Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Bill (No 2)

I present a legislative statement on the Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Bill (No 2).

💬 SPEAKER: That legislative statement is published under the authority of the House and can be found on the Parliament website.

Thank you, Mr Speaker. I move, That the Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Bill (No 2) be now read a third time.

This bill has two legs to it. The first is to confirm the annual rates of taxation for the 2022-23 year, which are unchanged from the prior year, and the second is a number of improvements to the tax code which improve outcomes for business and taxpayers.

I will briefly recap the main measures contained in this bill. Firstly, in respect of the platform economy measures, the measures in this bill make the competitive field between participants who are running a more traditional business model—it evens the playing field in their competition with those who list their services via the platform economy. The bill proposes that digital platforms be required to collect and return GST on short-term stay and visitor accommodation, as well as on ride-sharing and food and beverage delivery services.

The reasons for this are simple: it is about equity of treatment and fairness. Often, people who sell such services through the platform economy can do so currently without charging GST, giving them an advantage over traditional suppliers, and this is the same rationale that was used by the prior National Government when they introduced GST on remote services rules that came into effect in 2016. It’s probably why when the bill was introduced, Nicola Willis, the finance spokesperson for the National Party, supported this aspect of the bill, but then changed that position in a way that I find incomprehensible since, because it’s just wrong.

💬 David Seymour: What does the Minister comprehend?

Well, I do comprehend that. In respect of these issues, the OECD has made the point that as more and more services are sold via the web, we must make sure that artifices that are enabled through the web cannot be used to create unfairnesses in the tax system.

When consumers contract for services in using these platform apps, they’re actually buying services from New Zealand service providers. The services are delivered in New Zealand, they’re using accommodation or taxi-like services in New Zealand, and yet because they can construct their contract in a way which notionally at law is a contract in an overseas jurisdiction, they can, effectively, avoid the effect of GST. That’s unfair to the businesses that can’t do that, and the Hospitality Association made strong submissions to the Finance and Expenditure Committee on behalf of their many hundreds, if not thousands, of members that it’s wrong that their members return GST, and yet people selling through the likes of Airbnb can evade GST. Similarly, I know that the Taxi Federation thinks it’s unfair that their members selling services through taxi firms return GST, whereas those doing so through the likes of Uber don’t.

Now, there has been some suggestion by the Opposition exaggerating the effect of this on prices. They have at one stage said that prices would go up by 15 percent because that’s the rate of GST. That’s incorrect, because it is only, effectively, the net amount of GST that would be collected from an industry like that after allowing for GST input costs. That is recovered from the platform economy, and that’s less than half of the total—around 6 percent, we think.

In respect of the local businesses competing against these large, often overseas-based digital platforms, they welcome this change, and it will improve both the tax system and the small businesses, mainly, in New Zealand who face unfair competition currently. This will also ensure that New Zealand has access to information from overseas counterparts, which is one of the requirements of the bill.

The Government also wants to reform the GST apportionment rules to improve fairness and make them less onerous and less complex for businesses—particularly smaller ones—to comply with them. There are various remedial measures in the bill to that effect. It’s part of the Government’s general commitment to reducing the complexity of the tax system, where appropriate.

There’s also modernisation and greater flexibility in relation to the rules applying to the tax treatment of cross-border workers. It’s a very technical area that the select committee considered well, and I won’t go into it. It, essentially, does this by clarifying how the PAYE withholding tax, fringe benefit tax (FBT), employer’s superannuation contribution tax, and non-resident contractors’ tax rules apply.

There’s also a proposal aimed at producing a more neutral fringe benefit tax outcome between the options of travelling to and from work by car. At the moment, employers can provide car parks to their employees at significant cost, but there’s no FBT on that. The last National - United Future - ACT Government did actually try to fix that, but there was a bit of pushback and they didn’t pursue that any further. We agree that that leaves an anomaly where employers who would be subsidising more climate-friendly alternative forms of transport were liable for FBT. That’s not right, and we’ve fixed that by enabling employer-provided public transport fares that are subsidising travel by commuting to and from work to be free of fringe benefit tax. This was a recommendation of the Tax Working Group, and it is something I know that the Greens and the Labour Party have championed for a while.

We’ve also adopted, late in the piece, a recommendation from Julie Anne Genter and the Green Party that that FBT exemption be extended to include subsidies for bicycles, electric bikes, scooters, and electric scooters. There’s a regulation-making power to make sure that that can’t be abused by purchasing gold-plated scooters or bikes.

The bill also proposes to exclude build-to-rent assets from the interest limitation rules in perpetuity.

💬 Nicola Willis: Just exempt all housing, as has been the convention for 30 years.

So we’ve just had an intervention from the National Party which explains what they will do if they’re elected. They will restore the ability of landlords to deduct interest in full to enable landlords who have vast or large property portfolios to borrow 100 percent of the costs of their next home purchase, driving up the cost of existing homes, and excluding the people who live in those homes, rather than rent them out as landlords. We don’t think that’s good policy in New Zealand. We think it’s distortionary, and we think that we should instead be encouraging investment into new housing, where you get full deductibility now in perpetuity.

The Government is also aware that businesses are responding to recent North Island floods by providing benefits to their employees in affected areas. We don’t think it would be appropriate for those benefits to incur income tax liabilities for the employee or fringe benefit tax obligations for the employer, and therefore the bill proposes exemptions for cash and non-cash benefits provided by employers to employees who have been adversely affected by the North Island flood event, up to a maximum of $5,000. It provides that accommodation benefits provided by employees to employers for up to eight weeks after the start of the relevant flood event are similarly treated so that people can go and help out without creating some tax complications, and that the accommodation benefits of those employees who relocate to the affected areas for a limited duration for rebuilding and recovery projects aren’t adversely affected by tax consequences.

Those are some of the main features of this bill. These matters are important for New Zealand, and I thank the House for its consideration of these matters as I commend the bill to the House.

The question is that the motion be agreed.

Today marks yet another assault on New Zealanders’ wallets by a Labour Government that remains addicted to spending and has never seen a tax it could say no to—that has, after six years, delivered nothing but a cost of living crisis which has led more and more New Zealanders into the food bank queues, into emergency housing, into mortgage arrears, and into situations where they are telling their kids they can’t afford swimming lessons anymore. And what does David Parker, the Minister of Revenue, the “Minister for More Tax”, do? He gets up and says, “Look, I am thoroughly justified in taxing you more.” Well, here on this side of the House, we think it is exactly the wrong time to be taking more of New Zealanders’ hardearned incomes from them. Here on this side of the House, we understand that, in a cost of living crisis, people deserve to hold on to a bit more of the cash that should be in their wallets.

The contrast between the two parties couldn’t be clearer, because, on the other side of the House, we have a Government that is taxing at higher levels than we have seen in years. Because they are so addicted to wasteful-spending projects like merging TVNZ and RNZ, like dreaming up a new jobs tax, like little rinky-dink schemes that the Prime Minister, then, has to intervene and dump—because of that, they’ve had to rake in a heck of a lot more tax. The tax take is up $43 billion since this Government came to power—$43 billion—and the New Zealanders I speak to don’t see much to show for it. They see longer waiting lists for hospitals, they see more kids on the State house waiting list, they see no changes in the achievement in our schools, and they say, “Why am I paying more tax for all of this wasteful spending?”

Let me break it down: the tax take is up—when you break it down per household—$17,500 per New Zealand household. That’s how much more money this addicted-to-spending Government is raking in. So, even while real wages are declining, which is to say prices are rising faster than wages; even while many New Zealanders are falling backwards from one pay cycle to the next, are less able to pay the rent, less able to pay the mortgage—even while all of that is happening—inflation is being a sneaky little helper for this rapacious Labour Government. What it is doing is robbing New Zealanders twice: first when they pay for things at the supermarket—

💬 DEPUTY SPEAKER: Ms Willis, we’ve had two minutes now of fairly general debate—start referring to the bill in front of you.

Mr Speaker, this bill fails to reduce the tax thresholds that New Zealand working taxpayers are subject to. That is a significant failure. It is the very reason why National opposes this bill. What a good Government would do in the middle of a cost of living crisis, when introducing the tax bill, is adjust those tax thresholds for inflation. The bill we are debating—

💬 DEPUTY SPEAKER: And now we’ll talk about what’s in the bill.

In the bill are rates for taxation for 2023. My argument is a very specific one. My argument is that those rates have been set at thresholds which should have been adjusted and which the bill fails to adjust.

Now, here on this side of the House, we have observed what is common practice in many jurisdictions around the world when a tax bill like this is introduced. Rather than just confirming that the tax thresholds should hit at the same level as they always have, many countries around the world say, “Well, actually, inflation means that more and more people are being pushed into the higher brackets at which those thresholds hit.” So our contention throughout the debate on this bill—in fact, for over a year now—has been that it is time for the Government to adjust those thresholds to allow for that inflation. And this bill represents the final nail in the coffin where the Government has failed to adjust those tax thresholds. The reason it has failed to do that is that it is spending so much money. So this bill is a missed opportunity; National opposes the tax thresholds that are specifically set out in this bill, and I am setting out for you why that is.

This bill also contains new taxes. It contains an app tax. Now, this tax is a huge departure from the conventions around GST in New Zealand. We have had a longstanding convention that has been observed by all parties in Parliament: that if a business takes less than $60,000 in income for services or sales in a financial year, that business is exempt from having to pay GST. Now, that longstanding convention is one that we on this side of the House think should be adhered to. But, on the other side of the House, what they’ve now said is, “Well, that only applies if you’re in an old-fashioned business. But, if you’re actually running a 2023 business that uses technology, that uses a digital platform for your sales, we think we have found a new excuse to tax you more.” And, in fact, what this bill says is that, if you are using a digital platform to reach your customers—whether you’re the New Zealand business Zoomy, whether you are Airbnb, whether you are Delivereasy—if you are using technology, God forbid, then we will tax you. This is a longstanding convention that is being thrown out the window. And mark my words: this new tax will stop innovation, because it sends a signal to entrepreneurs in our technology sector that if you come up with a new digital platform, the Government will find a way to tax it. That is the wrong signal to be sending into our economy.

It also creates direct costs to everyday New Zealanders, because the IRD has warned that the full cost-impost of this tax will be passed on to consumers. That’s the IRD’s advice. And I have had Grant Robertson, the Minister of Finance, tell me many times that inflation is nothing to do with him; it’s just a mysterious visitor from overseas, and there’s nothing he can do with it. And I have consistently taken issue with that, because it’s just wrong. This is an exact example of the sorts of policies that lead prices to increase. When the Government has a policy choice, it can either introduce the tax—and people will pay more for their ride share, they will pay more for their food delivery, they will pay more for their Airbnb—or it can choose not to, and we will not see the price increases across those services. National is principled; we say stick with the convention around GST and save New Zealanders yet another cost impost in the middle of the cost of living crisis.

I want to turn now to an element of this bill that I find particularly cute, and that is the build-to-rent provision. I am a huge supporter of build-to-rent. It is something that New Zealand is missing—around the world, you see developers building long-term, secure rental properties of a high standard—and, for various reasons, we’ve not had that sector grow here. I’ve put forward a bill, which now Chris Bishop has in his name, to amend it—to fix the barriers that have been in the way. But what this bill claims to do is it says, “Oh, we’ll give build-to-rent a leg up by letting build-to-rent developments exempt their interest.”—as if that were a novel idea! For decades upon decades, everyone who provides a housing service in New Zealand, just like any other business, has been able to deduct their interest from their tax bill. And it is a huge overturning of that convention that this Government has engaged in as part of their war on landlords. When KiwiBuild failed, when their tough talk failed, they turned to their common trick of dividing New Zealanders one against the other, and they said, “Landlords are to blame, and we will put new taxes upon them. We will stop them being able to deduct their interest, and we will extend the brightline test.”

Well, you know who the collateral damage in that war is? It is tenants. Rents are up $175 a week since Labour came to power. As we see landlords lose their interest deductibility, more and more have explicitly warned that they will have to pass on that cost in the form of higher rents for New Zealanders already struggling in a cost of living crisis. I want to share with this House the human face of that. I knocked on the door of a family in Newlands two weeks ago, and I said to them, “How are you going?” They said, “Look, we’re OK, Nicola, but we thought we did everything right—we scrimped and saved to buy a rental property—and now we’re completely stuck. Without the interest deductibility, we can’t make the thing work. But the problem is: we could put the rent up, but the family who rent that property have four kids, like us, and we worry about what it will do to them. But we have no choice.” That’s Labour’s idea of kindness. It’s not National’s idea of kindness. This bill should have reduced tax. New Zealanders should be able to keep more of what they earn.

Thank you, Mr Speaker, for this opportunity to talk on the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Bill (No 2). I want to touch on all three of those headings, and I’ll start with the annual rates. We’ve just heard from the previous speaker, Nicola Willis, that the bill does indeed address the annual rates, and that is at clause 3. So it’s a very simple provision, saying that the income tax imposed by section BB of the Income Tax Act 2007 is to be paid at the basic rate specified in Schedule 1 of that Act. So that Act is not changing; there is no change to the rates.

Then we’ve heard also, from the previous speakers, some talk about this platform economy. So what the bill does is it does require digital-platform operators to provide information about the providers in New Zealand to Inland Revenue, and it does now mean that GST applies to accommodation and some transportation services.

There are some important definitions in the bill, and I’ll go to one, at clause 103, and that is the definition of “electronic marketplace”. That is, “a marketplace that is operated by electronic means by which a person (the underlying supplier) makes one or more of the following supplies by electronic means for another person (the operator of the marketplace) to a third person (the recipient): (i) a supply of goods: (ii) a supply of remote services: (iii) a supply of listed services;”.

So, as the previous speakers have said, this is new to New Zealand tax Acts, and what it will do is that the Goods and Services Tax Act—the amendments in this bill—will apply from 1 April 2024, so that there is an equitable application of GST on this electronic marketplace—that is, that it is equitable to those taxi drivers, to the hotels and motels that currently also pay GST.

Now I’ll touch on some other matters that are also covered in the bill. We heard from the Minister of Revenue about fringe benefit tax and exemptions to that. He referred to the car-parking exemption. In my previous life, I was a beneficiary of this law that exempts car parks. I had a very good centrally located car park in the fine city of Dunedin, and, of course, now, when I’m in Wellington, there’s no need for a car park. But as the Minister said, this is going to be extended. This exemption to fringe benefit tax has been extended to public transport, and that we can find at clause 27—I’m going to need some tags—so that certain public transport, if it’s travel between home and work, so that can be for a bus service, a rail vehicle, a ferry, a cable car, or if it’s partly funded by a Total Mobility scheme administered by Waka Kotahi—this is what we’re talking about that will be exempted.

And what was, I think, a very exciting development in the committee of the whole House stage of this bill, was a SOP—Supplementary Order Paper—from the Government, but very much taking the lead from Julie Anne Genter’s work, and that is to include certain self-powered and low-powered vehicles and vehicle-share services to be also exempt from this fringe benefit tax.

We heard from the Minister just then that there are going to be regulations, so if we go back to clause 27—which inserts new section CX19(d)—it names the vehicles that have been talked about that will have this exemption applied, and that is a bicycle, an electric bicycle, a scooter, an electric scooter, or any other vehicle declared under section 168(a) of the Land Transport Act to be a mobility device or not a motor vehicle.

As the Minister said, he noted that it might be that there is a gold-plated scooter somewhere in the world, and perhaps we don’t want the fringe benefit tax exemption to apply to that. Well, if that does appear to be a real issue, then regulations can be made and these can specify the maximum allowable cost of the vehicle and requirements for any vehicles.

I note, of course, that a number of members of this House cycle around the great cities of Dunedin and Wellington on cargo bikes and that they can cost a reasonable amount of money, but so too can centrally located car parks. So those regulations are there, that ability to meet the regulations is there, should they be needed.

Then, of course, the Minister also mentioned the other significant change that came through in the committee of the whole House stage, which was exempting income because of the North Island flooding events. There’s quite a lot in the bill about definitions of those flooding events. Really, the purpose here is that where an employee has made a payment for relief, that’s not to be subject to fringe benefit tax. This, I believe, has been derived from other emergency legislation in the past where things have happened—earthquakes, for instance, in Canterbury—where people need to buy some new things very quickly, and often that will be funded by good employers.

Then also another thing that I think is interesting and I am very pleased to see is this build-to-rent exemption from interest limitation rules. So for that to apply, there has to be a 10-year tenancy and it does apply to bigger developments as well, and there is a definition of “build-to-rent” in clause 98(3). So I think this is a good bill. I’m pleased that the changes were made to it at the committee stage and I commend it to the House.

It’s a pleasure to be talking on the Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Bill (No 2) third reading. As my colleague has already noted and we’ve said repeatedly, we will be opposing and we have opposed this bill for a number of reasons. The first of which is, obviously, that it enshrines the current tax rates and tax thresholds, which means that New Zealanders are paying far more than they ought to in tax, because—as a result of large amounts of wasteful spending from the Government—we’ve seen people getting pushed up into higher tax thresholds, which means they pay higher tax rates on their income as a result of wasteful spending which has caused inflation; and don’t we know what impact inflation is.

Of course, the Government has had to set about doing a whole lot of stuff, changing benefits, etc., to try and assist hard-working New Zealanders—well, in fact they haven’t had a benefit—but people on benefits, to try and help them through this period where we have a cost of living crisis, and it will go on because inflation will continue at similar rates for some period of time. That is the worrying thing for New Zealanders, and that is why we oppose this bill: because the tax rates continue to ensure that New Zealand households pay more tax than they ought to.

It’s interesting when you look at the context—and I know that Nicola Willis spoke about this—that the $42 billion of extra spending and tax revenue that the Government gets every year, in addition to what it was earning back in 2016-17 when they came into office, is just a phenomenal amount of increase in spending. Of course, that’s been going into Government pet projects rather than going back into households, and now business owners—so that they can fund their businesses; employ more people; grow the economy; increase our exports, which, of course, have decreased by 10 percent over the last year or so—and this is why the economy is in such a bad shape because of these policies, and tax is the core of it. So that’s why we do not agree with this bill; that’s why we proposed that, for low to medium income New Zealand families, that they should benefit from tax decreases, which is roughly between about $800 and $1,000 per family. On top of that, the early education announcement we made just very recently—they’ve got $3,500—that would deliver to mums and dads who have children about $5,000 in a reduced tax cost, or looking after their children while they’re at work. That is the meaningful difference that the National Government will bring if we are lucky enough to win the election later this year, in October.

So that’s the main point about this bill; why we’re opposing it. But, of course, this bill has a whole stack of other things in it, some of which are quite good; some of which are not. Of course, it already enshrines more taxes for New Zealanders so that if you are using certain Government services, the bill provides for GST to be levied on those. So if you are accessing certain Government services, the charges that you might have paid prior to these changes coming into place will now incur a GST liability. This, of course, is against a backdrop where those levies and those charges have previously been through the House, have previously been through select committee, and it has been agreed that they would not incur GST. But we’ve got a Labour Government that wants more money and that is why they’re imposing a new raft of GST on a whole stack of Government services which, in many cases, are not warranted and are inappropriate, and, of course, they come into play on 1 July, in a few months’ time.

The other side, of course, is the issue—the vexed issue—around the app tax, and Nicola Willis covered that very well. That is something that, you know, as we go into Easter, many people would have booked or will be thinking about booking accommodation to be able to take their family away for a few days over the Easter period. Of course, if you were to pay for $400 of accommodation—that’s probably two nights; you may need three nights to be going away all of Easter, but let’s say it’s two nights—you’ve got to pay GST on top of that. That’s another $60. If you get a cleaning service to clean the bach after you’ve hired it for the couple of nights—of course you would now be paying GST on that amount—so, all up, you know, that’s just adding on about another $85 of costs to New Zealanders who want to go away and have a few days away.

This is the impact of this app tax that the Government has been at the forefront of trying to push through. It was interesting, some of the submissions we had on this stuff. Obviously the world is moving towards trying to do these types of taxes, but of course New Zealand’s at the forefront of it—we’re at the bleeding edge of it—and there is no necessity to bring this in. We do not need to meet the OECD requirements at this stage. We need to be mindful of them, we need to be prepared, but we do not need to be bringing in these types of changes already. Of course, what it’s going to do is, to some extent, stop certain global players wanting to come into New Zealand because they know their products will be in a different tax regime which will affect, probably, our hard-pressed New Zealand tourist industry, and, of course, it distorts the GST proposals that New Zealand already has in place.

The main thing, of course, is, yet again, this Government has broken a fundamental tax tenet, which is anyone under $60,000 does not have to account for GST on their activities—that has been encased in law and been the practice for decades, and yet this Government again believes that it’s got the divine right to change those rules, and this is what’s happening under these new changes to this app tax that the Government is bringing in.

Of course, related to that, the first tenet that the Government broke—that Mr David Parker broke—was the issue around interest deductibility. Of course, there has been a fundamental tenet in tax for decades, again, which says that if you have assessable income—assessable income means that it’s subject to tax—you should be able to deduct expenditure to offset that income. Of course, what did this Government do when they first came in? They broke that cardinal rule and removed the interest deductibility on people who have properties that they rent out to people—pay tax, pay rates on it, pay all the good stuff, and provide a home for people who want to rent.

Of course, now we see reinserted back into this bill the tax deductibility for renttobuy, long-term rent accommodation, which means that you have to have a minimum of 20 buildings or houses in one area—we changed the rules around whether it’s contiguous or not. But, of course, those now allow interest deductibility only for those particular build-to-rent type of assets. Again, this may help the renting market, and we do need people to come into the renting market and have long-term rental arrangements, but what we have seen is a decrease in the rental market. As Nicola Willis quoted, $175 increase per week in the costs of renting for hard-working New Zealanders—perhaps some of the most vulnerable New Zealanders—and yet this has been the perverse outcome of this stupid rule of removing interest deductibility, and applying a whole lot of other increases on the requirements on landlords. Of course, there’s been a natural sort of market reaction to that. So that is a bad thing in terms of what it’s done to the rental market, but we do like to see more build-to-rent, but all those many thousands of houses that would have otherwise been rented have now been sold and have gone out of the rental market and made it harder for people.

Now, the cross-border workers reform—there’s an area here. We have a number of people coming into New Zealand—if they can get through the immigration rules, of course—hopefully, they’re starting to come through and coming to help hard-working businesses, but one of the proposals here is to allow cross-border workers to actually account for their own tax. That is a good thing because some of them will come here—they might have come from Switzerland to help on special types of printing machine, Heidelberg or whatever, is an example. They come out for a specific period of time. They are the ones best able to understand New Zealand’s increasingly complicated tax rules. They can pay their own taxes here rather than necessarily having the employer to do it but, by agreement, they can do it; that’s a good thing to help support small businesses and businesses in general in New Zealand.

But, look, there are some improvements but the fundamental issue about this bill—it continues to layer a heavy burden of tax on ordinary New Zealanders, and they should be paying less tax, not more tax.

I rise to offer a moment of calm and quiet and rational analysis on this excellent bill, the Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Bill (No 2). The annual rates bill happens every year as a matter of law. Every year, the Parliament is required to confirm the rates of tax that are paid. It has to be done by the end of the tax year, and that happens to be 31 March. Today is 28 March; we’re getting in with three days to spare on getting that one done. So we simply do have to confirm the annual rates, and it’s a fairly routine and regular process each year.

I want to talk a little bit about the problems that the Opposition has alleged exist in this bill, which I think really demonstrates misunderstanding on their part; just a bit of misunderstanding. Let me talk first about the platform - based tax. Now, the idea behind this tax—it is not a new tax. All it is is applying GST to people who provide goods and services via a platform. And there’s an important point here: ordinarily, a small business can opt out of the GST rules. So, as a matter of law, there is a threshold set in the Goods and Services Tax Act. It’s in section 51 of the Goods and Services Tax Act and it sets a threshold of $60,000, and any business or any activity that has a turnover that is more than $60,000 is required by law to be registered for GST; to charge GST on the goods and services they supply. They can always claim back the cost that they themselves pay in GST as well.

So thinking about it for a moment, Mr Speaker, you, of course, will realise that any motel will likely have a turnover of more than $60,000 each year—will collect more than $60,000 in sales. Taxi drivers will collect more than $60,000 in sales every year. So motels and taxi drivers are required by law to be registered for GST. So that means any ordinary old business is paying GST in that space.

Now, I just want to go to another section of the Goods and Services Tax Act for a moment. It’s section 6 of the Goods and Services Tax Act. Now, any entity that is engaged in continuous or regular activity, supplying goods and services, or services in return for a consideration, is actually caught by the GST rules—so that would be any activity is caught by the GST rules. Even someone who has a very small business that turns over only $10,000 a year is actually caught by the GST rules, except that later on in section 51, under that $60,000 threshold, those very tiny micro businesses can opt out. And that was really put in place as a matter of convenience. So what’s the point of imposing those kinds of costs, accounting for GST on a very, very small business? And what is the point, from the revenue’s point of view, of trying to collect those very, very small amounts of GST? So as a matter of compliance cost, as a matter of the efficiency of the tax system, that threshold sits in there so that tiny businesses are not required to register.

Now, when Airbnb-type businesses started out—so accommodation-sharing businesses started out—and when ride-sharing businesses started out, they were actually promoted as part of the sharing economy, which was a way that a person could share a ride in their car; they could share a room in their house—perhaps if they were going away for a weekend, they could rent it out; perhaps they could allow their spare room to be used from time to time. It was very much based around the concept of sharing. But these days, accommodation providers providing via an app, and ride-sharing providers doing so via an app, are not part of the sharing economy; they’re part of the economy, full stop.

The businesses over the years, since they first started, have changed in their nature, so that, now, people will buy a house and rent it out over Airbnb as a matter of course. People now will earn a full-time income from driving an Uber. So those sharing services are now just services, full stop. But, of course, the services that were operating via an app weren’t collecting and paying GST, and that put the more traditional providers—the moteliers, the taxi drivers—at a real disadvantage. So what this platform tax does is it evens up the playing field. Now, technology has changed the way we do business, and because technology has changed the way we do business, our tax system needs to change to meet it as well in order that it remains fair for everyone. And that is what the platform tax is doing. It’s very, very straightforward. It is simply a matter of fairness.

I want to address the issues around the deductibility of interest or not, which were raised by the Opposition. And, again, that’s an interesting point for tax technical reasons. Now, traditionally, a business or a person can deduct expenses to the extent that they were incurred in earning assessable income. Now, of course, someone who buys a property—uses a mortgage to finance it; pays some interest—is, of course, earning two types of income. They are earning rental income and they are earning capital gains on that property. And we know that, in recent years in New Zealand, the capital gains on property have far, far, far outpaced the rents that people earn. In fact, the reason, really, that people have invested in investment properties is not because of the rental income; it is because of the capital gain, the untaxed capital gain, and yet they claimed an interest deduction—they claimed an interest deduction. So you could try to apportion that interest deduction, but it’s rather hard to do. So what has been done is we’ve gone and said—but for two very good reasons—we have a housing crisis that has been exacerbated by the demand for investment houses driving prices up so that young people cannot afford homes. So we have tried to address that by looking at some of the issues around interest deductibility, and it is, in fact, a pretty sensible thing to do. And what we have done is we started to remove the capacity to leverage up your investment by getting that interest deductibility. So it’s actually quite a sensible thing to do.

And I want to remind the Opposition of this: if an investor sells their property within the 10-year brightline and makes a profit on it, well, that’s fantastic. You know, that’s a good thing. Making a profit is always a good thing. Now, they will pay tax on that profit that they make, but they can, at that stage, claim the interest deductions as well. All right? So quite clearly, because they’re paying the tax on the capital gain, they can claim the interest deductions that’s sitting in the law as it is. So that’s a fair aspect of the law. And the reason that we have the carve-out in this Act for build-to-rents is because, actually, we straightforwardly need more housing. We need more housing that is provided at a level that people can afford to rent it. And that is what the build-to-rent market does; it provides another mode of finding accommodation in New Zealand, not our highly, highly distributed private rental market—not necessarily buying a house, but sitting in that space of a build-to-rent. So that is what that carve-out does; it supports that way of addressing the housing crisis.

The Opposition have raised concerns of the bill, but I hope that they might realise that their concerns are, in fact, not justified. This bill takes some very, very sensible measures to address a real need in our tax system, and I’m delighted to see it does. I commend this bill to the House.

The Green Party supports the bill. It takes some very small steps in a good direction. I guess the bigger picture of all of this is, as we face an increasingly dangerous climate crisis and a risk of ecological collapse—which I know is not nice to hear about, but we actually have to confront that truth so that we can take the steps to stop it—we need to have a paradigm shift in how we approach Government policy. Since the 1980s and 90s, there’s been this dominant ideology of neutral tax system, blah, blah, blah, which isn’t neutral at all and has led to increasing inequality in our country and, at the same time, in some small ways, has actually subsidised fossil fuel, high-emitting cars, and single-occupant car trips at peak commute time.

So one of the great measures in this bill is, thanks to the input of the Green Party, who’s been campaigning on this for more than a decade, we finally even up the playing field when it comes to fringe benefit tax, so that employers can provide support for those to use public transport or micro-mobility for their commuting and get some tax advantage from that, which makes sense because there’s huge public benefits to it—huge public benefits. We’re talking less congestion; fewer cars on the road, or lower-emitting cars; healthier people; cleaner air—win-win. But up until now, we haven’t been able to have that, because of that dominant ideology I spoke about earlier that, supposedly, New Zealand’s neutral tax system is the envy of the world, when, in truth, we’re lagging far behind using the sensible, evidence-based public policy tools that we need to support the outcomes the community desperately wants, because the community does want a transport system that works, they do want to protect the climate and the environment, and they do actually want to live in a more equal society.

Previously, the Green Party had argued for public transport passes, electric vehicles, and micro-mobility vehicles to be exempt from fringe benefit tax. The draft of this bill, the first draft, included the exemption for public transport passes but nothing else. But through the select committee process, we saw huge people power: over 400 people and organisations came and submitted in favour of extending that exemption to active transport like bikes, scooters, e-bikes, e-scooters, and then, at the very eleventh hour, the Government did pick that up. So we were glad to see that, and this is why the next Government has to have far more Greens in it, so that we can get some of these sensible policy changes that will actually support the outcomes that people want.

Finally, on the debate from the National Party and the others on this side of the House: classic, you know, just lowest common denominator, campaigning against any sensible changes to make our tax system fairer, which is really irresponsible and unnecessary at this point in the debate. As the Labour Ministers and members have said, it is actually fair that online platforms face the same GST that our local businesses here in New Zealand face. That’s just fair. I mean, if something is providing or facilitating a good and service, let it be treated as such, and that’s what’s happening in this.

I heard some people speaking about interest deductibility. I think most New Zealanders would agree that is a very fair policy. It isn’t fair that New Zealanders trying to buy their own house don’t have interest deductibility, but those who are buying a rental property where they’re going to make huge, mostly untaxed capital gains were getting this extra benefit of being able to deduct interest as an expense. That’s an example of, like, where the system was screwed up, you know, and, obviously, rather than make it fairer, making it something that works for people and even the economy, the National and ACT parties just want to defend the status quo. You know, they wouldn’t want to change the system—as long as it allows the rich to get richer, they’re going to defend it. And, you know, that’s a large part of the reason we’re in this terrible situation.

And I hear them—oh, the crocodile tears for the high rents! I welcome the National and ACT parties’ support for an immediate rent freeze and rent controls. Put your money where your mouth is. Why don’t you support a rent freeze if you care about the renters? Oh, I know—every policy you’ve ever put in place is about protecting the rich landed gentry to get richer off their rentier activities, because you’re, basically, a bunch of feudalists. Sorry, Madam Speaker, not you, but the National Party and the ACT Party.

But, yes, let’s have a fairer tax system. Let’s protect the renters. I look forward to every party in this House coming in behind an immediate rent freeze while we catch up with a public house building that languished under the National Government. There should’ve been more public housing built following the global financial crisis, there should’ve been support for more housing supply added then; they failed to do it. That’s why there’s a lack of housing right now, and until we have that increase in supply, let’s have a rent freeze. Otherwise, you know who they’re here to represent and why they receive the donations from the very richest New Zealanders—you know, the billionaires who want to keep getting richer. When is it enough? Honestly, when is it enough for you?

The Green Party supports the bill, after our excellent contribution which will mean that employers can support those who would like e-bikes or to provide public transport passes for commutes to work. We will continue to bring constructive policy solutions to this House. Thank you.

Thank you, Madam Speaker. The bill sets the annual rates of income tax for the 2022-23 tax year. It deals with the platform economy, and GST exemptions for the North Island and dual dividend companies. It also deals with the great dream of the Green Party to get David Clark fringe benefits when he moves from Parliament into his consulting and corporate advisory work, and I congratulate him on that. But, you know, while Rome burns, or while New Zealand burns, Minister Parker and Minister Robertson play the duet fiddle with the people of New Zealand around taxes. And today in Parliament, the Prime Minister showed that he’s joined the party and he doesn’t care about hard-working New Zealanders who are falling behind in wages after inflation, and he’s prepared to run a high-tax economy on a per capita basis and give no benefits to the 3 million people who are working hard out there. So the ACT Party has made it its goal to actually look after those people and lobby for them, and if it means that we will incite financial rectitude, marches everywhere in New Zealand to make this an issue of the election.

Since Grant Robertson became finance Minister, the average tax take has gone up to $3,299 annually. And if you add GST, from 2017, it’s gone up to whopping $8,000 per earner. It increased dramatically in 2002, and, as a cost of living crisis is upon us, the people are losing out more of their income to the Government, and we used to have a deal where that was not the case. Somewhere, somehow, the one thing that doesn’t get you ahead is taxing people. The cost of living crisis is firmly on the agenda, and New Zealand was built around Government policy that rewarded and focused on hard-working New Zealanders. Just as an example, taxes to June, inside this bill will continue to increase $52 billion from when Labour was first elected, and it’s going to rise as inflation is still rampant.

Instead of taking the extra money from workers and finding new ways to hand it out, the Government should get its spending under control. It should pull the right levers to cut taxes and give everyone a break from working, with more of their own money in their own back pockets. ACT is the only party who will represent these workers and give them an alternative budget that shows and explains to them that they can have tax decreases and maintain services with the health, police, and educational system remaining intact. All we call for is more efficiencies and focus on what has been delivered for the people of New Zealand.

We will address the brightline test and dump it as a tax completely. We will give $2,000 minimum tax to someone on an average wage. We will scrap the 39 percent envy tax rate, which is contained in this, and restore interest deductibility, which is not contemplated in this bill. ACT’s the only party for workers now. It’s the only party that will actually challenge this bill and challenge Government spending and the provision of services to that. Just to put it in context—

ASSISTANT SPEAKER (Hon Jacqui Dean): Order! I’m going to direct the member back to what is intended in a third reading. To quote: the member should summarise and discuss the bill in front of the House and not what another party might do in the place of that bill. So can I ask Damien Smith to come back to the bill.

Thank you, Madam Speaker. We live in a country where this tax bill has resulted in a current account deficit being the worst in recent history. We are in a recession. There are no benefits to the income tax brackets to allow people to meet the cost of living and rising interest payments that will hit this year. Our net liability position is in a negative situation. We actually owe more than we actually have as assets in the country. And so this bill should have been one of taxes that were paid out to people who were incentivised to contribute to society, and there’s nothing in this bill that provides any benefit to that. We will attack any legislation, including the Credit Contracts and Consumer Finance Act, which has now reduced liquidity. All these levers have come to the point where this tax bill has, if we all admit it, not got the required focus to get us through the next two years. The tax bill itself, whilst punishing, overall, citizens of the country, doesn’t actually address the one fundamental thing: how do we make New Zealand more prosperous, and how do we create equality in this country and allow people to manage the cost of living? ACT opposes this bill and will be repealing it after the election.

I tend to agree with the Hon Julie Anne Genter that members opposite are using this rather technical bill to make some cheap political shots. Given that they have called into question the motivations of our Government around this tax bill and why we would be introducing a technical bill rather than tax changes, can I remind the House that there are other ways to deal with the cost of living? In fact, at the end of this week on Saturday, a fifth of New Zealand—1.4 million New Zealanders—will benefit from those changes through family tax credit changes; superannuation changes which mean that couples will get more than $100 per fortnight, and single people $66.86; main benefits will increase, as will student allowances; and there will be an increase to child support. I am saying that because this bill is an omnibus bill which deals with technical matters related to GST; it is not about changing the tax system. Our Government prefers to use other methods to have targeted support. That is because this omnibus bill is really about just setting the annual tax rates—and, as the chair of the Finance and Expenditure Committee, Rachel Brooking, said, there is no change to those tax rates. It also does make a number of technical changes which are really to increase the fairness in the system.

We’ve seen over the last couple of weeks, the instability that can be caused in financial systems when there’s a run on money. It’s really important that we have a financially stable system, and having a fair and equitable tax system is very much central to that. So it is unusual to be carving out exemptions—the whole buy-in from society is around paying tax, knowing that it is fair, and knowing that it is equitable. That is what some of the changes in this bill do, in terms of just closing little loopholes but also in terms of that one that has been so contentious and misunderstood, which has been around the platform or the gig economy.

It is simply wrong to say that small players will be paying GST—it is actually the platforms themselves that will pay the GST. The small players that may be caught by the impact of that will actually get a rebate of 8.5 percent. Yes, there may be a nominal increase that is passed on to consumers of around 6 percent, but we heard plenty of people in the hospitality industry and the taxi industry say, “That is a good thing because it makes the system fairer.” and they are sick and tired of being the ones who are having to pay GST when some of the other very big providers in the platform economy do not.

Now, we’re going to be seeing more and more of that style of business, and I’m proud that New Zealand is at the frontier of that. We are not the only ones doing it. There is a whole information framework and reporting framework around that with the OECD, which is about taking a global approach to taxation so that big players who are really good at hiding their income in different parts of the world will now have to be much more transparent, will have to disclose, and that is a good thing for everyone, everywhere. So it’s a good thing for New Zealand to be at the forefront of that, so I make no apology for that.

One of the other points I’d like to make is just a procedural one, really: to let viewers at home know that the committee is advised by really good, sound advisers. They’re not only the Inland Revenue Department advisers but we have the advantage of having independent advisers who work out in the so-called real world, who we can bounce ideas off and get views from. This has been particularly important around matters of taxation, and has led to some of the changes in this omnibus bill. So I won’t mention the IRD advisers—I know they don’t like to be mentioned in the House—but I will mention Therese Turner, who has been a really fantastic sounding board for the committee.

In terms of what the omnibus bill does, actually—and the IRD advisers have been able to give advice on—is not only the annual income tax rates and that framework for reporting and disclosing that I’ve mentioned but it’s also about the fringe benefit tax on public transport. We’ve heard in the House today that that has now been broadened so that there will be exemptions for e-bikes and e-scooters. Also, we’ve heard about the build-to-rent exemption.

Across the platforms, we’ve seen the gig economy that has now been tweaked so that it is much fairer and that we have a much more universal set of GST rules for those who are providing accommodation. When you now buy your Uber Eats, it’s not only the restauranteur that has a GST component to it but also the driver that brings it to you. That is not by virtue of them paying the GST, but the platform that they work from—and they do get the 8.5 percent rebate, as I said before.

There are some smaller technical little things which are good examples of where the independent adviser was able to give us some assistance. One of them is around the fringe benefit tax on cross-border workers, and that was, really, about closing a loophole where there were some cross-border workers who had foreign employers. The law was a bit vague about what they should be paying in tax.

To cut a very long conversation that went backwards and forwards short, we landed on a change to one of the sections—new section RD 62B, inserted by clause 93—where, yes, now the employee can opt out and pay their own obligations, but, actually, in the changes here, the employer must provide the employee with the relevant information that the employee does not have. That also, therefore, entails a burden on the IRD to make sure that those employers also have the information that they need, because it would be very unfair for somebody to come across the border, not know what they don’t know, and then have a strict liability offence around a tax payment.

So that was one example of where we were able to get some good advice and have a really fulsome discussion. Another one was just around going back to the accommodation providers. Originally, it was suggested that accommodation providers who are of large scale and who advertise across different platforms for 2,000 nights per year—actually, if they were just on one platform, they would be able to handle their own GST.

The select committee questioned that, and that has now been extended so that they can go across varied platforms because it would be too intrusive, really, on those providers—on those large providers—who might otherwise be having to make commercial decisions based on their tax liability rather than where they are going to get the best exposure and visibility and where they’re going to get the best custom from.

The other area that’s been touched on by the member Damien Smith from the ACT Party was around the dual-resident changes, which is really a consequence of a legal decision that came out of Australia which made it more onerous for New Zealand companies that have dual-resident status in Australia and New Zealand. The Australian Government did say it was going to close that loophole. That hasn’t happened, and so the IRD’s actually taken the bull by the horns and done that for them to make it fairer for them and just to make sure that they are not overly burdened by that status.

So, to summarise, really, the tax bill before us is an omnibus bill; it’s a technical bill that simply affirms the current tax rates. It’s not really a reason to be grandstanding about tax changes, in my view. The platform economy changes are timely; they ensure that we are futureproofed for the way that business will be done in the future and that we are addressing the hiding of income from some very large players that are working only in the digital space.

The GST changes are about levelling the playing field. There are distortions in the market currently; so it’s disingenuous, I think, to say that this will cause a distortion, and the dual-residency changes are, really, that the IRD in New Zealand, I think, may be losing its patience about the situation and looking after small and medium sized businesses—and large businesses—to make sure they don’t have an overly onerous burden there. The cross-border workers measures are really integrity measures; they are also about accounting for a more globalised world. We have also heard speakers talk about the changes that have come in after the select committee process, which is to take into account those businesses that have been really impacted by what’s happened with the weather events and to make sure that when they are genuinely looking after staff with accommodation and other means, they are not unfairly caught by rules which are really about profit making, rather than about trying to get through an environmental and weather-related crisis.

So I just thought I’d go through that to remind everybody that this is a technical omnibus bill. It confirms the tax rates for 2022 and 2023, and we have fantastic targeted support to deal with the cost of living coming in this Saturday, on 1 April. I commend the bill to the House.

Thank you, Madam Speaker. I’m sure the constituents of the member for Taieri, including, I don’t know, a resident in Middlemarch who occasionally rents out their house when there’s a big event on in the region—

💬 Chris Penk: It’s the middle of March now!

—that’s right, middle of—oh, pah tish!—or the part-time Uber driver in Mosgiel might be surprised to learn that the member for Taieri thinks that they are somehow part of the so-called platform economy. They are simply people trying to make a small income, and work within the tax rules that apply.

Now, I accept the point the member has made that it is necessary to modify the tax system to accommodate the fact that commerce has changed. And I was the Minister of Revenue in 2016 when the first GST that applied to, effectively, weightless goods came into effect: if one buys music or apps or something on iTunes, that’s an imported product that previously hadn’t been subject to GST, and now there is a framework for enabling that. That is consistent with our broad based - low rate tax system. What’s not consistent is that if anybody else makes a living—a small augmentation to their income, where their turnover is less than $60,000 from whatever source—they are not subject to the GST registration regime. But this bill does exactly that. It’s hardly administratively efficient, it’s not equitable—and I will come to equity in the context of Airbnb that Ingrid Leary mentioned—and there’s this weird kind of credit-back of 8.5 percent, which completely throws out the previously, I think, quite pure GST system that we had.

Now, there are issues that some hoteliers and moteliers around New Zealand have with people who are widespread Airbnb users, but often those issues are actually about compliance with hotel rules and local council by-laws. It wasn’t pointed out to me that the biggest inequity was GST. This is a solution looking for a problem, and I would be very surprised if it did anything other than drive people off those platforms and enable them to advertise their accommodation or do their part-time driving duties on other means—the notice up on the local dairy for a bed and breakfast or a bach or a crib. That’s going to drive us away from the technology.

But I’ll at least give the Minister of Revenue credit for finally mentioning what this bill does most, and that is confirm the rates for 2022-23, because he’s been a bit evasive about that in previous readings and in the committee of the whole House. And what Ingrid Leary says is, “Well, this is just confirming what we always do.” That’s true, but an omission is as important as an act if it serves to take money out of the pockets of hardworking New Zealanders through the thief of inflation. And the only beneficiary of that inflation is the Minister of Finance, because he has benefited to the tune of billions and billions of dollars as income goes up but tax thresholds don’t. And so doing nothing is an action, and it’s an action that is harming New Zealanders. And that is the number one reason why National will continue to oppose this bill.

And we heard it again from both the Prime Minister and the Minister of Finance in question time today that they think they can spend money better than taxpayers can and that somehow, when they spend it, it’s not inflationary. But when we commit to giving it back to New Zealanders so they can choose to save or spend or retire debt, that is somehow inflationary. And that, I think, treats the New Zealand taxpayer like an idiot, and that’s consistent with a track record of a “we know best” Government that is imposing stupid rules through this bill, and punitive tax thresholds that are a thief in the pockets of New Zealand taxpayers. We can’t support this, but we can say to New Zealanders: help is on the way; a centre-right Government elected after 4 October would treat New Zealanders’ money much better than this lot will. And we will change those thresholds. We will have a different bill this time next year.

It is a pleasure to rise and take a call on the Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Bill (No 2). There’s always a teachable moment for an economics lesson and this is a fine example of it.

It is great to be confirming the rates because when we’re—it’s really interesting hearing the difference in language used; when we talk about tax, we are talking about wisely investing in our communities and our society. It’s all very well to say put two bucks in someone’s back pocket, but that two bucks doesn’t build a hospital, it doesn’t employ a teacher, it doesn’t employ a specialist expert to assess a student who needs additional support. So affirming the tax income for this Government is something that is really important to do. We know that taxation should be fair, and the technical changes in this bill help. We’ve already heard about it reflecting our current economy, helping us to make sure that our local hoteliers and taxi drivers are able to compete and hold their heads up high and earn an income in a fair way.

The third thing about taxation is it can be used to incentivise behaviour. We’ve already heard a lot of different people around the House getting quite excited about new sections CX 19C and CX 19D, inserted by clause 27, and I want to reflect about the way that that is going to incentivise behaviour by extending the coverage from just public transport to self- and low-powered vehicles. It’s something really exciting for people who live in smaller parts of New Zealand, smaller cities and towns. Not everyone in this country has access to public transport—a bus, a train, a ferry, or a cable car. And, actually, by acknowledging that some ways that those smaller communities, who can be really frustrated, they really want to get out of their cars—and by incentivising some of this behaviour and saying it’s a really good thing, and helping to support those alternatives to public transport that not everybody in New Zealand has access to is a really great thing for somebody who doesn’t live very close to a cable car at home. So the great thing is it helps to normalise these behaviours and a modal shift—incentivises a modal shift. I think of the young people that I have taught over the years, and for them as they come out and they join the workforce, for their employer to say, “It’s a really great thing, we can help you out with your electric scooter rather than a slab of concrete for a car park”, I think, is a really great way of futureproofing things for our workers.

I’d also like to reflect about one other behaviour that is incentivised. We’ve heard a lot about the housing market and how the behaviour for landlords is affected by taxation treatments. And it’s really great to see, you know, this Government has done a lot to push back against the supply issues in the housing market, and one of the tax treatments here about the carve-out for build-to-rent helps also with the supply side. It is in addition to the impact that will happen on the demand side. We’ve heard that there’s issues, still—misunderstanding, possibly—around the tax deductibility, and by changing that it has helped to reduce the demand by speculators for housing and frees it up a little bit more for those who actually want to buy a home.

So it is really great to see some of these technical changes in this bill that not only make our tax system fairer but also help to incentivise really great behaviour, and they also help to make sure that this Government can continue to invest in the most important parts of our society: our health system, our housing, and our education system. And that is why I commend this bill to the House.

Thank you, Madam Speaker. It is a pleasure to speak on this bill as we set the annual rates for the 2022-23 year, and it is entirely appropriate, of course, that the Parliament debates these rates every year. It is part of the process of affirming that Governments have responsibility for those challenging but important decisions around how to have a tax system to afford the necessities that we all rely on: the hospitals, the schools, and the roads that we all use and all need and must be paid for somehow. But appropriate scrutiny of the Parliament is an important part of that process and that’s what we’re engaged in right now.

Now, of course, in New Zealand, we have what is described as a low rate - broad based tax system, and the rates that are proposed in this bill are a continuation of the rates that have existed previously. So we are arguing for the status quo, by and large. But I’ll come to the fact that within this bill there are also some improvements to our tax system that improve equity, that improve fairness, that improve the integrity of our tax system, and that remove some of the distortions that have emerged over time, because, of course, technologies change, the use of different technologies changes, the way our businesses respond to new technologies changes, and of course the way the tax system applies to them subsequently changes as well. And it’s appropriate that we should update the rules, as parliamentarians, to ensure we retain the integrity of that low rate - broad based tax system that we have here, that serves us so well, that makes it easy to collect taxes, that makes it—the important step of making sure that everyone pays their fair share. And we know that in systems where everyone feels that they are paying their fair share of tax, that compliance goes up. It becomes easier to collect tax, requires less resource to collect the tax necessary to pay for our schools, for our hospitals, and for our roads. And with that, of course, comes a lower overhead on the actual collection of those taxes.

So I’m very much in support of the bill before us. It does address, I think, some important distortions in our system that have emerged between the platform economy, on the one hand, and the traditional providers of services, on the other. It’s interesting; I was looking back in researching this speech at some of the previous positions taken in this House on the platform economy, and one that stood out to me was a member of this House being really clear that “A strength of the New Zealand tax system is the fact that taxes are applied fairly and evenly, and there are few exceptions. There’s a whole lot of positivity around our GST rules being applied equally, with few exceptions, to help us ensure that tax is fair, efficient, and simple.” These are all words of the sometimes very wise the Hon Michael Woodhouse, who we heard speak in the debate not so long ago, speaking in favour of the National Party app tax in 2016—not so long ago.

And to be fair, those were about a tax that would ensure that our system remains broadbased, that it actually applies fairly to businesses large and small, and it doesn’t create distortions in our tax system that enable large, often overseas-based digital platforms to compete on an uneven playing field with an unfair advantage over our locally owned businesses, who are paying their tax and operating perhaps in a more traditional manner, or perhaps just simply complying with the rules as they stand here. We want a fair system where every business can compete in the market, including those who are providing services traditionally, but also in the future as more businesses shift to a digital platform, we want a fair application of the rules across the board.

So one important thing this bill is doing is removing a potential distortion in our tax system that is emerging as more and more people shift to work in the digital economy. So that broad based - low rate approach that helps to ensure that our GST is fair, generally free of all sorts of complexities seen in the other taxes around, and other taxes around the world, and I’m quoting Michael Woodhouse again, “is the system indeed that we want here”.

It seems a shame that the National Party may now suddenly take umbrage at a proposal that they have sung the merits of before, in a different context, when they were in Government, because I think everybody in this House really appreciates the fact that we should have a fair system. We might debate around the edges about what that looks like, but we want a fair system where people pay their fair share, where it can continue to be low rate and broad base.

So this bill does a number of other things, though, which I want to touch upon in the remaining time. One of those is the implementation of the information-reporting and exchange framework, developed by the OECD, on digital platforms. Some members of the House will be familiar with BEPS work that the OECD has done in the past—base erosion and profit shifting—acknowledging that with these digital service models, it’s possible to have tax residence in a way that’s advantageous to a company—a large company that’s able to structure its tax affairs in a way that benefits it sometimes is unfair to those who derive the services under that system that they’ve set up. Again—I mean, we know that the likes of McKinsey have estimated that tax evasion globally is worth trillions, and that tax evasion around the world undermines the integrity of the tax systems, undermines confidence in Governments in providing those services, those hospitals, those schools, those roads that we all need. It’s very important that tax systems around the world have integrity, and that information can be shared across a common framework. So I commend this part of the bill that we’ve got before us in adding in the ability to have those information-reporting and exchange frameworks and that New Zealand is a part of them.

Further reducing complexity of a tax system where appropriate—we’ve got a reform in this bill of the GST apportionment rules and that will make it less onerous and less complex for businesses to work out how GST apportionment rules apply. Again, that’s about improving fairness overall so that there isn’t an increased burden for our small businesses.

The bill reduces complexity also in that it’s modernising and enabling greater flexibility for tax treatment for cross-border workers—it’s quite a mouthful. But we’ve heard Ingrid Leary speak a little about that, and other members about the technical aspects of the bill and the debates that were had in select committee to make sure that those rules were fair and more modern. And, again, it is good that we’re updating our tax system—again, to reduce complexity, to make sure it’s fair and that people can comply with their obligations easily.

Further to removing distortions, in the bill we’ve got the proposal it contains to remove from fringe benefit tax from commuting via public transport for work purposes. I think this is a really great step forward. We don’t want distortions in our economy that encourage people to use cars where they don’t need to, where they, obviously, can be more harmful to the environment than public transport, where there becomes a competition for car parks and we end up building more car parks that are not necessarily the most attractive things in our urban centres unnecessarily. We just want to remove the distortions to make it equally advantageous for people to take public transport if that’s their choice and we want to make it easier also—and this is also in the bill—for people to make other environmentally friendly choices, like taking bikes or electric scooters or electric bikes to work if a business is wanting to support their employees in those modes of transport. So the fringe benefit tax changes there I commend to the House, as well as a removal of unwanted distortions in our tax system.

So if we go back and look from start to finish in this bill, we see that it does those things that a good tax bill should do. It confirms the rates and enables us to have a debate about what the rates should be in this Parliament to make sure that everyone’s paying their fair share of tax, that we’ve got the tax necessary to afford the hospitals, the schools, the roads we need, that our tax system has integrity, that we remove the distortions, that we set the incentives up right for a system that everyone can then know is fair. And it ensures, overall, that it’s brought up to date so that as business practice changes, as consumer preferences change, we’ve got a tax system that holds water, that is able to collect the tax that’s required for the projects that we have as a Government on behalf of the people of New Zealand, an up-to-date, modern tax system that serves all of our needs and, above all, is fair. Thank you, Madam Speaker. I commend the bill to the House.

It’s an absolute pleasure to rise on behalf of the National Party, as a member of Parliament for North Shore, on the Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Bill (No 2). Gee, wasn’t it interesting listening to the Minister of Revenue on some of the comments around how good this tax bill is? They were definitely through rose-tinted glasses, I think, in terms of the overall benefits of this bill, because what this bill doesn’t do is actually deal with the key issue that Kiwis across this country are facing. This bill shows exactly what is wrong with this Government. At a time when Kiwis across this country are suffering from the impacts of a cost of living crisis which is really hurting families and businesses, and the costs that are forcing those families to be making those impossible choices around what they can afford and what they can’t—mortgage payments vs food on the table—when the Government’s only priority should be to be putting money back into the back pockets of hard-working Kiwis, the Government, through this bill, has decided, “Well, what a great time it is to come up with a whole lot more new taxes.” Yeah, that’s their solution. The tax take is up $43 billion since Labour came into power, and that’s over $17,500 per New Zealand household—$17,500 per every single Kiwi household—since National were in power. Every dollar of that increase comes out of the back pockets of hard-working Kiwis—out of their pay packets, out of businesses.

And what is that money being spent on? Well, I’ll give you a bit of a taster, but Kiwis know: light rail, three waters, and high-priced consultants—just to name three. If I had an hour to do this call, which I’ll take the liberty but I don’t think I’ll get, I could go on for a long time on that, and I will continue back to the bill.

The reality is: this can’t continue, and I’m going to work my way through some of the key components and just have a little bit more of a dialogue, because I think it’s important for those at home watching, before they sit down to have dinner this evening, in terms of the implications of this bill. It includes no changes in regards to annual income tax rates, in regards to the impacts of high inflation. There is no inflation adjustment on the tax thresholds. That is, basically, meaning, as I’ve said, Kiwis at a total level are being taxed $43 billion more, and this is compounding as the inflation rate continues to increase.

We’ve also got within this bill the introduction around what is referred to as the “app tax”, and you hear comments from the other side in regards to reducing distortion and other factors. Well, that’s absolutely rubbish—absolutely rubbish. This bill absolutely establishes an app tax, and the changes in regards to the platform economy mean that for those people who have got an Airbnb—OK, these aren’t villains, these aren’t big bad businesses. Someone who does Airbnb and rents out the spare room a couple of times a year—you know, if they’re going away for the long weekend and they do the Airbnb, they rent it out. These people aren’t bad people, but this Government’s decided, “You know what, let’s get in there and let’s tax them.”, even though the income which they’re deriving from that is below the GST threshold, which is at 60 grand. Do you know what? The average Airbnb revenue across the country is in the region of just under $5,000 per annum—significant, you know, 10, 11, 12 multiplier on what the actual threshold is for GST, but this bill introduces that, and that means, as a result, it is going to place a higher burden of cost on hard-working Kiwis, mums and dads across the country, and that is not good.

I heard a speaker before quote “in the so-called real world”—did anyone else hear that? It was an interesting quote. The so-called real world—well, I can tell you what, the so-called real world, which is right outside those doors, are the ones that actually have to foot the bill for this Government’s unlimited appetite for taxing more off hard-working Kiwi families, and spending it like there is no tomorrow.

The other aspect in regards to comments that we heard is that everyone loves this bill, everyone thinks this bill is, you know, “bread and butter”, to use the quote which seems to be in vogue at the moment on the other side. Well, I’ll tell you what: the New Zealand Law Society described these changes as representing—and I quote—“significant deviation to the orthodox GST treatment of services supplied in New Zealand.” Right, let’s be clear: this is not something where everyone thinks, “Hooray! It’s about time that these changes have been implemented.” The New Zealand Law Society, amongst others across this country, thinks that a number of these changes in this bill are absolutely a significant deviation. They aren’t, sort of, soft words; they’re pretty hard-hitting and go to the heart of a Government that is just hungry to feed its addiction to spending through taxing Kiwis more.

The other aspect that we haven’t talked about, but no surprise for those sitting at home going, “Mmm, OK, what else does this bill do?”, because it’s a tax bill, right? It’s not the most exciting piece of legislation on the table, but it should be, because it has significant implications. But this bill also introduces significant information requirements on a number of businesses to have to provide more information around what they are doing through to the IRD. The IRD’s getting a little bit of a reputation for information gathering. They say they’re not using it to come up with any new crafty ideas for taxes. Well, I wasn’t born yesterday, right? I mean, of course they’re gathering this information to make recommendations around future tax policy; it’s just they haven’t quite told us yet what those new flashy-dashy ideas will be. But I can tell you right here, right now, that they will be having and will be coming out with a whole lot more ideas on new taxes, because that’s the only way that they’re going be able to afford this significant amount of spending.

💬 Shanan Halbert: You haven’t even costed up your plan, mate.

And I’m hearing the member from Northcote, and it’s always good to get a bit of commentary from the member of Northcote on this, but I’ll get back and we’ll keep going and welcome any more input as we go through.

So let’s talk about the fringe benefit tax (FBT) exemptions to allow people to use environmentally friendly modes of travel. We heard around the points before that this is, again, an element of distortion. The challenge is, and we heard this in the committee of the whole House stage, that these rules are not, as they stand, practical to implement. They’re not practical to implement, because there’s two scenarios which play through: one is in regards to, if I work for an organisation and I go and buy my bus ticket on the way to work and then I get my employer to refund that bus ticket, well, that’ll be subject to PAYE tax, right? Whereas if my organisation or business or company does a deal with Auckland Transport and provides me with a pass to go on the bus for free, and they do that deal directly with Auckland Transport in this example, then that will be exempt from FBT. So you’ve got two different scenarios playing through, and I appreciate we might be getting into the detail, but this piece of legislation has not dealt with the practical nature of the bill. The Minister said at the committee of the whole House stage that these rules do need to be practical. Well, that seems reasonable. The challenge is he just hasn’t followed through with making sure that that is the case.

So I’m really disappointed in this bill. Instead of a pragmatic policy like indexing taxation and making sure that that is dealt with, the Government is, basically, dead set on implementing this app tax. For families that are already being squeezed across the country, for businesses that are struggling to open up their doors, they get no hope from this Government, because it doesn’t seem to be that anything in this bill is going to hit the mark. Basically, National oppose this bill, and we’re going to keep fighting for Kiwis to get a fair go.

I’m surprised—but I shouldn’t be surprised—that a National Opposition who are so opposed to taxation generally, they clearly haven’t heard the quote by Oliver Wendell Holmes Jnr that “taxes are the price we pay for civilisation”, and so addicted are they to the cheap, easy shots of Opposition, that they’re prepared to ignore the fundamentals of good policy. How can we have a tax system that doesn’t tax people equally, consistently, fairly, and transparently?

The National Party are very happy for Uber to have a tax advantage over the taxis it’s competing against. They’re happy for digital platforms like Airbnb to have a tax advantage over hotels and motels. Well, how can that be right? How can that be fair? Why should it matter how you are selling your services, how you’re connecting with your customers—why should that be the basis of a tax advantage? But that’s what the National Opposition are arguing for, and it’s a very sad commentary that the state of the Opposition is such that they’re willing to get up in the House and try to defend the indefensible. Apparently, for them, the level playing field doesn’t matter anymore.

The intent of this very good omnibus tax bill is to level the playing field, to treat everyone equally, regardless of the technology or the platform they use to conduct their business. It does two main things in this respect. It puts in place an information-reporting and exchange framework, based on the very good work done by the OECD in this area, designed to make the digital economy visible to tax authorities. And secondly, of course, what it does is it collects GST from people doing their business through digital platforms.

Why is that important? Of course, because, as other speakers have said—and David Clark most recently—fairness and consistency are critical to the legitimacy that any tax system relies on to be effective. But there’s another important reason for doing this, and that is that, in recent years, nation States around the world have found their tax base so badly undermined by both transnational capital and the global digital economy, their tax base has been gutted in many cases, and this is not a fantasy, it’s not scaremongering. If anybody needs evidence, they only need to look as far as what the likes of Google and Facebook have done to the New Zealand media market. They have gutted it and put the existence and the future viability of our news media in New Zealand in peril because they have sucked hundreds of millions of dollars a year in advertising revenue out of the New Zealand market. It’s not the same thing as digital platforms like Uber, like Airbnb, but it is an example of how radically and quickly the digital economy can transform the operations of our tax system and of our economy. That alone should be enough to convince the other side of the House that it is important, as a matter of principle, to bring the digital economy fairly and squarely into the formal economy and into our tax system.

I want to say a couple of things about two of my other favourite parts of this bill. One of them is the provisions in the bill which exempt climate-friendly transport from the provisions and the workings of the fringe benefit tax. The fringe benefit tax exemption is already enshrined in legislation—it provides an exemption for parking that is provided for employees at work. That makes no sense in the context of one of the most important changes we have to drive in our economy, and that is that we have to decarbonise the transport system. So while the tax system is providing a subsidy for people who drive to work, we are undermining everything else that we’re trying to do to decarbonise the light vehicle fleet, to encourage mode shift in the transport system so that there’s more walking, cycling, more micro-mobility in our cities, more use of investment in public transport, including rapid transit in our major centres. We’re shooting ourselves in the foot if we continue to subsidise the private motor car in that regard.

I want to acknowledge the advocacy over many years on this issue by Julie Anne Genter, my former colleague as Associate Minister of Transport. She’s been on about this for a very long time, and Labour was very happy in the committee stages to bring a Supplementary Order Paper that extended the fringe benefit tax exemption beyond just public transport and the operations of the Total Mobility service—for people with disability access—to a range of other forms of mobility including bicycles; e-bikes, of course; scooters; e-scooters; and micro-mobility sharing services that, in a short period of time, have become a staple for urban commuters in many New Zealand cities. So what this will do is it will act as an incentive, it will nudge the behaviour change that we need by workers and their employers to use climate-friendly travel to get to and from work. It’s good, from my point of view, to see Labour and the Greens working very nicely together on promoting the agenda of climate-friendly transport.

Finally, just let me say, very quickly, that I think that the extension of the exemption in perpetuity for build-to-rent is another highlight of this bill for me. We need more tenure-secure, high-quality rental housing in this country. The build-to-rent sector has enormous promise, as many other speakers have said, and what this bill does, by extending the same exemption from the interest limitation rules that applies to new builds in order to stimulate housing supply to give that in perpetuity to the build-to-rent sector is a fantastic move. I commend this bill to the House.