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 second time.

I’d like to thank the Finance and Expenditure Committee for considering the submissions on the bill, which has broadened scope and contains a variety of measures to make the tax system fairer. Many changes have been made to the bill in response to public submissions. These, together with the committee’s recommendations, make this a better bill by making important adjustments. First and foremost, this bill proposes a solution for the Government to collect GST on low-value imported goods in a cost-efficient manner and without holding goods up at the border.

Right now, it is not economic for customs to collect GST on goods of very little value. Under the proposed offshore supply registration, offshore suppliers and online marketplaces that supply more than $60,000 worth of low-value goods to New Zealand consumers will remit GST directly to Inland Revenue. This limit of $60,000, of course, is the same limit that New Zealand businesses have to reach before registering for GST. With a steady growth in online shopping from offshore suppliers, a significant amount of tax revenue is being lost. Initial forecasts project this initiative will boost revenue by $112 million per year by 2022. But in my view, this is not so much about increasing the revenue, but rather about the integrity of the tax system. It evens the playing field between all suppliers of low-value goods, and local retailers, in particular, will benefit, as they will no longer, of course, be at a 15 percent disadvantage, having to charge GST.

There are about 26,000 small businesses in New Zealand, employing more than 62,000 people in the retail sector. Many are in competition with foreign firms who sell exactly the same product into our market without collecting GST. This changes that. We also want to make sure this works well for offshore suppliers, and, following significant consultation with affected parties, the select committee proposed pushing back the application date from 1 April 2019 to 1 December 2019, and Ministers are still consulting on this point

This measure also simplifies compliance and reduces administration costs by removing tariffs and border processing charges on imported consignments of less than $1,000. Broadening the GST base is simply one of the many initiatives this Government will bring to bear on cross-border transactions to make the tax system fairer for all Kiwis. Last year, we legislated to crack down on base erosion and profit shifting, and we’ve recently released a discussion document on options to more fairly tax digital service providers who operate in New Zealand. All entities who supply goods and services to New Zealand need to pay their fair share of tax, regardless of their origin.

This bill is also about fairness, so I’m pleased that this bill proposes to ring-fence tax deductions on rental properties so they cannot be used to reduce tax on other income. Currently, the tax is applied on a person’s net income, which means if a property investor makes rental losses, those losses reduce the overall income and, therefore, their tax liability, and it’s my understanding that investors collect about $600 million in losses. The persistent tax losses that many property investors declare on their investments indicate that they rely on capital gains to make a profit, which we don’t believe makes for a healthy housing market, or encourages sound investment decisions—aren’t I right, Mr Twyford?

Negative gearing benefits property speculators to the detriment of most other sectors of New Zealand’s productive economy. By removing the ability of investors to gain a tax advantage from leveraging rental properties, we’re incentivising investment in more productive areas, while giving more opportunities for first-home buyers to enter the market. This bill also proposes to empower the commissioner of Inland Revenue to address errors or gaps in tax legislation that do not reflect the policy intent. Normally, such inconsistencies are addressed through remedial amendments and taxation bills passed once or twice a year. However, where there is a good case, it makes sense to provide certainty to taxpayers by allowing for an Order in Council or a commissioner’s exemption to modify the application of tax law without having to wait for, literally, months for the wheels of Parliament to turn.

Taxpayers will not be disadvantaged by the proposal, as it will include a number of safeguards, including limiting the application period of the Order in Council or the commissioner’s exemption to three years, and any changes will be optional for the taxpayers to apply in all cases. These measures were originally intended for the recently passed Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Act 2019. However, the Finance and Expenditure Committee rightly identified a need for more consultation to gain the confidence of the law and tax communities. I believe that following for further work with the Legislation Design and Advisory Committee and others within the tax community, this proposal strikes the right balance between protecting taxpayers and enabling efficient tax administration.

This bill makes several smaller policy improvements to the tax system. Businesses and community groups will now be able to retain tax records in New Zealand’s first official language, Te Reo Māori. It is time Parliament codifies Inland Revenue’s current operational practice, which has been in effect for over 20 years, and I’m pleased to amend the Tax Administration Act to achieve this. This bill proposes making it easier for the commissioner of Inland Revenue to exempt victims of sexual offences from paying child support for children born as a result of sexual violence. At present, exemptions can only be given where an individual has been convicted of a sex offence. Penalising a victim of sexual assault, simply because the perpetrator hasn’t been convicted, is a perverse outcome, and is at odds with a cultural shift this Government wants to see away from victim blaming.

This came about due to three letters I received as the Minister of Revenue, outlining women’s cases who had conceived as a result of rape, and, as we know, there are very few—about 10 percent, I think—of sexual assaults that are actually reported to police, let alone convictions. So this is fantastic, because it deals with a situation of inherent fairness for a small group of women who have had a very, very rough time, and, until this change, the IR had no ability to not seek child support from this group of women, so I’m pretty proud of this, actually.

The bill will also allow Inland Revenue to collect student loan deductions from schedular, election day, and casual agricultural income to reduce end-of-year repayment obligations for student loan borrowers. The bill contains a number of smaller remedial amendments to ensure our tax system continues to work effectively and efficiently for taxpayers and businesses. Finally, this bill sets the income tax rates for the 2019-20 tax year, with no change from the previous year.

In conclusion, I would like to thank the policy officials and drafters who worked on the details of this bill, the organisations and individuals who made submissions on the proposed legislation, and the Finance and Expenditure Committee for its consideration and recommendations to improve the workability and fairness of the provisions. This is a good bill for New Zealand, and I’m proud to commend it to the House. Thank you.

Thank you, Mr Assistant Speaker. This is a great opportunity to talk on the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill in its second reading. I think this Government is going to be known in time as that rapacious tax gatherer—rapacious tax gatherer—because since this Government has come in to play, they have introduced three lots of fuel excise tax. I see the Minister of Transport is over there, and he was the last one to do that. There’s also the regional fuel tax, which has particularly affected people in Auckland—only one and half million New Zealanders—the brightline extension to five years—

💬 Hon David Bennett: How many?

—one and half million, or maybe a bit more, Mr Bennett—the ring-fencing of losses, which I’m about to talk about; GST on mobile roaming; WorkSafe levies; and a tourism tax. So this bill is a further enhancement of a higher-tax structure in New Zealand, because the primary purpose of this bill is to reinforce the higher than necessary tax rates in New Zealand.

This is the difference between this coalition Government made up of Labour, New Zealand First, and the Greens, who want to impose more tax at a personal level on ordinary New Zealanders. We, in our last Budget, wanted to bring about a personal tax rate of $1,060 per person, on average, and what this bill does is reinforce the continued high tax rates without any amelioration of people.

💬 Hon David Bennett: Shame.

I think that is a shame, as Mr Bennett says. It’s a lost opportunity. I think it doesn’t recognise the fact that sometimes it’s better to give New Zealanders more money back in their pockets, and that’s why we will not be agreeing with this bill.

The other thing about this bill, though, is that since this Government came into power they have campaigned on a remit of not introducing new taxes, but since they’ve come into power, they’ve introduced, already, $2.3 billion of additional taxes, and then, in the very first thing after the Wellbeing Budget, what did they do with taxes? The first two bills they pushed through in urgency—which requires no select committee oversight, no public intervention, and no submissions from anyone—was to bring forward the fuel tax excise tax, and you’d have to say that that was totally unnecessary. It raised a mere $30 million, but for some reason the Minister of Transport thought, “We must rush that through in urgency.” The second thing was the tourism tax, which is going to raise, roughly, about $80 million a year. Those are the first two things they did in urgency. That is not what a wellbeing Budget’s about, and it’s certainly not transformational. Anyway—

ASSISTANT SPEAKER (Adrian Rurawhe): And during the Budget debate, you can talk about that. But it would be good if you spoke to the bill.

Good—thank you. So that is the tax tonight, and that’s why we’re not supporting this bill.

But there are some elements of this bill that are good, and I just want to now turn my mind to those. I think, on the issue around how we’re dealing with capital-raising costs for companies who are raising financing, there’s been quite an issue about whether, in fact, you could deduct some of the capital-raising costs for businesses. So this is a good thing for businesses, because it was unclear, and sometimes capital-raising costs are quite significant. But the other major thing that was dealt with—and, of course, it was started under the National Government—was this so-called Amazon tax that deals with the issue of overseas suppliers providing goods and services to New Zealand. This bill finally brings that to a conclusion. We, of course, introduced it—and when I say “we”, the National Government was dealing with this—and it’s good that the Minister of Revenue has taken this forward and that we’re seeing it here in this bill.

The Finance and Expenditure Committee did make some changes around this issue. Basically, overseas suppliers—and that might be a digital platform; it might be anyone, such as a US supplier of services or goods to New Zealand—will now have to register for GST and not only receive that GST but remit it back to New Zealand if their gross sales exceed 60,000 a year. That is a good thing.

Part of the debate in the select committee was around when this thing might come in to play. There was quite a lot of debate, and one of the issues that a number of the digital operators—platforms like Google, Alibaba, and those sorts of people—made strong submissions around was when they could reorientate and reprogram their systems to be able to comply with this arrangement. As a last change to the bill that the select committee considered, that date was pushed out to 1 December, whereas at one stage, it was going to be 1 October. I think that’s a good thing because we do want our overseas suppliers to have the systems in place to be able to comply with the New Zealand requirements now. Also, what is means is it’s a good thing for our retailers in New Zealand, who now are not disadvantaged—particularly on low-value items worth below $1,000—and I think that was a very good thing.

The main issue that we do have with this bill is the ring-fencing of rental losses, and this is quite a significant thing. The bill proposes to limit the ability to transfer any losses that you may have made on a property and to offset that against your other income. That’s the traditional approach, and that’s been the approach for a long, long time. What this bill has done is limited it to only carrying forward those losses and applying them against future sales of property, and that is a significant restriction on people.

What I don’t think people realise is that 42 percent of all houses in New Zealand are owned not by rich people, actually, but by mums and dads, because they see it as a wonderful opportunity to make some money, and they understand it; less so than what they might otherwise for the stock market, unfortunately. But they have chosen to make an investment in rental property. They own 40 percent of all properties, and what this now means is that they cannot offset any losses against their current income.

The whole excuse for doing this was to make sure that we were evening up the market and we were going to make it easier for first-home buyers, and, of course, everyone wants to see first-home buyers in the market—everyone. Everyone across the House here wants that. But what this will mean is that for those people, they are now going to be incurring higher costs. It’s estimated that this will haul in another $190 million in tax for the Government, but, of course, who are paying that tax? They are the mums and dads of New Zealand who own these rental properties. Of course, they will pass on that cost to their tenants, and that is the missing piece in the logic of this proposal, because passing on $190 million in costs to renters—and that’s 630,000 households in New Zealand—would imply that their rents are going to go up by $300 a year.

When you put that in the context of rents that are already, under this Government, increasing by over $50 a year, that is a further—

💬 Hon Paul Goldsmith: A week—a week.

Per week. That’s right—$50 per week. That is an outrageous imposition on renters. Of course, who are going to be adversely affected by that? It is certainly the people who are starting out in their careers, who haven’t yet assembled the money, and it is the more vulnerable members of our society. This thing will hit those people the hardest, and that’s why we’re are implacably opposed to this particular clause.

Even Treasury, the hard nuts of economic management, wrote and said—and I quote—“Rental loss ring-fencing will reduce after-tax rental returns for some landlords. This could encourage the transfer of housing stock from investment housing (i.e., rental housing) to owner-occupier housing, putting pressure on the remaining rental stock.” Of course, they go on to say what that means about rental pressures, and what this is doing is it’s going to be a bad thing for those people who choose or have no other choice but to rent from the market. I think that is a particularly bad thing about this bill.

We will be opposing it. There are some other goods aspects in this bill which I’m sure my colleagues are going to cover. But, on that basis, we will be opposing the bill.

It’s always a very hard act, following on from Andrew Bayly—the Scotch terrier of the New Zealand Parliament—a man whose level of excitement builds and builds and builds around certain issues when we approach a tax bill. It’s like a little Scotch terrier at the ranchslider when a van pulls up on the driveway, and, boy, does he get excited.

Can I say that Mr Bayly’s performance in respect of the annual rates in this bill is also like a Scotch terrier or another small kind of domestic animal at a ranchslider. I’m sure for all of us in this House who have had a small dog or a cat: they’re at a door; you open it. They say they want out. They’re out; they want in. The National Party is just like that when it comes to rates of tax, because they want it all at the same time. They want to cut taxes, but they also say they want to reduce debt, but they also say that they want to spend money. They just can’t pull together a credible fiscal approach.

Of course, that is what this Government is delivering, and this bill is a part of it. It’s about signalling a stable tax regime that is able to fund the services and the infrastructure that New Zealanders demand. Every member on this side of the House can stand up, based on this bill and the tax rates that it sets, and based on the appropriations set out in the Budget this year, and show the investments that we will make, show the surplus that the Government is running, and show our critical fiscal approach. Those members want to have it every single which way.

My challenge to Mr Bayly and any other Opposition speakers who get up and speak in this debate and spend half of their time talking about the annual rates—a small portion of this bill—is, at the same time as doing that, to identify where the cuts would come, because you simply cannot have one without the other and maintain a credible fiscal stance.

This is an important bill. The annual rates bill comes to the House every year, and, as well as setting the annual rates for the year ahead, it is generally also an opportunity for the Government of the day to deal with a range of other matters within the tax system. This bill deals with a number of quite significant matters. It was a complex bill, as all of the bills which come to the Finance and Expenditure Committee are—particularly the tax bills.

I do want to, on that note, acknowledge members of the committee across the House for their diligence and application in terms of considering this bill and the submissions that were received and the advice that came in from officials. The committee works well on these bills, and, as a result, we have an improved bill at the end of the process. Can I also acknowledge the officials, who gave good advice to the committee, and the quite large number of submitters who gave the committee the benefits of their views and who, in quite a few cases in respect of this bill, were able to effect changes that, as I say, have improved the bill.

I would also like to acknowledge the Minister of Revenue, the Hon Stuart Nash, a very busy Minister of Revenue. He’s carried on, picked up the torch, from another very busy Minister from the previous administration, the Hon Judith Collins—certainly busier and more active than her predecessors in the previous Government. We would all acknowledge that, I am quite sure.

There are a number of other important measures brought in by this bill. The bringing in of low-value goods coming in from overseas into the GST net is one of the most important, and it’s important because it does what I think most of us agree we want to have within our tax system, and that is to have a fair system in which people are treated equally. The situation that we have had for a long time is that these goods, most commonly now purchased by people online, are able to be purchased without the application of GST, whereas for the same good, if one was to walk down to the local bricks and mortar store and purchase that good—or service for that matter—GST would apply. That is not a level playing field, and so organisations such as Retail New Zealand and others have for many, many years been calling for a level playing field in this area.

So I think this bill makes an important advance in that area. It creates a level of fairness within our tax system. It certainly does support the revenue base as well—I think to the tune of around about $190 million when it’s implemented, from memory. But, actually, the most important thing is the fact that it creates a level playing field within the tax system.

The select committee did carefully listen to submissions that were received in respect of this part of the bill, and there are a number, quite a few, in favour. Some of the online market places, it would be fair to say, submitted against this part of the bill. That’s probably no big surprise. There were some in principle objections from them that I don’t think the committee was persuaded by, and then there were also some technical objections, primarily focused on the ability to implement the collection of GST in an orderly fashion before the bill is implemented. It’s on that basis that the committee is recommending in its report that the implementation date is pushed back by just a couple of months to 1 December, and I think that’s a good example of the committee process working well: members across the divide in the committee supporting the principle of the bill but listening to the submissions and making sure that it is implemented in a way that is going to be orderly and not cause too many problems.

There are a number of other smaller changes to this part of the bill that were made at select committee. We’ve dealt with some matters in respect of contracts that may have been entered into before the application date to make sure that people aren’t sort of caught between the two regimes.

One of the other important matters that people who buy goods online will be familiar with is how you deal with discounted goods. You might have a good that is originally put up by a supplier but then is funnelled through a market place—someone like Alibaba, for example. The market place applies a discount to that good—which price do you apply the GST to? The clarification is that it is the market place price—the price that you actually purchase the good from. But these are the important sort of questions that come up through the select committee process that we’re able to clarify in the text of the legislation.

The other very important provisions that the Minister talked about in this bill are the provisions around the ring-fencing of losses on rental properties. This was a very clear policy that has been signalled for a long time. It was part of the approach, certainly, that the Labour Party, at the time of the previous election, took to addressing runaway house prices and the housing crisis, which has locked so many young first-home buyers out of our housing market. Ultimately, it’s about shifting to a more rational market which isn’t driven by irrational exuberance, in which first-home buyers do have a shot and aren’t going to be out-competed by people who are fundamentally in the market to invest and, in some cases, to speculate.

It’s important to note that people will still be out to carry those losses forward. They will still be able to offset them against other residential property investments. They, simply, won’t be able to offset them against other forms of income. The important point about that is that, effectively, what the current regime means is that those people who are investing and able to offset that income have an advantage over and above the first-home buyer, who may be competing for the same property. That is something that this Government is simply not prepared to countenance.

I am very proud—and I acknowledge the Hon Phil Twyford, who’s in the House with us at the moment—about the fact that in the wake of that significant housing crisis, which pulled homeownership rates down to the lowest since 1951, we are finally seeing a turn-around with higher numbers of first-home buyers coming into the market under this Government. The same criticisms that have been made about this provision in respect of the ring-fencing of losses on residential properties—those very same criticisms—were made, I remember, when the brightline test was extended to five years by this Government. In actual fact, what we see is that, combined with other measures from this Government, has started to support more first-home buyers coming into the market. That’s a good thing, and I think this House should certainly be supporting it.

The final thing I want to touch on is the changes to the care and management powers within this piece of legislation. These are captured in Supplementary Order Paper (SOP) 193, and these, as Minister Stuart Nash outlined, enable either the commissioner by exemption or the Minister by regulation-making power to address, effectively, small errors that may make their way into the incredibly complex tax legislation that go through this House, which, ultimately, take a long time to rectify through the legislative process.

I want to highlight this SOP and those changes because, to me, it’s an example of how our Parliament and our select committees work well. These changes came before the select committee in the previous annual rates bill. They’re quite significant, in a way, because they do give powers to either the commissioner or the Minister that previously would have been the preserve of the Parliament. The select committee was not entirely satisfied by the protections at that time and asked for further work to be done. I give credit here to the Minister and to officials, who took that message on board and came back with reworked changes in the SOP to come into this bill, which I think have met the satisfaction of the select committee in terms of ensuring we have that flexibility to deal with obvious errors in tax legislation while ensuring that there are also checks and balances within that to ensure that we don’t have major changes being made that might disadvantage taxpayers or that are against the will of this Parliament.

This is a good bill. It deals with complex issues and ensures the fairness of our tax system. I commend it to the House.

Thank you, Mr Assistant Speaker. Well, thanks for the contributions that we’ve heard so far. I think the member who has just resumed his seat referred to my colleague Andrew Bayly, MP for Hunua, as a Scotch terrier, and I would say this to Mr Michael Wood, in that pre-ministerial speech that he just gave now, “Better a Scotch terrier than a weasel!”

💬 Michael Wood: I support you too, Mrs Collins.

Ha, ha! So now we’ve got that out of the way, let’s get back to business. We do actually have, mostly, a very good time on our Finance and Expenditure Committee, and Michael Wood MP, no doubt soon to have the housing portfolio, is someone who does—we do enjoy quite a good relationship across the aisle and the desks there.

The main reason that we are not supporting this bill is not because of so much of the excellent work that we did in Government and which has now been continued on—for instance, around what’s called the “Amazon tax”, which, basically, means GST on low-value or under-$400 goods coming into the country. Of course, when GST was first set up—in 1986, I think—by the then Labour Government, not many people would have bought anything from overseas except for, possibly, cars and big items like that, and machinery, but certainly not clothing; not to the extent that we do now. We have, over the years—I certainly did, as Minister of Revenue, for about 10 months at the end of our term of Government—heard from retailers that this was actually causing them great distress, and New Zealand economically, and there were certainly a lot of submissions from and lobbying from the members of Parliament from the National Party for this to be brought in because of provincial towns that were finding that they were missing out on work and goods and money, and it was something that we needed to address.

The issue that Inland Revenue certainly told us about was that the system that they had was not something that could cope with that. There were also issues regarding customs, as well, and the collection of the GST, and I well remember meetings that we had at that time with the then Minister of Finance, Hon Steven Joyce, myself, and the Minister of Customs, working on how we could make all this happen. Obviously, the officials were there to make sure that something actually did happen. What we found was a way through, and it’s great that this is now coming through in this bill.

The other point that we needed to do to actually allow the systems to work well was to invest in things like the Business Transformation project through Inland Revenue, which has actually given Inland Revenue an opportunity to expand out how they do things and to look at a more electronic way of dealing with issues. That cost about a billion dollars—I mean, only a third as much as what Shane Jones has got to go and spray around the country. But it certainly was a big amount for us for something that was never going to get everybody in the country saying, “Yay, let’s give Inland Revenue another billion dollars.” Strangely enough, people don’t vote for Inland Revenue to get money, but the point of it was to make a system that was going to actually be better at collecting the money but also in a more fair manner.

Mr Wood also made a comment about how it should all be equal, and it’s all about equalising tax or equalising things. I think it’s actually, really, more about equity, isn’t it? I think it’s more about equity rather than equality, because even though everyone is equal under the law, the fact is that some people are older, some people are younger, some people have more earning capacity than others, and so it is important that there be a degree of equity under the law, and under the tax law in particular.

We are opposing this bill primarily because it is another increase. It’s yet another increase in taxes, and that is particularly around the ring-fencing of rental losses. The reason for that is, actually, that increases rents. What we’ve seen in the 18 months of this Government is that, according to the TradeMe rental site, which seems to be one of the best records of what’s happening in the rental market, rentals have increased by $50 a week on average. That is a lot of money. That’s a lot of money for people who have to rent because they can’t afford their own house. It does not help them to get their deposit together to have to pay an extra $50 a week. It’s a lot of money for people who don’t have it.

I think one of the things that we’ve seen over the last 18 months is quite a Grinch-type attitude towards mum and dad investors. So many New Zealanders who are coming up to retirement may have one or two properties that they rent out, and they do that because they understand that a house is a house—it’s a property. They don’t trust always the sharemarkets. Maybe they got caught in 1986, under a Labour Government, in the great collapse of the share markets in New Zealand? Maybe—

💬 Hon David Bennett: That’s right. And Labour caused it.

I don’t think they actually did cause it, but they probably had a lot to do with it, Mr Bennett—probably did! It was probably them! Anyway, the stars were definitely aligned badly, and a lot of people lost a lot of money. They also learnt pretty quickly that they couldn’t trust everything that they were being told by some of the companies and the wide sort of behaviour that some of them had. So what they do is, having lost once, they don’t want to lose again.

What this does is this is actually going to make it harder for those people, those New Zealanders who have saved up a deposit for a house that they want to rent out because they want an investment property and they want to see their money when they go past it every day. For those people, it’s going to make it harder for them to buy that house. I’ve heard Mr Wood say, who’s resumed his seat, that this is because they’re competing with first-home buyers. Well, on that basis, let’s let nobody buy anything, because they’ll be competing with somebody else, or we should go down the path of just having the State own everything, because then nobody will be competing. It’s not just about competing. On the one hand, we’ve had house prices drop and, on the other hand, we’ve got rents going up. So it just doesn’t make sense. In the last 18 months, house prices in, say, Auckland—an area that used to be in quite high demand—have gone down. Yet rents have gone up. What there is now are fewer rental properties now available for people to rent, because if there were more places to rent, then the rents couldn’t go up, because they wouldn’t be sustainable in terms of getting tenants into them.

This is actually quite a serious issue, and with so many of this Government’s policies when they bring them in—it’s often all with good, fluffy, cotton-woolly, candyflossy type ideas around them about how they’re going to stop some evil—we end up with the unintended consequence of more people sleeping in cars this winter, with more people needing emergency housing, with a waiting list for State houses that has gone up by 70 percent.

💬 Hon David Bennett: No!

Now, that’s not 17 percent, Mr Bennett; it is 70 percent for State waiting lists, and yet every message has gone out to mum and dad investors: “Get out of the market. We don’t want you.” Phil Twyford has said to these people words to the effect of “If you don’t like it, get out of the market.” And he’s said that to them in their association meetings. My message is that, actually, these are the people who provide most of the rental properties that are needed by New Zealanders. It is really important in our housing market, and in our rental market in particular, that we have a good combination of community housing, of State housing, and of privately owned housing. We need more people providing rental accommodation, not fewer people providing rental accommodation, and we don’t need great big overseas corporates with enormous capital to come in and shove mum and dad out of that market and instead take away a rental property.

Thanks, Madam Assistant Speaker. It’s a pleasure to rise on behalf of New Zealand First and the Government to speak to this, the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill.

I just want to address—if you’ll allow, Madam Assistant Speaker—some of the claims made by Opposition speakers. They both used their contributions to talk down the Provincial Growth Fund. They used this opportunity, somehow, to talk about Minister Jones. But I challenge those members opposite to go into the Hawke’s Bay today, tomorrow, next week, and talk to the people in the provinces about what the Provincial Growth Fund has done for them—

💬 Hon David Bennett: They’re laughing at it.

They’re loving it, because Hawke’s Bay—more water, grow more fruit, pay more taxes, and they’ll be happy for it. Gisborne—

💬 Hon David Bennett: Waikato.

Yeah, Waikato. I’ll be in the Waikato soon, Mr Bennett, and do more than you ever did or have done in your time—

ASSISTANT SPEAKER (Poto Williams): Order! Order! Do not bring the Speaker into the debate and—

I think I’ve made my point. Thank you for your patience, Madam Assistant Speaker.

ASSISTANT SPEAKER (Poto Williams): Thank you. Shall we move on.

This bill is a bill that I am happy to support, because it is about building resilience in a modern economy. It is about growing this economy that is working for all New Zealanders, and it is a bill that improves outcomes. As I said, it is about fairness, which is integral to a good tax system. New Zealand does pride itself on a long history of a fair and transparent tax system.

I suppose that leads me to one of the first major changes or efforts here in this around the GST and low-value goods. So there was—and I’m proud to say—much consultation. The National Party, in their time in Government, did start us down this road, and I acknowledge that. They brought in what was maybe unfairly coined the “Netflix tax”, but they were prepared and ready to go down phase two. And here we are—this Government agrees. When I was in Opposition at the time, I did a lot of consultation with retailers in particular, to ask them what they thought. I just brought up a quote from Retail New Zealand, who were passionate advocates on behalf of their membership, who said that this piece of legislation is “outstanding news” for the retail sector here in New Zealand.

I just actually want to acknowledge some of the issues that this bill will ensure don’t come about. I’m quoting former pro vice-chancellor Bob Buckle from Victoria University, who said the number of items crossing our New Zealand border but slipping through that GST net threatened the sustainability of New Zealand’s tax system.

So here we are today, after much consultation, like I said, when I was in Opposition—but again, much consultation. Actually, it’s an appropriate time to acknowledge the members of the Finance and Expenditure Committee, who have done more on this. Here we are, making sure that there is a framework to collect GST on low-value imported goods. Why is that important? Because it creates a level playing field for New Zealand retailers. We’re talking about 26,000 small businesses out there, employing about 62,000 New Zealanders in the retail sector who, up until this point, have been at an unfair disadvantage from foreign firms who have been able to send goods into New Zealand, because the de minimis at the border has meant that they haven’t had to pay their GST contribution. Now, that’s a 15 percent head start, and that is not fair to New Zealand retailers, the people employed, and the hard-working business owners who have made retail their life. So this is an incredibly important step forward for this Government but also for those people working incredibly long hours in their small businesses, trying to make a living selling books, for example—all these small items that Kiwis love buying online, but we want them back in our shops as well. So this is a fantastic thing, and I’m proud to be a part of it.

The other conversation that the members opposite were having in their contributions was around the loss ring-fencing measures. Look, to be fair, I would have expected more from a former Minister of Revenue in terms of the contribution to the House, because she spoke about mum and dad investors and their rental properties—using the income from that when they retire. Well, by the time that they are in that position where they can enjoy the income from their rental properties, this ring-fencing provision doesn’t apply to them. This is very much about the initial stages of buying property and getting into that positive cash flow. So once you’re in that position, there’s nothing to claim against—there’s nothing to offset. Actually, as was pointed out, initially I was quite worried, as a New Zealand First MP, about what this would do to the rental market, but actually I went to one of our biggest rental property owners in Rotorua and asked the question: “Look, what’s this going to do?” And he quite bluntly said, “Look, it doesn’t affect me and I don’t care one iota.”, because he has positive cash flow. He’s making money off his rental properties, and he will continue to do so as he adds to the stock.

So this means the sky-is-falling contribution from the other side of the House is not the case at all. In fact, there’s more to it than that. Not only is the provision applied to a small number, and, over time, they become cash-flow positive, but actually, they can ring-fence their losses and claim that in future—forward ring-fencing. So you can do this and you can continue to claim on those losses. You might not get the money straight away, but it will be there and you will be able to offset it on the profits as you move forward.

So this is a good piece of legislation. I’m pleased that the House will support it in majority, and New Zealand First absolutely commends it to the House. Thank you, Madam Assistant Speaker.

Well, that was a very interesting speech from Fletcher Tabuteau, a man who, in the normal course of events, might have expected to be a Minister by now, given that in any normal Government, Shane Jones would have had to resign over his outrageous interference in the New Zealand Transport Agency incident. But such as it is in this Government, he might have to wait a little bit longer.

The point he was making about going to the Hawke’s Bay and finding out how everybody was happy about the Provincial Growth Fund money and how it is being spent is an interesting one, because it’s not actually very difficult to take $3 billion if you’re a Government and then wander around the countryside and hand it out. I mean, it doesn’t take particular genius to just take $3 billion and say you’re going to spend it. It’s actually a bit trickier to actually get something useful for the money and actually go about it in a proper function. As we’ve seen, his boss, Shane Jones, has announced $1.7 billion of funding, but he’s only actually managed to get $62 million out the door because of the incompetence of the way that it has been managed.

But the point I’d make in relation to this bill is that this is another tax increase—well, two tax increases. Obviously there’s the tax increases for renters, which will flow through from the ring-fencing, but also another year when there’s no inflation adjustment in the tax regime. Lots of people in New Zealand get some reflection of the impact of inflation on the way that they are looked after. So we’ve just recently had legislation around inflation adjusting benefits in this country to help those people, but workers and taxpayers don’t get any inflation adjustment. So every year a little piece is snuck out of their income as inflation pushes the tax thresholds further down into people’s incomes and savings. Over time, that accumulates in an enormous amount of extra tax for the Government. That’s what this Government loves, because they love nothing better than spending more, than borrowing more, but they have no economic plan and they haven’t shown any ability to deliver on their promises. So in this regard that’s why we’re not very impressed with this further tax increase.

The other point around the ring-fencing of losses is—look, there is a widespread concern about the affordability of housing, so people want to make a difference on that. But the point I’d make, and that they have to be careful about and consider, is that it’s not compulsory for people to rent out their houses. If you make it too difficult and expensive—and there’s been a wide range of things added on to the burden of landlords recently around requirements around all sorts of things, putting in heat pumps, and you name it, and various things that have been taken away from them. That’s fine. They all individually might seem like a good idea, but collectively the consequence may be that a number of people say, “Well, this is all too hard. It doesn’t work for me. I’m getting out.”

In the long term that will all sort itself out, but in the short term I predict we’ll have a real shortage of rental houses in this country in the next year or so. We’re already seeing that, because of the massive increase in requests for State housing and emergency housing, and homelessness. A considerable amount of that has been driven by this Government’s housing policies, which have reduced the supply of rental properties. You have to think about the consequences of what you’re doing, in the short term, and this is another example of that. On that basis, we are not at all convinced. Thank you.

Thank you, Madam Assistant Speaker. I’m pleased to be able to take a call in support of the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill—one of the most snappily titled bills I’ve had the chance to speak on yet this year! I’d like to just focus on five of the really primo parts of the bill, some of which haven’t had a lot of air time, and to kind of focus on some of those areas that haven’t gotten a lot of attention. But I will come back to some of the points that have been a matter for debate in the House, such as the ring-fencing deductions on rental properties and also the online GST issue.

But I just wanted to start with one of the provisions of the bill allowing tax records to be kept in Te Reo, which I think—you know, not a lot of people know that about this bill—is a fantastic innovation. It’s one of those, frankly, quite small things that we can do that, I think, sends a really big signal both in terms of ensuring that the Government is living up to its Te Tiriti o Waitangi obligations, but actually just to say to people, “Look, tangata whenua should be able to conduct their business with the Government in their own language.” To me, that’s just a basic right that you’re able to do that, and I’m really pleased that this bill has enabled that. It just shows that we are slowly edging towards a more inclusive and responsible society through measures like that.

The second measure in this bill that I just wanted to focus on, that again don’t think has had a lot of debate today, is around allowing the Commissioner of Inland Revenue to consider other information when exempting victims of sex offences from paying child support for children born as a result of sexual violence. I think, again, particularly given the programme of work that we’ve got in this Government on domestic and sexual violence, that this is particularly important, because at the moment the way that the system is set up is that it looks like we’re penalising a victim of sexual assault simply because the perpetrator hasn’t been convicted, and that’s obviously a perverse outcome that’s really at odds with the culture shift that we’re trying to generate in this.

If you think about those two provisions, the ability to hold your tax records in Te Reo and making it easier for the Commissioner of Inland Revenue to exempt victims of sex offences from paying child support for children born as a result of sexual violence, those are, kind of, deep social issues that you don’t normally see come up through tax law, and it is great to see this bill extending those out.

There’s also a great little provision in this bill which allows Inland Revenue to collect student loan deductions from things like people who are working casually on election day or from casual agricultural work and so on. That will reduce end-of-year obligations paid by student loan borrowers. So, again, it’s just one of those small provisions, making life a little bit easier for people who are often in pretty tight financial conditions—making life easier for them. Those are three of the smaller provisions that I don’t think have had a lot of air time, which I just did want to bring to the surface and to people’s attention.

I know there has been a lot of debate in the House today around the ring-fencing of rental properties so that they can’t be used to reduce tax on other income. I just want to pick up on one of the comments that was made by Judith Collins before, because she talked about how people may have been burnt by the 1987 stock market crash and are therefore wary about investing in the stock market, because of the 1987 stock market crash. I do know that the stock market does have its ups and downs and that there are members present who may have had their fingers burnt in the 1987 stock market crash. The logic that Ms Collins is applying is saying that because people have been burnt on investments in the stock market, we should therefore maintain preferential tax treatment for investment properties over investments in the other parts—particularly in the more productive parts—of the economy. Pretty much every economist agrees on this point, that we have a massive over-investment in investment properties and not in the productive parts of the economy. It’s a huge imbalance in our economy.

The idea that because people might be worried about the stock market going up and down, we should therefore continue to tilt the playing field away from productive investments and towards property is completely absurd. It is utterly absurd. So I just think that this provision, which in the grand scheme of things isn’t actually all that big, goes some small way to trying to create a more level playing field between investment property on the one hand and the productive parts of the economy on the other. So to me it’s an absurd proposition that because there was a stock market crash in 1987, and previously in 1929, we should therefore have this massive over-investment in property because somehow that kind of makes sense.

I think the other point to make on this point is that when you look across the investment categories, there are persistent tax losses that are being declared by property investors on their properties—like, persistently—which suggests that they hold those for capital gain, which, of course, they don’t pay tax on, rather than actually the rental income, right? So they’re not actually renting these houses out for rental income; they’re renting them out and declaring losses in order to maximise their capital gain, which, of course, they don’t pay tax on. So to me it’s completely absurd that you would maintain those kinds of existing settings. I do really strongly support the loss ring-fencing, because I do think in some small way it will help to level the playing field between the productive part of the economy and investment properties.

The last piece that I just wanted to pick up on, which my colleague Fletcher Tabuteau spoke fairly extensively on before, is about the requirement that offshore suppliers of low-value goods register for, collect, and return GST when their sales exceed $60,000. This has been a long time coming. Deborah Russell has made a point of this before, which is that this is a really pragmatic response to a changing world in which it is at least as easy, if not actually easier, to buy goods online than from your local retailer outlet.

So, at the moment, we’ve actually got this quite absurd situation where we’re actually encouraging people to buy small goods overseas from internet giants that generally don’t pay any tax in New Zealand anyway, or pay very little tax in New Zealand anyway, rather than from small New Zealand businesses. As Mr Tabuteau pointed out, we have 26,000 small businesses in this country that employ something in the order of 62,000 employees, and the idea at the moment is that, actually, there’s an advantage going to the likes of Amazon and so on, which, last time I checked, is not short of cash. So I think that this does go some way towards levelling the playing field, and to me this provision isn’t really about collecting revenue; it’s much more about ensuring that there’s a level playing field between small retailers in New Zealand and some of the big offshore internet giants overseas.

I know that retailers and small businesses in New Zealand will be delighted with this, and I think that they will probably be scratching their heads at why the National Party, which likes to talk about itself as the champion of business, and in particular small business, would be voting against a bill that actually explicitly creates a more level playing field for New Zealand small businesses rather than these big offshore businesses that don’t pay a lot of tax domestically. If I was a retailer in New Zealand, I would be really wondering what on earth the Opposition was doing voting against that provision. If I was Māori and wanted to be able to conduct my business with the Government, I would be scratching my head at why the Opposition is voting against a bill that allows me to keep my tax records in Te Reo. If I was a victim of domestic and sexual violence and I felt that the current set-up was discriminating against me, I would be scratching my head about why it is the Opposition is voting against a bill that explicitly changes that requirement there. If I was someone who wanted to buy my first home and to be able to have that Kiwi Dream—

Order! I apologise to the honourable member; your time has expired.

💬 Hon James Shaw: I commend this bill to the House.

ASSISTANT SPEAKER (Poto Williams): Thank you.

Thank you, Madam Assistant Speaker. Well, aren’t we so lucky to have the Green Party tell us about economics? These are the peak oil people from 20 years ago that are now banging on about other issues.

But there was one line in that speech that I think we need to really delve into. He said that it was preferential treatment that was being talked about, and I want him to just think of a scenario of company A. Now, company A is a business and it has two or three rental properties. It owns those properties, and company A is also a retailer. So it is a retailer that uses those properties for its business, and it may have a structure in there with a number of companies between, but, essentially, it is in the retail business and the rental business. Are they able to net off the income losses on that rental against the profits they make on the retail? Of course they are. That’s how they do it. That’s what businesses do. The pie is put together, and they pay tax on the profit at the end.

Now, the member over there, James Shaw, was saying that, no, this is unfair, that the losses on rental properties shouldn’t be able to be used against other income. That is simply not true. It is fair that people are able to do that, because they are providing an investment in our economy. They are providing a service to our people. They are putting capital at risk, and they should be able to net that off against the other investments that they make as part of their business, which is their salary and income and their investments.

We can go overseas and see how that has worked in the Australian example, for example. The Labor Party over there has campaigned on negative gearing for many, many years, and we can see how well that worked in the last election. The public react to an attack on negative gearing. When you have rental properties like this and the ability then to be able to claim or ring-fence those losses against other income—as in the case that you can do now, but this legislation will stop that and will ring-fence it—that means that there isn’t that incentive for someone to go out there and invest in property.

The Green member said the 1987 crash—well, there have been many crashes in the New Zealand stock market since 1987. Only going back six or seven years ago, we had the global financial crisis, which was a major impact on New Zealand’s sharemarket. New Zealanders are burnt, as the Hon Judith Collins says, because we don’t have a massive sharemarket compared with some other countries, and a lot of people do invest in property as their security mechanism. So when that member was saying that this is something that—he was trying to portray that it was many, many years ago and New Zealanders should’ve moved on. Well, that’s not the case in the practicality of how people work.

💬 Dr Duncan Webb: Balanced portfolio—balanced portfolio. That’s all you need.

Balanced portfolios—well, that’d be interesting coming from the Labour Party, a balanced portfolio. Have we seen a balanced portfolio out of the Labour Party?

💬 Dr Duncan Webb: Like our superannuation. Like the Cullen fund we set up.

Oh, the Cullen fund. That was a balanced portfolio—the borrowing money to invest in shares. Did the Cullen fund have land assets? No, it didn’t, because the Cullen fund was all about shares. That was a very balanced portfolio, wasn’t it? It was all about shares on the international market, and they were buying shares in New York and other places like that. But that’s the other economic brilliance we’re getting from the Labour Party. Their idea of a balanced portfolio was to borrow money and put it in the sharemarket. That’s what that member was just saying.

This actually will hurt ordinary New Zealanders, the ordinary people out there that work hard, go out there and make some money, and want to invest it in a little bit of property. Why should they be at risk now? Why should they be attacked by this Government? They are providing a very valuable service for this country, and if the Government thinks that it can provide all the housing in New Zealand, other than people that own their own homes, and if the Government doesn’t believe there should be a rental market out there, then fine, say that, but then I’d love to see them actually do it, because we have seen how KiwiBuild has been a failure. We’ve seen that their Housing New Zealand growth is only to a limited amount. They just can’t do it. There’s no physical way, if Labour and the Greens actually wanted to, for the Government to deliver all the houses in the New Zealand market. We need people to go out there and take a risk and invest, and to do this we’re penalising people that want to take a risk.

💬 Greg O’Connor: No, to build—no, to build.

To build—so the only exemption is to build, according to Mr O’Connor. Now, Mr O’Connor is another economic genius from the left. He’ll be coming up and he’ll be doing hand signals as he does his speech, and the waves will move as he speaks. We’re looking forward to that, Mr O’Connor, the economic genius that you are in the Labour Party as well—

ASSISTANT SPEAKER (Poto Williams): Thank you very much; I am an economic genius. I just remind you not to bring the Speaker into the debate.

Oh, no, I would never bring the Speaker into the debate.

💬 Greg O’Connor: At least I’m some sort of genius.

Oh, he’s some sort of genius, is he? That’s going to be interesting.

ASSISTANT SPEAKER (Poto Williams): Can we get back to the bill, please, Mr Bennett.

Well, I just wish that the Labour Party would actually look at this and in a practical sense actually support hard-working Kiwis that actually want to go out there and invest in property.

I understand this is a split call. I call Kiritapu Allan.

It is always a delight to follow the previous speaker, David Bennett, when I get to listen to claims about ordinary New Zealanders. Ordinary New Zealanders in my electorate, for example—I’ve got one particular ordinary New Zealander who’s acquiring so many properties—in surplus of 50, actually—who really loves ring-fencing. It’s prohibited a whole range of people—pretty much anyone—from being able to buy into that particular area. I’ve got homelessness on the rise, and so I just want to acknowledge the Minister who’s in this House, the Hon Phil Twyford, who is working very hard alongside my senior colleagues to fix perverse behaviours that have been allowed to run rampant under the previous Government.

But I turn now to the bill, and it is a delight to be able to speak in respect—and I want to actually just acknowledge the camaraderie that we do show within our particular select committee, the Finance and Expenditure Committee. We do have enjoyable debates. I too want to acknowledge our new independent adviser, Professor Lisa Marriott. This is the first particular bill, I think, that she’s advised us on all the way through. To our colleagues from IRD, they tolerate a lot of sometimes probably very ignorant questions—ignorant or insightful; perhaps just the ignorant ones are from me—but I do thank them for their contributions.

There are a couple of areas I particularly want to speak to this afternoon. For me, one of the key aspects in this bill for small regions like mine has been the application of GST to low-value goods. So for small local retailers in areas like mine—I’m thinking of Muirs bookshop up in Gisborne, or whitegold down in Whakatāne. Small-business owners—there’s about 26,000 of these throughout the country. They employ about 62,000 people through New Zealand. Now, those companies, in this new era of economic commerce, argued to say that they’ve been at a disadvantage, and this bill brings about some equity and equality. We received substantive submissions, and I want to acknowledge the submitters, and we’ve made a number of amendments. But this particular provision I just think is absolutely fantastic, and it brings us up to speed with the rest of the world. Australia brought in legislation like this last year; the EU are about to do it pretty soon. For a lot of those small businesses within our regions—and all of us have them—who’ve felt like they’ve been operating at a 15 percent disadvantage, this will, hopefully, restore some of those shops that we’ve seen close down in our front windows. The GST system was introduced in 1986. It’s been around most of my lifetime, and e-commerce wasn’t really anticipated in any big form when I was a young ’un, so it’s good to see the modernisation of this bill.

The other particular thing I wanted to highlight was the—and I want to acknowledge the Hon Stuart Nash for responding to the exemption for child support payments as a consequence of sexual violations. I’m thinking of a woman in particular. She was 15 years old when she conceived a child as a consequence of sexual violation. Very shortly after the child was born, that child went to her mother, and that woman was then sent letters from IRD requiring her to pay child support—17 bucks a week by the time that she was 17 years old. She commenced her adult life with a relative noose around her neck, and she went through a process. But it’s a relatively consequential matter that the Minister has picked up, and I do really want to acknowledge him for his foresight and his empathy, and I’m very proud to see that go through in this bill. Madam Assistant Speaker, I’m pleased to commend this bill to the House.

Thank you very much. Just a couple of matters I wanted to refer to in the debate on this bill. First of all, introducing a GST component on low-value imports—when this was looked at in the past, it was deemed that the cost of recovering that GST made the exercise not worthwhile. While that looked like a pretty Government-centric type of policy, it just seemed that adding compliance cost into the economy made it not worthwhile; however, the significant investment that has been made into Inland Revenue’s data systems has made it now possible for a GST regime to be introduced on low-value imports. Of course, that should be and is welcomed by small business. I’ve had a number of constituents, small-business owners, discuss this with me over the years, and it is good to see that now, due to the investment largely started by the former Government, this regime is now coming to pass.

I can’t and won’t speak more favourably, though, around the ring-fencing of rental losses, because there is only one impact on rising costs in any business, be it a landlord in a rental situation or any other type of business. There’s only one way—two ways—to deal with rising costs. In this instance, either exit the rental market, which is happening with a lot of landlords—I also talk to a lot of real estate agents, and a lot of landlords are now selling out because the return is simply not worth it. So you can exit the market, or you can do what is happening here in Wellington, and we are seeing a lot of that: the cost of rentals goes up.

So I fail to see—and I would love to know the rationale, apart from blind ideology, coming from the Government—why, in the context of wellbeing, which they seem to be pushing with every breath they take, on the one hand they talk about wellbeing, and yet knowingly, against the advice of Treasury and against the advice of the Inland Revenue Department, are introducing a regime into the taxation system which has the impact of raising, yes, $190 million in extra revenue a year from landlords. But as I’ve said, you put the costs up, either the housing stock available for rental is reduced—yes, that’s happening—or rents rise. It’s simple. It’s very, very simple.

So I do fail to see, and I am interested in the views of members opposite, how they can justify a regime which raises a not considerable amount of taxation revenue against the social cost, the wellbeing cost, of people who are in the rental market who then find their rents going up or the landlord selling the property while they are still renting. So, you know, it simply doesn’t—

💬 Dr Duncan Webb: We’re winning.

Winning? The member opposite says “winning”. Who’s winning? Certainly not people in the rental market, because in Wellington, where we are here, the rents are at an all-time high. Why? Why? A number of impacts of policy—the capital gains tax certainly put the wind up the sails of landlords, and now to introduce ring-fencing of tax losses is simply the icing on the cake, if you like. The only loser—the only loser—are those people who the Labour Government purport to support.

Well, it gives me great pleasure to rise and speak on this bill. It’s a great example of a tax tool being used not only to raise revenue but also to change markets. We know that the rental market has been one where people have been investing on the back of capital gains, making paper losses but real money and getting subsidised by the Government whilst they’re doing it, and that’s not right. So this ring-fencing proposal is fantastic. It’s part of an excellent package of reforms around the property market that this Government is implementing. Only today, I read that at last, first-home buyers are dominant buyers in the market in New Zealand today, and that is due to a Government that’s committed to making houses available to genuine, hard-working New Zealanders, wherever they may be. That is absolutely fantastic.

Levelling the playing field as well are our GST reforms. I think it’s fantastic that at last, as my colleague Kiritapu Allan said, small retailers are now not disadvantaged because overseas suppliers have a 15 percent head start on them. We now have got a very workable, very simple system for any overseas retailer whose turnover is $60,000 or more. Look, I must say, some of the large suppliers came in and said, “Look, you can’t rush us. Don’t impose it before Christmas, because we can’t possibly get our systems up to speed by then.” I must say, we were very sceptical of that. Now, the committee did recommend pushing the date to 1 December rather than 1 October—that’s going to be very carefully considered. It has an $18 million revenue impact, using some rough figures, so let’s think about that. But I don’t for a moment accept that these large internet suppliers are going to exit our excellent market, our profitable market, simply because they’re asked to put some systems in place.

So this is yet another excellent piece of legislation, making the playing field both in respect of rentals and tax and in respect of GST and retailing fair, equal, and also revenue-positive for the Government so we continue with the great project of making New Zealand a better place. Thank you, Madam Assistant Speaker.

Thank you, Madam Assistant Speaker. Before I start I want to remind James Shaw that some of us are older than 1987—one or two other speakers as well—and what, in fact, Judith Collins said was quite true. It was also true of 2007, of course, when the finance companies collapsed and there were a whole lot of New Zealand investors caught up in that. So the diversity of our opportunity in New Zealand is not great.

I also want to take the Green Party’s speaker up on one other point. There are some very good parts of this legislation and there are some pretty average parts, and that’s why we can’t support the legislation. Not because of the very good bits—which we do support, we fully support them and we realise they’ll get passed—but there are some parts of this legislation that we don’t like, and I want to talk about two bits, really. One is Supplementary Order Paper 193, which I don’t know whether I like or not because it effectively gives Inland Revenue, or the commissioner, the prerogative to change some tax rules, I suppose. That’s the first time that I know of where this House has, effectively, given the power to tax to an outside body. Now, there are some safeguards around that, in that it’s got to be put into legislation after three years if that does happen, but, none the less, it is a first and it’s an interesting proposition. I suppose, given the kind of democracy we have, it does speed things up from that perspective and also corrects things much quicker than they otherwise could have been corrected, but whether that’s sound or not I’m not so sure, because it does take some of the power away from the Parliament.

I now want to go to the bit that I really think is extraordinary, and that’s the ring-fencing of losses and the way it affects some people in the market and not others. It, effectively, has an impact on the small rental investor; it doesn’t have an impact on the larger rental investors, because those businesses are self-sufficient. So even someone with, say, 10 houses can very well be self-sufficient. They won’t be affected by this tax at all, because they won’t need to be writing off their income against their rental property expenditure, because a portfolio of that scale will deal with the issue for them. So that’s the first thing: I think it’s unfair.

The second thing that I think is very likely to happen is that—because about, I think, something like 40 percent of the rentals in New Zealand are held by small investors—this is likely to force the rental price up further. The ironic thing about that is that the small investors will still be penalised in the way they were. They’ll get some more rent but the big investors in the property market will get a free ride, basically, on the back of that. So they’ll have a bonus that they wouldn’t have anticipated. Again, it’s an ironic effect and it’s not an effect I think is at all sensible. So there are some anomalies, I think, that will be created by this.

The other thing I just want to briefly mention was the issue that, again, Judith Collins touched on to some extent—the issue in New Zealand of the diversity of our market. We’re unique in the world, almost, because we’re a well-off small country with a very small market. We don’t have opportunity in New Zealand of large sharemarkets and large alternative markets. So the effect that has is to force people to invest in New Zealand, and New Zealanders, because we’re so isolated from the rest the world, tend to trust themselves more than they’ll trust anyone else, so they’ll invest at home. What do they invest in? They invest in property because it’s the only thing that they can touch and see and be secure with. So you look at the two crashes that are being talked about, 1987 and 2007, both of those had a significant impact on New Zealanders who had no alternative investments from property; it didn’t have an impact on the property investors.

So it is an anomaly. I think it’s unfortunate, and I think that that piece of legislation contained in the bill that otherwise is pretty good—in fact, I think most of the bits of the rest of the bill we support. I think containing this piece of legislation in there is unfortunate because we need to vote against it for that reason. So Madam Assistant Speaker, that’s my lot, thank you. I commend the bill to the House—don’t support it, though.

It’s a pleasure to take the last call on this debate. We began the debate by—Michael Wood began it by comparing Andrew Bayly to a Scotch terrier. I have to say that if Andrew Bayly is a Scotch terrier then I think Paul Goldsmith is probably a whippet, David Bennett might be a Weimaraner, Jacqui Dean a bichon frise, Ian McKelvie a spaniel, and Judith Collins is, of course, a sweet friendly golden Labrador. Michael Wood, the chair of the Finance and Expenditure Committee, I think is a Border collie—highly intelligent and friendly, and he shepherded this bill through the select committee with great skill. I commend him to the House for his work in organising this bill through a long series of submissions and the like.

But in terms of the substance of this bill, it is, as my friend and colleague James Shaw said earlier, a response to a changing world. The world has changed in the years since we introduced goods and services tax in this country. As he pointed out, we are no longer just dealing with bricks and mortar; we are dealing with goods that can be shipped from anywhere across the world, services that can appear almost with the click of a finger as we download books or music from across the internet, or other services. In response to that changing world, we need to change our Goods and Services Tax Act to ensure that we tax consumption in New Zealand. Up until now, we have not been taxing consumption in New Zealand if the goods and services were purchased from overseas. Now we will. That is the effect of this bill, and I think it’s an important change.

In the select committee—as our chair, Michael Wood, has pointed out—we did shift a little bit on what happened in the bill as presented. We shifted the implementation date for the new way of charging goods and services tax, giving online retailers a little bit more time to adjust to the new law. I think that is a sensible change.

The other big issue that the Opposition has raised with respect to this bill is the issue with ring-fencing. That too is a response to a changing world. We used to have ring-fencing of rental property losses a long time ago. They were called specified losses, and they were actually limited to claiming $10,000 of specified losses a year. We lost that particular provision. Then, in the meantime, our housing market took off, and it meant that people could invest in rental properties. They could claim losses, they could withstand losses year on year on year—which ordinary business people can’t, because the money runs out—in anticipation of an untaxed capital gain. The world has changed, and we need to respond to that change. The ring-fencing is a response to that change.

People can still claim rental losses; it’s just that they must claim them against rental profits. It’s a straightforward proposition. What that ring-fencing does then is encourage people to invest on the understanding that they will earn a return on an ongoing basis, not just if they ever sell the property. So that is a sensible response to a changing world. This is an excellent tax bill. I think it deserves support. It’s a shame that the Opposition won’t support it, because these are just and fair measures. I commend this bill to the House.

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