateral positive benefit of evening out the tax position for overseas suppliers and also for New Zealand suppliers.

Another great thing: the tax bill, of course, does another important thing that I want to mention before I close, and that is it tidies up the tax legislation. Every year, we try to make this legislation more workable, more understandable, more consistent, and more plain English—believe it or not—and a lot of the bill actually goes to that. It’s something you won’t hear talked about in the House very much, but it’s ongoing maintenance. It’s going round and painting the house every year to make sure that it’s still fit for purpose. So what we have here is a great piece of legislation. Minister Nash has brought it to the House. Yes, it will bring in some more revenue, but what it’s really about is making sure the tax rules are fair and consistent across the board for all players, whether it be in respect of rental properties, GST, or some of those smaller things like student loans and sexual abuse victims. So that’s a great piece of legislation. I commend this bill to the House.

Thank you, Mr Assistant Speaker. For those who are just tuning in after the dinner break, National will oppose the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill.

I’ve been here a while, and this bill typifies the greedy attitude that this Government has to tax. I want the next Labour member who takes a call to tell me whenever before we’ve had the tax bill setting the rates for 2019-20 going to a select committee while it’s still working on the tax bill for 2018-19. That’s how keen this Government is to keep—

💬 Hon Dr David Clark: Patience.

—taking taxes off the poor New Zealanders so that they can spread them around like confetti. Hon Dr David Clark is laughing at this. But he probably didn’t have the chance to watch the TV ONE news tonight where, again, the Hon Shane Jones has been caught giving millions of dollars to his nephs in Gisborne against Treasury advice. It’s mum and dad taxpayers who are paying their legitimate taxes so this Government can spray it around, thinking it’s about buying votes. I’ve got a message for the Hon Dr David Clark and for the Hon Shane Jones: if they think New Zealand taxpayers are going to be fooled by the largesse of the Provincial Growth Fund as money is thrown around, then I think they’ve got another thing coming. So the select committee will continue to work on the tax bill for 2018-19. It will then start work on the tax bill for 2019-20.

I was very intrigued with the contributions from the Green member Gareth Hughes when he said, “It’s time for a bit of honesty about the tax debate.” The very next speaker, Dr Duncan Webb, said, “This is not about any new taxes at all.” Well, it is about a new tax. It’s about an Amazon tax. It’s about a tax on GST for online purchases. I support that bit of the bill, because it’s the work that National did prior to the general election. It is totally unfair on the retailers of New Zealand having to put GST on to their products and then have somebody else being able to go on the net, import it from the likes of Amazon or eBay, and dodge the GST component, putting the New Zealand retailer at a huge disadvantage. So I congratulate the Government for that part of the legislation, but I will be interested in the select committee process to hear how it’s going to be complied with, because I think the concept of a threshold—$60,000 turnover—means that these overseas companies must then register for GST purposes. Let’s see the compliance. I think that will be a challenge for the work around the select committee.

The next thing that Dr Duncan Webb got wrong was around ring-fencing rental property losses. He tries to justify that by saying it’s about fairness to the tax system. Why are we ring-fencing losses on rental properties for mum and dad apartment investors, mum and dad home investors, when at the same time the legislation before the select committee allows this to be opened up for wealthy horse-breeders? Give me an explanation, Dr Duncan Webb, or, in fact, the next Labour speaker—I think she’s also a doctor—Dr Deborah Russell. Tell me why we close it down for property owners and open it up in the other legislation for wealthy racehorse-breeders. There’s no logic at all apart from the fact that some promises were made during the last election campaign by the Rt Hon Winston Peters to his mates in the racing industry and those need to be fulfilled.

The final point I want to make is, again, a comment from Gareth Hughes, when he said it was time to be honest about this legislation and then went on to argue that National had proposed cutting taxes for the wealthy. That is not right. It is completely wrong. In fact, it’s dishonest, because what National proposed at the last election campaign was to leave the top tax rate at 33 percent—to leave it there. It was about delivering tax cuts to middle New Zealand—the people who needed it. But what the Government did was abolish National’s good tax proposals and instead spend $2.8 billion on buying some student votes with tertiary fees being free. That was going to see more university students enrolling in our tertiary education, and there are now fewer enrolled than before the policy change of Labour. So Labour wasted, effectively, $2.8 billion that, if we had managed to secure an election victory, we would have delivered to hard-working New Zealanders; not, as Gareth Hughes said, to wealthy New Zealanders. Their tax rate would not have changed. It would have been delivered to middle New Zealand, and that’s what it should have been for.

So I want to conclude my comments by reminding people of a very good comment that was made by Ian McKelvie, that wonderful colleague of ours on the National side, who said to me, just before the dinner break, “Ideology doesn’t work in politics.”—ideology doesn’t work in politics. So for the Labour Government to continue—and I’m pleased that the Hon Grant Robertson has come to listen to this final point—to think they can treat the taxpayer as an ATM machine and then spray money around recklessly, as the Hon Shane Jones is doing day after day, let me tell the Hon Grant Robertson that it won’t work. New Zealanders are sharper than that. They’ll pay their tax legitimately if it’s fair, but they will object to being ripped off by a Government that imposes a higher and higher tax burden on New Zealand taxpayers so that the Hon Shane Jones can chuck it around the country with a huge amount of largesse.

National will oppose this legislation going to the select committee. It will work hard to make it better legislation at the select committee, but it will certainly be opposing it when it comes back for the second and third readings.

Several of the members of the Opposition have proposed alternative names for this bill, which is always an entertaining thing to do. So I am going to propose an alternative name for this bill as well: “Taxation”—we’ll keep the “Annual Rates for 2019–20” because that’s a straightforward constitutional requirement. So “Taxation (Annual Rates for 2019–20,”—and then I would call it—“A Practical Response to a Changing World) Bill”, because that is what this bill is about. It is a practical, pragmatic tax response to a world that is changing.

Let me talk about how that works. Let’s start with the GST measures—the GST measures that are supported across the House. When GST was first introduced, when it first became something that New Zealanders had to deal with, on 1 October 1986, the internet barely existed. The internet was barely there. It was nothing like the world we live in today, where we can go online and, at the drop of a hat, buy 20 ties at a time by sheer chance by pushing a button, or go and buy books, buy records. The world has changed, and now it is very easy for New Zealanders to buy goods from overseas, GST-free.

It’s not happening just to New Zealanders. It’s happening in any place in the world where there is a value-added tax of some sort. So the Australians are facing this issue as well as we are. Other countries are facing it—the issue that they’re not being able to collect the value-added taxes on goods and services that are consumed within their country. So, like the Australians, we are introducing some rules around the collection of GST—not a new tax. GST existed already—a tax on consumption in New Zealand, and the consumption is indeed happening in New Zealand. All we are doing is collecting the tax.

It’s a straightforward, practical response, and just like other countries around the world, we will be requiring overseas retailers who sell more than $60,000 worth of goods and services into New Zealand a year to register for GST and remit that to us. In Australia, it’s a little bit different. They are going to impose it on goods and services above $75,000 because that’s their GST threshold. It’s a very practical response to a changing world, and it is an idea that is supported across the House. May I suggest in response to the previous speaker, perhaps somewhat tongue-in-cheek, that the rules around racehorses are also a practical response to a changing world—a changing world for the racing industry.

But let me move on to another practical response to a changing world. I intend to remind members of the House about the Taxation (Budget Measures) Act of 2010. Colleagues, which party was in power when that particular Act was passed—the Taxation (Budget Measures) Act 2010? Who was in power? It was the National Party. And the interesting thing about that particular piece of legislation is it contained a very practical response to a changing world—a practical response that in the parlance that is used across the other side of the House, “introduced a new tax” to the rental property market. They are not shy about doing it. They are not shy about taking a practical response to a changing world.

What it did, that particular Taxation (Budget Measures) Act 2010, when the National Party was in power, was it removed depreciation on buildings, and it had a direct effect on the rental property market. It increased the amount of tax that rental property investors had to pay. They are not shy about it. They are not shy about taking practical responses to a changing world, and the changing world was that building values were going up and up and up instead of down and down and down, so they took a practical response. So if they are so fond of practical responses to a changing world, why then are they opposing the rules around ring-fencing?

💬 Kieran McAnulty: Now, that’s a good question.

And it is a good question. So let me tell you what is going on with this ring-fencing. The way I want to talk about this is to focus on something that the Hon Amy Adams said and that other speakers from the other side have repeated, saying that no other asset class has its losses ring-fenced. Why, the Opposition speakers are saying, is the Government imposing special rules—very special rules, they think—for rental properties? In order to answer that question, I need to go back a step or two.

Look, anyone is entitled to run a business. Anyone is entitled to run a business and to make losses. The interesting thing is that the IRD doesn’t require people to be good business people; it just requires them to be in business, and if they make losses, then those losses can be claimed against any other income that the business person might have. So there’s no need to be a good business person. But in most circumstances there is a natural barrier to the amount of losses that can be claimed year after year against any other income, if it might exist. The business person who is making losses year after year eventually runs out of money—kaput, gone; sad event—and it’s pretty rough; there’s no doubt about it. But there is a little bit of a difference when it comes to rental properties, because at present there is no natural barrier to the losses being claimed.

At present, what is happening is that asset values have been going up and up. So someone who invests in rental properties can incur losses year after year after year and expect to recoup them when they sell the rental property for an untaxed capital gain. So there is no natural barrier to spending more and more and more on a rental property and getting the taxpayer to subsidise those losses through writing the losses off against your other income.

So we are taking a simple, practical, pragmatic measure to limit the amount that ordinary taxpayers have to subsidise rental property losses. We aren’t denying the deductions altogether. A person who makes a loss on a rental property can carry that loss forward and set it off against future profits on a rental property, or, if they’re operating within a portfolio of rental properties, they can set it off within the portfolio. So the deductions are not being denied. All that is happening is that they are expected to make a profit in the long term. They are expected to at least break even or to make a profit. Isn’t that what you want an investment to do? Surely, someone makes an investment in order to make money, not in order to claim tax losses.

So this is a very practical response. It’s a pragmatic response. All it is attempting to do is to ensure that those who invest in the rental property market will in the longer term look to make a decent return off that, and good on them if they do that. That’s tremendous. We’re just not going to let other taxpayers subsidise it. This is a practical response to a changing world, and that is why I commend this bill to the House.