Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Bill

I present a legislative statement on the Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Bill.

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

I move, That the Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Bill be now read a second time.

The purpose of this bill is to set the annual rates for income tax for the 2023-24 tax year. The bill also makes proposals to improve the current settings for a broad based - low rate framework. Public consultation is an important part of the tax development process and it is also equally important to the parliamentary process.

As reported back from the Finance and Expenditure Committee, the bill contains a range of adjustments as a result of public feedback. These adjustments have strengthened the bill, and I wish to acknowledge the members of the Finance and Expenditure Committee across the House for their input into this bill.

I would like to briefly touch on the more significant changes that have been made to the bill since its introduction. The centrepiece of the bill is a measure aimed at reducing the benefit to multinational corporations of profit shifting. Under the existing setting, some countries have attempted to attract economic activity by offering multinationals low effective income tax rates. This is particularly problematic when the income is from cross-border capital investment or the use of intellectual property. It has helped contribute to base erosion and profit shifting, where a multinational can achieve low or even no taxation by shifting their profits to low-tax jurisdictions.

To tackle profit shifting, the OECD has led the development of a global minimum tax, the GloBE rules, which ensures that large multinationals at least pay 15 percent tax on their mobile income where it is earned. Adoption of the GloBE rules by a critical mass of countries will help reduce the profit-shifting pressures on countries like New Zealand with higher corporate tax rates without preventing the use of tax incentives to attract real investment. Now that it is clear that a critical mass of countries will be adopting these GloBE tax rules, we are proposing in this bill to enact dates for its imposition by the New Zealand Government. On 1 January 2025, the income inclusion rule and under-taxed profits rule will be enacted, and on 1 January 2026, the domestic income inclusion rule will be enacted.

The GloBE rules are extremely complex. Rather than enacting them directly into our legislation, we are proposing law that will make sure that these rules are modelled through and developed in effect with the OECD countries along with New Zealand. This is the best approach to ensure that our rules are internationally consistent while keeping the Government’s implementation and administration costs low. Crucially, future Governments remain free to disapply any future updates to the OCED’s commentary or guidance on the GloBE rules which affect their application, so there’s no loss of sovereignty involved.

Another significant measure in the bill is the trustee tax rate proposal. Following consultation and public submissions, we have made a number of adjustments to this proposal. While most trusts will be unaffected by the proposals in the bill, there did remain a risk of over-taxation of trusts with lower-rate beneficiaries and settlors. That is a crucial point because over-taxation can’t be determined by looking at the income earned by the trust, but only by reference to the income of settlors and the beneficiaries in the trust.

Inland Revenue estimates that there are at least 400,000 trusts. In 2022, approximately 76,000 trusts paid taxes at the trustee tax rate. To help mitigate the risk of over-taxation, we are proposing a $10,000 trustee income de minimis. This will mean that a further 27,000 trusts will not be affected by the 39c tax rate. Based on this, only 12 percent of all trusts would be affected by the 39c tax rate. This reduces the risk of over-taxation while also addressing the vast majority of the under-taxation of trustee income. Trusts in estates with up to $10,000 in trustee income in an income year would continue to be subject to the 33 percent tax rate. Trusts with over $10,000 in trustee income in an income year would be subject to the 39c tax rate on all income. At the committee’s recommendation, disabled beneficiary trusts would be taxed at 33 percent instead of a 39 percent personal tax rate.

We are also simplifying and expanding the proposals relating to estates. An estate would continue to be taxed at 33c in the dollar for the year of death, plus a further three years. We’re also making sure that energy consumer trusts and legacy superannuation funds are excluded from the 39c tax rate.

The committee also made a number of recommendations to improve the fairness, certainty, and consistency of tax treatment. For instance, to improve the current proposal on the tax treatment of backdated lump-sum payments from ACC and Ministry of Social Development, the committee recommended including backdated lump-sum payments for attendant care, and related to the Cyclone Gabrielle in North Island flooding event relief measures, the committee made a number of recommendations, including adding the August 2022 Nelson flood buy-out to the list of events covered, by turning off the brightline and other timing tests.

The committee was also concerned at the potential for overreach in the proposed charities and the deregistration tax integrity measures. They therefore recommended providing relief when assets are transferred to other New Zealand tax resident exempt entities and deferring the application date. Along with these, there are a number of other smaller policy matters which have been suggested by policy officials in response to issues brought to them by third parties. This is good news. It shows that the Inland Revenue is working in collaboration with the private sector and with the wider Public Service in order to improve efficiency. An example is the new proposal relating to the Ministry of Disabled People.

District health boards and the Ministry of Health had historically made direct funding for disability support payments to their clients. The Income Tax Act provides an income tax exemption for these payments. However, due to an oversight, the exemption was not correctly updated to reflect the fact that the newly established ministry was now responsible for administering some of the direct funding disability support payments. This means that those support payments won’t technically meet the requirement for the exemption. The remedial amendment makes these payments exempt and has retrospective application to July 2022, as these payments were always intended to be exempt.

Similarly, Health New Zealand has taken over contact tracing from the Ministry of Health. Inland Revenue shares information with the Ministry of Health to help make more efficient processes and procedures; however, that arrangement cannot continue for the purpose of the legislation enabling such sharing of information for Health New Zealand as it was not referred to as a Government agency. For the purposes of information sharing, the bill therefore proposes adding Health New Zealand to the definition of a Government agency.

Another adjustment to the bill is a proposal to provide more certainty to the early payment discount offered by the IRD. This intends to encourage businesses to pay their taxes in the first year. Inland Revenue applies interest to unpaid tax bills, which is known as the use of money interest. That interest charged depends on the economic conditions of the entity. The application rate for this discount has moved more often than was envisaged in recent times, and due to economic conditions, this has created uncertainty for taxpayers and has undermined the ability of an early payment discount to incentivise voluntary tax payment by businesses in their first year. To maintain this incentive, the bill proposes tidying up and ensuring the early payment discount rate for the use of money interest at 31 March of the preceding income year. This would be applied to the 2024-25 and later income years.

As you can see, this is a comprehensive, complex, and detailed tax bill. There have been significant changes and modifications as a result of the Finance and Expenditure Committee working across party lines in order to listen to feedback from a large number of people making consultation and inputs into this bill. It is important to note that many of these changes that were made by submitters to the select committee have been very carefully and diligently considered by the select committee and, as a result, have been reflected in the bill which we are tabling in this House today. That is an appropriate use of parliamentary time. That is an appropriate mechanism, and it is a good example of how legislation can and should be improved by a select committee process, and, again, I acknowledge those members of that committee for their contribution. I commend this bill to the House.

The question is that the motion be agreed to.

Thank you, Mr Speaker. The first part of what I would like to say today is that I would like to draw the House’s attention to page 14 of the report back from the Finance and Expenditure Committee and a particular paragraph in there, in which the committee says—and I want to read this into the record—“We wish to register our sincere thanks to Therese Turner for her work as the independent specialist adviser on tax bills over the last 25 years. Her advice has been invaluable to members of the Finance and Expenditure Committee and undoubtedly improved parliamentary scrutiny of tax legislation. We wish her all the best.”

Therese Turner was the independent adviser to the committee for a long, long time. In fact, when I started work at Inland Revenue back in 2004, in the policy advice division then, Therese Turner was then the specialist adviser whom we consulted as tax officials, whom the select committee worked with, and who has provided extraordinary advice to the committee over a very, very long time. Tax can be complicated. Therese Turner looked at it, reviewed it, explained it to committee members, and gave us that independent advice—independent from officials, independent from Treasury, independent from political processes—as to whether or not the tax legislation in front of us was workable. The Finance and Expenditure Committee, over 25 years, owes a great deal to Therese Turner, as does this House, and so I’m very glad to have that recorded in the select committee report.

Mr Speaker, and other members of the House, you will notice as you read this report—as I’m sure you all do—that it was unanimously agreed to by the Finance and Expenditure Committee. That is unsurprising. This bill started in the previous Parliament, under the previous Ministers of Revenue, and then continued in the current Parliament, so these are tax measures that were introduced during the last Parliament. It is unsurprising that members on this side of the House agree to these tax measures. There has, however, since then been an Amendment Paper introduced, which will be introduced at the committee of the whole House stage. Obviously, we will want to debate that Amendment Paper, but the bill as it stands at the moment is one which all members in this House agree to.

However, there are some matters that I would like to address a little. I first want to point out that it is the annual rates bill. As a constitutional requirement, the Government is required to ensure that the tax rates are set by legislation every year, by 31 March of the year for which the tax rates apply. This bill does that job, and it is the Government’s responsibility to ensure that it is passed through all its stages by 31 March, and so members will find that the tax rates are set in, I think, clause 3 of this bill.

But I do want to take issue with something that the Minister of Revenue has said in his speech. He said that setting the tax rates confirmed—I think he said that it confirmed it was part of the commitment we have to a broad based - low rate tax system. As I’ve said many times before, we do not have a broad based - low rate tax system. There is a significant gap in our tax system where capital income is not treated as income for income tax purposes. Now, to a large extent the brightline test addresses that. However, coming up in the amendment bill, the Government is proposing to remove the brightline test, or to reduce it down to two years. It is moving further away from a broad based - low rate system, and we need to remember that we might have a low-rate system, but we do not have a broad-based tax system.

However, aside from that, there is a great deal in this bill which we do agree with, and which I think it is important for people to understand. There are a couple of matters I would like to talk through and, if I have time, a third. But I’m sorry, Mr Speaker, when I start talking about tax, I sometimes get a little carried away and concentrate a little too much.

ASSISTANT SPEAKER (Greg O’Connor): Yeah, well, five minutes in to get to the bill wasn’t bad, actually, Ms Russell.

I’ve been speaking to the bill all along, Mr Speaker. I want to talk about the changes to the trustee tax rates. Now, the bill as introduced proposed increasing the trustee tax rate to 39 percent to align it with the top personal tax rate. However, we received a number of submissions—quite a significant number of submissions—from accounting firms, from lawyers, from practitioners, and from people affected by this, saying that that might be inappropriate for a large number of trusts in this country. It might be appropriate to have trusts which earn a large amount of income to have that 39 percent tax rate aligned with the top income tax rate, but a great many trusts in this country do not earn a lot of income, and that might have been overreach, going for the 39 percent rate.

So the committee and officials and submitters all worked together to work out what would be an appropriate threshold if we had two trust tax rates—one for tax below a certain threshold; one tax rate for trusts above that threshold—and it turns out that there’s an appropriate flex point. It’s at about $10,000 or so. Now, $10,000 is a nice, round figure, so we’ve worked with that. What it means is that in the bill, as it has come back from the committee, if a trust earns over $10,000 in trustee income, then that income will be taxed at 39 percent—all of it, from the first dollar right up through. If a trust earns below $10,000, then the trustee income will be taxed at 33 percent, and that provides small trusts with a bit of relief from that top tax rate.

However, that figure was chosen quite carefully, because at that $10,000 point, the advantage of having a 33 percent tax rate over a 39 percent tax rate is just $600, right? So a person could be better off by $600 if they kept the income below $10,000, or if you set up a number of trusts, you could maybe spread all the income across a number of trusts to try to get around that top tax rate. So, instead of having one trust with $100,000 of income taxed at 39 percent, you could maybe have 10 trusts with $10,000 of income each, taxed at 33 percent. But the compliance costs of running a trust, of getting it set up, and of doing all the processing for it is probably more than the $600 is worth. It’s a good flex point to choose, both in terms of the number of trusts which actually fall below that threshold but also in terms of working out where the point is where compliance costs outweigh the benefit of a particular tax gain, so we all supported that threshold.

I think the committee showed really good sense too with the changes it made with respect to deceased estates, where, again, taxing them all at 39 percent was inappropriate. Most deceased estates don’t have that kind of income sitting in them, but, more to the point, it can take a bit of time to wind up a deceased estate. When we talked to practitioners, we found that they were telling us that, actually, most deceased estates can get wound up within 18 months to two years, and some may take a little bit longer, so what we have put in place is three years. There’s a three-year grace period to get those deceased estates wound up; so that’s three years past the income year in which the trust begins. So that’s quite a considerable period of flexibility, and it’s a very sensible change.

I just wanted to speak very briefly to the taxation of backdated lump-sum payments. This is where ACC lump-sum payments are backdated. If a person gets a lump-sum piece of income in one year by chance—so, for example, if they got, say, $200,000 of backdated income—then some of that would be taxed at the top tax rate of 39 percent because it was all received in a lump. So what we’ve said is that in actual fact, what should happen is that for that sum of money, the appropriate tax rate should be determined by looking at the average tax rate over the previous four years and applying that rate. So that seems to be a fair thing to do, and I think having that spread over four years is quite reasonable.

I suppose we could try to go back many years to when the injury was first incurred for ACC purposes, but, in actual fact, in some cases, there might have been higher tax rates in force at the time. I think that spreading it back over the four previous years strikes a reasonable balance between getting it right for the individual taxpayer and making it comparatively easy to calculate, and I think that, in the large majority of cases, it means that the actual amount that is taxed is about right. It won’t be perfect, but it will be pretty good, and so, for that reason, we support that change.

So there’s a lot to talk about in this bill. I could take another call, perhaps, or maybe not. There is plenty for people to talk about and it is a good bill, and, at this second reading, I commend it to the House.

E te Māngai, tēnā koe. Tēnā koutou e te Whare. I hope I’m not betraying the confidence of my mates across these seats, but Rawiri Waititi, the co-leader of Te Pāti Māori, just dared me to make this exciting—so, Mr Speaker, if you will indulge me. Unfortunately for Mr Waititi, the fact of the matter is that the Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Bill as recommended back from the Finance and Expenditure Committee, as the Hon Dr Deborah Russell just outlined very articulately and very clearly, was unanimously supported. I think the fireworks are probably going to fly at the committee of the whole House stage.

So let me just unpack some of that kind of technical basis that I’m talking about here, for those who are following along at home. What the bill does, the Minister of Revenue just outlined pretty clearly, and it was, with that unanimous support, to raise the trustee tax rate to 39 percent to align with the top income tax rate. That, of course, is to stop people from moving their money around in such a way that they avoid paying that top tax rate of 39 percent, some evidence of which we saw borne out in some of the reporting from IRD to the Finance and Expenditure Committee. There also is the establishment in law requiring multinationals headquartered in Aotearoa to pay a top-up tax to the IRD if their effective tax rate is lower than 15 percent. And this is, of course, part of an international coordinated push by the OECD to implement a set of rules to stop a race to the bottom when it comes to corporate taxation. Also, those changes with regard to ACC and Ministry of Social Development payments and lump sums, requiring the Government to match the 3 percent contributions to KiwiSaver made by those on paid parental leave, and relief from recognising insurance income for businesses impacted by flooding and cyclones recently—those are the relatively uncontroversial pieces of this legislation.

However, for those following along at home, they may have seen that this Government has recently stated that they will be putting forward a number of new policies, as tabled by the Minister and foreshadowed by the Hon Dr Deborah Russell, which we will be debating at the committee of the whole House stage. So I just want to make it really clear to those who are following along at home that the Green Party of Aotearoa New Zealand currently supports the bill at the second reading because it is the version of the bill that does those things which I have just outlined. It is not the version of the bill which will come into effect after the Government uses its three-headed taniwha majority to push through the changes for repealing back to the two-year brightline test and those interest deductibility changes, as well as removing depreciation deductions. So, relatively uncontroversially, again, the Greens support this.

So if I can just offer some broader reflections, particularly on that select committee process. I also wanted to join with the Hon Dr Deborah Russell in offering our appreciation to Therese Turner, who, as the Hon Dr Deborah Russell outlined, offered many, many years of service, expertise, and independent advice to subsequent Finance and Expenditure Committees in this Parliament and those beforehand.

💬 Ryan Hamilton: When’s the exiting part?

CHLÖE SWARBRICK: So to the exciting parts, as the members of the Government are asking me for. Well, the exciting part is—or, rather, the rather depressing part is—that we know, based on IRD’s other reporting from, for example, last year, with subsidiary papers from Treasury, that we have a tax system in this country that sees the top 311 families pay an effective tax rate less than half of that of the average New Zealander. And, unfortunately, this bill does nothing to fix that unfairness—that fundamental unfairness—in the way that our tax system operates. And, in fact, even worse than that, prior to Christmas, under urgency, this Government introduced legislation which repealed requirements for the IRD to report against a set of tax principles, basically to showcase to New Zealanders whether the tax system is working efficiently and fairly in such a way that all of us could expect—i.e., to inform the public debate on tax with evidence. Spooky stuff—spooky stuff—as far as the tax debate here in Aotearoa New Zealand is concerned!

If I can allude to other hearings that we’ve had at the Finance and Expenditure Committee, particularly related to the subject of tax, we recently had Treasury officials in, who I questioned about the productivity implications of our tax system, and they made it abundantly clear that were we to introduce the capital gains tax, we would not only generate the revenue necessary to invest in the infrastructure that all New Zealanders deserve but also that we would have a fundamentally more productive economy.

So, finishing on that point, the Green Party supports the bill in its current version, but the far more deeply unequal and, dare we say, rather undemocratic process to introduce substantive and material changes at the committee of the whole House stage, whereby we are not going to be able to have that select committee process, such as the Government intends to do by virtue of what they themselves have tabled in the House today, is something that we will be opposing further down the track. So just to make that abundantly clear to all who may be following along at home—I apologise for not being able to make all this too exciting, but I guarantee you the fireworks will be coming, because we will not be letting this Government get away with increasing inequality, which, they know full well and their advice bears out, will occur as a result of them progressing this policy agenda.

Thank you. I rise to speak in support of the Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Bill, which is—yes, it’s not very exciting, but I did think that the Hon Dr Deborah Russell did do a good job of trying to make it exciting. I just want to join with her and Chlöe Swarbrick in just acknowledging Therese Turner. Obviously, I’m a first-term member of both this House and of the Finance and Expenditure Committee—

Chlöe Swarbrick: Great committee!

Thank you, it is a great committee—and I do want to thank Ms Turner for her contribution. Obviously, 25 years of providing advice to the select committee is quite an achievement, and she again delivered when giving advice to the select committee on this bill.

This was, I think, a process where we actually did improve the bill at the select committee. A lot of that has been touched on, but I just do want to mention that we actually did listen to submitters and some of the, you know—

Chlöe Swarbrick: De minimis.

Yeah—the problems that were raised and the issues they saw as problematic, and we actually did address them. And, yes, the de minimis tax threshold for trustees rates is one such issue, where we ensured that some common sense was applied so that people wouldn’t actually be making decisions regarding their trusts which could be detrimental but also ensuring that they were being taxed at the correct rate.

Another one was the deceased estates. Again, we had a lot of submissions talking about how one year would be too short a period to make sure that deceased estates could actually be wound up. Again, we reflected on that, we took advice, and we arrived at the three-year position—which, again, I think is a really sensible one to make sure that in this important area the affairs of a deceased estate can be properly wound up, but done so in a timely manner but one which also doesn’t disadvantage those taxpayers.

I think—again, it’s already been touched on—the lump-sum payments and ACC and making sure, again, we delivered some fairness to taxpayers when they receive a lump-sum payment. Again, this can often be where it takes a number of years for a complex ACC case to be worked out and actually for someone to receive their lump-sum payment and, again, making sure that they weren’t disadvantaged by the time taken. I think, again, we arrived at a really pragmatic and sensible solution to that issue.

For me, it was obviously interesting watching all parties represented on the select committee actually working together—and, again, there were some very experienced members on the select committee, and I think it was really useful to have their insights and knowledge as we worked through the issues and tried to find pragmatic solutions. So I really want to say thanks to my fellow select committee members. I think there will be a lot more discussion and, obviously, further readings on this bill, but I want to commend this bill to the House. Thank you.

Thank you. I rise on behalf of New Zealand First and the challenge to make this exciting. I will do my best. As they say, to become good at speaking in the House, one needs to keep speaking in the House, so I will do that. I apologise if there is repetition, and I will completely understand if there are more cellphones being lifted up, but it is a very good bill to speak on.

Now, it’s called the Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Bill. That was a bit of a mouthful. Now, this omnibus bill introduces amendments to a number of Acts, with the addition of proposing amendments to the Income Tax Act 2004. One of the purposes of this bill is to set the annual rates of income tax for this 2023-24 financial tax year. Another purpose of this bill is to improve the current settings within a broad based - low rate framework for income tax. Also, this bill aims at improving settings for tax administration, KiwiSaver, and child support rules administered by the Inland Revenue Department.

Now, to speak on some of the items of the bill which I know have been spoken on, but I will once again speak about the increase of the tax rate from 33 percent to 39 percent: when originally drafted, this bill would have required many lower-income trusts to pay this top rate of 39 percent, or 39c in the dollar, but, thankfully, the Finance and Expenditure Committee has accepted the Government’s advice that a $10,000 trustee income de—my Latin’s not that good—minimis be introduced. So that has been done, and this is excellent as it will stop people trying to set up multiple trusts and avoid taxation.

The other part that I will speak about is the disabled beneficiary trust. To mitigate over-taxation, this bill proposes—maybe I’m not going to repeat myself too much there, because otherwise I will see a few more cellphones coming up, but, in short, it is recommended that a 33 percent flat tax rate is applied to beneficiary trusts as well. Also, deceased estates—trustee income of estates would continue to be taxed at 33 percent.

There are many other areas that I could speak on. I will touch on the energy consumer trusts. Submissions were received that trusts with beneficiaries representing a wide range of the public, such as trusts that own electricity distribution companies, should be excluded from the 39 percent trustee tax rate due to the risk of over-taxation. So, again, it is agreed that a 33 percent rate should remain.

Also, legacy superannuation funds—they will be excluded from the 39 percent trustee tax rate. They will be subject to the same tax treatment as widely held superannuation funds, currently at 28 percent. Now, I won’t touch on a couple of items that I feel might change the mood of the House. Just, in short, New Zealand First will happily recommend this bill to the House. Thank you.

Kia ora, Mr Speaker, otirā, tēnā tātou. Tēnā tātou i tēnei rā i runga i te āhuatanga o tēnei pire—

[Kia ora, Mr Speaker, and everyone else present here today. Greetings to us on this day, and in regards to this bill—]

I’m not going to speak too long on this particular bill, but I do find it exciting to listen to everybody’s kōrero. I think the most exciting part is to acknowledge Therese Turner for the mahi that she’s done over the few years—25 years, in actual fact—advising this particular Finance and Expenditure Committee. You know, it’s people like that that make this—it must’ve been an exciting job for her to be here 25 years and to advise this particular committee. I’m new to the committee, so I was new to the people and the people who are part of the committee, but I just want to support all the kōrero and acknowledge her mahi at this particular time.

In particular, increasing the trustee tax rate from 33 to 39 percent for trustee income over $10,000 is a small part of actually what Te Pāti Māori’s tax policy was to address in terms of the injustices within our tax system. The tax system has only been there to service the wealthy and actually put a pinch on the working class and the poorer whānau. What this tax bill actually does—its current form we support, and so we supported it to the second reading, we supported it to select committee, and I think that was unanimous across the House. We are going to support this to there, but the amendments on the other hand we take issue with. While the average person in Aotearoa is paying 20.2 percent in tax, the wealthy are only paying 9.4 percent, and they are the ones that usually benefit from these trusts. Our tax system allows the wealthy to illegally avoid tax through housing, investment funds, property, and through trusts, hence why we are supportive of this particular bill in its current form, introduced originally by the last Government—so we probably would’ve supported it if it was still a Labour Government.

We’re supporting this bill in this current form, because it’s still in the form that they presented, but the amendments that actually give tax breaks to the more wealthy, I think, coming into the committee, that’s where we’re going to get some—like Chlöe said, it’s going to get exciting. It’s going to get exciting, because what it does is—in actual fact, it does not benefit the 98 percent of the people who pay more tax in this country. Again, what it does is it gives support to the 2 percent who control 50 percent of this country’s wealth and continue to get the tax breaks that this Government is so openly supportive of—and you can see it across a whole lot of other legislation. You know, it is unacceptable that over 2 million people in Aotearoa earn less than $30,000 per year while the rich use trusts to illegally avoid paying taxes. Now, if the current form of this particular bill holds on to that, we would support it all the way through to third reading, but it will not—it will not—and we will head into the committee having to challenge and continue to challenge this Government’s agenda for tax breaks for the rich and for the wealthy.

I told you I was going to take a short call on this, Mr Speaker, and so I thank you for that particular opportunity. We will be supporting this particular bill at second reading but we look forward to the robust discussions within the committee process. Therefore, we commend this bill, in the second reading, to the House. Kia ora tātou.

Steve Abel—and I should’ve announced that this is a five-minute call.

Kia ora. I appreciate that, Mr Speaker. I’d be very willing to take a shorter call if it was permitted. I mean, we all love taxation, but taxation does have a real effect on people’s lives; it does very much determine the fairness of our society. What this current version of the bill before us does is it makes a fairer taxation system, therefore we will be supporting it at this reading. But, as has been articulated by other members from this side of the House, the proposed changes in the lodged Amendment Paper—which we’re not discussing right now—will reinstate interest deductibility, reduce the brightline test from 10 years to two years, and remove depreciation deductions for commercial and industrial buildings.

Now, I want to speak to why a brightline test at 10 years is such an important thing and why it shouldn’t be moved to two years; that would be a terrible amendment. What we currently have with a brightline test at 10 years—in the current proposal, it means that sellers, if they had a shorter time frame, which they used to, would be required to pay income tax on profits from the sale of residential properties when they are sold within two years of purchase and don’t qualify as the main home. That is why it was moved to 10 years. The objective in doing that was to incentivise development and put downward pressure on rents.

Now, this change is, essentially, retrospective, as investors who may have previously been willing to wait five years or 10 years to sell their property will now be able to sell much sooner and pay no additional tax—that is, if it is to be amended and changed. A fair taxing tax system is—

ASSISTANT SPEAKER (Greg O’Connor): Mr Abel, the rules of the second reading are: you can refer to possible amendments at the committee but not discuss them in detail—just for your information.

OK. Thank you, Mr Speaker. So we do not want legislation in our tax system that constitutes a significant tax break for property investors. That is why the current formulation of this legislation does make a fairer tax system. That is what we should be endeavouring to do, because fairness is a core principle of our society; that is agreed to by members of the public. We want a fairer system, and that is why we commend this current version of the bill to the House, and we will be debating at further readings the harms done to this bill by the proposed amendment. Thank you, Mr Speaker.

Thank you, Mr Speaker. It gives me great pleasure to rise in support of the Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Bill. Again, I commend all the work and observations that have been made to get us to this point on this omnibus bill. I was hoping to talk more to the Government’s Amendment Paper, but I respect the process in the Chamber and that that will come at the next stage.

Although referring to it—as you’ve said, we’re allowed to in passing—this omnibus bill with the Government amendments will certainly restore a lot of fairness to those mum and dad landlords that dominate our landscape. In fact, about 80 percent of landlords in New Zealand own one property—they are mum and dad landlords. So restoring interest deductibility for them and returning the brightline test to two years is going to make a real difference. And as this bill will cover off, a lot of us heard on the doorstep just how much people, mum and dad landlords, were looking forward to the Government looking at that restoration of interest deductibility. Again, that is a legitimate cost, a tax expense that should be claimed as an expense, and that is something—

ASSISTANT SPEAKER (Greg O’Connor): Having pointed out you understood the ruling, you’re probably putting it a little bit far there, Mr Brewer.

Oh, it’s the much more exciting part of the legislation. Like member Swarbrick said, it’s difficult to make it exciting—

ASSISTANT SPEAKER (Greg O’Connor): Well, another good rule of the House is don’t get ahead of yourself.

Thank you. The main provisions—if we go back to the purpose of the bill—are about redefining New Zealand’s tax framework towards a broad based - low rate model, and improving the administration of taxes, KiwiSaver, and child support by the Inland Revenue Department. Just to recap for those viewers as to what this omnibus bill actually looks at and addresses, it is setting annual tax rates; global anti-base erosion measures; the trustee tax rate, which has been well-exercised, to align with the top personal tax rate; the taxation of backdated lump-sum payments; taxation rollover relief; the Nelson floods and the brightline test there; and the overseas donee status; and correcting extra pay inaccuracy on termination.

So, as our Minister of Revenue, Simon Watts, introduced this stage with, this is something that’s been a huge effort and that pulls a lot of strings together. And as I alluded to and I will allude to one more time, with the amendment bill that’s coming to this taxation bill, it will focus on the Government’s determination to reform our tax policies and address tax anomalies. The residential property investment support—again, measures restoring interest deductibility and reducing that brightline test, which is key.

Regarding the select committee report that others have referred to, the Finance and Expenditure Committee examined this and unanimously recommended its passage, along with unanimous amendments and further recommendations for streamlining the legislative process for tax purposes and emergency responses.

So I finish as I began: I am looking forward to talking about the Government’s Amendment Paper, where we’re looking at, and the Minister’s proposing, the restoration of interest deductibility on rental properties and reducing that brightline test from 10 years to two. I commend this bill.

Thank you, Mr Speaker. It’s a pleasure to be able to rise for the second reading of the Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Bill.

This particular bill has had two fathers and one mother. The two fathers: it first started in the office of the Hon David Parker. I then became its mother and took over the bill as it was progressing through the last stages of the previous Government. Then the final father, who will be shepherding this bill through the rest of the stages, is the Hon Simon Watts. So I just want to make it really clear that there will be parts of this bill that this side of the House will absolutely agree with and we will provide our support for this second reading; however, the last bit that is on the Table, by the new Minister of Revenue, the new father, we will have a lot to say on during the committee of the whole House stage, so I hope the other side of the House is ready for some good debate.

I do want to take this opportunity to thank the Inland Revenue officials who have worked on this bill, and the drafters that sit within the Inland Revenue Department. A lot of them are actually colleagues that I have worked with in my previous career. They are good folk and they have been able to do their best with this bill and the changes that the Finance and Expenditure Committee (FEC) wanted.

I also want to take the opportunity, which is covered briefly in our report, to thank the independent specialist adviser Therese Turner. Now, for any members who have been in this House for a longer time, basically, for any tax bill that has come through this House in the last 15 years, I would say, Therese Turner has been the independent adviser for the select committee and has provided some of the best advice that I’ve seen. I have a little bit of bias because I went to tax camp with Therese Turner in my first—yep, tax camp; that one time at tax camp! I went to tax camp with Therese Turner—

💬 Rawiri Waititi: Were there flutes?

Well, you know! So I went to tax camp with Therese Turner. She, basically, managed to distil what I had learnt in taxation law in university over 12 weeks into five days. It was intense, and it was definitely a really good reminder of the reason why I chose to become a tax lawyer. So I want to mihi to Therese Turner, thank her, and thank her husband, Ian, for supporting Therese to be able to do a stellar job for New Zealand and for our Parliament.

So, going back to the bill, I’d like to acknowledge, actually, the Government members of the Finance and Expenditure Committee. They’ve come on to the bill at quite a sort of a difficult stage, but the work that we did within the select committee, particularly on the revision-tracked version of the bill, was very cordial. So I want to acknowledge those members, because it’s not easy just picking up a tax bill sort of part-way through the process and then, basically, listening to a lot of long hours of submissions and being able to work cordially with the other side. So I just want to mihi to them as well.

One of the elements of this particular tax bill is the Global Anti-Base Erosion (GLoBE) model rules. For a long time, there’s been what’s called the base erosion and profit shifting policy work that’s been happening in the OECD in Paris. Inland Revenue has been sending people to be part of the working group to, basically, remove the ability to arbitrage between different jurisdictions for tax purposes. So the GLoBE rules that this particular bill brings in remove another element of that arbitrage.

We had a number of submitters come to the committee, because what this particular bill says is that we will enforce these new particular rules but with reference to the OECD guidelines. So that’s, basically, what this bill does. We had a number of submitters come to FEC saying that, well, actually it shouldn’t be in reference to the OECD rules, because if the OECD changes the rules and then here in New Zealand we don’t agree with them, we don’t really have an ability to be able to change that quickly. However, some of these submitters said that, actually, we should just have those particular rules in this primary legislation.

However, the advice from officials and, actually, through a number of submitters—because the FEC worked really cordially together and we tested the other submitters as they came through—was that because the way that arbitrage is happening across different tax jurisdictions can happen quickly, the OECD, who, basically, have a full unit that works with the different countries, can make those changes and New Zealand can input into that process through the working group. So the committee agreed with officials, which is why it’s still by reference in this particular revision-tracked version.

However, the FEC did say to officials that we want to ensure that people have certainty of those rules, and we asked them where they will publish them. They advised that it would be in a web page, the tax information bulletin, but, basically, we were comforted by the fact that, actually, Inland Revenue would do their job to make sure that taxpayers here—because it’s only if you earn a significant revenue that you would come within these new GLoBE rules. The Inland Revenue, basically, said, “Well, actually, we have case managers for a number of those significant enterprises, and we will make sure that they can comply with these rules even if the OECD in France changes it.”

One of the things that we did look at was around the application date of those GLoBE rules, and the select committee—the bill when it was introduced, it was through Order in Council. However, through our deliberation as a select committee, we decided, actually, we believe that we should have an application date within the bill. So that is a change from the bill that was introduced to this revision-tracked version. So the FEC has recommended amending the bill so that the income inclusion rules, part of the GLoBE rules, under tax profits rules apply from 1 January 2025, and the domestic income inclusion rule applies from 1 January 2026. So that’s a small change, which, even though it looks small on paper and in our report back, is actually a bigger change, because previously it was through regulation.

The trustee tax rate: this side of the House believed, when we introduced some of the changes, actually, a couple of years ago—the trustee tax rate was at 33 percent. Basically, what the Hon David Parker said to his officials at the time was “Keep an eye on this change between 33 percent and 39 percent.”, which is the top personal tax rate, which they had changed in the 2024-25 tax year. So he said to his officials, “Just keep an eye on that. If you think that we need to change it for integrity reasons, then we will look at doing so.” So, therefore, that’s why this particular bill does include an increase to 39 percent, to align with the top personal tax rates from the 2024-25 tax year.

One minor change, though, that came out strongly through the submitters who came to the Finance and Expenditure Committee was that they were saying, “If you don’t put in a threshold, there’s going to be a lot of compliance cost for barely any revenue.” So the recommendation that came out quite strongly from submitters was that we should bring in a threshold of $10,000. The committee did have some good debate on it, and, basically, we agreed with those submitters, which is the change that you’ll see in this bill, which is a de minimis rule—so that’s for trusts that have under $10,000.

There’s a couple of changes there around the disabled beneficiary trust rule, and, again, it’s to make sure that they’re not being over-taxed. That is a change which we believed as a committee needed to be done—especially for those who are beneficiaries of trusts and who are disabled, to make that compliance a little bit easier for them as well.

A really important change that is in this bill—which I have seen through various roles, probably over the last maybe eight years—is the taxation of backdated lump-sum payments. This bill changes the way that backdated lump-sum payments from ACC and the Ministry of Social Development (MSD) are treated. So, basically, rather than a person getting a lump-sum payment and they’re getting fully taxed on the year that they received that backdated lump-sum payment, this bill changes it to look over the four previous tax years. We believe that this was bringing greater fairness into the system, because a lot of these ACC clients and MSD clients, through no fault of their own, were absolutely eligible for these backdated payments, and we just thought, to be able to treat it a bit more fairly, you’d look back over the four years.

So, just to finish off, probably the last bit, which is at the time I was the mother of the bill, the taxation rollover relief for the 2023 North Island floods—I want to thank the Minister for agreeing to that particular Supplementary Order Paper (SOP). That was introduced after the bill was introduced, but we could allow for submissions on it through releasing that SOP. I want to thank the Hon Simon Watts, because one of the early deliberations of the committee was whether he was going to accept it or not; he did accept it. I believe, for those who were in the North Island floods, in those particular areas who have already had a difficult time, some of this rollover relief will be absolutely pivotal for them.

So I do support this bill at the second reading. We will have a lot to say in the committee of the whole House. I commend this stage to the House.

Thank you. And just for the clarification of members, the previous speaker spoke on an amendment that had actually gone through the committee, so she was able to speak at some detail about that amendment.

As a member of the Finance and Expenditure Committee, I am very pleased to stand in front of you today to commend the Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Bill second reading, to the House.

The Finance and Expenditure Committee met multiple times and heard many public submissions from industry experts, tax experts, independent specialist advisers, policy advisers, as well as individual, day-to-day New Zealanders who had a genuine interest, and their best intention was to give their recommendation to the Finance and Expenditure Committee. If I can share a little bit of the public submissions that we heard, there were 67 interested groups of written submissions and individuals that we received and considered. As the select committee, we also heard oral evidence from 25 submitters. As a Finance and Expenditure Committee member, and as my first term as a new member of Parliament, I really wanted to say a big thankyou to these New Zealanders who have come forward to give their best advice to the House, to the select committee, on what they see is the best future for New Zealand.

If I may now—to join the many people before me, the many members before me—thank Therese Turner for her excellent contribution over 25 years as an independent specialist adviser on many, many tax bills. When I had the opportunity to listen to her, and to have her advice, I thought she would have been one of the best tax lecturers I could have wished for during my university years. And, during the later stages of our select committee meeting, when I found out that she had decided to take a step back and step down as an adviser to us, I felt very disappointed—disappointed that I hadn’t met her earlier, so that I could learn more from her and make a good contribution to the House. So I look forward to the second Therese Turner, to the third Therese Turner, who can be very helpful to us.

If I can, in my time, bring us back to the 10 main provisions of this bill in front of the House. Those were clearly laid out by members before me already, so I won’t repeat them. But the main provisions that I really, really wanted to talk on today are the three which are the global anti-base erosion (GloBE) rules, the trustee tax rate, as well as the restoring of the brightline test back to two years.

The reason why I wanted to address these three main provisions particularly are because of the messages that I have received, through email, on doorsteps, through phone calls, through many, many of my former colleagues in the tax and accounting industry, who have come forward to say to me, “Finally, finally, you guys”—“you guys” referring to the Government—“are finally listening to what people in the industry really wanted.” For that, I wanted to give three key messages that I have received. One is around our adoption of the OECD’s GloBE rules. The key point that I received was: we are not re-creating the rules; we are learning from the best practices, and we are adopting them. We are looking for ways that we can be efficient and effective, and we are bringing the best practices to New Zealand.

Also, on the trust tax rates, what I have also heard was our best effort to understand what is really captured between the trusts and between the individual tax rate—the discrepancies in the tax system. The compliments that I have received were about the de minimis of $10,000—that we have thought about the alignment but we have also thought about what is practical for New Zealand.

Lastly, the amendment that I have received a lot of compliments about was restoring the brightline test to two years. From the many, many doors that I have knocked on and phone calls that I have made, the fact is that most of the households here are mums and dads who really just wanted the two years back, because they need the flexibility—

ASSISTANT SPEAKER (Greg O’Connor): Ms Lu, you’ve been sitting in the House. You know that’s a proposed amendment that you can refer to, but you’re getting into some tintacks.

Thank you, Mr Speaker. So, if I can say, listening to all the opinions—from the many different perspectives, different political backgrounds on the select committee, but also the many different social backgrounds, many different targets and different goals, and from the many stakeholders—I wanted to say I am honoured to be part of a team that was able to see across all the differences and rise above, stand back, and finally, agree on something, so that we can highlight New Zealand’s dedication to forming tax policies that are modern, that are efficient, and that are effective.

As a member of the Finance and Expenditure Committee, and for the National Party, I am pleased to present this bill to you, which we’ve agreed on unanimously, and to recommend this stage to the House. Thank you, Mr Speaker.

This is a five-minute split call—Rachel Boyack.

Thank you, Mr Speaker. It’s a pleasure to take a short call on the Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Bill.

This is a very good bill, and I want to begin my contribution by thanking the three Ministers that have worked across this bill and also to put on record my thanks to the Finance and Expenditure Committee—of which I’m not a member, so I haven’t been part of the select committee process. My thanks to both the former committee and the current committee and all of the officials—particularly Therese Turner—who have worked in providing advice to Ministers and also to the committee.

It is a very good bill. Unfortunately, as other members have noted during their contributions—and I’ll just speak briefly to it—we have seen some of the proposed amendments from the Government that will come forward at the committee stage. Unfortunately, it’s the opinion on this side of the House that the bill will no longer be as good as it is today. So I wanted to take some time today to talk to two particular matters in the bill that are relevant to the work that I do as a parliamentarian. The first is around my role as spokesperson for ACC, and, secondly, there is some improvement here in the bill that will affect some of our homeowners who were affected by the Nelson floods nearly two years ago, and I’ll talk to that briefly also.

So I’ll begin by just speaking around the changes that the bill makes to the taxation of backdated lump-sum payments. As ACC spokesperson, but also as a constituent MP, I have spoken to people who have received these lump-sum payments, and I’m sure nearly every electorate MP and many other MPs would have spoken to people in those situations. I want to talk specifically around ACC lump-sum payments given to those who have had sensitive claims. Sensitive claims are an important part of the ACC system—so people who may have been subjected to often quite horrific examples of sexual abuse, often when they were younger, who, later in life, have been able to take a claim from ACC and receive both support through things like counselling but also a lump-sum payment that allows them to have access to some income.

I want to speak particularly to a constituent who I’ve gotten to know very well over the last couple of years who came to me about this very issue. What she’s told me is that the impact of that abuse when she was a little girl has robbed her of her opportunities. It has robbed her of the income that she could have earned if she’d been able to go to work like others who haven’t had such significant offences committed against them. One of the things that I think this bill addresses so very well is that people who receive these payments would often end up receiving a large payment that would pop them up sometimes into the highest tax bracket. Even if you looked at it only over a year, often it would be significantly more income than a person would earn in previous years. So it is a very good change in the bill that people will be able to have that lump-sum payment assessed across a four-year period. I think it’s one of those issues where all of us across the House would have met with people who have been subject to these particular circumstances.

I think the only message I would want to send to my constituent—who I’ve met with on many occasions and who has lobbied for this type of change—is just how unfortunate it is that we can’t make these changes retrospective. That is the nature of our lawmaking. Unfortunately, we can’t go back in time across all of those lump-sum payments that have occurred. But what I do want to be able to say to my constituent is that she and others like her have been heard—you have been heard by the House—and this is one of those changes that does make this bill a very good bill.

Just in the final few seconds of my contribution, I want to acknowledge the change here for the small number of people who were impacted by the Nelson floods nearly two years ago, and I’d just like to put on record, before he gives his final speech tomorrow, my thanks to the Hon Grant Robertson, who made this happen. It was a couple of phone calls—after we’d been having real challenges, to be honest, with officials both at the council and departmental level—that actually got this buy-out across the line. My thanks specifically to Grant Robertson for making that happen. What this bill would have meant was that, again, those affected by Cyclone Gabrielle and the Auckland floods would have had the benefit of this bill, but not my constituents in Nelson. So it’s a very good change, and I do want to thank the committee from the bottom of my heart that, once again, my constituents in Nelson have been treated fairly, as they needed to be.

It’s a great bill at this stage—might not be so great in a few weeks’ time—so I commend it at this stage to the House.

Thank you, Mr Speaker. It’s a pleasure for me to stand and talk to this bill, the Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Bill. And it’s very pleasing to have just recently returned to the House to find that everybody is, basically, supporting this through this particular stage, although it may be questionable about future parts, according to the Opposition there.

But when I joined Parliament and was lucky enough to be on the Finance and Expenditure Committee, I soon realised the amount of work that had already been done. And, as was previously mentioned, I think it was Barbara Edmonds who called this the “Two Fathers and a Mother Bill”. It’s been through a number of Ministers’ hands to get to where it is today. I look at the process that has been run, and I do feel that what I have been involved with—the many submitters that have come forward to present and the way in which the committee has resolved with what it has presented to the House today—has been a very thorough process.

If I look at the purpose, and without reading the purpose of the bill, I would summarise it as being a bill about fairness. It’s about the fairness of individuals not being overtaxed; it’s about the fairness of entities, being trusts and that, not being overtaxed; but it’s also about reasonableness, and that’s about individuals and entities that have earned profits actually paying their fair share of tax as a result of that.

There are many other main purposes of this bill. One of them that I would like to speak to is the global anti-base erosion (GloBE) rules, and that is the one with regards to multinational entities. Obviously, we’re talking about entities that do have a significant revenue. In fact, they only reach the threshold of being attached to these rules once they’ve reached €750 million, which provides them the position of having the effective rate of 15 percent. That rule is all about making sure that we don’t have entities shifting their profits around the world and removing the ability to pay taxes. The many countries that have already signed up to the GloBE rules is a very good step forward to making sure that any profits that are earned in a jurisdiction are paying a fair and reasonable tax in that jurisdiction. I’m hoping that the GloBE rules will actually, ultimately, affect that outcome, particularly once more countries attend. I understand it’s north of 130 countries that are looking at that at this particular point in time, and I’m sure many of those countries are very fortunate that they’ve actually got that passed through.

Obviously, with those GloBE rules administered at an OECD level, they are up for change. There are clauses within the bill that allow our country to have our autonomy if we don’t agree with it, so it’s not like it’s a catch-all. So I think we’ve got sensible clauses within the bill that protect our sovereignty, but at this stage, joining with the rest of them, I think, makes sense as well.

There’s been considerable debate amongst the submitters. There’s been plenty of submissions about the trust tax rate. Clearly, on that, I think there was argument about what is a reasonable threshold. At the beginning, every trust was going to be paying the highest tax rate of 39c in the dollar for all of their profits or income earned. Obviously, it came to the point with the submissions that we felt that that wasn’t actually fair, and the $10,000 threshold for the 39c tax rate coming into play, the committee felt, was fair and reasonable. We did have a look at many different levels, including right up to as high as $100,000 and maybe even further north of that. Probably for every action there’s an equal and opposite reaction, and we felt that this $10,000 threshold ensures that maybe large trusts aren’t incentivised to cut themselves down into smaller revenue-earning trusts and endeavouring to play the tax system that way. The cost of not just starting up a trust but also yearly or annually administering a trust probably dissuades people from actually doing that. So I’m pleased to take this short call, and I’m happy to support the bill to the House.

Mr Speaker, if you’ll indulge me, I’d like to acknowledge the previous speaker, David MacLeod, and seeing him enjoy WOMAD in his rohe yesterday. It was great to see such a great arts event. Congratulations to you as the local MP and to the organisers, and I do hope that he goes into bat for the artists when the inevitable cuts come, around the 6.5 to 7.5 percent, because we do know they’re a vulnerable group.

But, Mr Speaker, you will be happy to know that I plan today to talk about the Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Bill, and I would like to focus my comments on the brightline test. I do so because of the report, on page 11, around the Nelson floods and the brightline test, alluded to by my colleague Rachel Boyack. What this bill does—we know that there is unanimous support for it across the House—one of the really good things it does, is it proposes section CZ 26B of the Income Tax Act, to be inserted by new clause 18C, to ensure that the brightline and other time-related tests do not apply to a property that’s been affected by North Island adverse weather events and subsequently bought out by the Crown or a local authority. As Rachel Boyack said: in Nelson, there are actually about 14 properties that the local council is looking to buy out, and without this proposed amendment that was suggested by the Finance and Expenditure Committee, it would mean that the brightline test would have applied.

Now, would that be a good idea if a local council was purchasing a property in those situations? Let me unpack that a little bit. First of all, for those who are following along, a brightline test is, basically, a way to tax the financial gains that people make when they buy or sell a house for income. We know that the brightline test currently is at five years, and other members have alluded to a tabled—but not moved—amendment that proposes to move that to two years. Now, if we did not have the suggestion in the report by the select committee and the change to the bill, those 14 houses would be subject to the current brightline test of five years, which would seem terribly unfair, to tax the owners of those houses; to say, even though these weather events mean they are forced to sell their houses, effectively, to the Nelson Council—it would seem very unfair to tax them. So the fairness principle does seem to apply here.

That also raises the question of when is it fair to tax properties in those circumstances. Now, as other speakers have said, if we had retained the taxation principles Act, we might have had a better barometer, in my view, because that did have six criteria—universally accepted criteria—by which to say, very clearly, we could measure vertical and horizontal equity, and so on. We no longer have that Act, so the idea about when it is or isn’t fair becomes, effectively, a political judgment. And that, then, for me, raises the question, “Well, if we’re looking at brightline tests”—which is brought into this debate under the Nelson changes and recommendations. I’d just like to make a few comments about that, because there are assumptions about brightline tests and interest deductibility that have been made, about increasing housing supply, and they’ve been made in this debate. But, actually, that only applies in a competitive market. And the issue we have here, as everybody knows across the House, is that New Zealand does not have enough houses being built.

I’d like to add that there’s also $2 billion going each year to landlords for an accommodation supplement. So it starts to create perverse drivers, where a brightline test and interest deductibility are a way of allowing people to double dip. They don’t pay tax on their capital gain if they are selling the house outside of the brightline and yet they are able to claim interest deductibility. That will encourage more landlords to purchase large numbers of houses, which is what we have seen previously, which makes the market tighter. They’re incentivised by the accommodation allowance—$2 billion a year—and, ultimately, rents go up. And I would say that the justification of a kind of trickle-down economics in this kind of scenario doesn’t work, especially in an environment where councils are adding significantly to rates bills because they have repealed the affordable water reforms that the previous Government brought in and, therefore, there are incentives for landlords to actually use any surplus that they generate or any profit to try and offset those increased costs.

As I say, I raise this because there is an amendment that’s been referred to, and I’m not going to go into the provisions of that amendment; I know, under Standing Orders 122(3) and 123(1), that wouldn’t be appropriate, but I do note that I can refer to the subject matter, and that subject matter has certainly been traversed by speakers on both sides of the House. So I would just ask those who are listening in—this is a little bit of my view on why we are signalling that, although we support this bill as it currently stands, there is a tabled amendment yet to be moved which raises these very issues that are also raised by the Nelson scenario, which we will be vehemently opposing.

The other element to that is that it’s very cynical, in my view, to introduce that amendment after the select committee process. So the debate has been confined. The debate that we had on this very issue—about the brightline and interest deductibility, and what’s fair, and how markets may or may not move—will not be able to take place now. I understand that; it has to happen at the committee of the whole House stage. But I would urge people to be watching at the committee stage, because that is when we will have licence to do so.

So, in summary, I just want to say that it’s very useful having this reference to the Nelson situation, to the 14 houses. It gives us an example of where the brightline does have a direct impact and where we can see that it would be very unfair to apply that test, or only let North Island flood-affected houses have the benefit of that, where Nelson wouldn’t have been able to. And I also think it’s really important to acknowledge Therese Turner. As a former chair of the Finance and Expenditure Committee, I also had the benefit of her very pragmatic and sound and solid tax advice as we worked through similar complex bills in the committee.

Finally, just also to endorse—and thank, actually—the chair of the select committee and the comments that have been made about making sure that taxation on lump-sum payments, under the Ministry of Social Development in particular, are now fairer through the amendments of this bill. I remember when I was at the Brighton fair a couple of years ago and one of my constituents came up to me. I do hope he is still with us. He had stage 4 terminal cancer. He had been able to get a lump-sum payment on the basis of medical misadventure associated with treatment for that, but because the lump sum had come in at the end of a very late period, he was due to pay a lot of tax on it. He had been fighting for many years to get equity around that issue. So this is a great day if he’s still with us; if he’s not, I want to salute the work that he did and his advocacy for this. It is only fair that lump sums are paid at the equitable rate of when the tax payment would have been due, not a lump sum at the end, which is likely to increase people’s income and, therefore, lead to a higher tax rate.

So, in the dying moments of this debate, while we do support the bill, it has had many mothers and fathers, as the Hon Barbara Edmonds has said. I look forward to some fireworks at the committee stage, when these very important questions about tax fairness, about the brightline test, about interest deductibility, and about what is appropriate and what is the true impact for renters in the market will come to the fore. It will feel truncated because it hasn’t been to select committee, and therefore, we will certainly make our views known, and we invite viewers out there to follow the debate closely, because there is something about the logic of the National-led Government that doesn’t add up. It’s trickle-down economics. So I’ll reserve my comments for then and commend this bill currently as it is to the House.

Look, I thank you for this opportunity to speak in support of this bill. It’s great to see cross-party agreement across the House on this, and we’ve enjoyed our discussions through the select committee process and listening to submissions on various parts of the bill. But, you know, on this side of the House, we are laser focused on creating a better tax system in New Zealand, one that is fairer and does enable hard-working New Zealanders to keep more of what they earn and get ahead. There are many parts to this bill and there are many complexities to it, but it is all focused on creating a fairer tax system for all New Zealanders.

One area that I do particularly want to comment on is the tax relief that it will provide for a lot of the victims of Cyclone Gabrielle. I’m the MP for Tukituki, and in my electorate we still have hundreds of families that are doing it really, really tough out there, in our cyclone-ravaged region. The amendments to this bill will ensure that those property owners whose assets have been destroyed by the cyclone get deferral of tax liability on insurance proceeds for assets affected by the floods. This is a practical approach for many people who are going through an extremely stressful time, and they just don’t need the added stress of tax at this very, very tough time—the last thing they need is that, when they have so much to do to, basically, repair their properties. Many are currently going through category 3 buy-outs of their homes. It’s really, really tough. It’s a year on, and they’re still dealing with quite a slow process, trying to get the buy-outs for their homes.

Also, adjusting the brightline test will provide relief for flood victims as well. So this is something that I think we should all be very, very supportive of, particularly for so many doing it tough, not only in Hawke’s Bay and the East Coast but also across Nelson and that particular area as well, where those property owners are going to be given a lot of relief through this bill. Similar tax relief was provided in Christchurch, with the earthquake in Kaikōura, so it makes sense that we are looking at practical solutions around tax and providing tax relief and respecting those people that are doing it tough across the East Coast and Nelson. So I do really, really support this particular area of the bill.

We made a number of recommendations around the select committee process, when it came to tax relief around Cyclone Gabrielle and the Nelson floods and the North Island weather events. And I do believe that this bill is very supportive of the people in those regions and what they’re going through, and will be very, very beneficial for them. But I think that, overall, this bill is about fairness; it’s about creating a tax system that is fair for everyone. We spoke, in the select committee process, around the global anti-base erosion rules, which will prevent tax-base erosion by multinational companies, to ensure global consistency. That, again, is going to create more fairness within the tax system. And the trustee tax—to create more consistency, again, across the tax system, to ensure that we do have a fairer, broader, better tax system. Then the lump payments—as the member across the House has also alluded to earlier, that this is fairer. We heard submissions about people that were getting lump sums, and it only seems fair that it shouldn’t be all specifically taxed at once.

So these are all targeting a fairer system, which we absolutely agree with because, on this side of the House, we are very, very focused on ensuring that hard-working New Zealanders are able to keep more of what they earn. And, as the member across the House has also spoken about, the brightline test, and looking at where we can see benefits in reducing that brightline test back to two years, is going to be very, very beneficial. Then, when we look at the select committee process, as she spoke about, in terms of interest deductibility and the benefit that that is going to have on our housing sector and relieving the housing crisis—because we have seen rents go up $170 a week in this country. So restoring interest deductibility is really going to look at downward pressure, it’s going to look at lowering rents, opening more houses up, so that we’re not inflicting more cost on landlords. So there’s no types of things—

💬 Ingrid Leary: Point of order. Mr. Speaker, I just refer you to Speakers’ rulings 122/3 and 123/1, where the speaker may refer to matters in the amendment but not speak to that. The points that I made were in relation to Nelson, which was mentioned in the current bill, but I believe the speaker is going outside of that purview.

ASSISTANT SPEAKER (Teanau Tuiono): I’ll just take some advice.

That’s OK, I will round it up now, anyway.

ASSISTANT SPEAKER (Teanau Tuiono): I’ll take this point of order, thank you. Thank you to the member for that point of order. I do understand that the previous Speaker that was sitting in the Chair had taken your point, so I hear your point. So I would invite the member to wrap it up.

Yes, OK. Absolutely. There’s many great things about this bill that we have discussed through the select committee process—many benefits, particularly in cyclone-ravaged Hawke’s Bay. So I do commend this bill to the House.

Motion agreed to.

Bill read a second time.