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

Well, I’d be absolutely remiss if I didn’t give it my best nudge with the one minute and 45 seconds that I have left to speak on the Taxation “dot, dot, dot” GST Offshore Supplier Registration Bill. Yesterday, I spoke about the long-term problems that we’re facing as a country and how we’re tackling them. In particular, I spoke about how this bill was addressing that through housing. I talked about how we are getting rid of the ability of speculators to ring-fence their losses. Then, I talked about how we are committed to building a strong economy, and how this bill here does just that—it does that by supporting small business. Then, I said how we are focused on wellbeing. Now, there are a whole range of factors that this bill does to ensure the wellbeing of a whole range of different sectors within our communities and our society. But, in particular, I referenced the rather niche aspect within this bill—which is around protecting those that have been sexually violated. It gives the discretion to the IRD commissioner to be able to grant an exemption to those people that must pay child support.

There was one final thing that I really wanted to turn my mind to, and that was that we are building a New Zealand that we can all be proud of—and this bill does just that. It formalises a process that has been relatively in place for the last 20 or so years, but it actually legitimises the way that people can keep their records in Te Reo Māori. Now, Te Reo Māori is an official language of this nation. My colleague Willow-Jean Prime spoke to this far more eloquently than I can, in the last seven seconds. But what a fantastic bill, and I commend it thoroughly to the House.

Thank you, Mr Speaker. National cannot support this bill. National vehemently opposes most aspects of the Taxation (Annual Rates for 2019-20, GST Offshore Supplier Registration, and Remedial Matters) Bill in its third reading. This is an omnibus bill, and, as I said, there are one or two aspects of the bill that we can support.

In Government, we began the work on introducing GST on low-value imports—sometimes known as the Amazon tax. But in the past, the compliance and the administration of raising the tax on low-value imports was simply not worth the revenue gained, and if we are to have a good, solid taxation system, then—the Government doesn’t levy taxes just because they can—there needs to be a benefit from those taxes. Sure, now that the technology in Inland Revenue has improved—the systems have been upgraded; work which commenced under our Government—it has made the collection part of it less costly and complex. So it does make sense now to close that loophole, and, yes, it will support small businesses. National, of course, is the party who does support small businesses, and, quite clearly, Labour is failing to deliver on its promises to support this economy, and, in particular, in terms of those of us in New Zealand who rent. I would venture to say that everyone in this room has rented—perhaps now, but certainly earlier in their lives when they were students or just starting out in work.

The measure that the Labour-led Government are bringing into this taxation bill is ironic. It is ironic because the measure of ring-fencing tax losses on rental properties won’t benefit anyone. It’s not bringing in much revenue into the Government. It may bring in $190 million extra in tax from landlords, but that is chicken feed if one considers then what the impact of raising this tax on landlords, to the tune of $190 million, will mean. What it means is very clear, and the Government has heard advice from Treasury to this effect. Who will suffer? Tenants will suffer. Those very people, those renters, who cannot or have not yet bought their first home and who are in a rental situation, are the very ones, the very people, that will pay the price for this taxation, which is based on the politics and the policies of envy. It is the member who just resumed her seat, Kiritapu Allan, who proudly in her intervention mentioned speculators, and, of course, in the context that the member mentioned, it can only be that speculators are those people in our society—i.e., landlords—who are there to fleece people. Well, the only ones who are being fleeced are the renters, and they are doing so at the hands of this Government.

The impact of raising—

💬 Hon Andrew Little: Stupid speech. What a stupid speech.

Stupid speech—there we are. They are completely in denial about the advice from Treasury. So maybe I will turn to that now, and, with indulgence from the Speaker, I will quote from Treasury. “Rental loss ring-fencing will reduce after tax rental returns for some landlords. This could encourage the transfer of housing stock from investment housing”—which is, of course, rental housing—“to owner-occupier housing, putting pressure on the remaining rental stock.” Argue against that. On average, owner-occupied housing tends to have fewer people per house. “This suggests that a transfer of housing stock from rental to owner-occupied may reduce the amount of housing available [to renters]”, and so it goes on.

I was speaking to a to a real estate agent, just this afternoon, as I was preparing for this speech. In small-town New Zealand, where this real estate agent works, he was saying that not only has the market certainly been suppressed by the prospect of ring-fencing of rental losses—and also the prospect of the now defunct capital gains tax proposal—but also the housing stock available for renters has reduced significantly, even in an environment where there isn’t particular pressure on housing.

So senior Ministers of the Government do not seem to realise the very, very basic fact that if you increase costs on landlords by way of ring-fencing losses for rental properties, that loss is going to go somewhere. Those landlords are going to exit the rental market. We see that happening. There will be less housing stock available for those very people who that Government purports to support. How can that be good taxation policy? Yes, the Minister is right on one point, and that is that it will be easier for, say, a young couple to get into their first home—which can even be ex-housing stock—but there may be five other people. Two people go into a house, and five other people are now on the rental market looking in a shrinking market of rental properties. How can that make sense?

This Government seems to be very blinded by the politics of envy, and there will only be one group of people who suffer for that—

💬 SPEAKER: Order! Order! Back to the bill, please.

—and that will be the renters.

Mr Speaker, I am delighted to take the final call on the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill. It’s a tax bill, and it’s a very interesting one.

The Opposition has raised, in essence, three major concerns with this bill—three reasons why they feel they may not be able to support it. The first is to do with tax rates, the second is to do with the date at which the new rules for offshore suppliers start with respect to GST, and the third is to do with ring-fencing of losses on rental properties. I intend to deal with each in turn.

With respect to tax rates, what the Opposition demonstrated, first and foremost, was simply how out of touch they are with ordinary New Zealanders. Let me tell you what the Hon Amy Adams said. She said that the average wage is approaching the top tax rate. Wrong—simply wrong. The average wage at the moment is something like about $50,000. The top tax rate cuts in at $70,000—40 percent more than the average wage; a simple matter of maths, which the Hon Amy Adams couldn’t get right.

The Rt Hon David Carter showed that he doesn’t understand numbers either when he ranted on, I suppose, about the ballooning of the tax take. The tax take was going to get enormous and huge because we weren’t adjusting for bracket creep. Wrong—just plain wrong. If the Rt Hon David Carter had bothered to look at the percentage of the tax take over the next five or six years, as set out in the Budget Economic and Fiscal Update delivered to this House just a week or two ago, he would have seen that in 2018, the tax take would be about 28 percent of GDP. In 2019, it’ll be about 28 percent of GDP. In 2020, it’ll be about 28 percent of GDP. In 2021, it will be about 28 percent of GDP. In 2022, it’ll be about 28 percent of GDP. In 2023, it’ll be about 28 percent of GDP. I sense a theme here, but, whatever the theme is, it is not a ballooning. A simple check of the figures would have revealed that.

But the Opposition were concerned that we weren’t adjusting, that we weren’t cutting taxes, and they said that if we don’t do this, then taxpayers will miss out year on year. Those were the words from the Hon Amy Adams. Indeed, they will miss out year on year if we do cut tax rates. They will miss out on hospitals if we don’t take in sufficient tax revenue. They will miss out on education if we do not fund that properly. They will miss out on mental health care if we do not fund our Government properly. They will miss out on the work that is being done to reduce domestic violence if we do not fund our Government properly. They will miss out on the extraordinary work we are starting to do at long last on responding to climate change if we do not structure our tax system properly.

It is all very well to talk about cutting tax rates willy-nilly, but the question always has to be what services will be cut instead. I suggest that the Opposition needs to think a little bit harder about the purpose of tax.

💬 SPEAKER: Order! Order! I’m going to suggest the member get back to the third reading of the bill, which is focusing on the bill as it emerged from the committee stages. It is not an opportunity for a general tax treatise.

That’s very disappointing, Mr Speaker, but I will obviously take your advice.

💬 SPEAKER: Order! The member will resume her seat. The member will stand, withdraw, and apologise, and she will refrain from commenting on my rulings in the future.

I withdraw and apologise, Mr Speaker. The Opposition are refusing to support the tax rates in this bill. I reject their arguments and I support the tax rates that are outlined in this bill.

Moving on to the second issue that the Opposition raised, and that was the issue to do with the new rules for GST on offshore suppliers. It’s a simple proposition for which, as the Opposition have pointed out, the work actually started under the previous Government. The idea is that when people in New Zealand consume goods and services—and in this case, particularly goods that are bought from overseas—that they must pay the GST on it. This will be collected by the offshore suppliers and remitted to the New Zealand Government. The system is in place in Australia already; it has been well signalled by us. What the Opposition wanted was for us to allow more time—they said we had to give these offshore suppliers more time to get these rules in place. There were a number of submissions on this during the course of the hearings at the Finance and Expenditure Committee and, indeed, the Government did move to allow some more time in response to those submissions—another couple of months in order to get those systems in place. It is a reasonable response to the submissions, and I think that on the whole it is a sensible change and one that ought to be supported.

The third issue that the Opposition were concerned with was ring-fencing of rental property losses. They raised a number of arguments as to why we should just allow people to claim losses on rental properties against their other income. They said that if we did this then landlords would just sell the houses. To whom, I wonder. Might it be to the renters themselves? I suggest that this is actually a good response to the rental crisis. They said that landlords would just put rents up, but that is an extraordinary view to think that the price of something is determined only by the cost. Rents are set in a market situation. They are set by the market as much as they are set by cost; that is basic economics. As a Government we are taking a whole suite of measures in respect of the high price of rental accommodation, of houses in this country, and ring-fencing is just one of those responses. They told us that it won’t bring in much money; but $190 million—that sounds like a fair chunk of money to me, and quite a useful sum of money to bring in.

Then they said that other assets aren’t treated this way, and that is because there is a fundamental difference between houses and other assets. I want to explain it because the Opposition seem not to understand this—usually when a person invests in a business they expect to wear losses for a while. It does take some time to get a business up and running, but, typically, if money doesn’t start coming in the door, if a person doesn’t start making a profit on that business, then the business folds. Unfortunately, the person makes a loss and, of course, that is a very difficult situation for that person. The difference with rental property houses is that a person can wear losses year on year on year if they expect to sell that property for what is an untaxed capital gain. They wear the losses because in the long term they expect to make a profit. That is how it works and that is the difference between rental property investments and investments in other assets, and it merits a different tax treatment.

The old treatment does give rental property investors a tax break. It gave them a tax break, but it was a tax break that was not serving the country well. So that is the reason we have brought these ring-fencing rules in, and with that—people did it because it gave them a tax advantage, but there is a simple rule of tax planning: never ever enter an investment just because it gives you a tax break, because that tax break may not last. This tax break is not lasting because it does not serve our country well.

This is an excellent bill that tightens up several anomalies in the tax legislation and brings in some significant and much-needed change. It is a bill that underpins the strength of our Government, and that underpins our need to fund our Government properly. I commend this bill to the House.