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

Thank you, Mr Chair. It’s a pleasure to take a call on Part 2 of this bill. The bill is a bit of an enigma—a bit like some of the Minister of Revenue’s comments a moment or two ago about opening and shutting the railway lines north of Napier. It bemuses me how they can open the port of Gisborne with a whole lot of money, open the railway line from Wairoa to Gisborne, and open the railway line from Wairoa to Napier. One or the other is going to get the trade; not both.

Anyway, I want to speak about Part 2 of this bill, and the enigma in this bill is that there are some parts of this bill that are clearly very sensible and very well put together and there are some parts of this bill that we cannot agree with. I think that’s a bit of a shame because there are many parts of this bill that are sensible and make good sense for New Zealand. One of those is GST being applied to offshore goods, and that’s a piece of legislation that’s been talked about for some time now and has finally arrived in the House.

I think it’s a very sensible piece of legislation. It’s critical that we get it right. It’s critical that we end up in a position where we are able to tax equitably all of those people supplying into the New Zealand market at that level. I think that will be the challenging thing for the inland revenue to get those people registered and to get the money collected from them, because it is a very complicated business, and it’s not unlike the racing reform legislation that we had through the House this afternoon, where a similar sort of proposition has been put, where we are looking to collect, effectively, a levy on gambling. Here we’re, effectively, looking to collect a levy, or a tax—obviously, it is—on goods that are imported to New Zealand via remote means, I suppose.

It’s been a bugbear for the retail sector in New Zealand for quite some time, because not only have more individuals been able to import goods under $1,000 to New Zealand and pay no GST on them—which, effectively, straight away makes them 15.5 percent cheaper—but there’s also another anomaly in this, and it won’t be fixed by this bill. It has always bemused me a bit that if you import stuff through remote means or through the internet, or however you import it or buy it, you don’t then pay duty where duty is applicable in New Zealand, and on things like clothing in New Zealand, for example, we still have an old-fashioned kind of duty applied on that clothing. We don’t have that, obviously, on goods that are imported by individuals into the country. So straight away that’s another small inequity that our retailers suffer from, and that’s grossly unfair.

If you go back a few years, of course, we used to have massive duty on cars when we were protecting the New Zealand car manufacturing industry. We are now protecting, or still protecting, in effect, a New Zealand clothing manufacturing industry which is very, very small. In fact, it’s not quite non-existent because there are some pretty good clothing manufacturers in New Zealand still, but the vast majority of our clothing goods are made offshore, and, of course, they come into New Zealand from offshore through a legitimate retail sector—and I’m not saying that any other means is not legitimate—and they end up paying an extra duty on it. So not only were those people who were bringing clothing into the country, for example, getting a 15.5 percent discount for no GST; they were also getting a 10 percent discount because they don’t pay duty on it. So there are still some anomalies in that, but this piece of this legislation is a sensible solution to a problem that’s been bugging New Zealand retailers for some years, and I hope that it’s successfully resolved.

A little bit more time has been given to the revenue to get this in place—and I think probably sensibly so—and no doubt my colleagues might talk about one or two other issues that have arisen in the course of that, like the ability to tax pre-ordered goods and one or two of those sorts of things. But it is a very sensible piece of legislation. It will raise a significant amount of money for the inland revenue, and it will, I think, temper to some extent the purchase of offshore goods via the internet because it will make the prices much more relevant to New Zealand prices at the time. So, whilst I said earlier there are parts of this bill we certainly cannot support, this is a part of the bill that the National Party certainly can support, and we’ll look forward to it being implemented successfully as it goes forward from here. Thanks.

As I said in my comments on Part 1, we’ll be voting against the legislation, but I mentioned there was one or two bits within the legislation that I’m relatively supportive of, and Part 2—the issue of GST collection on low-value imported goods—I fully support. This work was actually initiated by the Hon Judith Collins, as I recall, as revenue Minister under the previous Government. It was brought about because for some time now, successive Governments have recognised the huge disadvantage that some retail operators are under because of internet shopping. We’re seeing now an increasing trend, particularly amongst younger people, where they could go on to Amazon, eBay, TradeMe, etc., and look at bringing stuff into New Zealand, and at that stage they were able to escape GST, whereas a retailer offering the same or similar products in any part of New Zealand—but particularly I felt for the ones in those smaller rural towns that Mr Nash said he was interested in in his earlier contribution—was completely disadvantaged and had pressure on them. So both National and Labour have worked to find a solution, which is now incorporated in this bill, and it’s a good solution.

The part that I found particularly worrying as we went through submissions was that originally the legislation proposed that the enactment date would be 1 October this year. We had eBay, we had Amazon, and we had TradeMe before us saying “We simply can’t set up systems that quickly. We need an extension.”, and the National members throughout the hearings also said it was unreasonable. We suggested we should delay it until 1 April, and the Government members were absolutely opposed until we went to the final stages of consideration.

I’ve got to say it was some of the poorest chairing of a select committee I’ve seen in my time here, where suddenly we were told, as we were considering the slip, “The date has been changed, not from 1 October but to 1 December.” So there was some gain because of the insistence of Opposition members that it was impractical to try and do it by 1 October, but I would have expected a select committee that worked in a fairly diligent way and tried to bury politics to have at least had the opportunity for a discussion, rather than a simple imposition of this by the Government members, which, of course, hold a significant majority on the select committee—no discussion at all. We raised it and said “That’s not the way to run a select committee.”, and the chair admitted that it wasn’t good form, but that’s the way this select committee is often chaired, to be honest.

I still think that Andrew Bayly’s amendment—which I would certainly support—of moving it to 1 April is actually more sensible. This is a big change of legislation, it is significant, and we’ve got to make sure that those larger companies that do supply goods into New Zealand via internet shopping have the ability to put up systems that work. Otherwise, if they don’t have the systems, they have an easy response and it is—and this is to consumers here in New Zealand—“Sorry, we don’t supply it to New Zealand. It’s simply too difficult.” I still think there’s a risk of that with the inception date moving from 1 October to only 1 December, and therefore I think the committee stage here in the House should give full consideration to the amendment in the name of Andrew Bayly. Move it to 1 April and make sure that suppliers have the opportunity to set their computer systems in place, whereby they can legitimately collect the tax, so that is paid by the importing consumer here in New Zealand, and it is then legitimately remitted back to IRD here in this country, as it’s supposed to be.

But, of course, delaying it from 1 October to 1 December has a fiscal cost. To delay it from 1 December to 1 April would have, obviously, a bigger fiscal cost, and as we were told by Government members sitting around the Finance and Expenditure Committee, the tax revenue is so critical to this Government because of its magnanimous spending projects that they initially weren’t prepared to even consider the movement from 1 October. We managed to have a small win to get it to 1 December, but I still think, practically, the committee of the whole House should think seriously about an amendment being proposed to move it to 1 April.

Thank you very much, Mr Chair. First of all, we all agree with this. We all agree it’s a good idea and it should be implemented, so the only thing we disagree on is the application date. I’d like to inform both members who have spoken on this part, Ian McKelvie and David Carter, that the fiscal cost of moving it from 1 December to 1 April is about $30 million. It’s about $30 million that, in fact, we wouldn’t collect, but we can collect it if it is 1 December. Now, what I can say, as the Minister of Revenue, is I’m not going to put our revenue at risk, or New Zealanders at risk, by imposing a date on these large companies that I do not think they can meet.

The other thing I would like to say is that I actually would like to defend Michael Wood. I think he does a fantastic job of chairing the Finance and Expenditure Committee. He’s fair, he’s reasoned, he reads all his papers, and I think he does a very good job and he’s a knowledgable member. I don’t like to hear criticism of a person, certainly when he’s not in the Chamber to defend himself.

But that aside, as mentioned, I would not put the revenue streams of this country at unnecessary risk if I didn’t need to. The 1 December date we are absolutely clear we can meet.

The other thing, as well, that’s important is we talked about the high street. We talked about the retailers and how important they are to our communities, whether it’s provincial, rural, or the big city communities. If we can get this implemented by 1 December, and we can—we know we can—then why would we go for another retail season? Why would the National Opposition want our retailers to go through another high season at an economic disadvantage, at a competitive disadvantage, as Kiwis can still buy stuff online 15 percent cheaper than they can on the high street? Why would you want to do that to the retailers of this country when we know that we can do this well by implementing it on 1 December? It just makes no sense to me.

So it’s not about the revenue; for me, it’s about the integrity of the tax system. It’s about making sure we get it right—it’s always been about that—but it’s also about ensuring that we level the playing field. That is incredibly important for me.

Now, I’m not saying that because we’re going to bring in GST on low-value goods, people are going to stop buying things off the internet—of course that’s not going to happen. But what it does mean is that at least the men and women, the Kiwis who own the retail stores—the bricks and mortar—actually are not at a competitive disadvantage to an overseas multinational based wherever, but not here. So 1 December is the date because it can be done and it’s fair, and it’s actually the right thing to do for the tax system but also for our retailers.

Well, that’s a nice segue way into Supplementary Order Paper (SOP) 251 in my name. So for people who are not aware of the SOP, what it seeks to do is to change the commencement date of this GST arrangement from 1 December 2019 to 1 April 2020. It was interesting, just listening to the Minister of Revenue, and the first thing I want to say is that we all, I think, across the House want to support our retailers and we know the importance of having a level playing field. In fact, this piece of legislation, as the Rt Hon David Carter mentioned, actually was initiated by the Hon Judith Collins. So this is now our intent and our piece of legislation. It’s just good to see it coming through to the House under the current Minister, and we acknowledge him for that.

It’s traditionally referred to as what’s called the Amazon tax. We do want to make sure that New Zealand retailers are not disadvantaged by people buying on the internet. When GST came into being, no one sort of had the concept around buying and purchasing goods over the internet, and, of course, we’ve gone through many phases and, as the Minister knows, GST now accounts for 23 percent of all our tax revenue. Traditionally, up to now, we’ve had these rules that any goods up above a $400 threshold would be subject to duty or tax and GST. But what this bill is seeking to change is to make sure that these lower value items—i.e., less than $400—are actually subject to GST, and we have no debate with that.

The issue is there’s been a huge growth in e-commerce as a result of all this. So what this bill does is deal with it, and we are very supportive and receptive, as I’ve said before. The issue we’ve got is that we had lengthy discussions at the Finance and Expenditure Committee. We had many, many submitters. We had a number of the overseas international offshore suppliers, which is the official term for the people that run or operate these trading platforms—people like Alibaba, eBay, and all those sorts, and Amazon is, of course, another one—and those people came and made very strong representations. Like it or not, New Zealand is a very small part of the world economy—I think 0.2 percent, or something, from memory. We are very, very small, and they made a valid point. They have been asked to make changes in Australia and they’re dealing with the IT programs and reprogramming issues that were happening in Australia. Of course, what that was doing—good to see the Associate Minister of Finance David Parker stepping up to the chair—what is happening is they were literally saying, “Look, we cannot meet this time frame.”

When we pushed the officials on it, they were steadfast that it should be brought in on 1 October. In fact, with last-minute intervention, I believe, from the Minister, it was pushed out to 1 December, with no notice to the committee. It was, effectively, a fait accompli, at which point we gave the officials a grilling as to why there was a sudden change of heart. I think it was totally driven by the Minister. I welcome that, if that was indeed his intervention.

But the issue with this, as I said, is we want to look after retailers in New Zealand. We want to make sure there is a level playing field for these low-value items, and, remember, items greater than $400 are subject to GST. But what this does is it puts in a new regime, and the issue is the practicality of getting very large entities, international offshore suppliers, to turn their attention to New Zealand. There is a genuine risk, and this was highlighted, that in fact the time it would take to do a program—and if you’re talking about a trading platform like TradeMe, it is not an insignificant issue to reprogram it. Merely, what this SOP in my name does is give some more time to that and it makes it from 1 April 2020. As the Minister said, a $20 million to $30 million additional loss of revenue in the scale of things of taking in all that amount of money is a very, very small amount of money, but it protects the sovereignty and integrity of the tax system. [Bell rung] Can I carry on?

No.

The question was put that the amendments set out on Supplementary Order Paper 248 in the name of the Hon Stuart Nash to Part 2 be agreed to.