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

Members, we now come to Part 3. This is the debate on clauses 102 to 137 and the Schedule, “Amendments to Goods and Services Tax Act 1985”. The question is that Part 3 stand part.

Thank you, Madam Chair. I’m just rising to talk on the addition of GST to the electronic market place for the supply of goods and services. Now, I know that and I do—and I assume a few people in this House do, and I know the good folks back home in the electorate of Tauranga certainly do when they’re sitting around on a Saturday night and they want to get home, they’ll be opening up their phones and getting an Uber and then probably getting home and quite likely also ordering up some Uber Eats. We are in the middle of a cost of living crisis, but the feedback that we have been hearing from this is that the additional GST on these goods is going to most likely be passed on to the consumer.

So I’d like to ask the Minister: has he heard anything to the contrary around that, and, if he has, why are they still proceeding with it, given that it is likely to be inflationary? And we do have a lot of food inflation, as well, I know, and I see a few folks round here do like to try and beat that—beat the fresh fruit and vege rises that we’re having at the moment—and order their Uber Eats online, or maybe it’s just a way of balancing the nutrition in their diet.

The other part of that that I’d like to explore with the Minister is around why this is being applied inconsistently with how GST is applied, where the current regime allows sellers of goods and services to earn up to $60,000 before GST is applied to them, and what advice the Minister sought and obtained around why it was necessary to extend it without a threshold to suppliers in the electronic market place. Thanks.

Thank you for those questions. Indeed, the taxation of transport and accommodation services booked through online platforms is the most important part of this part of the bill, and I’m happy to address that. In New Zealand, GST applies to almost all goods and services—the exclusions are interest and rent; those are the main ones—and our system is meant to be consistent across both different sorts of expenditure within the economy and different methods of delivery, and the rules need to keep up to date with changes in technology. It was for that reason that the last National-ACT Government introduced GST on apps that were purchased through the likes of the Apple Store in order to protect the tax base. The OECD has gone further.

We take advice on these matters from the Organisation of Economic Co-operation and Development; they said that Governments around the world need to adjust their tax policies to make sure you can’t create what is, effectively, a legal fiction that because you’re booking your accommodation through an online app that notionally has that contract based in overseas jurisdiction, even though the service is paid for in New Zealand, by a New Zealander, to a New Zealander, we thought that that hole in the GST system should be plugged.

Indeed, the member would be interested to hear that on 1 September 2022, his finance spokesperson, Nicola Willis, said, “It’s about fairness, ensuring motels are treated the same as Airbnb and that Ubers are treated the same as taxis.”, and she was right. So I’m happy to quote her. The reason why this is favoured by not just the Labour Party and various other parties that are in this Parliament but by Hospitality New Zealand and the Taxi Federation is that they know that it is unfair that they could be undercut by people on the basis of GST in these circumstances.

In terms of the GST, members have quoted perhaps an unfortunate paragraph in the regulatory impact statement (RIS) for the bill that suggested that, at the extreme, 15c extra GST could be passed on by the providers of these services; in fact, that’s not correct. It was pretty loose language in the RIS, because people get a credit for the notional GST input expenses that they would claim if they were filing their own GST, and that’s 8.5c of the 15c GST that would be charged. So the maximum extra impost in respect of those people would be 6.5 percent, and, of course, many of their competitors are already paying GST in full on their competitive services. So the effect on prices will be even less than that.

Thank you to the Minister. Actually, what he’s described is not levelling the playing field in as far as GST is concerned, and there’s some real-time examples of that. What the Minister has tried to suggest is that, actually, what he’s doing here is the same as what we did when we were in Government, and, as I remember, I might well have been the Minister at the time. What we said was where one supplier overseas provides goods to New Zealand—tangible goods to New Zealand—over a threshold, they must register for GST and we would simplify how that would be done. And the reason for that is the thresholds remain the same. The example that the Minister gave—and he mentioned our finance spokesperson saying that they should all be treated equally and the same, and fairly—is correct. But this legislation does not do that.

If we take a New Zealander that has a bach and they want to rent it out on a nightly basis and they advertise in their local newspaper or in a magazine and that is rented a number of times and they collect $10,000 during that year, they do not have to, Minister, register for GST. But if that very same New Zealander uses an online service—in New Zealand or overseas—they will have to register for GST and, therefore, an additional 15 percent will be charged to them. In effect, what the Minister is doing is saying, whilst the GST system in New Zealand is simple and it’s very, very straightforward, it’s not complicated, it has rules in it, he’s saying, in this case—because this is a Government that wants any single bit of tax it can get off New Zealanders to spend, not on those New Zealanders but on things the Government decides are priorities—that they’re going to change the GST system and not keep it equitable or fair and just collect off those New Zealanders, irrespective of how much they earn.

Now, if this legislation had said where a New Zealander with a car on Uber or a New Zealander that rents out a property over Airbnb receives $60,000 worth of income in that year, they must pay GST, that would be fine, but the law already says that—that actually if they collect $60,000 or more or if they expect to collect $60,000 or more in a year, they must register for GST and charge it. That’s not what this legislation is doing, and it’s quite, quite different from what was done in a previous Government to what we’re doing now.

For the first time, that individual who will be having GST collected on their behalf does not have the ability to offset any GST expenditure, which would be the case if they were registered normally under GST in New Zealand, and the reason for that is the Government has decided that, actually, an average of what their expenditure may be means 6.5 percent would be what they would be getting back, or what wouldn’t be passed on.

Minister, you haven’t made the case that New Zealanders won’t pay more for this. For any New Zealander out there that has a business that earns or expects to earn $60,000 or more, irrespective of how that money is collected—internationally, domestically, via post, through advertisements online—they should and must register the GST, but that’s not what this legislation is doing; it’s saying to New Zealanders that make a bit of money on the side who have a tax obligation placed upon them, to pay tax on that money that they’re earning, that, irrespective of the amount that they may end up charging or earning in a year, GST will be collected on their behalf, they won’t be able to claim GST back because the Government is deciding how much they should get back, and, ultimately, it is the New Zealand consumer that will pay more.

Well, interesting that I didn’t hear from that member any reference to Nicola Willis’ statement on 1 September: “It’s about fairness, ensuring motels are treated the same as Airbnb and Ubers are treated the same as taxis.” But I’m not surprised. Look, the policy rationale for why you have a $60,000 limit for GST turnover, before you pay GST, isn’t that people charging for less than $60,000 services per annum should have a GST advantage over other people; it’s just that when you’re a small business like that, the administration costs for a small trader are disproportionate to the GST that would be collected. So it’s an administration rule that’s an efficiency rule that sits behind that. And of course that just falls away when, instead of 100 Uber drivers all doing their own GST returns, you collect it at the platform level because of course the compliance costs associated with this just are so much lower, on average, because it’s one GST return for Uber rather than 100 GST returns for 100 Uber drivers. So that’s why you can move away from the $60,000 threshold. As to the point that the Uber driver doesn’t get the benefit of their inputs, they do in the calculation that is made, which is why, in effect, they are paying a net GST of 6.5 percent instead of 15 percent gross.

Thank you, Minister. I did make reference to what Nicola Willis said. I said that they should be treated equally and they should be treated fairly, and in this case they are not. If we take the example the Minister has given of a taxi driver versus an Uber driver, that taxi driver gets to claim back the full amount of GST on their purchases in the case of their work vehicle; an Uber driver does not get to do that—number one.

Number two: Minister, I assume what you’re saying in as far as the only reason that this Government, the Labour Government, is not making people who earn $60,000 or less register for GST and collect GST and pass it on, is because it’s too difficult. What that suggests is if this Minister can find a way to make it easier and less costly administratively for smaller businesses to have to collect and pass on GST, and the Government will decide what their off-put on that should be, that he’s in favour of that.

In effect, the taxi driver and the Uber driver are not being treated the same. Where a taxi driver will earn $20,000 in a year, he does not have to register for GST, but may choose to; an Uber driver who will only earn $20,000 a year will have GST collected on his or her behalf. That’s not equal and that’s not fair, as our finance spokesman said the system should be. If this is just around how easily money can be collected, then New Zealanders all over the place should be very, very worried, because it sends a signal that the Government, if it can find ways to collect tax from you, will be coming to do that.

The final thing is: fine about this Minister finding an easier way to collect money from very, very many New Zealanders, from those that have baches and they rent them out from time to time to those that want to supplement their income through driving a car or riding a pushbike to deliver food and so on who must pay tax on that earning. What he’s actually saying is that he does not believe that there will be an extra cost to the New Zealand consumer, and that is manifestly not correct. This isn’t a fair and equal service. It burdens New Zealand consumers because they will have to pay more, and at the same time it is actually un-levelling the playing field, saying there are a group of New Zealanders who earn less than $60,000 for whom now the GST regime will be applied to, but they won’t get the same benefits of getting GST back, depending upon what their outgoings are. Secondly, another New Zealander that doesn’t work online with a New Zealand company overseas will not have to register and pay GST for the same amount of earnings.

That isn’t fair, that isn’t equitable, and it’s actually just this Government after more tax to spend on things they want, rather than trusting New Zealanders to have their own money and get on with their lives.

The Minister of Revenue mentioned that Inland Revenue will get only 6.5 percent of each dollar spent on stays and rides by way of the sales tax. In practice, the law of supply and demand meant that 6.5 percent tax burden was likely to be split in some proportion between hosts and drivers on the one hand, and the customers on the other. So the price of stays and Uber rides is likely to rise, but not by the full 6.5 percent. Do you agree with that, Minister, and what do you think the figure is?

I agree.

OK. So Andrew Bayly’s tabled amendments to Part 3 are out of order as they were not lodged with 24 hours’ notice.