Taxation (Annual Rates for 2021-22, GST, and Remedial Matters) Bill

I present a legislative statement on the Taxation (Annual Rates for 2021-22, GST, and Remedial Matters) Bill.

ASSISTANT SPEAKER (Hon Jacqui Dean): That legislative statement is published under the authority of the House and can be found on the Parliament website.

I move, That the Taxation (Annual Rates for 2021-22, GST, and Remedial Matters) Bill be now read a third time.

The role of tax in our society is a big and crucial one. It provides the funding for important Government services and functions that New Zealanders want, need, and value, and it can help support citizens and businesses in difficult times, such as those which we have been recently encountering. To achieve these things, tax rules must be applied as fairly as possible and the integrity of the tax system must be protected. That’s what this bill seeks to achieve.

The most significant measure in the bill relates to the deductibility of interest on residential investment property. The bill limits the deductibility of interest expenses incurred by residential property investors, and I want to start out by briefly covering the rationale behind these changes.

Firstly, New Zealand does not have a comprehensive capital gains tax on residential property, despite capital gains making up a significant proportion of the income from residential property investment. Despite this, our current tax law allows full deduction of interest costs. This leads to a situation where landlords aren’t taxed on a large portion of their income from their investment but can deduct their interest costs on highly leveraged assets in a way that doesn’t occur in other parts of the economy—or doesn’t generally.

Secondly, interest deductions are based on nominal interest. Some of that interest cost is simply compensation to the lender for inflation. That is to say, some of the interest is not a real cost but it has been tax deductible. For example, if inflation’s running at 3 percent and the mortgage interest paid by an investor is 6 percent, then the real interest being paid by an investor is only the other half, the other 3 percent. In real terms at the end of the year, the investor only owed 97c adjusted for inflation. Yet investors have been getting a deduction for the full 6 percent interest charge. They get a deduction, effectively, for the inflationary component of their interest payment, but normally don’t pay tax on either the real or nominal increase in the value of their asset upon sale.

Over time, this is a huge tax break. If their debt is 60 percent of their property, then the excessive deduction in this example is 1.8 percent per annum. Over 20 years, that is a 36 percent tax deduction of the original purchase price. That amounts to a distortionary tax setting and it’s one of the reasons why house prices have become so inflated in New Zealand and one of the reasons why residential rental owners have been able to outbid a first-home buyer because they have a tax advantage over their competitor for a house if that competitor is a first-home buyer or an owner-occupier. As the Finance and Expenditure Committee pointed out, there have actually been times recently where real interest rates have been less than zero.

Now, all of this is complicated, and it’s very difficult to ever get the tax system to tax everything absolutely perfectly. But over a long time, we’ve allowed, significantly, over-deduction of interest on residential investment property. This has caused investor demand to massively increase and squeezed out first-time buyers. So the Government’s decided to act by removing the ability of investors to deduct their interest. For clarity, that interest can still be deducted against profits under the brightline test because that’s fair too. The objective is to reduce investor demand for existing residential property and, thus, make it easier for first-home buyers to successfully compete to purchase a home.

However, we also want to ensure there’s no obstacle to new supply. So the bill proposes exemptions from the interest limitation rules for land businesses, property development, and for new builds. There are also proposed changes to the brightline test for the benefit of residential land. Also, the bill makes owners of new builds subject to a five-year brightline period, reducing that from the 10-year period before this bill passes. It proposes limited extensions to roll over relief from the brightline test for some common ownership change scenarios where the economic ownership has not changed or is materially the same as it was before.

The bill contains other measures to ensure that the tax system continues to be applied as fairly as possible. It confirms rates of income tax, including the 39c rate on incomes over $180,000, and we believe that this is appropriate that higher-income earners pay what we think is a fair share. There are a number of amendments to the GST rules, and they’re aimed at making life easier for businesses and helping our economy. Chief amongst these are proposals to improve GST apportionment rules. These have the effect of helping ensure that the sale of an asset of mixed use, some of which is taxable, some of which is non-taxable, which has appreciated—the profits on sale or the GST on sale is not an overtax.

Proposals also reduce compliance costs for smaller GST-registered suppliers by allowing them to apply to the Inland Revenue for an improved alternative apportionment method. There’s a proposal to zero rate the domestic leg of international transport services, applied as part of international transport of goods. This addresses a current inequality where the domestic transport of goods within New Zealand is taxed differently where it’s part of international transportation of goods. We propose to expand zero rating of accommodation to subcontracting arrangements.

We’re also keeping up to date with technological innovation and new business practices. The bill proposes to exclude crypto-assets from GST. This ensures that people are not disadvantaged when investing via crypto-assets or using them to raise capital, and it enables the use of these new technologies. The bill also proposes that tax pooling be able to be used to satisfy a tax obligation, but where there is no existing tax assessment or where the tax obligation has not been quantified.

An important function of maintaining the tax system is to be vigilant against attempts to defeat the tax rules. We must continually work to uphold the integrity of the tax system so that everyone pays their fair share and they’re not left carrying the burden or the share of others. Current tax laws allow tax authorities to transfer the benefit of their tax-exempt status to their taxable council-controlled organisations. This means that local authorities—or some of them; most of them haven’t been doing that, but some of them started—are able to shelter their controlled organisations from tax The integrity of the tax system is jeopardised if local authorities can, effectively, extract profits from the council-controlled organisations tax free. This also provides certain council-controlled organisations using this mechanism with an unfair competitive advantage against private sector competitors. The bill therefore improves the integrity of local government taxation.

It introduces new penalties on the sale and acquisition of electronic sales suppression software—again to protect the tax base. Such software is explicitly designed and sold with the sole purpose of misrepresenting and under-reporting taxable income artificially and deceptively.

Other measures in the bill include removing the time limit from COVID-19 information-sharing purposes, thereby allowing it to remain in effect without need for repeated extensions through Order in Council. That, though, is linked to the COVID pandemic. This information-sharing has been very important to allow Government agencies to help respond swiftly and efficiently to the pandemic, including with support for taxpayers.

The bill proposes 11 New Zealand charities with overseas charitable purposes to be given overseas donee status, which supports wider overseas development aid objectives in the Pacific and in other developing countries. In addition, the bill contains a number of other minor technical and remedial changes to the legislation.

The final point I will make relates to the committee stage of this, where the Opposition proposed large tax cuts for those earning over $180,000 a year. I won’t say much about that other than to note that last week when the IMF was here, as the Minister of Finance said in the House today, they said—and I have the article here—that now is not the time for any reduction in the level of overall taxation. And as veteran political commentator Richard Harman noted, “Ironically the IMF statement comes only three months after National Leader Christopher Luxon himself also said now was not the time to decrease taxes.” I agree with the IMF and the summer holiday version of Mr Luxon.

Lastly, can I think the select committee for its diligent work and also the policy officials and drafters for their work. I commend the bill to the House.

The question is that the motion be agreed to.

Thank you, Mr Speaker. Interesting final comments from the Minister, and I think I’m going to address those shortly, but we will, of course, be opposing this bill, because this bill is all about imposing more taxes on hard-working New Zealand families and individuals. Of course, we don’t think that’s appropriate, particularly at a time when many of those people are suffering from this incredible high cost of living that’s resulted from Government policies that led to this rapid escalation in inflation, feeding through into higher fruit and vege costs, housing costs, building costs—it just keeps going on. As the Speaker knows—Mr Speaker does know—inflation is currently at 5.9 percent but wages are only going up by just under half of that amount. So New Zealand businesses and people are getting caught because they just have a less amount of money to spend on essential or household items. That’s why the tax rates that are enshrined in this bill, we oppose them.

I want to say that this is a Government that loves to tax. It has this wonderful need to tax because Mr Grant Robertson, of course, loves spending the money, loves spending that stuff—he’s addicted to it. Unfortunately, much of that spend is in poor areas that don’t derive real benefits for New Zealanders. Of course, just to give an example of that, we’ve had the fuel tax. Of course, now we’ve got the biofuels proposal to put a bit more tax on our fuel cost, even though they’re not high enough yet, according to the Labour Party; that’s not what my constituents tell me, particularly my farmers and growers in Pukekohewho do not get a discount for diesel at the moment. We have got the brightline changes, we’ve got the ute tax, we’ve got the interest deductibility—all new taxes coming in. That is why our leader Christopher Luxon proposed revision, a reversal of the tax creep that this Government has put in place since 2017.

What our proposals are about is not a tax cut, it’s actually about just scaring back to 2017 and allowing people to keep what they might otherwise have had, if it hadn’t been for this Labour Government. Taking into account inflation over the last four, five long years—gee, it’s getting to that stage, isn’t it, Mr Little, five long years. We propose that we just reverse the tax thresholds to take into account inflation. That would have meant that the first 10.5 percent is normally paid up to 14; it would mean extend it to 15.6—$15,500. Next threshold, rather than $48,000 at 17.5 percent would go to $53,500 and of course the 30 percent goes up to $78,000 rather than $70,000. That means that someone on $55,000 would be better off a year by $800. Someone on the average wage would be $870 a year better off, and someone over $78,000 would be better off by $1,000. Of course, the Labour members love to misconstrue the figures, because we were careful not to make any adjustments to the 39 percent tax thresholds. Of course, superannuitants would be better off by $540. What this is about is returning money that has been ripped off them by this Labour Government, and that’s the central opposition of this bill.

The second thing, getting back to the issue of interest deductibility; the Minister just spoke about this. He has broken the cardinal principle of deductible expenditure with assessable income. It is a cardinal rule that if you run a business, that if you have assessable income—which means you have to pay tax on it—it is only fair and legitimate that you should be able to deduct relevant business expenses off that—

💬 Chris Penk: It’s called a loophole.

That’s right, Mr Penk; my colleague here is just reminding me. He called it a loophole; it’s no loophole at all. In fact, this Labour Government has broken the cardinal principle. We fundamentally disagree with it, firstly on those grounds, because then, let’s say we take this and extrapolate this breaking of this principle that this Labour Government’s brought in, what does it mean for business expenses now, on someone legitimately doing an expense? Why don’t we just say you can’t deduct the price of fuel? Why don’t I say to my growers, or the Labour Party should say to my growers: you no longer can deduct the fuel expense from their business. It’s just the Labour Party, and Mr Parker in particular, have broken that cardinal rule, and that is wrong.

Secondly, when we started to ask how many people are going to be affected by this and what is the extent of this, the IRD came back and said there were 350,000 people who own investment properties in New Zealand—350,000. Contrary to what we hear from the Labour members, “There’s thousands of these rampant investors”, there’s 350,000, of which 75 percent, or about 260,000, claim interest. Of which, 75 percent claim less than $30,000 a year. Hardly a major investment group out there taking all this money and driving these huge businesses. We hear from the Labour members it’s always about these investors and they’ve got hundreds of homes. Actually, by far the most amount of homes are owned by mums and dads who are claiming no more than $30,000 interest a year. If you take it away, which is what’s proposed by this bill, what it will mean is that those people will be in a situation where they will not be able to claim the interest. In some cases, they’re going to have to sell the properties, and of course once they sell those rental properties, they’ll no longer be available to be rented and, if they do keep them, they’ve got to bear a $30,000 cost. If they don’t have the money, what are they going to do? They’re going to put up rents. This is what the tax officials, and this is what the experts said, “Don’t do it, don’t do it; it’s not good policy.”

💬 Dr Duncan Webb: They didn’t say that.

Yes they did. But, guess what! Labour, because they’ve got a philosophical issue, are going to ram this thing through, and it means that New Zealand mum and dad investors who, on the average own only one rental property as part of their retirement, are now going to bear up to a $30,000 loss.

The other major element is the brightline stuff. Unfortunately the debate on this during the committee of the whole House stage was brutally cut off before we even properly dealt with this issue. What it means, the brightline test, is that if you are out of your property for more than 12 months during a 10-year period, you will have to pay capital gains tax on your property.

💬 Dr Duncan Webb: For that period.

What that does not mean—and I hear Dr Duncan Webb saying it. This is where the practical considerations come into play, but, of course, we’ve got a Government who philosophically hates landlords and loves the idea of a capital gains tax on property. So if you’re in the military and you get posted overseas—like I have two constituents from Onewhero who have been posted overseas, on a military assignment, gone overseas, serving our nation, going to be away for three years because that’s a normal term to go on a military posting. Of course, they’re now in a situation, their home in Onewhero, because they can’t live in it because they live overseas, in Canada, now they’re going to have to pay tax on that property. They’re not going to get reimbursed during the military posting, of course; they’re going to have to pay tax. Same with our people in Foreign Affairs. Same with police and school teachers who normally and regularly get posted around the country to get a better opportunity, a new opportunity, or, in the case of the police, are literally told to go. Of course, now they go away—they may have a place in Pukekohe—, a great place to live—and get shifted to Eketāhuna. They want to keep their place in Auckland because they always want to come back to it. But under these rules that have been ill thought through by this Government, they will now have to pay capital gains tax because they’re out of their home—

💬 Barbara Kuriger: Appalling.

—for 12 months or more, and that’s what Barbara Kuriger is saying. It is appalling. It’s appalling.

Then we’ve got people going to hospital, and suddenly finding, hey, they’re really seriously ill and, gee, they’re going to end up paying capital gains tax. And then the worst one is mums and dads trying to support their children into a house. They’re now captured under these brightline laws. They will have to pay capital gains on the contribution of the deposit, if they do so for their children, and that is an outrageous proposition when we’re trying to get people into their first home.

💬 Dr Duncan Webb: Kia ora, Mr Speaker.

Ah!

💬 Dr Duncan Webb: It’s Duncan Webb, sir.

ASSISTANT SPEAKER (Ian McKelvie): I’m caught betwixt and between, and I’m a bit frightened of the other one than I am of Duncan Webb, but I’ll call Dr Webb.

Thank you, Mr Speaker. First of all, it’s always hard to follow the Minister the Hon David Parker, because he is so thoughtful, so thorough, so perceptive, and just so clear. So he hardly leaves me anything to tidy up, but, thankfully, we’ve got Mr Bayly, who I can follow with ease—where I understand.

But the thing I find most offensive about his speech is his continual harping on about “hard-working New Zealanders” as if bus drivers aren’t hard-working New Zealanders, cleaners aren’t hard-working New Zealanders, and people who are in the care industry aren’t hard-working New Zealanders. He seems to think that only people who earn a lot of money are hard-working New Zealanders, and, therefore, they deserve more back. Well, on this side of the House, as the Minister said, we think that people who earn a little bit more should pay a little bit more, and that’s what this progressive tax system does. And as the OECD said, this is not the time for tax cuts. This is the time to hold fast and have a rational tax system.

As for the interest deductibility question, the Finance and Expenditure Committee did have a good look at this question. Mr Bayly was in there when we got special advice—we asked specific questions from the IRD, and he knows as well as I do that the IRD said that inflationary effects skew interest deductibility, and that the real interest is usually a lot lower. And so that means that, in many cases, people are getting, fundamentally, a significant tax rate. They are deducting more expense than they are really incurring, and that’s what this fixes. And let’s face it, as I’m sure will be said by other speakers here, many people who have rental properties are in there not simply for cashflow returns, the money they make off rent; they are in there for long-term capital appreciation. The real income they make is made when they sell their house. And Mr Bayly himself said they are doing this so that they have an asset, an appreciating asset, for their retirement. And so they get a double win: a tax break on their interest, they claim more than they actually incur in real terms; and a tax-free capital sum at the end of the investment period. This addresses that skewing of the market. It says that’s not appropriate, the market isn’t actually operating correctly, as my friend, Mr Clark said, and what we need to do is to straighten that out and straighten the interest rules out. And that’s what we’ve done. That will correct, as we are seeing already, the out-of-control housing market, and slow down some of that price appreciation. That’s a good thing for people who want to buy their own home.

And, of course, we’ve made sure the rules allow for people to get tax deductions for building new homes, because that’s something we want to encourage. But trading in homes for simple capital appreciation is not something we want to encourage. We want people to be able to afford and get into their own homes.

And, of course, we looked at a whole lot of other things in there, GST rules; apportionment rules; cryptocurrency was interesting; and also that sales suppression software—absolutely offensive software that seeks to thwart the tax system by, essentially, lying and defrauding the tax system by creating fictitious sales records. There’s penalties in there for that. That also is a very, very good thing. I absolutely commend this bill to the House. Kia ora.

Thank you very much, Mr Speaker. It is a privilege to rise on behalf of the National Party and as the member of Parliament for North Shore to talk on the Taxation (Annual Rates for 2021-22, GST, and Remedial Matters) Bill third reading.

As we’ve heard from a previous speaker, Andrew Bayly, National oppose this bill. We oppose this bill for four key reasons, and I’m going to spend a little bit of time going through those. But firstly, I do wish to acknowledge the Finance and Expenditure Committee, of which I am a member, for the work that was undertaken on this bill. I acknowledge the officials and the specialist advisers and all of the taxation and special interest groups that provided submissions through that process. While we heard a number of your submissions, it is regretful that we weren’t able to get the numbers to change this, but we’ll talk about that a little bit more as we go through.

So National, firstly, oppose the limit on interest deductibility which is included as part of this bill. We know that this is basically stopping the ability for a business to legitimately claim a business expense. This is at the heart of taxation: that where a business incurs revenue, it should be able to offset that revenue with expenses—and, in effect, this will limit the ability to do that. The limitation of interest deductibility applies specifically for residential investment properties, and, as we’ve heard previously, that will impact a number of middle-income Kiwis, mum and dad investors, that are, in effect, claiming less than $30,000 of interest per annum. This has sort of been bandied around as these significant, big investors that will be impacted, but the reality is this will impact a number of middle-income New Zealanders, and that is why National are opposed to this.

New Zealand also has a housing crisis, and middle New Zealand is impacted most, through the impact of housing affordability, and the cost of living crisis, as well. What is interesting in regards to this bill is both Inland Revenue and the Treasury advised that the change in limiting interest deductibility would reduce housing supply and push up rents. So this is not just me and the National Party, as Opposition, saying that this is bad policy. This is consistent with a number of people that provided feedback through the select committee process that this is bad policy. This is Labour Party policy, driven by a Robin Hood ideology, and it is not backed up by those that are within the sector, and that is because it is an inconsistency which goes to the heart of the ability to deduct interest from business.

I want to also talk about the brightline test. National, obviously, oppose the extension of the brightline test. This is when a person sells a house within 10 years after purchasing it, and the sale proceeds may be, therefore, taxable. Labour are increasing this from five to 10 years, and our issue, primarily, around this—National support the brightline test of two years, but the extension of this to 10 brings a large number of unintended consequences. Some of those unintended consequences of this change are aspects that my colleague Andrew Bayly referred to before: it captures people within this net that may include a wide variety of individuals, but we did talk about service personnel who are deployed to other areas of the world, or, indeed, the country, which means that they will be outside of their home for that period of time. That is a significant issue for us. And, at the end of the day, the actual change in policy is not going to drive any of the actual intended benefits that have been discussed in regards to this. So, again, National would oppose the extension of the brightline test.

The third element I want to talk about is in regards to the 39 percent personal tax rate. National strongly oppose this element of the bill. This tax will affect nearly 120,000 Kiwi taxpayers. This is 44,000 more Kiwi taxpayers than the Inland Revenue originally and first estimated would be impacted by this change in the law. The IRD has noted, and I quote: “significantly higher than anticipated“—so that’s the number of people that are captured by this new tax. This element of the bill really acts as what I would describe as the driftnet of taxation that Labour are using to basically harvest and feed their addiction to spending—this driftnet of taxation that we’re seeing across the board. The 39 percent personal tax rate, the extension of the brightline test, the limit of interest deductibility are all examples of where this Labour Government are continuing to put pressure and increase taxation on hard-working Kiwis.

The fourth element of the bill relates to changes within the Goods and Services Tax Act. National supports the modernisation of our GST system. The issue that we have, particularly—and this was echoed by a number of submitters, as well—is that we need, and individuals require, a lead-in to implement the modernisation, particularly around information requirements for GST. We would have liked to have seen some practicality around providing additional time for people to implement these changes in regards to modernisation.

Those are the four areas in terms of the bill that National strongly oppose. Through the process, and post - select committee, we did provide some simple and effective contributions and ideas around effective tax policy to the Government, which were not taken up, but, you know, I’m looking forward to the ability in the future for National to implement positive changes to the tax system when we are in Government. One of those is around the inflation-adjusted tax bands to reduce the impact of cost-of-living increases that we’ve seen under this Government. That’s just a sensible change in taxation policy that is very disappointing that hasn’t been adopted and wasn’t considered as part of this bill.

We will, obviously, repeal the 39 percent personal tax rate. We’ll repeal the limits on interest deductibility. We’ll repeal the brightline test back to two years. And, of course, we’ll repeal the “ute tax”, which is completely ridiculous and does not deal with the underlying issues that we need to do. We would extend the loss carry-back scheme for up to four years for businesses impacted by COVID, and increase asset write-off on capital investment, and increase depreciation—all ideas that we contributed through this process in the bill which were not picked up by this Government.

Lastly, again, I wish to thank all of those who made submissions to this process. Their feedback is appreciated and National will oppose this bill.

Thank you, Mr Speaker. At this time, I just want to quickly pay tribute to a number of our Labour family who have lost really important people over the last 24 hours, particularly to our member, the Hon Willie Jackson. Haere, haere, haere atu rā, to his mother.

It’s always a privilege for me to speak on a tax bill. I’ve spent over a decade of my professional career in the area that is tax law or tax policy, and I fully appreciate the work and effort that has gone into making these omnibus tax bills. So I once again thank the work of the IRD officials, the Finance and Expenditure Committee team, independent adviser Therese Turner, and the Minister.

I appreciate the considered submissions provided by submitters not just on the bill itself but also as part of the generic tax policy process. As set out in the regulatory impact assessment, consultation was undertaken on some of the measures within this bill and helped to inform what has become the bill itself. I especially want to acknowledge a number of the tax practitioners who submitted, as their technical feedback ensures that the draft legislation is cohesive and identifies any unintended consequences.

It’s not unusual to have two to three tax bills per year because tax policy evolves quickly to cater for changes in technology, to cover fiscal or integrity risks, and as the deputy commissioner of IRD, Robin Oliver, once said, to keep the lights on. So here we have that, in the title: the “remedial matters” bill. The Minister, in a number of his speeches talked about why maintaining the tax system at this time is a crucial function, but particularly at this critical time for the health of our people and the economy it is absolutely vital. Although New Zealand has relatively strong tax settings, it is important to maintain the tax system and ensure that it continues to be fit for purpose. This also means, again, that it adapts to changes in business practices so that compliance costs are kept at a minimum.

I just want to talk briefly on a matter that our chair, Dr Duncan Webb, touched on, which is New Zealand does have a progressive tax system, and security guards, cleaners, our bus drivers are hard-working people. To reiterate what he said around the OECD and the IMF: that now is not the time for tax cuts—now is not the time. If you want to be able to increase income for those lower paid workers, you do it directly through tax transfers. That’s how tax policy has, a lot of the time, been made in New Zealand. That’s why we have Working for Families. That’s why we have the winter energy payment, and that’s why we’ve lifted the minimum wage.

I just want to touch briefly on probably the biggest policy item which is in this bill, which is the interest deductibility rules. The IMF also said that some of the domestic risks in New Zealand are centred around financial stability, particularly in relation to the housing market. We know that tax is not the cause of this problem, but it does contribute to the problem. So it’s our Government’s goal to level the playing field for existing homes in favour of first-home buyers and those moving to new homes compared to those investing in residential property. So investors can generally outbid first-home buyers, and we want to make sure that residential properties are less attractive for investors while stimulating new investment in housing. That’s why the deductions for interest expenses of residential properties will be restricted from 1 October 2021. We’ve tried to make sure that transitioning is possible within the bill by ensuring that the policy will be phased in so that interest deductions on a mortgage on a residential investment property acquired before 27 March 2021 will progressively be reduced between 1 October 2021 and 31 March 2025.

We are removing interest deductions as a business expense for residential investment properties, but allowing deductions for property developers or people purchasing a newly built residential property. Once again, this goes to around financial stability in trying to apply for supply because we know, again, that tax is not the cause of the problem but it does contribute. So we want to ensure that the playing field is even for those who are bringing in new supply.

So, once again, a real privilege for me to be able to stand to speak briefly on this bill. I really, again, thank our officials and thank our Ministers for bringing it to the House, and I’d like to commend this bill to the House.

E te Māngai, tēnā koe. Tēnā koutou e te Whare. The Opposition has many times throughout the debating of this legislation invoked Robin Hood. I’m not sure if they recall from their reading of that childhood story that Robin Hood was, in fact, a good guy. He was the good guy who was pardoned by the king at the end, after implementing a fairer tax system.

All of that said, we’ve heard a lot from the National Party, who have been speaking, I think, out both sides of their mouth. What I mean by that is that we’re hearing, on the one side of things, that the National Party wants housing treated as any other business when it comes to tax deductibility rules but then, when it comes to things like the brightline test—or paying tax on income that you receive from capital sales—that they want housing treated differently to any other form of business. I think that that duplicity, or that difference of approach, is perfectly indicative of the fact that the National Party very much perceive those so called hard-working New Zealanders that they so frequently invoke not as those who work to earn an income for their living but as those who own assets and earn income as a result of that.

This is a huge missed opportunity, unfortunately, as a piece of legislation addressing our taxation system. It uses a scalpel to address the housing crisis—and, ostensibly, also the issue of inequality—when what is needed is a saw. What is needed is a far, far bigger tool for a far, far bigger problem. In fact, as all of us well know—and I’m sure you’ll hear from other speakers throughout this House—we’ve seen in the COVID context that the economic response, that is, the fiscal and monetary policy deployed by both the Reserve Bank and, via Treasury, by the Minister, has seen trickle-up economics, that is, estimated by economists, approximately a trillion dollars’ worth of wealth transferred to the wealthiest New Zealanders.

To that effect, addressing the points that have been raised by National Party speakers thus far around inflation or what they’re banging on about with regard to costs of living, cost of living is not something that is felt equally across all those of different socio-economic backgrounds. We know for a fact that inflation, if you own a house, has been pretty all right for you in terms of those capital gains, especially, obviously, on paper. To that effect, we know that New Zealanders who are of lower incomes have for a really long time—and Statistics New Zealand has research to bear this out—been paying approximately double the rate of inflation because they, of course, are paying the majority of their income on those essentials.

When I say that this bill is a missed opportunity, it’s, unfortunately, a missed opportunity because it doesn’t tackle those far more fundamental issues inside of our tax system. Whilst, again, the National Party has been banging on about the fact that this is really unfair that we’re extending this brightline test, it is, of course, the case that of the 35 OECD countries, Aotearoa New Zealand is the only one without a capital gains tax. In fact, I’d say, philosophically, that all of us should agree that there should be some form of simplicity inside of our tax system. When we’re talking about things like income earned on capital gains, it is, of course, the case that within the Income Tax Act, it was intended that those who were earning income on the sale of capital were supposed to be paying for that income tax. That is, of course, the reason that the former National Government introduced the brightline test in the first place. This is again why I would say to my Labour colleagues on this side of the House that this is a missed opportunity to not just straight up implement that simplicity in a capital gains tax.

To the other point, as raised by the National Party—because they have, in fact, been banging on about their policies as announced by their new leader—when they talk about wanting to lower income tax rates, when they talk about this trickle-down economics, I think that it’s important for all of us to recall how they paid for those promises in their former terms of Government. That was, of course, by increasing GST, which, again, had a disproportionate impact on lower-income New Zealanders.

💬 Hon Member: They’re growing the economy.

CHLÖE SWARBRICK: And I hear across the aisle that Mr Bayly is screeching once again about trickle-down economics.

What this bill does is nowhere near enough to meet the scale of what is necessary to tackle the climate crises nor the crises of poverty nor the crises of inequality nor the crises of biodiversity in this country, and we need to see far more substantive changes in the Budget, as well as the emissions reduction plan coming up.

Just finally, in summation, I’m sure we’ll hear over the next few contributions—probably responding to some of my points as already laid out—that the economy is a set of rules that are set in place by human beings about how we are going to organise our economic transactions and the rules about things like distribution, the types of spending that we want to do, and otherwise. The economy is not a deity that is set in stone nor is it a deity that we have to sacrifice to. It is the set of rules that all of us agree to about how we choose to govern society, and we get to make choices about how we want to do that, about how just and how fair and how equitable we want that system to be. Whilst this bill, again, uses a scalpel to address some of the issues around the housing crisis, we’re gutted, as the Greens, that it doesn’t go anywhere near far enough to address these crises of inequality.

The Greens will be abstaining on this bill, to that effect, noting that it again, unfortunately, simply does not go far enough.

Thank you, Mr Speaker. It’s always a great pleasure, and sometimes a great amusement, to speak after the Green Party on a piece of legislation. And they’re speech number six and we’re speech number seven, so happily it happens very often. We’ve just heard Chlöe Swarbrick get up and say, “Isn’t it terrible that $1 trillion of wealth was added to property values because of cheap money?”. I don’t want to start beating the Green Party up with history, but which party voted for the Reserve Bank to have a dual mandate that led to the low interest rates, that led to the money printing, that led to the inflation of house values, that transferred so much money away from younger New Zealanders?

💬 Hon Paul Goldsmith: The Labour Party!

Do we hear anything? Yes! The Labour Party and the Green Party. That’s right. So when we talk about hyperinflation of housing, they are absolutely guilty. And then the Green Party says, “The economy’s not a deity that we should bow down and make sacrifices to.” Well, I know that this is no longer a pagan world, but the ACT Party is not in favour of bowing down and making sacrifices to any deity—we’re trying to separate politics and religion in this country. We’re trying to have rational economic debate about how we create opportunity for the next generation of New Zealanders.

And that is why the ACT Party stands wholly opposed to this Taxation (Annual Rates for 2021-22, GST, and Remedial Matters) Bill. You see, Parliament does this every year. And I’ll give you one thing: it’s good that we live in a country where the Government can’t take your money in taxes unless this Parliament, that everyone can vote for, actually has a debate and a vote and agrees—in quite a few pages; 137 pages—that this is what the law says. No taxation without representation. That is a very good thing; perhaps the best of things in a free society.

The problem the ACT Party has is that there’s too much taxation and not enough representation in this particular bill. Where to start? Well, it starts off by selecting the tax rates that people pay. It says that if you earn over $180,000, that income gets taxed at 39c in the dollar. I know what people will say: “Stuff them, they earn too much money. They’ve got it, we’re going to take it.” That’s what they like to say, and I just ask the Labour Party: where is the future for a country where it is acceptable to take stuff because they’ve got it and we can? We’ve got to stop thinking that way, because we’re not going to become a wealthier country if we say, “39c in the dollar. You worked hard at school, you studied, you got qualifications, you worked hard at work, you saved your money, you invested carefully what you’ve put away, you have an income over $180,000. Well, stuff you, we’re going to put an extra tax just to take a bit more because we can.” That is the wrong values for any country.

Then it says, 33c from $70,000 to $180,000. Then it says, from $48,000 to $70,000: 30c. So you’re on $48,000 and you add an extra dollar of income—you work hard, you earn it—and you get to keep 70c. Well, the ACT Party says that’s wrong. And we put up amendments that no other party voted for, that would have given a generous middle-income tax cut: dropping that 30c down to 17-and-a-half. All the way from $14,000 to $70,000, you pay 17.50c under ACT’s generous middle-income tax policy. And it is a representative democracy. We put that up for every other party to vote on and none of them did. None of them wanted to give $2,000—a real tax cut for middle-income earners—back to Kiwis.

The funny thing about it is that the Government has increased the amount of tax it takes off the average person in the last four years by about $2,000—adjusted for inflation, which is significant now. We wanted to give it back; no one else did, and that’s a good reason to vote ACT—because taxpayers have had enough.

We had Barbara Edmonds get up and say, “This is not the time of tax cuts.” Well, let me just give you a fact into the debate. You know, the Government’s tax take in the last two years has gone from $85 billion up to $103 billion this year forecast. So when the Government takes an extra $15 billion in two years—you know, if the Government’s just taken $15 billion extra in two years and people are struggling to pay their bills, that’s not the time to let people keep more of their own money? What that tells you is that Barbara Edmonds and the Labour Party will never, ever leave you “Sure to Rise” because they don’t want anybody to ever get any of their taxes back, I can tell you.

What else does this bill do? It introduces the brightline test. How many stories have we heard of people who now have to change their plans? Can’t move for work because if they leave their house, when they sell it after 10 years, they’re eligible to pay income tax. Tens, sometimes hundreds of thousands of dollars of tax people will have to pay just for doing what New Zealanders ordinarily do: living in their home. But if they live outside their home for a year over 10 years—perhaps they moved for a job or whatever—then all of a sudden, they’re liable for tax. How disruptive is that?

And I say to the National Party—the National Party say, “Look, a brightline test’s OK so long as it’s only two years.” I say to them what I said in 2015: “Don’t do it. Because if you introduce a brightline tax at two years, guess what! Taxes are like acorns. They grow.” You put it there at two years, then it’s five years, then it’s 10, soon it’ll be 15. It’s a de facto capital gains tax on your house right now because National introduced it, Labour expanded it, what do you expect? The ACT Party’s the only party that said “no” to a brightline test, and we predicted it would expand at the time. And Mr Speaker’s looking there wisely because he knows, he remembers it well too.

Then what else does it do? It takes mortgage interest deductibility away from landlords. Now this is probably the dumbest of all. And I just go back a step: ACT put up legislation saying, “Let’s get rid of the brightline test.” Every other party had an opportunity to vote to get rid of the brightline test. No other party did. The National Party said, “As long as it’s only two years, it’s OK.” Labour Party said, “We want it to be forever.” The Green Party probably wants you to be taxed indefinitely. The ACT Party says, “Let’s get rid of it.”

Then there’s the mortgage interest deductibility. Now here’s the thing, when this policy was introduced by the Prime Minister, Jacinda Ardern, she said, “We’re going to tilt the playing field towards first-home buyers.” Well, this is a case study in somebody who doesn’t know how to separate intentions from outcomes when it comes to setting policy. Here’s how it works. We have a tight rental market; that’s why rents have gone up like a rocket for New Zealanders up and down this country. And when extra costs go on to landlords in a tight rental market, what do they do? They increase the cost of rent. And if you put an extra tax on landlords, what is that going to do to tenants? They’re going to have to pay more rent to help the landlord cover the tax.

Now here’s the next question. What sort of people are tenants? If they’re renting, they probably don’t own a home—most of the time. And if they don’t own a home but they’d like to own one, then they are first-home buyers. So the Prime Minister—trying to tilt the playing field towards first-home buyers—has put extra taxes on first-home buyers, made it harder for them to save a deposit, and actually sabotaged her own policy. I mean, it’s incredible how big the gulf is between great Instagram and good intentions on the one hand, and actual policy that works and does what it says on the tin on the other hand. But that, sadly, is our first ever Instagram Prime Minister, Jacinda Ardern. And people are hurting because of bad policy that she makes and promotes, and it’s not the first time she’s done it.

The ACT Party, of course, put up an amendment to this bill, where we said, “Let’s get rid of the mortgage interest deductibility removal.” Or, “Let’s keep mortgage interest deductibility for landlords, because actually it’s the right thing to do.” Every party had the opportunity to vote for it; none of them did. So what comes out of this is that if you believe in lower taxes, if you believe that people should be able to keep more of their own money, and if you believe that people that get up and try to make a difference in their own lives and the lives of people they care about, then, of course, there’s only one party in this Parliament through the passage of this bill—the annual rates bill setting the taxes for New Zealand this year—that has stood up for lower taxes and people making a difference in their own lives, and that is the ACT Party that proudly opposes this bill, which puts tall poppy syndrome in the tax code, holds us down, and hurts the very people the Prime Minister said she was trying to help. Thank you, Mr Speaker.

Members, the time has come for me to leave the Chair. This fascinating debate will resume at 7 p.m.

Sitting suspended from 5.58 p.m. to 7 p.m.

I rise in support of the third reading of this bill, and I come at a time when we’ve heard speeches from the National Party and ACT and the Greens. It’s always a privilege to come after those speeches, because it gives me the opportunity to actually think about the principles and values I stand for and what might be different. One of the things that I think we have a duty to do in this House is not mythologise, and I want to bust a few myths right now. The first is that people who raise these issues, things like mum and dad investors and the tall poppy syndrome, are myth-making—this is not what is going on in this House and not what this legislation will do.

I want to talk first about the mum and dad investor, and the myth of it. I lived at a time when a lot of people, because they were wealthy enough to have some capital, were able to buy a house, and they bought that house because they had the capital plus they had tools like interest deductibility, and that interest deductibility meant that they could offset a lot of those costs, and the cost wasn’t captured, because the capital gain wasn’t actually captured at any point. Those people are not mum and dad investors. They own a lot of land, and what we are actually doing if we don’t put this through is we are protecting those people at the expense of others—because there are losers in this system. One of the losers is the first-home buyer. They miss out on these houses. When they are sold under this scheme because somebody wants to invest in housing, that house investor will reinvest that money. They will invest it in things like the economy, which will be good for us all. They may well choose to invest it in new housing, and that will add to our supply. Those are win-wins people, because the other house that comes into the market will, hopefully, go to those first-time homeowners, and I’ll be pleased to see that happen.

So this is not about one group pitted against the other. This is about a piece of legislation that shapes the way that we think and shapes the way that we put investment, and, after all, isn’t that what we’re supposed to do? We are a Government, after all. We are supposed to shape policy that will actually change things that have been going wrong—and that’s been going wrong for a long time.

I want to talk about another tool in the tool box that’s being used and has been mythologised, and that is the brightline test. I was disturbed to hear Mr Bayly talk in his last speech about how this would affect people who were divorcing—that they would suddenly be caught by the brightline test. It is just simply not true. This is a main home exemption, so if somebody’s marriage breaks up and they have to sell their house at that time, they won’t be caught under this situation. The people who will be caught are people who actually are making an income out of flipping houses. Those are the majority of people who will actually end up having to pay the profit that they make.

Another myth that came out today was that for some reason the people who were out of the house for one year would somehow have to pay capital gain on the entire time in their property—that was the implication at least. So I want to put that straight for the New Zealand public—because that’s not what the story is. The story is that if you are out of your house for one year and you come into the new brightline, you will actually only have to pay the capital gain on the time you were out of the house. So if you have your house for nine years and for one of those years you have been out of the house, the other eight years are not ones that are subject to this—it is only profit while it is not your main home. This is a really important thing to get straight, because these myths are damaging. We need people to understand what the purpose of this legislation is, and it isn’t right to put the New Zealand public wrong about that.

I want to talk, finally, about the myth of the tall poppy, because this comes into the debate about our tax rates. Our tax rates are very moderate in this country; 39c will be paid by people when they have already earned $180,000, and those people who pay that extra tax have been supported in doing so over the last few years by our nurses, by our teachers, by our supermarket workers, who have earned nothing like that, and I want to see policies that target those people. I want to see tax policies that do that and I want to see other policies, and I certainly don’t want to see $8,000 for the Leader of the Opposition and $2.30 for somebody who is on the minimum wage. It is not good enough. I commend this bill to the House.

I call the Hon David Bennett—five-minute call.

Thank you, Madam Speaker. Well, tonight’s debate will show you the true colours of the Labour Party and their members and their desire to really knock out of any New Zealander the aspiration to do well, to build a business, to actually get out there and do anything. Because they tell you, time and time again—and in these speeches they’re very confident around it, saying, “We actually have a duty to do this, as Labour Party members. Our duty is to make sure that anybody that makes any money in this country has to pay it so that we can distribute it to other people.” That’s their fundamental belief, and it is contrary to what human nature is, it is contrary to what the country has been built on, and it’s contrary to what good economic policy is built on.

💬 Hon Damien O’Connor: That’s bullshit.

Now, Mr O’Connor may say “rubbish” there, but, you know, he’s all the time saying that we need to trade with the world, we need to be in the business area, and yet he’s cutting out this very business that people are in of providing housing for other people. And he can’t explain that. And Mr Nash, who’s sitting beside him, is another reasonable member of the Labour Party. I remember Mr Nash saying that we should tax just income and not actually have any expenses that can be deductible, at one stage. He soon backtracked from that.

That was the same theory that we’re seeing here tonight: they are only wanting to tax income, and not the expenses that people have in that business. And it is not that they are doing some God’s work, that they are saving people and that they are providing some great country that will provide freedom and a free lifestyle for everybody. It is doing exactly the opposite. It is hurting those very people that actually need a hand in this country, who don’t want a skewed system around the business of owning homes. And that is what we are doing here. We’re skewing it completely differently from any other business. So those that go into the homeownership business, you can say, of providing rentals for somebody that can’t get there themselves, have now a different model from any other business. And so they have to earn more income. They have to charge more rent. It’s the only way they can do it. That then puts the cost of living up, puts inflation up, and the very people Labour say they’re there for are the very people that get hurt. It is the traditional Labour Party economic policy that’s failed for generations, and it will always fail.

💬 Dr Duncan Webb: Oh, look at the bigger—

And that member from over the other side, from Christchurch—he was very confident in his speech, saying, “This is our God-given right to do this. We need to do this. This is our job. We need a progressive tax system like this.” That’s his words. They are a failure waiting to happen.

And if you want to look at it, what’s happened to housing prices in New Zealand in the last year? Twenty-five percent increase in house prices. If it’s such a great policy, why hasn’t that stopped? Why is first-home ownership still dropping, as it has around the world, and it will continue to do because it gets harder and harder to do that? This policy won’t stop that. This policy is just for the ego of the Labour Party, and it will not actually help the very people that need assistance. This is lawmaking at its worst. It is bad policy being enacted by a bad Government. It will not achieve their purpose. What’s worse about it is that they present it in a way that it is there for the interests of those people in most need, when it will do exactly the opposite. It creates a system that will then mean more costs on those people that are renting, that then will reduce their ability to get into homeownership and keep them in that cycle of renting for ever and a day. It is stupidity of the highest level, but it is Labour Party policy, and we expect that from them. And that’s why you’ve got an economy that’s out of control at the moment. They’ve got inflation they can’t control. All those things come from—

💬 Dr Duncan Webb: Low unemployment. High GDP.

Low unemployment, that’s what he’s saying. Low unemployment, that’s the answer! There’s low unemployment. But we’ve got inflation going out of control—if you can’t get ahead, then that is not the answer. It’s about low unemployment! The reality is that their economic policies have failed. We’re seeing it coming home to roost now. This bill is another example of how they will continue to fail and achieve the wrong purpose. Thank you, Madam Speaker.

Making a remote contribution, I call Anna Lorck—five minutes.

Thank you, Madam Speaker. I’m speaking on the third reading as a member of the Finance and Expenditure Committee.

This Government is on the side of renters, first-home buyers, owner-occupiers, and investors in new builds. Some people say housing costs too much but then oppose every move to fix it. What is disappointing, but not surprising, is that tonight we have continued to hear the same deflating rhetoric from the Opposition, who claim to be business smart and yet are not smart when it comes to the business of investment—because the legislative changes this bill provides are a huge opportunity for property investors in modernising their portfolio. The more supply we have, the better we are at addressing housing shortages. So let’s build and, better still, invest in new for the rental market: grow the rental portfolio.

It’s working already, and it’s sending a very strong signal—a message that the Opposition refuses to talk about because members of the National Party don’t want anyone to know about it. One of the best things this bill actually does is encourage investors to build more and more new houses and new homes to rent. If you are planning to invest in housing for the rental market: build new. Build new and help contribute to the housing supply. Because the more we build the more affordable housing becomes for more people. Even if you are a mum or dad investor who has a rental property that you are renting out, and may well have had for more than a decade, here is an opportunity to take advantage of interest deductibility by building new and investing in new, and selling your old one. Be part of fixing the housing crisis by selling your existing rental and having a modern investment by investing in a new build for the rental market.

Now, in Camberley, a suburb in the electorate of Tukituki, where I am the local MP, I recently visited a new development of 10 three-bedroom, warm, affordable, dry rentals. All the interest is deductible for this investment, and, also, because it’s a new rental development, if sold after five years, it will not be subject to the brightline test. Affordable rentals are critical in dealing with the housing crisis. This Government recognises that new rentals play an important part: so that families wishing to rent can. When I see these positive investments happening, like they are in Camberley, I know that this legislation is sending the right signals to investors: build new. I commend this bill to the House.

Madam Speaker, thank you for the opportunity to speak on what really is a technical bill, but, actually, the debate has turned much more on to inequality and has really highlighted some fundamental differences between this side of the House and the other side of the House. Because what this bill does is it levels the playing field in favour of first-home buyers rather than speculators, and that’s via the interest limitation. And, really, that is one of the most significant things that we can do to close the inequality gap in New Zealand. Now, the other side—National and ACT—are saying that tax cuts will do that. That is utter nonsense. Their tax cuts will benefit the top 2 percent—those who are earning $180,000 or more.

What we need to do, and what we are doing on this side, is two fundamental streams of work. One is around pivoting the housing market away from speculators, towards first-home buyers, and, secondly, we’re providing targeted support. Now, the benefit to the first-home buyers comes via this bill, and, as we’ve heard, investors can generally outbid first-home buyers, and that is because they have a significant tax advantage. We’ve heard from the Minister how inflation skews that interest advantage even more. Now, Simon Watts has revealed, and, actually, David Bennett as well, the view from the Opposition that housing is a business—they have spoken about that many times this evening—versus this side, where we see housing as a social necessity for all, and shelter as a human right. So what we want to do is make properties less attractive for speculators, but also stimulate investment in new housing, and that is very much what this bill does.

We’re also phasing in the interest deductibility changes so that they occur between March 2021 and March 2025 so that they do send a signal—as my colleague Anna Lorck has said—they provide those signals for investors so they can make wise choices with their investments. And really importantly for everyone to remember is that the main home is not affected by these new rules. So even owner-occupier rental situations where somebody is owning their home but renting it out to others as well while they’re in there, they can still claim interest deductibility.

It would be remiss of me not to mention the targeted support. I do this specifically in response to the claims made by Andrew Bayly and Simon Watts around closing the inequality gap, but also to the comments made by Chlöe Swarbrick. From 1 April, the second pillar of what we’re doing is we are doing very targeted support to help close this gap, and that’s around supported living, jobseeker support, sole parent support, the youth payment, the young parent payment, orphans benefit, Working for Families tax credit, Best Start tax credit, student allowance, superannuitants, and so on—the list goes on. It is all about reducing inequality, and it’s inequality that impacts on some of our hardest workers.

I absolutely reject the comments from the Opposition and also from the leader of the ACT Party, David Seymour, that only people who go to university and earn high wages are hard-working. We have seen through the pandemic that some of the hardest-working and most critically important workers are our bus drivers, our cleaners, our mothers, our security guards, and so on.

Now, National has said that there’s a housing crisis, but they refuse to take action. They appear to be supporting the highly leveraged speculators, and that’s not surprising given their interest in also providing tax cuts to the highest earners. But doing nothing is actually a really big risk to our economy. The IMF has not only said today that tax cuts would not be appropriate at this time they have also warned repeatedly that the ballooning housing market could trigger a housing slump. And so we have had to tackle this head-on.

In summary, what was actually a technical bill has been worth exploring because we’ve been able to see some fundamental philosophical differences. The other side see housing as a business; we see it as a social priority. National, I think, see the workforce as a hierarchy of contributions from the highest paid to the lowest paid; in Labour, we see that everybody has a contribution to make and everybody should be valued, and that some of those disparities have come about through history and through happenchance. So this is a great bill. It’s a bill that I expected to speak more technically on, but I’m glad we’ve had the opportunity this evening to reveal some of the fundamental differences in the way we view the workforce and the way we view inequality on this side of the House. I commend the bill.

Oh look, an unexpected pleasure to have to speak on this bill, but there is nothing more exciting in this House, I am sure, particularly for the Labour Party, than to discuss tax because, as we know, the Labour Party loves tax and this bill shows it abundantly—an increase of tax for what they deem to be the highest earners, and I think that’s a really important thing for the public to understand. On this side of the House, and certainly for myself, I’ve got no problem, actually, of people paying their fair share, but the issue is not so much the tax rates, it’s the fact of who the Labour Party decides has to pay their fair share and where they’re going to set that bar.

For those tonight who are thinking, “Oh, it’s great, those rich people are going to get taxed. That’s all fine.” Of course, the thing is that next week, next month, next year, they might be in the gun—amongst other reasons, of course, because the Government is not taking on very sensible ideas from the National Party, which is that we need to actually address tax bracket creep. So that, for people at home, is that as you begin to earn more—well, not in real terms; of course, any wage rise you’ve got has been completely wiped out, completely wiped out, by inflation, but as your income supposedly increases—you move tax brackets and I think, unfortunately, some Kiwis are going to get a bit of a fright in their back pocket.

Unfortunately, the Government has attempted to phrase this as an equity argument, and why I think it’s unfortunate is not because the concept’s a problem, I mean, go equity. You know, there we go—a bit of an endorsement and a bouquet for the Greens and left. Equity’s fine except the problem is that the Labour Party has delivered no equity; things are getting much, much worse. I just intimated at least one of them, which is the fact that inflation is way outpacing growth around wages. And yes, it’s all well and good that unemployment is low. I mean, partly, that’s not really a surprise. We’ve had our country sort of imprisoned and locked down for two years. We have not allowed any migrants in the country. That possibly has an impact. I also think we’ve moved a number of people on to the benefit, but that’s probably a debate for another night. But fundamentally, it’s great these people have got jobs but, as I say, inflation’s eating away at whatever they’re earning.

That underlines then probably the second major problem. Actually, I hadn’t quite finished on the equity comment that this tax change, all these tax changes—I see some of them come actually on 1 April, which I thought was some sort of joke, and that’s an incredibly bad pun. But equity is getting worse in this country. It doesn’t matter if you look at child poverty, the fact that we’ve got 26,000-plus people now on the housing register, gang crime, you name it—things are getting worse. And so here again, we have a terrible illustration coming from this Government of talking one thing and delivering the polar opposite.

So let’s delve a little bit into the rental changes because—well sorry, the taxation changes particular around the brightline test and around the inability now—to stress that—the inability for landlords to take their interest payments on mortgages as an expense. My honourable colleague David Bennett highlighted that. I mean in just about any other circumstances you are taxed not only on income but there’s allowance for what are legitimate expenses—and interest on a mortgage has been a traditional expense. Now we may disagree on that. That’s perfectly fine from the Labour side. But what really got stuck in my throat was the argument that these changes are going to help the rental market. In fact, they went as far to say that they were already making improvements to the rental market. I know I almost had a coronary, which is probably not a good thing to have. Things are getting worse.

If you are a renter in my electorate, and that’s in Auckland, your rent is going up—I think, is it $70 a week? I might actually have the figure wrong; I know it’s no lower than $70. It’s going up and up and up. I have constituent after constituent coming to me, tenants, saying it’s getting almost if not completely impossible. And landlords, to be fair, don’t want to put the rent up but they’re humans, they have to pay their own bills. They are responding to a Government which is making things less equal. I’ve actually mentioned it in the House before, particularly around rentals, particularly around this taxation suggestion, that the more that this Government tries to interfere in the market, they just make things worse. And so here we have more changes, supposedly to make things better.

We heard from one of the speakers tonight, one of the honourable members from the Labour Party, that one of the reasons they think this tax—sorry, it’s not strictly a tax; it’s more that they’re not allowing interest on mortgages to be used as an expense. They think it’s a good thing because that’s going to force landlords to sell the property and then somehow a first-home buyer or a person who is really struggling to purchase is just going to walk on in and buy that house. There’s two practical and fundamental problems with that. Firstly, the other side will probably find they won’t sell. People will just sit on their property. They just won’t rent it out. It just becomes not worth it and, unfortunately, I’m hearing that from a number of landlords: “It’s just become too expensive, too difficult. I’m just going to sit on the house.”

The second practical problem—and granted it’s probably come from my electorate, and I will acknowledge it’s not a representative demography. You know, Tāmaki, is by and large, very well-to-do and wealthy if you looked at any of the statistics. But just to use that as an illustration, when Bob and Mary sell that house that they’ve been renting out, it ain’t going to be affordable. That’s something that the Government might want to keep in mind because all that’s going to happen—and I suspect we will see—is more legislation from this left-wing Labour Government to try and force its view on to others. You heard a hint of that from, again, other honourable members who have spoken. They’ve talked about housing as a social necessity: “We, the Government, will decide what you can do with your house or houses. The greater good of the community deems that we will now dictate to you, including through this little piece of legislation”—well, actually it’s not too little; it’s quite a tome—”how you can and cannot operate your house.”

The final point I would make, and it’s really just a simple and fundamental one and, yes, I think members have rightly expressed tonight that debates around taxation, exciting as they are—Greg O’Connor, I can see it on your face—do highlight the difference between the left and right of politics. The two principles really are, ultimately, on this side of the House we believe that individuals and families can make the best decisions about how they want to spend their money. It’s why we are always trying to seek, ultimately, how we can deliver more money to Kiwis. In fact, I make an erroneous statement. It’s not even “deliver”. We just want to allow Kiwis to keep the money they have legitimately earned; keep the Government out of this.

But no, we have a left-wing Labour Government. They believe, they understand, they know how to spend your money better than others. I know that’s a trite statement that always comes out from the right. But you know, the thing is that what comes out of the right is right. It’s sort of a hint in the name, you know, right? You know, another bad pun—that’s two.

The last point I would make—the last point I would make—is that, ultimately—

Three strikes, Madam Chair.

SIMON O’CONNOR:, I’m actually trying to just excite things here in this House tonight as we talk taxation. The ultimate one, ultimately—the last point I would make, and people in New Zealand should never forget this: when any Government, it doesn’t matter if it’s left or right, goes out and says to you “Look, all these amazing things we’re delivering by these extra taxes.”, that is simply you, the public, being bribed with your own money. Never forget. No Government makes a cent. They tax it off hard-working Kiwis day after day. I’m conscious on this side of the House every time we make a spending promise, every time we spend that money, we have generated that from Kiwis. And so when Jacinda Ardern and others—Grant Robertson—get up and talk about how wonderful they are and doing housing subsidies here and employment things here, and Working for Families there, in themselves they’re great. But New Zealand, you’re only being bribed with your own money, particularly when it comes to the likes of Working for Families, I’m afraid to say. You work hard, you pay all your taxes, which go into the great circus which is Working for Families, and then they spit some of it back at you.

Maybe I’m a simple man. I am an O’Connor. Looking at Greg O’Connor again—well, maybe we’re simple men. But do you know what? Why take the money off us in the first place? Anyway, with that attempt at somewhat levying, which I suspect was taxing on all concerned, that’s No. 3, I commend—no, I don’t, actually. I’m not going to commend the bill to the House. That’s probably the final point. I don’t know I can condemn the bill, Mr Whip, but I cannot support this bill tonight.

Every family has a branch who’s put on Earth to make the rest of the family look good, and that member has just achieved his goal. Well, I am pleased to say there is no blood there.

I have sat and listened to this debate, and I’m sure that those at home will have too, and they’ll be confused because everyone’s been in that family situation where a child is demanding money be spent on a new toy, a new holiday, or a new something. The refrain from the parents is inevitable: “Do you think money grows on trees?”. Listening to the Opposition across the floor I would actually believe, apart from the infantile speech that we just had to put up with, clearly, they do believe that money grows on trees. Because if you sit through this House, through any day, starting at question time, going through the various bills we debate, what you will inevitably hear is demand that this Government does more. Latterly it’s been COVID: give hospitality more money; give tourism more money; give farmers more money. Although at $9.50 this year, probably even Mr Bennett’s probably not going to stand up and say that this year. But so often you’ll hear them stand up and make a speech that says “Give more money.” However, we then come to a piece of legislation like this, which actually tries to address some of those issues, to ensure that we, as a Government—any Government has the means to do what Governments do. It’s security. It’s ensuring that its citizens can go about their business free of interference by those who would stop them, to create that level playing field.

Now, this bill, when you look at a piece of legislation, it’s been talked about just another boring piece of tax legislation, it’s actually quite a significant piece of legislation because, certainly since through the 2000s, across two hues of Government, we have seen housing become increasingly unaffordable. Now there are those who will nostalgically look for the good old days, and the good old days are often not as good as people believe they were. It’s often said that pain has no memory. But one thing that was quite clear when we speak to people who did shift around towns, who did move, was that housing, while it was always a significant expenditure, was not something that was beyond the realms of anyone who had, essentially, a job. It was always going to be something that someone could—if all else failed, you had your own house. I had a grandfather-in-law who had lost his house during the depression, and he never got another house again. But through that time he could have afforded a house, it was just the fear of having lost that house was what governed him.

So, this piece of legislation, what does it do? It does two things around housing. One of them, it incentivises people to build more houses. Because if you want to escape the tax that has been so harangued here tonight, there is an easy way around it: invest that money in a new house, because you will actually be able to get the tax deductibility then for up to 20 years. So that’s a pretty good incentive to go out there and build a new house. What that will do is free up those other houses to be built.

I note the previous speaker said he will have people who will not rent the house, they’ll just sit and let it sit there. Well, in an environment where that house is not going in, those houses are being farmed or bought for capital gain. If there is no capital gain, why would someone possibly do what the previous speaker suggested and sit in that house where not only is it not going up, it is probably, quite possibly, going down, particularly as it is in many parts of New Zealand now.

ACT New Zealand, they amuse—we had a speaker from ACT speaking on an earlier part of this bill, who talked about how—we were talking about roading and how we should be more like Sweden because Sweden had these magnificent roads where down the middle they had a barrier which prevented the sort of accidents we have in New Zealand. And we should be more like Sweden. I did remind that speaker across the House of the very high taxation rate in Sweden, and that member really didn’t have an answer. Because we could have anything we like if, like Sweden, you do have absolutely free education—not that I’m advocating we go to those levels. But certainly someone has got to pay, which comes back to what I mentioned originally, that those opposite, in a relatively infantile way, obviously believe that money does grow on trees. They can have these things that we demand, that we can have all these things we demand, but no one pays for them.

Let’s give everyone a tax cut, which will see most people in this House getting, probably, up to five figure tax deductions, possibly more, while the very people—and what really does rile me, if I can finish on this, we’re the workers, the hard workers, well, in this building, do you know who I believe works the hardest in this building? It’s the people who come when we all go. The cleaners who are likely to come from one of the lowest socioeconomic parts of town, probably won’t own a house, will have one or two cleaning jobs at least, will be here through the night, will go home, get kids off to school, while another partner in the house or other people in the house will go and have jobs. They are the people who, I believe, work and keep this place operating more than, certainly, we do as MPs. But they’re the very people under the sort of tax changes that are being advocated across the room, will get the least.

This is an attempt to make our tax system fairer. I think history will be very good to this piece of tax. I think we’ll look back and say that we’ve actually now started to steer our way into a fairer system. New Zealand will become the New Zealand that we like to think it is, but unfortunately, perhaps, it is moving in the wrong direction. This will hopefully move in the right direction, and, therefore, as the last speaker, it’s my pleasure to commend this bill to the House.