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.

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

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

I wish to acknowledge the House for their time devoted to ensuring that this bill passes through this morning. This bill is an important bill as it confirms the tax rates that will be applicable for the current tax year. And as you know, this Government relies on this tax bill to ensure that the services and functions that this Government provides are delivered, and the Government does, obviously, run on the tax dollars collected through this. Without that, the Government and the services and functions it provides would grind to a halt. The New Zealand tax system is a progressive, low rate - broad based tax system. The measures within this bill, which have been recently added by Amendment Paper, contain changes that New Zealand needs now. It is crucial that this bill passes promptly to ensure that New Zealanders reap the benefits of the changes as soon as possible. I will provide, in my third reading speech, an overview of some of these key matters for the benefit of this House.

The first Amendment Paper aspect that was added as part of this bill is a proposal to add back the ability to phase back the ability to claim interest deductions for residential investment properties. Tax settings generally allow for deductions for business expenses to be claimed against income, so that overall taxation is imposed on a net profit basis. However, the current situation is that interest limitation settings for residential investment properties do not allow interest to be claimed as a deduction for tax purposes. The reality of the setting has provided upward pressure on rental costs. Depriving landlords of the ability to be able to claim mortgage interest deductions has made residential property less attractive as an investment, and this is simply a matter of supply and demand, as with more landlords offering properties, upward pressure on rents will resolve. The ability to be able to claim interest deductions for residential investment properties will be phased back over two years, with 80 percent of the deductions allowed from 1 April 2024 and 100 percent of deductions allowed from 1 April 2025.

The second measure added as part of the Amendment Paper on this bill that will have a positive implication for renters is a proposal to repeal and replace the current 10-year brightline test and replace it with a two-year brightline test. A shorter brightline test reduces the compliance burden on taxpayers and makes residential property more attractive as an investment opportunity. Making investment in residential property more attractive can incentivise more housing construction, and, as I have already mentioned, a greater supply of housing will reduce the upward pressure on rents, and everyone wins.

Another measure by the Amendment Paper is to remove the ability to depreciate commercial and industrial buildings at the current rate of 2 percent of the diminishing value from the start of the 2024-25 tax year. For most taxpayers, that’s from 1 April 2024. The ability to claim depreciation for buildings was an economic stimulus intervention designed to increase cash flow in the COVID response. We are obviously well beyond that, and we are removing it because it is no longer needed, and the tax dollars saved are better utilised for other purposeful matters that this coalition Government is relentlessly focused on delivering, in particular ensuring that hard-working New Zealanders can keep more of what they earn.

The situation that arose out of COVID, the next measure in the proposed amendment, is one that came into force during COVID, and this specific aspect was around the current rule that treats a person who disposes of trading stock for a price below market value to a derived income on the market value of that trading stock and as such that amount was taxable. It is an anti-avoidance rule, but it does not take into account the real charitable reasons for which these transactions were undertaken—particularly where a business, during some of the challenges we saw in the floods and other natural disasters, donates trading stock to other entities, which we saw during the COVID response also. It also didn’t take into account that a business could also dispose of trading stock at a lower value as part of its ordinary business activities—for example, when a business could be doing this as part of a publicity or marketing approach. The bill therefore takes steps to address this overreach to those limits and the application of those anti-avoidance rules.

The bill also addresses a loophole in taxation favouring offshore gambling casinos. Casinos in New Zealand currently pay a higher tax than online casinos based overseas. This is not fair. The only tax that applies to offshore casinos currently is goods and services tax. Under this coalition Government and as a result of this bill, from 1 July 2024, offshore operators will be required to pay a gambling duty of 12 percent of gross betting revenue.

Finally, this bill contains a proposed transitional rule to ensure that operators of electronic marketplaces do not have to account for GST on contracts for short stay and visitor accommodation entered into before 1 April 2024. This will mean that those contracts will not be subject to the new GST rules for the platform economy.

All of these measures, all of these amendments that have been added as a result of this paper, strengthen this bill, and New Zealanders, as a result, will be better off for the changes led by this coalition Government. The bill will help pave the way for the ability to provide tax relief. It reduces the upward pressure on rents, and it removes a number of inconsistencies and improves fairness. It also does away with a number of unnecessary expenditure aspects within the provisions that were in place before. These are good things for New Zealanders. These are good things for the New Zealand economy, and it will make it more productive.

I am proud of the measures that are included within this taxation bill. I acknowledge the select committee and the members who participated in a comprehensive exercise to ensure this bill was appropriately drafted, and I also acknowledge the significant work by Inland Revenue officials, who work tirelessly in the background to ensure that we have what is required for an integral and important and world-class tax system. I commend this bill to the House.

The question is that the motion be agreed to.

Thank you, Madam Speaker. We have spent a bit of time in this House debating this particular bill, very much so because of the changes that have been introduced through the Minister of Revenue’s Amendment Paper. Those changes that came through that Amendment Paper have seen that this side of the House will, therefore, not be supporting this bill.

When this bill was introduced, it was a good bill. At the first reading of this bill, we had members who are now on the Government side not supporting this bill. They didn’t support this bill because, one, it increased the trust tax rate. The Government members who were in Opposition at the time opposed it because they didn’t want to see an increase in the trust rate. Members on the other side of the House also said—and I do want to quote from the Hansard—“Increasing the tax rate from 33 to 39 percent is yet another tax grab.” Oh, how two readings later and a committee of the whole House debate changes—oh, how that changes—because what we have seen through the Amendment Paper that that Minister has tabled is the dream of homeownership for everyday Kiwis disappearing, disappearing in a boat that is going offshore to Australia, where they can get higher wages, where they can at least fulfil the dream, the Kiwi Dream, of being able to own your own home.

I know the Minister has spent some time in his speech addressing it. He says that property is more attractive as an investment opportunity as part of this bill. He also makes the statement that it’s to make it more productive. Well, I have news for the Minister: we don’t want property to be an attractive investment opportunity, because we want everyday Kiwis to be able to own their own home so they don’t have to be tenants, so they don’t have to be subject to the uncertainty that comes all at the power of their landlord. Yet we’ve heard from the other side of the House that the reason why they want to bring these changes in is so they can have tax cuts. But what’s the point of tax cuts if you can’t afford your rent? What’s the point of them?

We are seeing $2.9 billion as a result of this bill go into the hands of landlords and, therefore, making the dream of homeownership for everyday Kiwis—for everyday Kiwis, for young homeowners, for older homeowners, the inability to own their own home, all because of this bill. But yet that’s $2.9 billion—$2.9 billion—that cannot go into lunches in schools for children, $2.9 billion that cannot go to help the disabilities community have more access to reprieve, to help more with wheelchair services. That all goes with this bill, because $2.9 billion is needed for that landlord tax break. I am outraged by this. We should be supporting everyday Kiwis to get on the property ladder, everyday Kiwis, so they can be their own king or queen or he/she, or whatever pronoun they want to be, for their home. Yet what we have done through this bill is make it easier for property investors to outbid them, because there is a tax advantage in them being able to have interest deductibility as a result of these changes. They have the tax advantage over an everyday person who does not have investment property, who is trying to get on the ladder. They have a tax advantage over them, and yet the Minister says it’s so that it makes it more productive.

Well, guess what! A house is not going to produce anything other than that house, and if a person, if an investor, doesn’t buy the house, the house doesn’t disappear; the house stays there—someone else can buy that house. Maybe someone else like the young couple who’ve just got married, who would like, through the support of their family, to get on the homeownership ladder, but the interest deductibility changes in this bill have basically disadvantaged them. It has given that advantage back to landlords, who will have a bidding advantage over them, because where do everyday Kiwis who are not property investors get their interest deductible? They don’t. So there is a saving there for a landlord that will then outbid an everyday Kiwi.

The other aspect that the Minister says is that there will be more construction of housing with the reduction of the 10-year brightline down to two. Well, guess what! In the last few years, where the brightline test was either five years or 10, we had the highest consents ever—the highest consents, applications for people to build homes—and now we are starting to see consents coming down, and yet they want to change this to two years. So I don’t think that marries up at all. I don’t think the amendments in here marry up, because, actually, when it was 10 years, we had the highest consents, and now it’s coming back down to two. Basically, all that allows is for a property investor or a property speculator to flip the properties faster, but then they can flip them faster to the other property investors or speculators because they now have a bidding advantage because of their interest deductibility being removed.

So I do not support this bill. This side of the House, the Labour Party, is fighting for everyday Kiwis—for that young couple, for that middle-aged person, for those people who do not own a home, so that they are not beholden to a landlord, so they can become the person of their castle that they want to be because they own it. I think it’s shameful—absolutely shameful—that members of the Government want to support a bill that gives a bidding advantage to property investors when we have such low homeownership rates. For myself, who is a Pacific person, we have one of the lowest homeownership rates in this country. For those who are Māori, they have one of the lowest homeownership rates in this country. But all that this Government wants to do is, basically, say to all those who do not own a home, “We’re going to make it harder for you—

💬 Tim Costley: You made it harder.

—so much harder for you.” And that member on the other side likes to say we made it harder. Again, I’ll go back to the evidence that we had some of the highest consenting in the last six years. I bet you, if you dig a little bit further into the data, that the first-home ownership has actually increased. So if that member would like to have a discussion about the correlation between the ability for a property investor to be able to have the tax advantage of interest deductibility, come to the House with a proposal that allows, therefore, the average Kiwi to have interest deductibility for them, so then you can be correlating, then you can have alignment. But that’s not what we’re seeing from the other side of the House.

So I do not support this bill, on behalf of all those everyday Kiwis who deserve the ability to get on to the ladder, on behalf of all the disabilities community, who do not see any of the additional $2.9 billion. They are being squeezed as to the eligibility funding that they can receive. Instead, this Government is approving $2.9 billion to landlords. I do not commend this bill to the House, on behalf of everyday Kiwis who have children in schools in low-income areas who, potentially, may have their lunches in schools removed from them. I do not commend this bill, on behalf of the students and under-25-year-olds who no longer get free public transport or half-price public transport because of the $2.9 billion in this bill for landlords. We are sticking up for everyday Kiwis on this side of the House, so I do not commend this bill, and I think it’s shameful—shameful—that $2.9 billion, which could be used for better purposes for everyday Kiwis, is being rammed through this bill. That is the reason why I’m here every day—every day—for all those everyday Kiwis.

So take that reflection and do not support this bill to the House. And here again, once again, just think about those kids who will potentially not get lunches in school. If anything else, they are having it reviewed, and yet in this bill, we are confirming $2.9 billion for landlords.

E te Māngai, tēnā koe. Tēnā koutou e te Whare. We’re in a really funny situation here because the bill as introduced was one which, as the previous speaker, the Hon Barbara Edmonds, has just alluded to, this side of the House actually supported at its first reading. We had a really constructive time at the Finance and Expenditure Committee as well, making changes that were roundly supported by all parties there, around particularly the de minimis changes and otherwise. But the issue that we have in front of us right now is that this Government is using the vehicle of an Amendment Paper at the committee of the whole House stage to drop fundamental structural changes to the intention of the legislation as was introduced, bypassing the opportunity for public consultation, engagement, and input, and the conventions of this place, not the least when it comes to something that has a price tag in excess of $3 billion, when we’re talking about those changes not only to tax deductibility but also to the brightline test.

These are questions which, of course, we teased through with the Minister, as we had nowhere near enough time as would have been afforded had we had a select committee process for these changes, in the committee of the whole House stage. We made the point to him and tried to elicit answers around advice that he may have received around, for example, the impacts that this may have on property speculation and therefore the bidding up of house prices and therefore the creation of less housing affordability. Yet we received pretty opaque answers in response, which once again goes to show the mockery that this Government is making of this institution—this institution of Parliament. And they use the argument that they won the election and they campaigned on these things. But, as we’ve seen play out amply over the last few weeks, those promises that they went to the electorate with throughout the election, that they promised were rock solid, have been proven to be anything but.

This House of Parliament has been asked in fewer than 48 hours to rubber stamp their will without the due scrutiny that we would expect of any Budget or any other piece of legislation. And it simply is not the case, this side of the House contends, that winning an election and being able to cobble together a Government gives you the ability or the mandate to bypass the typical conventions of lawmaking. And these were the questions that we put to the Minister: whether he had received any advice whatsoever as to whether the intent to ram this through prior to the Budget process would have degraded the quality of the advice or the lawmaking that was in front of us. And, again, we got next to no meaningful response out of that. So I guess they just wanted to make this appeal to the Government benches, for us to be able to meaningfully and properly engage in the things that they want to put on the Table, beyond the rhetoric and the slogans of campaigning. But, to dig into the devil of the detail, we need to have respect for the institutions and the conventions of this place, so that we can have due public scrutiny and that we can make laws better. That’s kind of the point of a Parliament, and it’s kind of the point of the separation of powers between those of us in the legislature—i.e., the Finance and Expenditure Committee—and those in the executive. But I think that point has been amply made.

The second point that I wanted to make is about the choices that are in front of us, the choices that every Parliament, that every Government, gets to make. What we’ve seen here is that the centrepiece of this legislation is that $2.9 billion commitment to those changes on tax deductibility. So let’s just really spell out the trade-offs that this Government is making with that $2.9 billion commitment. We could be asking, should we be prioritising that $2.9 billion in tax cuts for landlords or could we, for example, retain food in schools at its current levels, expand fees-free for tertiary education, retain free prescriptions, and have money left over for other interventions and investment into our public infrastructure? Should we spend that $2.9 billion on tax cuts for landlords or should we retain Jobs for Nature? Should we double the Department of Conservation’s funding? Should we give those $2.9 billion in tax cuts to landlords or should we retain half-price public transport, which not only is a benefit for increasing patronage and reducing the barriers to people getting around our towns and cities but also for reducing our carbon emissions profile, which, by the way, is highest in transport in all of our major town centres?

These choices are being made, the Government tells us, because they apparently and ostensibly want to put downward pressure on rents. Now, this is the point that we in the Greens have been really trying to unpack, and I put a slew of parliamentary written questions to respective Ministers on this, and obviously we’ve sought to prosecute it with the Prime Minister at question time. So I just really wanted to unpack this, because it was a particular point of contention that was unpacked at question time just yesterday.

Here I want to quote directly from an answer that I got from the Hon Chris Bishop, the Associate Minister of Finance and, obviously, the Minister of Housing, where I asked him what evidence, advice, briefings, documents, statistics, or otherwise, if any, the Minister had received, on restoring tax deductibility, that landlords will lower their rents for tenants. And the answer from the Minister was—and I quote—“I received advice from Treasury and Inland Revenue officials in December last year on restoring interest deductibility for residential property investment. In that advice, officials said that the policy change could”—this is the operative word: “could”—“put downward pressure on rents in the long run. Research, however, by the Housing Technical Working Group, a cross-agency group of housing experts, suggests that rents are primarily driven by household incomes and relative supply and demand for rental housing. Officials advise me that changes in taxation would not significantly impact rents in the short run as the stock of housing supply is fixed.”

That is what we’re dealing with here: this Government is saying that they are taking a punt and putting a whole lot of weight on the potential of “could” and the notion of potential downward pressure, when they cannot guarantee us whatsoever that there will be a reduction in rents as a result of this $2.9 billion policy, which, as I have just demonstrated, comes at the trade-off of making those investments—and far, far better investments—in, for example, reducing inequality or poverty or paying to increase the public housing stock, for example.

Now, some of the other points that have been raised throughout this debate and the commentary, particularly in the public domain, have been—and it’s been fascinating to watch this play out, particularly the arguments between the Labour and National parties about the number of landlords in this country and the distribution of ownership of rental houses amongst those landlords. The honest truth is that we don’t know. The best that we can kind of glean from Ministry of Business, Innovation and Employment bond lodgment data, from Land Information New Zealand, and from the Companies Office, and seeking to synthesise that information, is that we have approximately 120,000 landlords. We don’t really know that, nor do we really have a figure on how many property managers are managing those property portfolios. And, of course, there is a bill currently in front of a select committee to seek to address this. We know that we have approximately 120,000 landlords, but we have approximately 1.5 million renters.

So the question to this House must be: whose interests do we serve here by not setting in place structures so that we can properly look at the data and, therefore, seek to make better evidence-based policy that actually impacts these groups in our society? And I just put a solution on the table for members, particularly of the Government, who will be considering this at select committee—that there is a vehicle through the registration and the regulations for property managers in front of the House at the minute, to expand that to regulate and create a register for landlords, so that we have the baseline data to make good policy and not have this nonsense tit for tat about who has what data, when it appears as though none of the legacy parties are actually interested in answering that question.

The other solution that I would put on the table is that we’ve heard a lot about these rock-solid figures, particularly from the now Prime Minister, saying throughout the campaign to “Just trust us because, you know, we’re the party ostensibly of economic management.”, despite the fact that that completely fell apart when any independent economist sought to put a lens over what was being proposed. But these costings blow out the better part of a billion dollars when we’re talking about the tax deductibility changes contained within this legislation. This stuff could have been pre-empted and resolved without the unnecessary bickering and back and forth, again from a place of evidence-based policy, were we to implement the independent policy costings unit—or otherwise known as the PCBU around this place. This is something which the Hon James Shaw sought to put forward with the Hon Grant Robertson in the 2017 to 2020 term. It was shot down by the Hon Simon Bridges, who then was the Leader of the Opposition, and I would encourage the Hon Nicola Willis now, as the Minister of Finance, to make good on her promise to see this institution come to light.

At the end of the day, this legislation just continues to deeply entrench the deeply unequal tax system that we have in this country, and we all know it. We have screeds and screeds of evidence, independent and commissioned by successive Governments, which tells us that. We’re talking about the Tax Working Group, we’re talking about the International Monetary Fund, not a particularly well renowned lefty organisation that is, and we’re talking about Treasury. This legislation simply doesn’t cut it, and it’s trickle-down economics.

Thank you very much. I rise to speak in support of this bill. I want to thank Chlöe Swarbrick for her contribution. She is right: we are making choices. And our Government is making some different choices.

I also just want to reflect briefly on some of the comments by the Hon Barbara Edmonds. It seems now that the Labour Party has finally woken up after six years and are in favour of supporting lots of groups that they decided to not fund properly in their time in Government. So we’re left to clean up the programmes, many of which she mentioned, that were underfunded or not funded at all: taxpayer school lunches, Pharmac, disability care. This bill seeks to make sure that we have the taxes to make sure those people are looked after. ACT will be working as part of this coalition Government to actually ensure that the taxes we collect from New Zealanders are spent appropriately and are actually delivering the services they want. The Government doesn’t magically just come up with a bunch of money. It is taken off ordinary working Kiwis every day, and we have a responsibility to carefully spend that money, and that’s what we’ll be doing.

We are very pleased to see interest deductibility restored. It was a bad public policy to remove this from this type of investment class, and the previous Government was warned that this would lead to upward pressure on rents, and that is what occurred. ACT campaigned for this change around interest deductibility, and we’re delighted to be able to deliver this for landlords and renters alike. So thank you for the opportunity to speak on this bill, and I commend it to the House.

Madam Speaker, thank you. I rise on behalf of New Zealand First in support of this bill. New Zealand First is committed to ensuring that our tax policies are equitable and transparent, and supportive of economic growth and social wellbeing. Our principles continue to prioritise for fairness with taxpayers, especially those who are affected by the natural disasters that we’ve previously seen. And we seek to minimise compliance burdens while maximising revenue for essential services, which is why New Zealand First will commend this bill to the House. It aligns with our principles with its potential to improve the fairness and the efficiency of our current tax system. Thank you.

Tēnā koe e te Pīka, otirā tēnā tātou e te Whare. E tū ana ahau ki te waha i ngā kōrero mō Te Pāti Māori mō tēnei pire.

[Thank you, Madam Speaker, and I acknowledge those in this House. I rise to speak on behalf of Te Pāti Māori on this bill.]

I rise on behalf of Te Pāti Māori to speak on this taxation bill in its third reading. We did support it to the first and second readings. However, we very much now oppose this after the recent amendments and changes.

We were in support, in particular, of the section on increasing the trustee tax rate from 33 percent to 39 percent for trustee income over $10,000. This is actually a small part of what Te Pāti Māori’s tax policy was in terms of addressing the injustice within our tax system. I want to break this down properly for all our whānau—and, in particular, rangatahi—on this kaupapa around tax, and acknowledging that as soon as the “T” word comes up, we scrunch our faces. Tax is definitely not a topic of conversation at the dinner table.

So let’s break down the whakapapa of tax in Aotearoa and how it continues to suppress and oppress Māori, but not just Māori but the rest of the country—to be exact, 98 percent of people in Aotearoa. It is unacceptable that over 2 million people in Aotearoa earn less than $30,000 per year, while the rich have the use of trusts to illegally avoid paying their taxes. We have a broken tax system in this country, which has fuelled extreme wealth and inequality that is only getting worse.

Our tax policy is very simple. Quick maths: 98 percent of people in Aotearoa pay an average of 20.2 percent in tax, while the other 2 percent—the wealthiest people in Aotearoa—own 50 percent of the country’s wealth. This 2 percent makes an average of $26 million—average—per year, and only pay 9.4 percent in tax. They pay only 9.4 percent while the kaiako, the nurses, the front-line workers, the Public Service, 70 percent of Māori, and 98 percent of people in Aotearoa pay 20.2 to 33 percent. This is a huge inequity and injustice. The wealthier or richer you are, the less tax you have to pay.

We in Te Pāti Māori advocate and encourage growth and wealth. Our Māori economy is currently sitting at $70 billion. This isn’t about bringing down the wealthy or bringing down the rich; it is clearly making sure they pay their fair share. This is about creating a tax system with an even playing field.

I was truly saddened that our GST off kai policy last week wasn’t supported by anyone. Our whānau couldn’t wait another meal. Even if it was $20 or $40 saved a week, it goes a long way. The GST off kai bill was a bill that ensured our whānau could get more kai on their table, especially with the current state of the cost of living crisis, or, as I call it, the cost of surviving the crisis, especially during a recession. Whānau need answers now, and solutions.

The reason I bring this into the conversation on this particular bill is because this bill intends to bring $2.9 billion worth of tax cuts to the landlords, particularly, in the section where it says it is restoring interest deductibility for residential investment property. GST on kai rolls in $3.4 billion, on average, per year to the Government, so it looks like the cost to eat is rolling straight to the landlords. Parties opposite have continuously campaigned on wasteful spending, and it is bizarre to see that this Government says that wasteful spending is spending on something like the use of my own language, or even school lunches. School lunches I was able to receive at my kura. I have been recently inspired by Kirikowhai Mikaere, a mātanga i roto i te ao tatauranga—an ultimate expert in data sovereignty.

In my recent research, I have found that 20 percent of the people in my rohe of Hauraki-Waikato that earn over $50k in income contribute $190 million of our tax to the system. This is only 20 percent, so imagine the other 80 percent. This isn’t even touching on how much we contribute to the overall country’s economy within our own iwi. This clearly shows that we over-contribute to the system—the system that continues to suppress us, even after the fact that everything we’ve ever known has been taxed and axed from us: our natural resources, land, water, language, and culture. So my question to this Government and the Minister—

The member’s time has expired.

Tēnā koe, Madam Speaker. I’m standing here today to oppose this bill. And I want to use my five minutes to speak to the amendments made in this bill on interest deductibility. Yesterday, in question time, our Prime Minister said that this Government was unapologetically on the side of renters—well, that’s the joke of the year, isn’t it? Well, the Government really should apologise to renters for taking us for fools. Does the Government really think that renters are idiots?

As one of the only members of Parliament that rents and does not own a house, I can tell you that we know that these changes to interest deductibility are not in our interests, and we shouldn’t seek to make out like it is. They’re not doing it for us—they’re not doing us any favours. And when was the last time a National Government did anything good for renters? They’re doing it for themselves, knowing that most people in this House own multiple houses and make their living off people like me who are renting their houses. And they’re doing it to line the pockets of their rich landlord mates. This Government is unapologetically on the side of the rich.

I’m a renter. I’ve flatted in Kelburn, in Te Aro, in Aro Valley, in Mount Cook, and in Brooklyn here in Wellington Central. And there have been claims by this Government that this bill will benefit renters and that the benefits of the interest deductibility will transfer on to renters. And I can tell you that, excluding one flat that I’ve lived in for the better part of the last decade, whenever my rent has increased, it has had absolutely nothing to do with any improvements that that landlord had made to our flat. But I do remember when the last Labour Government increased student allowances by $50, and all of a sudden, magically, my landlord put up my rent by $50 per person, just because they could. That is an example that landlords will find any old reason to lift our rents, and that there hasn’t been an awful lot of research into this particular bill to show the impacts that it will have on renters. And it goes to show that increases in the amount of money available to landlords will not be passed on to renters.

It’s not just me who thinks that; it’s all of my friends who are renters, and even Treasury agrees with me that there’s no evidence that this bill will pass on any benefits to renters. That’s because, in reality, the provision of housing is seen as a business by our Government, and this bill simply increases the ability for housing to be seen as a commodity, as opposed to what it is: housing is a human right.

In reality, landlords don’t really care about your circumstances—I can testify to that to you. They’re just there to make a profit. They see it as a business. And don’t get me started on the nightmare property management companies, who are even worse. As my colleague Chlöe was saying before, we actually don’t know anything about these landlords or these property management companies because they’re operating in a way that we don’t even know what they’re up to or how many houses they’re managing. And those property management companies, some of them pride themselves on being able to squeeze every single cent that they can out of renters. And this just increases that and contributes to that.

Let’s not forget who is paying for this cash handout to landlords: it’s the kids at school who won’t be getting school lunches anymore, it’s disabled people and their carers, and it’s people on benefits, whose lives will get much worse so that landlords can get even richer. Housing is a human right. It’s not a commodity; it’s something that everybody needs to live a good life and to contribute meaningfully to the societies that they live in. And when bills like this are rammed through without any evidence or feedback from the people, it becomes clear that we have a Government whose objective is to make bigger profits for their landlord mates.

Better solutions that we, the Greens, are constantly advocating for include more public housing to clear the public housing wait-list and bring down median rents across the country. We’re pushing for rent controls. We’re pushing for a rental warrant of fitness. These are actual things that you could do for renters to walk the walk, to match the big talk that you’re talking. Thank you.

Well, thank you for the opportunity to speak on the third reading of this bill, which I support, because on this side of the House we are absolutely laser focused on strengthening this economy and ensuring that hard-working New Zealanders can keep more of what they earn.

Now, during this debate, we have heard a lot about the areas where this bill will support a fairer, more equitable tax system. But there’s a couple of areas that I just want to quickly touch on, because I’m the MP for Tukituki, where we have been impacted heavily by a cyclone. And this bill will benefit hundreds of people who have lost their homes and their properties. It’s about taking practical steps to ensuring that we are supporting the victims of the cyclone with tax relief, ensuring that they are not having more stress added to their lives at the moment. Also, adjusting the brightline test will provide relief for flood victims.

But just another area where we are going to improve things is with interest deductibility, which will put downward pressures on rents and not keep adding costs to landlords, which are then passed on to renters. We need to put downward pressure on rents. We’re also going to reduce the brightline test to two years. This is going to create a more equitable tax system, and, therefore, I commend this bill to the House.

Madam Speaker, thank you for the opportunity to speak to this taxation bill. I want to focus on some of the statements that the Minister made in his third reading speech to this House. The first comment I wish to focus on is the Minister’s claim that we have a broad based - low rate tax system in New Zealand. It’s just not the case. We certainly have comparatively low income-tax rates. They are comparatively low. Our top income tax rate is 39 percent. Now, the top income tax rate in Australia is 45 percent, so we have comparatively low income-tax rates. So it is a low-rate system, but what we do not have a broad-based system. And here is the contrast that will help people to understand the idea of a broad-based system: at the moment, workers are taxed on every dollar they earn. Someone who is earning the minimum wage will pay tax on every single dollar they take home. Anyone who is on salary and wages will be taxed on every single dollar they earn. Someone who earns income through capital gains does not pay tax on those capital gains, so there is a whole chunk of income that is simply not taxed.

There is an exception to this. In the previous two terms of Government, we ensured that at least some capital gains were subject to taxation. We did this through the brightline test, and it was particularly in the space where it was not clear whether a person bought a property for long-term investment or whether they bought it with the intention of resale. Now, it’s a little bit ambiguous so we clarified that intention by picking up the brightline test that was introduced by the previous National Government and extending it to five years and then to 10 years. What that did was it taxed some capital gains. So there was some attempt under the previous Government to extend the base of the tax system: a movement towards actually instantiating that broad based - low rate tax system that we aimed for. This bill moves us away from that. This bill moves us back towards a more uneven and a more unfair tax system. This bill gives tax breaks to people who already own a substantial asset in addition to their own home, while it still continues to tax workers for every single dollar they earn. That is why we do not have a broad based - low rate tax system, and it is time that side of the House stopped claiming that we did.

I want to speak, in particular, to the measures in this bill that are contained in the Amendment Paper that was tabled in the House last week and then debated this week in the committee of the whole House—so no select committee process for the measures that are contained within this Amendment Paper. In particular, the issues that are sitting in here that we should have had a select committee process for were the changes to the brightline test and the changes to interest deductibility.

Now, what we had done in the previous Government was to remove the ability for landlords to deduct all of the interest expense on their mortgages. And there was a really good reason for that: in this country, we have been pricing homes out of the reach of ordinary people. You see, that’s the problem. That side of the House does not seem to understand that an investment property is not just a tradable good; it is a home. It is a place where people live. It is a place where people establish themselves, where they have their standing place, where they can build their lives from. It is not something that can simply be traded away at the click of the fingers. The changes that we put in place around interest deductibility were to try to curb this rampant trading in homes. And it worked—it worked. More homes were brought within the reach of first-home buyers. More people were able to buy homes, and this is critically important for all sorts of reasons.

Look, let me start at the other end. We often talk about young people buying their first homes, but, increasingly, we have our senior citizens, people who are entering retirement—entering retirement—without owning their own home. Yet our major strategy for supporting our senior citizens is to have them aging in place in their own homes. We fund our senior citizens through New Zealand Superannuation, but it is predicated and set at an amount that assumes that people own their own home. Yet, increasingly, we are removing the capacity for people to own their own home. There are many people in their middle years who are renting, moving from place to place.

Now, ordinarily, we would expect that young people rent. They rent as they build up the resources to buy a first home. They rent as they are in the stages of establishing their career and perhaps moving from place to place, so renting makes sense. But the hope is, and the plan is, and the dream is that they will be able to build up the resources to buy their own home. And, in fact, we even support this through our KiwiSaver settings. We want people to be able to buy their own homes, but that capacity has been removed, and it has been worked against by this bill because it restores interest deductibility and delivers a powerful tax break to landlords. That is a real shame.

Now, the other side of the House has said that delivering that interest deductibility break will make sure that rents go down; the evidence is against them. The evidence is really straightforward. Rents are not primarily driven by landlords’ costs; rents are driven by the market. That’s where rents come from. In fact, the rent increases in recent years have exactly matched inflation in recent years. And rents, where they have started to fall, have done so because more houses have been built. If we want to solve the problem of homeownership, if we want to ensure that people can continue to buy their own homes, we need to continue the strategy of the previous Government, which was simply to build and build and build more homes: more Kāinga Ora homes, more social housing homes, more first homes through KiwiBuild. That was what we attempted to do.

There is something else I want to talk about in my last couple of minutes, and that is something that the Minister said. He said that—and these are his words—“tax provides for services and functions”, and it was a sentiment that was echoed by the speaker from the ACT Party. Indeed, this is what tax is about. It is about building up our resources so that we can build ourselves up as a country. The speaker from the National Party, the member for Tukituki, Catherine Wedd, gave a brilliant example of what taxes are used for in terms of supporting people. She talked about the rollover relief that had been provided to people in Tukituki, to people in Hawke’s Bay, to people in Auckland, to people who had been affected by the North Island weather events last year. We are able to do that precisely because we build up our resources through taxation. Taxation is what we do in order to provide healthcare, in order to provide education, in order to provide welfare. Taxation pays for our roads, it pays for our medicines, it pays for health. When we pay our taxes, what we are doing is making a contribution to our society, and it’s the sort of contribution that builds us up. It is a contribution that we pay forward. Our parents, our grandparents paid in order to build up the infrastructure of this country. Now it is our turn to do the same, to pay our taxes, to pay our share, to ensure that our children and our grandchildren live in a flourishing society.

So when we see tax breaks for landlords, when we see a tax system that is not a broad-based system, and when we see little assistance given to people on the lowest incomes, then we are walking away from that vision of a society to which we all contribute through our taxes and from which we all benefit. This bill does nothing to help the lowest-income earners. It does nothing to help the marginalised. It does nothing to help anyone except for people who are already high paid. We cannot support this bill.

Madam Speaker, I stand before you with my full support for the third reading of the Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Bill. The main provisions for this bill cover several areas of New Zealand’s tax legislation, and there are 10 main provisions—all common sense and based on what New Zealand needs right now in our current environment. A National-led Government is delivering positive changes in a timely manner.

There are two areas that I want to highlight in my speech today. The bill proposes to introduce the global anti-base erosion rules in New Zealand, limit the race to the bottom, and it strengthens New Zealand’s tax legislation by improving fairness and equity, generating tax revenue for our country, and increasing global cooperation and transparency.

This bill also proposes the reduction of the brightline test from property sales from 10 years to two years. This is actually offering several benefits, including increased market liquidity to make it easier for buyers and sellers to enter and exit the property market. This is actually a “back to normal” brightline test requirement that brings greater flexibility for property owners, and, according to Stuff in 2021, the latest Ministry of Business, Innovation and Employment data shows nearly 80 percent of residential landowners in New Zealand own just one rental property each—80 percent. While the popular perception is that landlords own multiple rental properties and get big capital gains as a result, the bond data in New Zealand actually suggests this is not true, because although there are some large landlords, they were not the majority of landlords in New Zealand. Most investors in New Zealand are ordinary Kiwis who just want to build a better long-term future for their retirement.

So, with the proposed amendments to bring the brightline test back to normal—back to two years—property owners, including most of those who only own one rental property, can adjust their investment strategies more frequently, such as by buying, selling, renovating, without being subjected to extended tax obligations. The prospect of the shorter-term gains will stimulate economic activity in New Zealand and increase property transactions, which will lead to higher demand for related goods and services: construction, renovation, real estate agency services, repairs and maintenance, and everything that goes with maintaining a rental property.

So, with all of the above, we are proud of the measures included in this bill to improve our tax system in New Zealand. So I strongly commend this bill to the House.

This call is a split call. I call the Hon David Parker.

Catherine Wedd in her contribution said this bill will improve the economy. No, it won’t. It will have the opposite effect. It will once again encourage over-investment by landlords in the residential property sector, sucking out investment from the productive economy and driving up house prices so that it will no longer be affordable by people who just want one home to live in. The interest payment by a landlord on a mortgage has two parts. One part of it is compensating the landlord for inflation—it is not a real cost; it should not be tax deductible. There is an argument as to whether the other roughly half of the interest payment which isn’t compensation for inflation should be deductible or not, but that’s arguable, and that’s handled in different countries in different ways.

This $2.9 billion transfer of income, over the forecast period, to landlords will drive up house prices. It is capitalised by landlords into the price they can afford to pay. That’s why before we made this change—and I was the Minister of Revenue at the time—the proportion of houses being sold to landlords was going up. I shouldn’t have put my hand up like that. The proportion of houses being sold to people who wanted to live in them was going down. Immediately upon the change being made, that changed, and the proportion of houses—existing houses, not new houses; existing houses—being sold to people who wanted to live in them went up.

People talk about the effect on new supply. This had no effect on new supply, because the new supply was always exempt from the rule. We didn’t want to disrupt people investing in new housing. We need more of it. In fact, under the last Labour Government, the number of houses being built in Auckland doubled, because we got the settings right across both planning and other matters, like infrastructure financing.

We heard from the other side that this would benefit tenants, because rents will go down. Every year, every quarter, since this change was made in 2021, inflation has been higher than the increase in rents. So rents didn’t go up higher than inflation, proving the point that rents are more determined by the marginal cost of new supply coming into the market, which was not changed by these rules. This is appalling law. It shows the economic lunacy of the National Party that they will not only allow a landlord a tax deduction for a cost that is not real, because at the end of the year the landlord, in inflation adjusted terms, owns less than they did at the start of the year. On the other end of the transaction, when they sell, they say, “Woah, go for it. Fill your boots. You’re going to get no tax whatsoever.”

The brightline test in New Zealand is a de facto capital gains tax. It is a good tax, it is a fair tax, and it is needed. And why doesn’t National support that, despite the OECD, the IMF, and all of the other international agencies saying we over-invest in property in New Zealand? And partly because the gains are tax free to the landlord, despite the fact that they’re wealthier and they earn more than the people who earn their wages and salaries. Despite the advice of the IMF, the OECD, the Treasury, and the Reserve Bank, the National Party—no, they have a different view. They are serving the interests of the capital class, who pay lower rates of tax than working New Zealanders, once again—always have, always will. Not only that—they’re undermining the economy, because the investment will charge back into residential.

Now, the Reserve Bank data shows that as well. Total lending to first-home buyers averaged 12 percent between 2014 and 2017, and 29 percent went to investors. Since the law was changed, the share going to first-home buyers averaged 20 percent. In fact, as of July 2023, the share was 25 percent and the share going to investors has gone to 17 percent. So where were investors putting their money? Somewhere else—somewhere else productive, which grows jobs, which grows exports. This law should not pass.

Deductibility is back—deductibility is back. Labour tried to phase it out—they’d begun their phase-out period—and what happened? They failed, and failed badly, and renters were the loser. Rents have gone up. Rents went up under the last Labour Government $170 a week. That’s nearly $9,000 a year that every rented house had to find under Labour. So phasing in interest deductibility for residential investment properties will encourage rental—

💬 Dr Hamish Campbell: Oh, shocking. Renters like me.

—supply and provide, Dr Campbell, provide downward pressure on rents. This is a huge issue for mum and dad landlords. It’s a huge issue.

One of the members over here says, “There’s no data on who the landlords are and how many there are.” Well, we know, as Nancy Lu said, that 80 percent of landlords own just one property. The worst thing is that the Ministry of Business, Innovation and Employment statistic, based on bond lodgments, came out in 2021 but they started the phase out regardless. So they were hitting the very people that they purport to represent, those middle of the road mum and dad landlords—80 percent of them. They have been screaming out, and we all saw it, and Labour would have seen it on the doorstep: bring back deductibility. Some of their deductibility costs had gone up tens of thousands a year, and that was all just falling back on renters.

So this is long overdue. This is great news for rents. This puts the downward pressure on rents that we’ve all been looking for and asking for. They tried for six years; they failed. Rents went up $170 a week. We are putting some measures in place to reverse that, to put some downward pressure. They won’t be going up at that rate. The costs are less; the supply will be more. I commend this bill.

Thank you, Madam Speaker. I’m pleased to take this, the last call of this third reading. There’s been many questions, there’s been much debate over the last couple of days, and of course this follows an extensive select committee process prior to that.

I’ve heard many emotive speeches, particularly from the other side of the House, on this third reading debate. One such speech that I want to talk to is around the fact that they believe this is the demise of first-home buyers. I am very clear that, in my mind, the housing crisis that our country currently faces is absolutely affected by housing affordability and housing availability. That will soon be helped by other bills that this coalition Government is soon to introduce to this House.

This taxation bill is sensible, it’s pragmatic, it’s fair and reasonable, and it will help our country get back on track. I’m happy to commend this bill to the House.

Thank you, Madam Speaker. I’m very pleased to take a call on this bill and talk about some of the things that have been said in the House in the course of this space. One of which that I am most interested in is the claim by the members opposite about the tumbling down of rents that we are about to witness after the passage of this bill. I just want to give assurances to members opposite that we will be monitoring that. We will be looking for the evidence of rents coming down, because there is not a single economic commentator that agrees with the members opposite in terms of what the impacts are. But, none the less, we take those honourable members at their word, and monitoring them on these claims in the House today will be something that we promise to do with diligence and vigilance.

What we have before us is the annual taxation bill that comes before this House, most of which was actually work that was prepared by the Hon David Parker when he was the Minister and has come before this House. The exception to that is the Amendment Paper to this bill that puts in place several measures with which we certainly do not agree. My colleagues have talked about what some of these are, and I’m going to traverse those as well, because they are so important. There is the interest deductibility and what that means. There’s also the extension to the brightline test. Also in that Amendment Paper is the work around the gambling tax.

Now, one of the issues that we have for why this is so important is because this is the annual taxation, the way in which the Government collects revenue to pay for the services we need, like health and education and the other core services that New Zealanders rely on. What we are seeing with the introduction of this Amendment Paper is a bit of a pickle for the Government. What we saw through the election campaign was all kinds of claims. If we take the gambling tax, for example, there were claims that there was going to be $176 million a year collected through this tax. That is $716 million over the four-year period which a Budget will cover.

The problem that the Government now faces when putting together the Budget—with this taxation as the basis of it—is that the IRD’s regulatory impact statement for this bill tells us there’s going to be $35 million a year collected, or $155 million over a four-year period. This is a fiscal hole of revenue of $500 million that is sitting there for the Government. So, rather than the bold and audacious claims that were made on the campaign trail about what was going to be collected, what we see in the regulatory impact statement that sits aside this legislation is a gaping fiscal hole of $500 million. So we look forward to the Budget for how it is that that is going to be accounted for.

The other problem that sits inside this piece of legislation with the Amendment Paper is the interest deductibility and the costs associated with it. What we do know is that this policy is going to cost $800 million more than what the National Party were on campaign telling New Zealanders that it would cost. So we can see, right off the bat, there’s a $1.3 billion hole in the Budget that this Government is trying to put together.

Now, I have had the great delight of being a Budget Minister. I have had the great delight of having to go through and deal with colleagues about things that won’t be funded. So I can only imagine the kinds of things that are not going to be funded. But, luckily, given I’m not that imaginative, not that much has been left to the imagination of what is not going to be funded. We’re already getting a taste of that. We’re already seeing disability services—the kinds of things that are being cut from those core kind of services. We have all the rhetoric around school lunches—the most fundamental thing in terms of what this money could have been used to fund—making sure that our kids are well fed in school. This is something that the Government has signalled is on the block. I know that, in terms of climate action, the kinds of things that were being funded—they’ve already been cut. That money has already been taken back to centre in terms of anything that was being funded for the Climate Emergency Response Fund. I’m informed, through the annual review process, that any money that was in things like insulation—underspends from this year—has already been returned to centre. That has already gone through.

These are the kinds of things that could be funded through what we take with our tax take, but we have a Government that is showing clearly where its priorities are, and these are tax breaks for landlords. This is not funding the kinds of core things. I believe it is the responsibility of any Government to ensure that we are adequately funding health, we are adequately funding education, we are investing in our future by making sure we’re adequately funding climate action, and we are funding disability services, for goodness’ sake! These are the kinds of things that we need to put into place now.

The members opposite seem to have drunk the Kool-Aid and convinced themselves that this is going to solve the housing crisis, that this is something that they think is going to be. They tell us—I’ve heard the rhetoric—there’s going to be increased market liquidity and flexibility. This just reads code for tax breaks for their mates, because what we’re seeing is some kind of magical belief that these changes are going to lead to an increase in supply. Well, what they are doing is taking away the very policy lever that was put in place to increase supply. When our Government removed interest deductibility on existing rental properties, it was done in a very intentional way. We said to mum and dad landlords, “Help us solve the housing crisis. Do not go and compete with your kids in the suburbs for their first home but, instead, be part of the solution and add to New Zealand’s needed housing stock. Go out and build new supply.”, because, ultimately, if you want to solve the housing crisis, you need more houses. And putting in place a giant lever that privileged new builds over existing housing was doing exactly that.

Let’s look at the evidence. In the midst of a cost of living crisis, we saw rents consistently rising at less than the rate of inflation. Now, look around the world globally—look around the world, globally—and look what has been happening in rental markets around the world. If these members can lift their horizons beyond their desks for just a moment, they can see the kinds of policy measures that need to be put in place. They are supply side measures, and that is exactly what interest deductibility’s not applying to new rental stock was about. This is a Government that is going to plunge us back into the days of the housing crisis with no solution, simply telling councils to go and zone land. A “build it and they will come” approach with no plan for how to turn that into build-ready or serviced land is putting us back a decade from where we need to be in addressing a housing crisis.

What we saw under our Government was that, actually, we were starting to turn the tide and that we were closing the supply gap. And we hear the howls from opposite, but some simple counting—and I suggest to those members that they do learn to count; it’s a very important political skill—of the gap between the number of people in the country and the number of houses we need closed for the first time in decades in New Zealand. We were getting on top of it. I have not heard from this Government one supply side measure that they want to put in place. But I would expect them to be putting additional supply side measures in place, not just dismantling supply side measures like they are doing with the Amendment Paper to this bill, because that is exactly what reversing interest deductibility will do. We will see the bad old days of mum and dad speculators getting into the burbs, competing with their kids on existing houses rather than doing what we as a country need them to do, and that is building new stock. And that is exactly where we were putting our support for those landlords.

So we do not support this bill, we do not support those measures, and I look forward to seeing some positive policies from the Government.