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Members, we now come to Part 5. Part 5 is the debate on clauses 187 to 204, “Amendments to other enactments”. The question is that Part 5 stand part.

Thank you, Madam Chair. I’ll just take a call on this. I’m looking here at the amendments to the Income Tax Act 2004. What I’m interested in is clause 200C. I’ll remark here that it is remarkable that we’re amending an Act that was repealed by the Income Tax Act 2007, but yet it seems still to be relevant.

But what’s happening here is that the definition of “business use” has a small change so that the words “and exclusively” are added. So business use in the 2004 legislation is defined as “for a motor vehicle and for a person, means travel undertaken by the vehicle wholly in deriving the person’s income”. So I presume that they will now read, “for the usage undertaken by the vehicle wholly and exclusively in deriving the person’s income”.

I’m interested in why “and exclusively” is needed, and does not “wholly” already cover it? I mention that because I think there was a bill introduced today about plain English or something, and “wholly” would already seem to mean that everything was included, so the inclusion of “and exclusively” would seem redundant.

So I’m interested in why this bill includes “and exclusively” and if that means that the word “wholly” in other pieces of legislation—and I’ve not reviewed all the other legislative references to “wholly”, but if there is now an indication that when something applies to something “wholly”, that that means that there can be other things that somehow are not part of the “wholly”, which is why we need the “and exclusively”. Thank you.

I’m looking at clause 188, and in particular 188(4) and (5), where it talks about “QROPS”, which is a new acronym that’s being introduced into the Act. Interesting, given we’ve just had that plain language bill introduced, and yet we have another acronym coming in. Now, in order to know what “QROPS” is, we have to go back to Part 2 of this particular bill, where it’s defined. It’s “a superannuation scheme in New Zealand”—so a New Zealand KiwiSaver scheme, a New Zealand Super scheme—“that is a qualifying recognised overseas pension scheme”—a qualifying recognised overseas pension scheme, or QROPS; and this is the interesting bit—“for the purposes of the Finance Act 2004 (UK)”.

We didn’t actually discuss this much during our Part 1 debate—I don’t want to go back to—

CHAIRPERSON (Barbara Kuriger): That’s good, because we won’t.

Hon Dr DEBORAH RUSSELL: —the Part 1 bit or even the Part 2 bit or whatever it was, but I do want to talk about this QROPS accumulation, which is sitting in clause 188(5). It talks about, “in relation to a member of a KiwiSaver scheme, [it] means the net value of the foreign superannuation withdrawal derived by the member from an interest in a superannuation scheme”. It’s quite a complicated little definition there, about where a person has accumulated super scheme amounts.

What I’m asking from the Minister here, in relation to this, is it amends the KiwiSaver Act, but it does seem to involve some quite complicated calculations and analysis and sort of trawling through transactions and so on that is required in respect of the QROPS schemes, of the QROPS accumulation. In particular, this is because it goes back to the Income Tax Act 2007 and that has been reinvested in KiwiSaver schemes before 17 July 2015. So we’re already going back nine years on that—well, nearly nine years on that. So going back quite a few years doing some complicated transactions.

What I want to know from the Minister is: what are the compliance costs associated with this for KiwiSaver schemes in New Zealand? We know that this particular section of legislation has been changed in order to ensure that people don’t end up with a double tax burden or with an extra tax charge, but there’s also a compliance cost for the schemes in terms of calculating all this and keeping track of all these records. I wonder if the Minister could just talk us through the extent to which compliance costs were taken into account when working out whether or not it was sensible to make this change to our tax law.

Thank you very much for the members’ questions. In regard to clause 200C, interestingly, at that time the Minister of Revenue was Dr Michael Cullen, and he made a decision to remove the word “exclusively” from the definition.

Hon Rachel Brooking: A very, very sensible man.

Hon SIMON WATTS: Well, no, in retrospect, maybe it wasn’t, because, subsequently to that, there’s been a lot of confusion. We’re simply 19 or so years, or not 19—21 years later, we’re reversing it back to what it was before 2004 and adding “exclusively” back in there. So, there we go—a little bit of history for those that are studying taxation law, or whatever they’re doing at home while watching this, no doubt.

With regard to clause 188(4) and (5) and the term “QROPS”, just for those that are wanting to know, basically, if you go across to the UK, get a pension over in the UK, and then you return to New Zealand, you would want to bring that pension back with you, that’s the model. The UK legislation has rules where those pensions have to be within a specific entity in New Zealand, and that entity is called the QROP. That, basically, maintains the same structure and form as what it is in the UK, and then, when you hit your retirement age, you can also get that money out. It just stops people taking retirement savings from the UK and spending it on whatever they like, and there’s no integrity between countries.

What we’re simply doing is adding flexibility in these changes. Where someone originally brought their pension over and, say, stuck it in one of the KiwiSaver funds or, hypothetically, one of the banks, at the moment they can’t change that and move it to another provider. So we’re bringing in flexibility to allow those individuals to move that QROP from, say, bank A to bank B, or to another provider which offers QROPS, and that’s, just again, flexibility.

The compliance costs in that actually give more taxpayer flexibility. It also means that, obviously, some KiwiSaver funds have better returns than others, and that allows taxpayers, in terms of personal responsibility, to be able to make more informed investment decisions around their retirement, which I think is a good thing. So those are the answers to those two.

Thank you, Madam Chair. I have a question for the Minister of Revenue from his Amendment Paper 247, and this is clause 200H. I just want to say I’m learning a lot from this bill in terms of how taxation systems work. But I think for this one, with 200H, I know we explored some parts of the final-year fees-free scheme under Part 3, but I think new section 195B, inserted by clause 200H, is something I want to get clarification on from the Minister. So the Minister has given us clarification under Part 3 that when the final year is free, it, essentially, is a reimbursement after the completion of the degree, which is confirmed here.

Let’s say, in an example where a student needs to take on a student loan to pay for that final year, and upon the receipt of their qualification, that final amount is credited to them with that qualification. However, let’s say there’s a scenario where a student was intending on doing that, got a loan, and decided to take a gap break after one semester, and then decided to go overseas on work experience, which then would trigger student loan interest as a part of that, despite the fact that they would decide to come back to Aotearoa at some stage to complete the degree. Would the credit from the final year’s fees-free against the borrower’s consolidated loan balance include the additional interest that a student would accrue during the gap year when they no longer become a tax resident of Aotearoa and then triggers that international loan interest rate and potentially debt rate? Can I just check with the Minister on whether the final-year fees-free has taken this into consideration. Thank you.

Thank you, Madam Chair. Again, focusing on the Minister of Revenue’s Amendment Paper, because they are amendments that have not been through a select committee process, so I just want to ensure that we have the policy intention really clear. I’m looking at the Amendment to Taxation (Annual Rates for 2021-22, GST, and Remedial Matters) Act 2022. That’s on page 14 of the Amendment Paper, AP 247.

Now, I notice that there’s been a change of a previous Act. It’s been an extension to what looks like a sunset clause. So the application date for when this provision basically closes—so it’s been extended for two years from 1 April 2025 to 1 April 2027. It looks normal, right? It looks like a remedial matter until you look at, actually, what that section is extending and it’s extending Schedule 7 of the Tax Administration Act 1994—the disclosure rules. These are disclosure rules that were brought in during COVID-19 and, from my reading of it, it had a sunset clause of 1 April 2025, but that’s now been extended. New section 200I(2): “In section 231(3), replace ‘1 April 2025’ with ‘1 April 2027’.”

So you look at Schedule 7 amended by the Taxation (Annual Rates for 2021-22, GST, and Remedial Matters) Act 2022, the disclosure rules, it makes changes to when the Commissioner for Inland Revenue may disclose the information, which is information for COVID-19 purposes, with other Government agencies, but only if the commissioner considers—and it’s got four different qualifying tests to get in there because it’s “and”, “and”, “and”, “and”. So you look at the clause that it’s amending.

You’re going through now the Tax Administration Act, which the Amendment Paper is now changing. It talks about section 18—which is the secrecy provisions for the tax Acts—“does not prevent the Commissioner disclosing to a government agency information about a person or entity for the purpose of enabling the government agency to provide or fulfil any duty, obligation, or other thing in relation to any person or entity in connection with COVID-19”.

Then, through that particular Act, it states all the different Government agencies where the secrecy provision doesn’t apply—so the New Zealand Customs Service, the Ministry of Business, Innovation and Employment, workplace safety, agencies for charities regulation, agencies for foreign trust regulation, Government agencies with voice recognition analysis, the Financial Markets Authority with the KiwiSaver information, Land Information New Zealand, the registrar of courts, credit reporting agencies. It keeps going: agencies for the gambling levy, the Department of Internal Affairs offshore betting charges, the New Zealand Film Commission, the Registrar of Companies—but I think that’s now being repealed under these changes—the Registrar of Companies again, KiwiSaver providers, agencies for R & D, agencies for Australian wine producer rebate, regulators under the Overseas Investment Act, the chief executive responsible for the administration of the Residential Tenancies Act. And that’s just Subpart 1 of those disclosures.

Working off a phone and it’s difficult to cross-reference different Acts which you don’t have a paper copy of, but if I understand it, all those disclosures, unless they’ve been repealed by subsequent Acts—so there’s been a couple of Acts between 2022 and this one in 2024. Is that correct? Am I reading that correct? I would like the Minister to correct me if I’m wrong; I’m happy to take it if I’m wrong.

Is it correct that now those disclosures which allow the Commissioner of Inland Revenue to, basically, breach the secrecy rules, the secrecy rules won’t apply to all that list of Government agencies has now been extended from 1 April 2025 to 1 April 2027? If my interpretation is wrong, I’m happy to be corrected, but I just want to check if that is the case, because it’s quite serious if it is.

Thank you, Madam Chair. I haven’t had the opportunity to participate at this part of the committee stage yet, so it’s always a pleasure to receive a call and to be able to do that. I wanted to focus specifically on the Minister of Revenue’s Amendment Paper and look at the changes to the student loan scheme. But I want to cover some different material from what’s already been discussed in relation to that.

One of the papers that has been tabled to support the Minister’s changes under the Amendment Paper to the student loan scheme is the supplementary analysis of the final year of fees free. This is a regulatory impact statement which goes over the impact of what the implementation of this policy would mean. The thing that really stood out for me, and I wondered if the Minister would be able to reflect on this, was the Treaty of Waitangi analysis that is included within this document. I also note that this particular document is dated 22 October 2024, so I have questions about how this was taken into account at the time when the policy was decided and also if the Minister has had an opportunity to reflect on some of the quite blunt statements which are included in this document. That is the overall opinion in this document: that the new final-year fees-free policy does not fulfil the Crown’s obligations under Te Tiriti o Waitangi.

It goes on to say that the new final-year scheme is not the best approach to address financial barriers to equity of tertiary education access and achievement for all learners, including Māori learners. There was also limited engagement with Māori learners, and the conclusion of it is the Crown’s obligations under article 3 are not fulfilled by this particular policy. This has real implications for learners, Māori and non-Māori, in the implementation of this particular policy.

The Minister, as well—I have a question around this particular policy and how much advice, if any, he received around the particular implications of the employment statistics at the time that information was gathered about the first-year free policy and then looking to change that to the final-year policy. Because, of course, it is very well known that in situations where there is high unemployment, tertiary education enrolments tend to go up, and in situations where there is low unemployment and plenty of jobs available for people, then there are fewer enrolments. So it seems to me that the data collection in relation to first-year fees free was impacted by periods of time under the previous Government where there was significantly more job opportunities available for people and now we’re seeing—and I’ve heard this reported recently—the increase and, in fact, the financial increases, which will, I’m sure, be of interest to the Minister, especially the budgeted financial increases in relation to tertiary education. So the statistics, when you look at them side by side, really don’t necessarily tell the full picture.

One of the big things that has been advocated over many years in terms of engaging populations that haven’t historically engaged in tertiary education, especially university education, to the same degree as other population groups, has been the deterrent factor of the expense of education and the fact that that is a significant cost outlay—different cultural approaches towards going into debt, which are different between different cultures. We shouldn’t assume that taking on debt is seen as acceptable in every single culture. My experience and information that I’ve heard about from different people is that it’s a vastly different proposition to some cultures to take on a student loan, compared to other cultures. I think that is something that needs to be taken into account when the switch occurs.

My question, really, is in terms of this quite substantive advice and also adding to the fact that due to the time lines available, there wasn’t enough time to do significant stakeholder consultation—did the Minister consider that at the time? Has the Minister considered this advice further? Has he looked specifically at the differentiation in employment data between when the first-year fees free and last-year fees-free scheme was implemented, and has that caused him to reflect and perhaps think of changing any of those decisions in relation to that?

Thank you very much, Madam Chair. Working our way through those questions, we had a question in regards to extending the date of repeal of information-sharing provisions—new clause 200I. This is particularly focused around extending the repeal which relates to the current authorisation for provision of information sharing between IRD and the Companies Office. It’s making sure that the repeal of that aspect is on the same date that the proposed new information-sharing agreement will come into force. So it’s dealing with the Companies Office and IRD, and that’s the purpose of that clause.

There was a question from the Greens member in regards to student loans, around interest. Obviously, if a student loan borrower goes overseas, in that instance, they would be subject to interest on their loan. However, when the individual returns and completes their final year, which, I think, was the question raised, they will only be credited back for the fee portion of their fees—they won’t be credited back for the interest portion—which is the policy intent.

Lastly, the last member notes around the fees-free—I mean, it’s not within my scope to be commenting around the broader policy intent. Obviously, that is a policy that is being implemented by our Government; we think it’s a very effective and appropriate policy. It makes a lot of sense to do fees-free on the last year, versus the first year. It turns out that people stay on and finish their degrees, surprisingly, under that little incentive, versus just doing it and then deciding to do other stuff. It’s a common-sense policy, very practical and realistic, but what we’re really talking about here, in the context of the tax Act, is how we deal with that flowing through in terms of student loans. I didn’t hear a question in that regard.

One member also just asked a question about not having a physical copy of the legislation. For those members who haven’t been here too long, there are copies of the legislation sitting on the Table in front of us, if they want to refer to those.

I want to move on to—this is in Part 5, so it’s clauses 197 through 199, which are amendments, of all things, to the Stamp and Cheque Duties Act 1971. Interesting that we’ve still got this, given that most of us no longer have cheques or use them—I can’t recall the last time I wrote out a cheque—but, of course, it does have particular relevance in this particular tax bill, in particular because this is where the Minister of Revenue asserted that there was a growth measure in this bill. When we asked him to name, way back in the Part 1 debate, one measure in this bill that was something that would promote economic growth, this was the particular set of measures he cited, the AIL clauses—or the approved issuer levy rules.

So here it is, the actual particular clauses he was referring to—also, 128 and 141. In particular, this clause 199, what it does is it allows the circumstance where someone has forgotten, through oversight, to register that they are paying interest as a New Zealand borrower paying interest overseas, and they’ve forgotten to register for the approved issuer levy—the AIL. The impact of this is paying, I think, a 2 percent interest tax rather than 15 percent and so on. What it does is it enables this to happen when there’s been an oversight and someone’s made a mistake somewhere along the way, and they get to put it right and therefore get a lower tax burden because they have the opportunity to put things right.

Now, that’s a little unusual. Most of the time, people are expected to know what the tax law is and they’re expected to comply with it. Turning up to Inland Revenue and saying, “I didn’t know.” is usually not taken to be a reason for getting some kind of concessionary treatment. Indeed, one still has to pay one’s taxes, and, in fact, one ends up paying fines on it as well if you’ve gotten it wrong. So there does seem to be a circumstance here where a particular set of people who might be subjected to taxation are getting, maybe, preferential treatment—maybe the sort of treatment that lots of us would like to have through the income tax system.

Now, I know that Inland Revenue can be really quite good when people do make mistakes with their taxes or do make mistakes through oversight. We always encourage people, if they run into problems with their taxes, to contact IRD and to sort it out, and IRD do work with taxpayers to ensure that they get their taxes right. Nevertheless, we have legislated here provisions—so not just within the commissioner’s discretion but we have sat here and legislated a set of rules which, basically, say that if someone got it wrong and didn’t get something done in time, well, then they can claim this concession. That does seem to be quite an extraordinary thing to do.

I’d like to hear from the Minister, just for the benefit of the committee, for the benefit of those watching at home—and my dad will be watching, because that’s what he does on the afternoons. But just if you could explain it for the benefit of my dad—and, Dad, I will return that phone call—that would be good to hear, just the Minister’s explanation of that.

I move, That debate on this question now close.

Thank you so much, Mr Chair. I’m just wanting to elaborate on the questions that my colleague Camilla Belich already raised. I think we’ll appreciate that this Amendment Paper hasn’t had a chance to go through the normal select committee process, particularly the changes around the fees-free scheme. I appreciate that the Minister of Revenue said that these changes were sensible and made sense, or something along those lines—I’m paraphrasing; I can’t exactly remember what he said—but I think it is worth exploring the policy rationale for this. I appreciate that the Minister said that he either wasn’t able to or wouldn’t get into that debate, but this is the reason why they’re changing this through the Amendment Paper. So it would be appreciated to have some engagement.

It’s really interesting that one of the key statements in the regulatory impact statement is “we do not expect a net benefit with final-year over first-year Fees Free, beyond moderate cost savings.” So, in fact, is that actually the real reason this is going to be put in place? I mean, there’s been some stated policy rationale for the changes to this legislation that they articulated here, which was to, “incentivise learners, particularly disadvantaged learners, to progress through and finish their programme of study”. The problem with that statement is that when you go through the cost-benefit analysis table—which is on pages 18-19 on the supplementary analysis report—they stated that the impact of that on rewarding successful completion of tertiary education was estimated to be low, and the evidence certainty that it would have a low impact at best was high.

Another reason that the Minister, I think, articulated in his previous intervention was for taxpayers to be able to have confidence that their spending would have a positive effect in terms of tertiary education. But, again, in the supplementary analysis report, the section that analysed whether the confidence that their investment has a positive outcome rewarding completion, the impact was estimated to be low. So, again, there’s been this rhetoric that this legislation is actually going to make a substantial difference, but the analysis that we have in the supplementary analysis report doesn’t seem to indicate that.

Worryingly, it appears to have quite negative impacts on the Crown’s relationship with Te Tiriti o Waitangi. If you look through the section it analyses, it says this policy does not fulfil the Crown’s obligation under the Treaty of Waitangi, and that this policy does not effectively address real barriers to equity of tertiary education access and achievement of Māori learners.

Again, is the actual point of this to save money? I acknowledge that the supplementary analysis report seems to indicate that it does generate substantial savings, that the table on figure 20 indicates about $180 million in the 2024-25 year, $261 million in 2025-26. So these aren’t trivial sums of money necessarily. But, I guess, if the Government’s intention was just to actually produce cost savings, then they should just say that, instead of going through this rhetoric about incentivising learners and rewarding learners when the evidence for that just seems skimpy at best.

Again, to the Minister: is the actual point of this just to save money? That’s certainly a valid objective; you are the Minister of Revenue after all. If not, just have that as the actual objective instead of going through this pretence that it’s actually going to improve outcomes for learners in any reasonable way.

Well, the member Francisco Hernandez and I are not going to agree on a point of policy in regards to whether we should have fees-free in the first year of university, which was the case, or moving it to the final year, which is the policy intent. We are here to talk about the taxation bill and the implications of that policy decision on the tax bill, which I didn’t hear a question on, so I’m not able to comment any further other than it’s a policy which is being edited, and the changes within this bill are, in effect, dealing with the tax implications of that policy decision.

In regards to the question on approved issuer levy that was asked previously: obviously, the approved issuer levy tax model reduces the cost of capital on New Zealand borrowers. The change in the bill that we are implementing here simply allows retrospective registrations, which allows people that have made a mistake with their registration to be able to go back and correct that. As a result of that change, that will mean that those people can take advantage of that piece of tax legislation, and that reduces their cost of capital, which obviously has an implication in terms of increasing economic growth, which we as a Government are very focused on.

Thank you, Mr Chair. It’s just a really quick question in relation to the response that the Minister of Revenue gave for new clause 200I. The Minister said that, basically, it was to repeal the Companies Office and that the repeal date of 1 April 2027 was to align with the sunset clause for all the other secrecy provision exemptions. I just want to confirm: are all the other secrecy provisions 1 April 2027; if so, why was the Companies Office the incorrect one—out of that huge list of Government agencies, why did that have a separate sunset clause date, given everything else was 2027?

Quite simply because the agencies have entered into a new agreement between IRD and the Companies Office, which will come in and be effective from the date on which this remedial change repeals the old model. So it relates to those two entities only—hence, why we’re repealing that date, to allow the new agreement to come into effect.

If that’s the case, do all the other provisions, then, still apply for all those Government agencies under the disclosure rules?

They do apply, but this specific remedial, under new clause 200I, deals with the agreement, in particular the Companies Office and Inland Revenue only.

Therefore, under section 231(3)—I just want to be clear, because it’s really difficult to find the application date for that previous Act, again, without having the paper copies to work through it. Do the rest of those Government agencies which had disclosure rules which applied during the period of COVID and subsequently—because I can understand why you might still need those disclosure rules to ensure that IRD can share information with other agencies, particularly around auditing, given the Small Business Cashflow (Loan) Scheme, I think, has payment dates which have come up. For all of those other Government agencies—and there was a huge list of them—is their sunset clause now 1 April 2025 or 1 April 2027? Just to be clear.

Just to be clear, as I said twice already, the specific aspect only deals with the Companies Office and IRD.

So what is the application date for the sunset clause for all the other agencies?

Thank you, Mr Chair. I want to start by thanking the Minister of Revenue for his history lesson about “wholly and exclusively” and to say how pleased I am to be in the same boat as the late Michael Cullen on my thinking about those words.

Now, I just want to talk briefly, and I have a simple question around clause 204. So this is “Goods and Services Tax (Grants and Subsidies) Order 1992 revoked”. That order from 1992 made in the name of Cath Tizard when she was the Governor-General—talk about history!—goes through a number of grants and subsidies that are non-taxable. I see, of course, in the bill in front of me that Schedule 2 includes Government grants and subsidies: non-taxable amounts, and that this was part of the Part 4 discussion, the words in that schedule, but clause 204 is in Part 5.

So my question simply is: why is the order revoked, and is it because everything is transferred into the schedule, or are there some differences between what is in the order and what is in the schedule?

Thank you, Mr Chair. I just want to go back to my previous question from the Minister of Revenue—and thank you, Minister, for the response that you’ve given. Understanding that, if a student takes a student loan in the final year and, halfway through between the two semesters or between that final year, the student goes abroad and no longer becomes a tax resident of Aotearoa, in which case they will accrue interest as part of their student loan. But consider a loan balance on that date does not include the additional interest that is accrued. Just for clarity: this is still the Amendment Paper 247, section 200H, the newly introduced section 195B.

But I wanted to check with the Minister: in that particular case, let’s say the scenario is that a student, for example, has a three-year degree. They have a $60,000 student loan and the final-year student loan is $20,000. Halfway through the semester, they go overseas, they come back for a year, they complete a degree. With universities in general, they allow you to pause your degree for up to three years and potentially longer, depending on your discussion with a particular university, let’s say. You know, they come back and then they complete their degree so they’re eligible for the final-year fees-free scheme. Therefore, the $200,000 is considered a credit against the consolidated loan. The student will still need to pay interest, but in that situation would the student be paying interest on the basis of $40,000 minus the final year, or on the basis of the entirety of the $60,000 loan? Thank you.

Well, as I noted to the member Dr Lawrence Xu-Nan before, if in that scenario the individual went overseas for a portion of time, at that point, interest would be subject to the loan—or the portion of the loan—that they’ve currently incurred at the point at which they depart New Zealand; interest would be applied to that. But, irrespective of the timing of that and the interest relevant, the only amount that would be accredited back to the individual relates to the fees portion only. There is no crediting back of interest under the model which we are putting in place.

I understand that, but, again, what we are seeing here is that a student did not actually, in fact, in those cases, have a $60,000 loan, because that $20k is supposed to be earmarked to be returned. This is, I think, fundamentally one of the concerns that we have when it comes to the previous system, which is that students apply, and that gets money directly to the university, whereas now the system is that a student has to take a loan first, in which case it actually does punish and penalise students further.

So, in that sense, are you saying that it has not been considered at all that student loans would be, or, at least, the interest amount, which is not going to be paid—I get that. But even the interest on the total sum of the loan isn’t going to remove the portion that gets consolidated as part of the credit as the final-year fees-free scheme.

Just reminding the Minister of Revenue of my very simple question about clause 204 and the revocation of the Goods and Services Tax (Grants and Subsidies) Order 1992, and is there any policy difference between what was in that order and what is in the Schedule? There’s COVID payments, which is obviously something that was added after 1992; there’s also the earthquake support payments; there’s payments made by the New Zealand Agency for International Development; and other loans of the Crown; and other various different benefits there. So a very simple question.

I move, That debate on this question now close.

The question is that the Minister’s amendments to Part 5 set out on Amendment Paper 247 be agreed to.

Amendments agreed to.

The question is that Schedule 1 stand part.

Members, we now come to our final debate. This is clauses 1 and 2. This is the debate on clauses 1 and 2: “Title” and “Commencement”.

Thank you very much, Mr Chair. I’ll just help members with this point: the title of this bill is the Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Bill. The title was chosen because that’s, in effect, what the bill does and that’s exactly what it focuses on. The commencement dates are outlined as part of this, which is very standard, and I’m aware that the Finance and Expenditure Committee, while undertaking a full six-month process, did not suggest any changes in regard to both those points.

Thank you, Mr Chair. I’m sure that there are other colleagues who may be speaking more fully in terms of the commencement date—where there are many, many, many, many subclauses. But I have a broader question around the commencement date, noting that a number of the commencement dates are retrospective. I’m just checking in terms of the consistency against the New Zealand Bill of Rights Act report that it doesn’t seem to mention anything in terms of retrospectivity.

I wondered from the Minister of Revenue’s perspective: was there any test or any advice that the Minister has received regarding if there were any sort of retrospective penalties—which, to be fair, often we think of from the perspective of criminal penalties, but it could also be financial penalties in some ways around section 26(1) of the New Zealand Bill of Rights Act. So because of the fact that there are substantial areas which are retrospective, I just want to check with the Minister if that has been a consideration.

Thank you, Mr Chair. And, yeah, two particular questions in relation to the application dates for both clause 138, which is the “Assessment of penalties related to crypto-asset reporting framework”. If we look at the commencement date for it, it looks like it’s 1 April 2026, so it’s in a couple of years’ time. Is that to align with the OECD when the crypto-asset reporting framework does come into force?

And then my second question is actually in regards to the donee status—so that is clause 115, page 128 of the bill; so donee status, or Schedule 32. Generally, if you are a charity in New Zealand, basically taxpayers, if they donate to you, you can get a tax credit back for that donation. If it’s an overseas charity, they need to be listed on Schedule 32, which shows—there’s a number of them that are new in clause 115(2), so there’s six new charities. But then it also deletes charities off the donee status list, so the Help a Child Foundation, Operation Vanuatu, Sampoerna Foundation Ltd, SpinningTop Trust, The Food Bank of New Zealand, Together for Uganda, and then at (4), it deletes Support Services for Humanity.

Now, if you look at clause 2(28), which is the commencement date for the charities that have been taken off, it does talk about clause 115(4), which is Support Services for Humanity. But just checking: should that also apply to clause 115(3B), given they’re also being deleted, and should those charities which I listed—Help a Child Foundation, etc.—also be deleted, from 1 April 2029?

Yeah, thanks, Mr Chair. I mean, the questions in regards to both the Green member Dr Lawrence Xu-Nan’s point around retrospectivity, and the member the Hon Barbara Edmonds’ points around clauses 138 and clauses 115: in regards just to the point around clause 138 around crypto-assets, the member is correct in the context of the timing of when that legislation comes into play.

Clause 115 for standard adjustments around commencement when we are putting in place a new donee charity: in this case, we’ve got Le Quesnoy, which is the World War II charity in France, which is obviously well known and something that has been well supported across the board. That’ll make it a donee charity in the context of overseas charity status, but the context that the member mentioned about the removals and parts, those are standard aspects.

The point that the Green member made in regards to whether we consider that throughout the passage of the other parts: there were a number of questions asked in regards to clauses which had retrospective commencement provisions and, from my recall, we did talk about those as they came up throughout. But that is to be expected in a taxation bill of this size and scale which deals with remedial issues. Retrospective changes are not done lightly. They are well considered, but often the reasoning underpinning that is to ensure the integrity of the tax system and also to be flexible in regards to taxpayers being able to take advantage of that, such as the point that we noted before around making a mistake and being able to retrospectively fix it.

Thank you, Mr Chair. I have a question around the title clause and I just wanted to confirm my understanding of all the things that this bill is doing so I could potentially suggest some changes to that title clause, which is currently the Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Bill. Now, look, I see the “Annual Rates for 2024-25” there clearly and I see the “Emergency Response” bits there quite clearly.

But there’s a number of provisions there that are quite substantial that aren’t reflected in the title clause—for example, the Auckland Future Fund and all the amendments that exist to kind of further enable that, and also all the amendments in the Minister of Revenue’s amendment that deal with the final-year fees-free scheme. Also—this was in the original legislation even before the amendment—the crypto-asset reporting framework. Would the Minister consider amending the title to either reflect all of these things that this bill actually considers, or to shorten it so that it just says “Annual Rates for 2025 and Remedial Measures Bill”, which I believe does cover all of those wonderful topics?

No.

I move, That debate on this question now close.

Really short question. Again, to clarify that clause 115(3B)—because there is an application date for clause 115(2) in clause 1(23) of 1 April 2024. I can’t find the application date for clause 115(3B), which is the deletion of the list of charities. But then in clause 115(4), that actually has an application date which the Minister clarified before, 1 April 2029. So I just need to ask the Minister of Revenue—because unless it’s an application date that is missing—when does clause 115(3B) come into force?

It is an important question because I can’t find the commencement date in those clauses. Again, my apologies if I’ve missed it. There are a number of commencement dates. But it does seem unusual that there is a commencement date for subclause (2), there is a commencement date for subclause (4), but there is no commencement date for subclause (3B). It could be the date in which the bill comes into force or it could be, again, back-dated to 1 April 2024, which you see in clause 1(23). Or you could see in clause 1(28) it comes into force on 1 April 2029, which are very different dates. One’s retrospective; one’s prospective. I just want to clarify: when does clause 115(3B) come into force?

I appreciate the member Barbara Edmonds is as excited about getting this bill passed as I am, because the answer to the member’s question is: the point at which we pass this bill—hopefully, very soon from now.

I move, That debate on this question now close.

Looking for new material—the Hon Barbara Edmonds.

Yeah, the Minister of Revenue responded that that provision should come into force very soon. What is “very soon”? It’s quite clear—again, I went through the dates. There are different dates for the commencement. I am responding directly to the Minister’s response. When does that section come into force? If the commencement date is missing from the commencement clauses, then that’s an issue. When does it apply? Is it a default position as to when the bill comes into force? Is it the position which was taken for retrospectivity around 1 April 2024 for clause 115(2)? Or is it prospective—1 April 2029—for clause 115(4)? Just a very simple question, but it’s important because it’s the commencement date of when these charities are deleted from Schedule 32. Again, that applies because taxpayers who donate to these offshore charities can get a tax credit for it. It can be quite substantial because it can be up to the amount of their income here in New Zealand. I just want to clarify: when does it commence?

Yeah, I appreciate the member Barbara Edmonds’ questions. The commencement clause will come into force on the day after the date on which the bill receives the Royal assent, and that is noted in clause 2, which is the commencement of the legislation, which the member has in front of her.

I move, That debate on this question now close.

The question is that the Minister’s amendments to clause 2 set out on Amendment Paper 247 be agreed to.

Madam Speaker, the committee has further considered the Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Bill and reports it with amendment. I move, That the report be adopted.

Motion agreed to.

Report adopted.

Third Reading

I present a legislative statement on the Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Bill.

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

Hon SIMON WATTS: I move, That the Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Bill be now read a third time.

Well, I’m very proud to be part of a Government that is all about going for growth and making it easier to do business. That is exactly what this bill is about. I would like to thank the House and the members of the Finance and Expenditure Committee for their work on this bill, and their comprehensive input in terms of it. In the progress through the House, the bill has been considered by the Finance and Expenditure Committee, who recommended a number of changes, which we have discussed through the committee of the whole House. The bill as it is now has also had further amendments added through my Amendment Paper through that process.

The first aspect in regards to that was the added measure in regards to helping implement the replacement of the first-year tertiary education fees-free scheme with the final-year fees-free scheme. We’re proposing data collection and sharing processes between the Inland Revenue Department and the Tertiary Education Commission to allow the two agencies to assess learner eligibility and to enable entitlements to be paid. This proposed change will allow eligible learner fees to be paid following the completion of a student’s qualification or programme. This is an important change as New Zealand needs a skilled workforce. A skilled workforce obviously means that we can boost the economy by increasing productivity, attracting investment, and fostering innovation. It will also, importantly, mean that Kiwis have higher wages and more opportunities, particularly in high-skilled sectors. That is why it is important that we incentivise students to complete their studies. This approach will also reward learners who complete their programme of study and, of course, reduce the overall cost of study.

Importantly, there are also changes in the bill which relate to the Le Quesnoy - New Zealand Memorial Museum Trust. This second measure honours our New Zealand troops who served in World War I. In the final week of World War I, the New Zealand division seized control of the French town of Le Quesnoy. Even today, the residents of that community continue to commemorate an important role that New Zealand played in its history, including by having a New Zealand memorial at that spot. That is why I am very proud that this bill includes another new measure within it that adds the New Zealand Memorial Museum Trust - Le Quesnoy to Schedule 32 and gives the trust permanent overseas donee status. This change means that the memorial museum will be treated the same as charities that operate here at home. I acknowledge members across the House, and past members, who have been working diligently to get this change made. At long last, that change has been made here in the House as a result of today, and that acknowledges those that have come before us.

A primary focus for the Government, as I’ve noted, is in the context of economic growth. We are very much committed around supporting the tech sector and start-ups—key drivers of growth and also the aspect in regards to higher-paying jobs and attracting capital. The existing way that we support that tech sector is through encouraging the use of employee share schemes. To keep the exempt scheme effective, the bill also proposes measures to ensure it remains fit for purpose. We want to also smooth the path for migrants wanting to move their overseas pension funds here to New Zealand. Amongst a host of other measures, the bill also contains amendments to provide greater flexibility for the tax system to respond to emergency events. Also, importantly, it introduces measures to enact the crypto-asset framework into New Zealand legislation.

As with many bills under this Government, it also includes a wide range of remedial matters removing the compliance costs on New Zealand taxpayers. The bill covers a wide spectrum of tax system changes, but only one thing remains constant: the need for remedial measures in future tax bills. We can all look forward to those. Remedials are vital. They are important because the world keeps changing and we need to keep our tax legislation up to date. As society evolves, so must the tax system. Business models also change and the tax system must change with them.

While headlighting tax policy changes may come and go, the key for New Zealand taxpayers and tax agents is ensuring that our tax system operates as quietly and efficiently as possible in the background. The private sector is keenly interested in our remedial work to keep the tax system fit for purpose in a changing world. That’s why the bill includes a wide range of remedials, many small but all, of course, very important. They keep the tax system running efficiently, which keeps the entire machinery of Government operating.

In conclusion, I would like to thank the policy officials from the Inland Revenue Department and the drafters of the legislation, all of whom do a significant amount of work for us in supporting our tax system. I acknowledge all of them as this bill is brought to its third reading. I commend this bill to the House.

The question is that the motion be agreed to.

This bill has been through a long, long examination in the committee of the whole House stage, and I thank the Minister of Revenue for his persistence with that. I thank, also, the officials who sat there and supported the Minister and, through that, supported the House in examining this bill.

Hon Dr Megan Woods: Democracy done well.

Hon Dr DEBORAH RUSSELL: It was a lot of work, and, yes, as my colleague the Hon Dr Megan Woods says, democracy done well.

The Minister said this bill was all about growth—growth in the economy. It’s an interesting claim for him to make, because when we asked him during the committee stage if he could name a measure for growth in this bill, he could come up with only one: the approved issuer levy. It took us to point out that the changes to the stock measures for shareholders in tech start-ups and the like was also a growth measure. It seems he didn’t quite know his own bill as well as he might have. But it’s an interesting thing, because just saying a bill is about growth doesn’t make it so.

There are a number of taxpayer-friendly measures in this bill, as would be expected—measures to tidy up the tax system, to make it function better, to ensure that anomalies are tidied up, that the tax system, as the Minister said, must move to meet new conditions. But the bill itself is named after the emergency measures that were put in place. Now, let’s just step back to this. These emergency measures are measures that are pulled out when we have black swan events—events like the Auckland Anniversary Weekend floods, events like Cyclone Gabrielle, events like COVID—where we needed to put in place special measures to help businesses through those times. Under our Government, we did that repeatedly, to the point where we said, “Actually, we need to have these measures ready to go when the next black swan event occurs.”, as it will—as it will. Now, I suppose that could be characterised as a measure for growth, but, really, it’s an emergency measure, and that is what the bill is named for. If we go through all the other measures in the bill, they are tidy-up measures—they are taxpayer-friendly, but they are tidy-up measures. It’s more the silences in this bill that matter, not so much what’s in here but what isn’t there.

As we went through the committee stage of the bill, the Labour Party voted for all the sensible amendments there are in this bill, because the actual technical detail of tax in this country is, by and large, a very bipartisan matter. We tend to agree on the technical detail, and that’s because the tax community, the tax policy people, the tax experts working in the big firms, even the politicians, tend to agree that we need to get the tax system right, that it shouldn’t be full of special little measures for this lobby group and the other but we should just be getting it right, and that’s the overall objective here. We voted for those measures, but the Labour Party will be voting against this bill overall, and that is because it fails to address a critical issue—absolutely fails to do so.

Back when that Government took office, in the briefing to the incoming Minister of Finance, Treasury warned very, very clearly that there is a structural deficit in our tax system; that the way that the tax system is set up, the way that Government expenditure is set up, means that over time there will be a permanent gap between the revenue that the Government collects and what it spends it on. That is because we have some needs in this country which we simply must meet—around health, around welfare, around homes, around education—expenditure that Governments are absolutely committed to no matter what banner they run under. There is a structural deficit in our tax system, and it is caused because there is a giant, gaping hole in the tax system.

That party will say, and parties have said over time, that we have a broad based - low rate tax system. That is simply not the case. We do have a low-rate tax system, but we do not have a broad-based tax system. We do not tax capital income. It creates a huge, longstanding gap in our tax system. In fact, the IMF has talked about it, the World Bank has talked about it, the OECD has talked about it, banks are talking about it, business leaders are talking about it. It is a critical gap in this bill. This bill does not address the overall structure of our tax system, and yet it is a critical need and it is a responsibility that that Minister of Revenue has. It is that Minister’s job to protect our revenue system, and he is notably failing to do it.

It has consequences. Failing to collect the revenue that this Government needs means that our health system is under strain, that there is unmet need in our health system, that there are people being pushed out on to private waiting lists where they are not getting seen, and it means that children are not being treated for palliative care. It means that people are queuing up at emergency departments because our health system is understaffed, and it’s understaffed because it is underfunded. Why? Because we are not collecting sufficient revenue. So we have a huge problem there.

We have an increasing number of people on the unemployment benefit. Why? Because that Government is not supporting jobs. It’s worth supporting jobs. We support jobs because when people are in work, there are all sorts of benefits, of course, to the people themselves, but that is part of what grows our revenue base as well. That Government’s short-sightedness in cancelling construction projects that has left 13,000 workers leaving this country has also left our revenue system short. Jobs actually matter, and that Government needs to support jobs. In supporting jobs, we support our revenue system.

That Government stopped building homes—it stopped building homes. It said it couldn’t afford to do it anymore. Why? Because they are not collecting the revenue they need. Jobs, health, homes—that Government is not supporting them, and the reason they cannot support them is because they are simply not collecting revenue. They are refusing to address the gaping hole in our tax system.

We’ve heard some hints from the Minister of Finance, we’ve heard some hints from the Minister of Revenue that there’ll be some work done on charities and the taxation of charities. There’s a discussion paper out at the moment. We’ve had some hints that there’ll be some announcements in the Budget; we’ll have to wait and see. So that Government, instead of going after the giant, gaping hole in our tax system, is going after the charities sector instead.

There might be a case for it when charities are engaging in the sorts of activities that aren’t real charitable work, but while they’re going after the charities sector, they’re also going after the small not-for-profits—the small not-for-profits in our communities who’ve been told in this latest tax discussion paper that they too may be up for taxation. I mean, that’s the local embroiderers’ guild. It’s the local potters’ club. It’s not sports clubs—they’re exempted—but it’s all the small, little, local groups that operate as not-for-profits, working in our communities, supporting our communities, being part of our daily lives. That Government is saying, “Perhaps we ought to consider taxing them.” They are certainly saying we ought to consider how we tax charities, but what they are not considering is how we tax capital, and that is the gap in this bill.

So I say to that Government over there that they need to grow up. They need to get past the slogans. They need to get past just saying growth, growth, growth, growth, growth as though it’s some kind of cargo cult. They actually need to do the hard work. They need to take a long, hard look at the structure of our economy, a long, hard look at the structure of our tax system, and then they need to take some hard decisions. But they won’t. No courage, no capacity to do it, no interest in doing anything that’s going to rock the status quo. So there’s some good measures in this bill, but overall this bill is a failure and we will be voting against it.

Thank you, Mr Speaker. It’s welcome to hear the speech from the previous member, the Hon Deborah Russell. I’m glad that after having comprehensively ruled out a capital gains tax in the previous election, Labour seems to be following the Green Party’s lead and actually taxing capital, taxing wealth, and actually making sure that we have a fair tax system. Very welcome that we’re still leading the left. That’s welcome to see.

Now, what this bill—

Hon Member: Oh, yes, you are.

FRANCISCO HERNANDEZ: It’s very acknowledged. Thank you for the acknowledgment, to that member on the left.

Now, this bill does several things. One of them is to implement the changes to the annual tax rate. That’s where we see a lot of the flaws—and I’ll get to that later—because what they’re proposing is actually deeply regressive in not only what it does but what it doesn’t do, and the previous speaker went into that.

What it also does is enable a generic response to emergency events. That is one aspect of the legislation we do support. It should be easier to provide tax relief and we should enable the extension of emergency end dates much better. The crypto-asset reporting framework is also an important step forward. Some members were able to hear a briefing from Binance through the Finance and Expenditure Committee, and we heard through that this is something that the industry does support and it is something that will enable better protection of consumers.

It enables the Auckland Future Fund, which is something that we have voted to support. But one of the things that it does do is that it enables the Tertiary Education Commission and it enables a lot of the frameworks around the final-year fees-free. That is something that we do not support. We don’t support it because the supplementary analysis material that came with it was very clear, very adamant that this legislation would actually not have a net benefit compared to the status quo, which is the first-year fees-free, beyond moderate cost savings.

The supplementary analysis paper also went into some detail about how this policy does not fulfil the Crown’s obligation under the Treaty of Waitangi and that this policy does not effectively address real barriers to equity of tertiary education access and achievement for Māori learners.

Now, I signposted earlier in my speech how the changes that this bill was enabling were deeply regressive. They’re regressive in that they don’t actually address the fundamental issue. The previous speaker was right; there is a gaping hole it doesn’t address: the fact that 311 households hold more wealth than 2.5 million New Zealanders. It doesn’t address that fundamental problem.

The tax rates that it enables are deeply regressive, for example—and I ran this through the Government’s own calculator. A deputy chief executive at a ministry—say, the Ministry for Regulation—making $348,000 a year would get a tax cut of $20.50 a week. A minimum wage worker would be getting $12.02 of tax cuts, and a single parent on the benefit would be getting a tax cut of about $2 a week. Now, if someone who’s at the top, someone who’s making disproportionately more—10 times more than a beneficiary—is getting a large amount of tax cut, then that just goes to show how regressive this truly is.

Now, one of the other things that we would have liked to see and that came up during the discussion was a question by my colleague Dr Lawrence Xu-Nan around the provisions around the emergency management measures and how, in some measures, it enabled tax relief for people earning an income, but we did ask a question about whether that could be potentially considered to extend to beneficiaries as well. But, alas, we, unfortunately, didn’t get a response from the Minister of Revenue, and I think that’s really sad to see. It’s really important, because climate—well, no, not just climate but disasters impact people unevenly. They impact people unevenly depending on the social strata and the socio-economic status that they belong to.

Someone who is on a high income, who’s making quite a lot of money, is able to respond to the shocks of disaster in general, depending on the level of disaster and how impacted their home has been, say, compared to a beneficiary on a more limited income. So we would have liked to see some consideration of the ideas that we are proposing.

I talked about what the actual impact of ignoring that gaping hole is, and it is the broader context of the fiscal and economic decisions this Government has made since they’ve taken office, and it’s the legacy of cuts and degraded public services. Around the country, from Auckland to Dunedin, I’ve talked to people, and a lot of New Zealanders are realising that something has fundamentally gone wrong with this country. They’re seeing that their dollar isn’t going as far as it used to, and they’re seeing that the critical public services that they used to be able to rely on get degraded and get cut so much that they’re not able to access what they need.

One of the things that this bill does is enable better emergency management response but, unfortunately, at the same time that this Government has enabled an easier emergency response, they’ve made cuts to the critical infrastructure that underpins our emergency management capacity, such as GNS Science. This is a quote from one of the media releases that described their work as “critical work helping New Zealand adapt to climate change and manage natural hazards and risks from earthquakes, tsunamis, and volcanic erosions.”

We’ve also seen the negative impacts of the cuts felt across our police and our law and order services. This is a media release from the Police Association and they’re saying, “We think that this will be a scattergun headcount-reduction exercise made in a silo by people who don’t understand the work people do, who they do it for, and who also won’t personally be affected by the outcome of the ‘realignment’ exercise.”

That was about the cuts in the civilian workforce, but we’ve also seen that there are 72 fewer police. This is something that is happening because the Government has chosen to prioritise tax cuts to the people making the megabucks that this legislation enables. We’ve seen the impacts of it: a 12 percent increase in thefts at retail premises.

Now, one of the other services that, unfortunately, is being starved the funding, thanks to the tax regime that this legislation helps enable, is the health service. We’ve seen the Public Service Association call out the nearly 3,300 staff going at Health New Zealand and the impact it has on the front line has been well reported. One doctor who was speaking to RNZ said, “One shift I made seven beds, answered a million phone calls, and fixed the printer. Is this a really good use of my time? I suspect I’m the most expensive person there.” But what that also shows is the bogus division between the front line and the back line, because, actually, a lot of the front-line workers know that they rely on the critical work that the back-line staff do, the administrative staff, the people who actually go on to support the critical work that the front line is doing.

But we’ve seen the impact of actually trying to do more for less; this rhetoric that you can somehow cut the funding and still get better or at least neutral outcomes. We’ve seen that in the school lunches programme. We’ve seen that in the impact of children having to put up with burnt lunches or plastic or just really degraded quality. That ideology fundamentally doesn’t work.

But help is on its way. We’ve got the Green Budget coming up in a couple of months and we’re presenting an alternative vision of what we think Aotearoa should be.

Dan Bidois: Degrowth.

FRANCISCO HERNANDEZ: We’re presenting a comprehensive policy that will actually enable the critical public services that we rely on, that doesn’t rely on imaginary market-based mechanisms, that actually relies on making sure that everyone has what they need to thrive, unlike this Government with its record unemployment rate, with an economy that’s still actually—well, one member there was saying “degrowth”, but the economy is actually more than it was this time last quarter, so they’ve done the degrowth and we will green grow New Zealand. Thank you.

Thank you, Mr Speaker. I appreciate the opportunity to rise on behalf of ACT to speak on this Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Bill.

Now, the ACT Party does not like lots of tax, but some tax is all right, and you do need to have it. So I am very proud to be supporting this Government’s agenda to make business easier, to have an efficient background tax system that makes it efficient for New Zealanders to go about their business without the large admin costs—not just for the businesses and trusts and charities but also for the Public Service that is administering the tax system.

I think I can agree with one thing that the Opposition has said today: it has been through a thorough committee of the whole House. I think we spent a good amount of time getting into every little bit and asking multiple questions, sometimes on the same topic. This is going to lead to a swifter tax response in emergency events, providing earlier certainty for affected taxpayers I think we can agree that the work done in that space has been a good thing. There are some tidy-up measures, as Dr Deborah Russell has said, but she also said another thing, which was quite interesting: this is to address structural deficits in the tax system.

Well, I think the Piketty cargo cult that Modern Monetary Theory would just keep raining down from the sky on to the landing strip of a South Pacific island and all we have to do is dress up as if it was going to work for ever is really the definition of the “cargo cult” that Deborah Russell was talking about there. Industry supports it. I support it. Thank you very much.

New Zealand First is proud to support this bill. It aligns, as far as I can see, with our commitment to fairness, to efficiency, and to economic resilience, and we believe that these changes are about an efficient and effective tax system. As we’ve heard, the bill has been through a thorough process. It’s about providing for a practical, well-balanced tax policy.

Look, what I’ve heard from the Opposition—it’s really quite interesting, they’ve basically said, “We like what’s in there; we don’t like what isn’t in there.” That’s a really strange approach to take, saying, “Well, we’re going to vote against it because you didn’t include a whole lot of other stuff.” Well, funnily enough, most legislation doesn’t include everything you want, but at least if it moves you forward, that’s quite a sensible thing.

So what does it do? Well, some of the things we’ve already heard about is that it improves the ability to be able to respond to emergency events and provide tax relief for people who are under pressure as a result of emergency events—that makes sense. We’ve heard about the FamilyBoost—that makes sense. We’ve heard support from the Greens around the way in which crypto is dealt with in terms of taxation, and they like the Auckland Future Fund, but they’re still going to vote against it. Why are they going to vote against it? Basically, what both parties across the aisle have said is they want to see a wealth tax—they want to see a wealth tax. That’s the approach that they’ve taken.

Deborah Russell stands up and says that there is a giant, gaping hole in the tax system. Well, part of that is because our economy got so damaged by her very party. We now are paying something like close to $10 billion a year, and rising, to fund the deficit—to fund the deficit. That is just the interest cost on that debt. That is part of that giant, gaping hole. If we didn’t have to do that—it’s like a family with a mortgage versus a family without a mortgage: you’re a lot better off. So that is part of that giant, gaping hole, and that is part of the response to that.

Across the other side of the House, their approach is just to say, “Let’s tax more and more and more.” The effect of taxing more and more and more is going to drive business out of business. It’s going to mean that people who would invest in New Zealand are going to say, “No, I’m not going to invest in New Zealand.” So what that will do is reduce the size of the economy, all other things being equal. That is not what this this Government stands for.

This Government stands for growing our economy. If we grow our economy, we start fixing that giant, gaping hole that Deborah Russell was talking about, because we have more money to be able to spend on the things which we all want to do. We want to spend more on health. We want to spend more on education. We want to spend more—actually, we want to have a high-quality lifestyle. We cannot do that by taxing our economy into the floor. That is what we’re hearing from the red party and the Green Party over there. They talk about growth as if it is a bad thing. But it is not a bad thing. That is what we have to do if we are going to remain a First World economy with high living standards and good quality services. What I heard, particularly from Deborah Russell, was, “It’s a good bill, but it’s not good enough, and therefore we are going to vote against it.” To me that seems to be a particularly strange approach, a very unproductive approach.

The other thing I heard from the Green Party: this bill simply confirms the tax rates and the tax brackets which have already been agreed through the Budget process. Now, you might not like those, but this is giving effect to those processes. Francisco Hernandez stood up and said, “Well, the people who’ve got the most money”—the higher tax brackets—“get a bigger tax reduction than the people who are further down.” Well, actually, all of those tax targets were about the lower and middle income at most. If you’re paying a whole lot more in tax, funnily enough, when you get tax reductions, it tends to benefit you slightly more, not in percentage terms—not in percentage terms—but in dollar terms. Funny that—because you’re paying a lot more tax.

Can I remind the people on the other side of the House that it’s only about half of our population that actually pays tax net of transfers—only about half of it. So those people at the top, the people you like to malign all the time, are the people who are paying the taxes. They might earn more, they might own more, but they are still paying a heck of a lot more tax than the people at the bottom who earn less.

This is a sensible, practical way of giving effect to decisions which have, effectively, already been made. It’s been through a thorough and rigorous process. I understand the Opposition not liking it, but it is a very counterproductive argument to say, “We like the bits that are in there; we don’t like the bits that aren’t in there.” Obviously, what we’re hearing from the Opposition is political speeches saying, “We want wealth taxes.” That is a message, loud and clear, that New Zealanders should hear: “We want wealth taxes, we want capital gains taxes, and we want to make sure that our economy is not a robust, First World economy.” This Government rejects that approach, and I would like to commend the bill to the House.

The next call is a split call with—

Dr Lawrence Xu-Nan: I guess I’m doing the first split.

ASSISTANT SPEAKER (Teanau Tuiono): —Dr Lawrence Xu-Nan.

Thank you, Mr Speaker. I am particularly heartened by the fact that the other side of the House is listening very intently in terms of what the Greens’ vision for taxation is like, and I do find that heartening.

But let us just be very clear about this—and I think we do need to start off with some of the context—because we are in the third reading, and we do want to round up some of the conversations from the committee of the whole House stage. I think from the committee stage, one of the important things—and we discussed things around health and safety and emergency response. Those were key components of this bill which we did discuss. We did talk a little bit about FamilyBoost.

I want to just sort of mention in terms of the final-year fees-free scheme in particular, alongside my colleague Francisco Hernandez, the fact that what we are seeing is a policy that is ill-thought-out and will actually not benefit the students anywhere. Particularly when we are asking the Minister of Revenue about how the students are going to have that reimbursement if they go overseas and their interest rate was to be compounded as part of their original loan.

It seems like a lot of these sorts of nuances of our interest and loan—particularly in light of the fact as of next week, as of 1 April, we are going to be seeing New Zealanders overseas having their student loan interest rate increase by 1 percent, and the debt increase by 1 percent as well on the fact that they are already unable to pay for some of that debt. We are actually not getting that debt back. There is no evidence to suggest that the repayment has increased. We are actually just punishing our own people overseas. It is a concern when we are having a policy such as the final-year fees-free scheme which has not thought that part out, also, in light of record immigration of our young people to other countries because we have not given them the opportunities to stay in Aotearoa after they complete their degree.

That is a problem because we are taking—or more precisely this Government is taking—an austere approach to our economy. We have seen record numbers of unemployment. If unemployment is the growth that this Government is talking about, then, yes, we are seeing a growth in unemployment. We are seeing a growth in more homelessness, particularly in Māori communities. We are going to be seeing a growth in our prison population, particularly from Māori, as a result of the issues that we are seeing in this case.

But just in terms of when we’re looking at particularly this bill, and just to remind this House of some of those key stats that we have seen in the regulatory impact statement: the top 40 percent of people in Aotearoa will receive $1.6 billion in tax relief, which makes up 55 percent of the total relief package. The bottom 20 percent of Aotearoa, if you really want to look at—and you can talk about all of the pretty terms, of the fact this benefits low and medium income earners, but the bottom 20 percent of Aotearoa only will receive 5.4 percent of the relief package. That is not us making that up; that is in the stats and that is in the document that we have received as a part of this bill: 130,000 people will get nothing at all, and 8,000 households will be worse off as a result of this package. The top 311 households, as we know, hold more wealth in Aotearoa than the bottom 50 percent of the population.

These are numbers, these are facts, and this is what we mean when we say that we do not support this bill because what we want to see is a fairer tax system. It doesn’t necessarily mean that for some people we will be taxing more, but it needs to be fair and equitable. If we want to keep some of the money in Aotearoa as opposed to sending it overseas—just to give another example, Bupa, a retirement manager, as we have been told, made $900 million, but they paid an effective tax rate of $11,000. That is what we’re seeing when we don’t have a fair tax system. So we will not support this, because this is not fair for most people in Aotearoa.

I stand up here today, proud and sad, in some respects. I’m proud to support this, being the third reading of a bill which has had much deliberation, but sad because the chair of the Finance and Expenditure Committee’s father passed away in the early hours of this morning. So, whilst he can’t be here, I just want to acknowledge that loss of Cameron Brewer’s dad, David, and I know that David would be very proud of the big impact in a short amount of time that Cameron Brewer has made in Parliament, and now as chair of the Finance and Expenditure Committee. So, while the family grieves, on behalf of Cameron and his family, I commend this bill to the House.

Thank you, Mr Speaker. I do want to acknowledge the previous speaker Ryan Hamilton’s condolences to the chair of the Finance and Expenditure Committee, Cameron Brewer, and his whānau on the loss of their father. I do want to echo those sentiments. This is still a House where people work and we may have differences of opinion and show them across the House all the time, but, ultimately, we have families, and when family calls, that’s where we should be. I want to acknowledge the Brewer family and the whānau.

It’s been a really interesting period. Since December, I have attended 10 funerals. That’s a lot. They were between December and March, and in one week in December, there were actually four funerals that I attended. For some of these people, a lot of it is in relation to dying very young. You realise your age when your friends around you and people who are not too much older than you pass away. So I do want to just extend those further condolences to the families of the people that I’ve attended—including workers from this House, with Jenny.

My very good friend Marina, or Bino, Akavi—she was 49. She had three children who were between the ages of 18 and 23, and she died from bowel cancer. Now, the reason why I want to mention in particular our friend Bino and why she died from bowel cancer is that she was a Cook Islander. There are statistics out there that show that for people who get bowel cancer, generally you get it younger if you’re Māori or Pacific, and a really important part of treating bowel cancer is being able to get it quickly.

I want to acknowledge that there have been some changes to the bowel cancer screening programme and that this will help more New Zealanders. However, it is a fact that Māori and Pacific people die earlier from bowel cancer, and so we want them to be screened even earlier. The question, and why it’s related to this bill, is that when the resources are stretched and when finance and funding for Government services, including healthcare, are stretched, it is really important that Governments make the choices, backed by evidence, to ensure that the scarce resources that the Government receives through revenue and through the way that we tax revenue—whether it’s a levy in other Acts or revenue from within the tax Acts—that it is sufficient enough to deal with the choices that Governments have to make.

This is my concern and it’s why Labour is not supporting this bill. The main reason why we’re not supporting it is because it has provisions that include tax cuts, but those tax cuts come at a price. They come in and they limit choices made by Governments, and we can stand on this side of the House, in the Opposition and in the Labour Party, and we can fire across the House every day, as we do—sometimes we stand there gracefully and just accept the fire coming back—but we stand here, fighting for those choices for people who have no voice in this House, which is why we stand here in this House, why we fight for those resources, and why we fight for that funding.

As we’ve seen with this tax bill—because, again, it confirms the annual rates for the next tax year, because it has to be done through Parliament—it gives a tax cut. But the Opposition has clearly shown to the Government that through its choices, it means that services to the everyday public are being cut, because you have to pay for the tax cuts—you have to pay for it. If you’re going to reduce the income tax rates, it means that there is a hole in the Government Budget. It means that this Government has made the choice to cut services and funding for key things like healthcare, and I don’t need to repeat the amount of examples almost every day that different members of this House are asking the Minister of Health about. What about the mothers in this area, what about these cancer patients, and what about these patients who are having to wait even longer for their surgery, even longer at the A & E—which is now being replaced in many places by telehealth?

These are the choices you make as Government, and I can hear members on the other side saying, “Bring out the banjos. Bring out the instruments.”—say that to your constituents when they can’t access their doctor or when they can’t go to their doctor because their GP fees have gone up too high because this Government has made a choice not to fund GP services by more than what was required by officials.

Dana Kirkpatrick: What did you do for six years?

Hon BARBARA EDMONDS: Then I hear—no, no, this is for the annual year. It’s quite clear that I’ve hit a bit of a sore point with Government members. It’s quite clear, because you can hear the interjections—because they don’t want to face their communities and say, “I’m sorry your GP fees have gone up because we chose to fund it by only 4 percent, even though officials were saying 5 percent.” It is an annual formula. It is an annual decision. Your decision to give tax cuts comes at a cost. It comes at a cost, and that is the cost of these decisions.

As we’ve heard from other members on this side of the House who have talked about that structural deficit, they’ve talked about the spending that had to be done during a pandemic. But I can still hear New Zealand First members piping up, so let’s talk about those tobacco tax cuts, if the members of New Zealand First really want to go there. The tobacco tax cuts, or the $2.9 billion that was given to landlords—these are all tax choices, and, again, it’s the confirmation of the annual rates in this tax bill.

Dan Bidois: You didn’t mention this in select committee.

Hon BARBARA EDMONDS: And that member, who’s quite new to the select committee, says, “You didn’t mention this in select committee.”—Dan Bidois. You don’t mention this in select committee, because the purpose of select committee is to try and make a bill workable. That is the purpose of a select committee, and you’ll have your chance here in the House to defend your decisions to confirm the annual tax rates, to take more money out of Kiwis, and to take more money out of the healthcare system. Again, I remind the members, every day we are getting examples. [Interruption] And then we hear “More money for health.”, but do you know what? The assessment of the health budget last year showed that it wasn’t sufficient for inflation and it wasn’t sufficient for population growth, so it’s going to be really interesting to see how this year’s Budget is going to address a lag already for population growth and already for inflation.

But that will be a speech for another night, because, again, we go through this House fighting for the things that everyday people want us to fight for. They want to be able to send their kids on the school bus because it’s cheaper, they want to be able to see their doctor but sometimes they can’t afford it, and this bill, basically, creates the hole in which that Government had to make choices to take things away from everyday Kiwis, and what for? So that we can have a sicker population, so that we can have fewer people in jobs, and so that we can have fewer homes?

Do you know what, when you have this revenue hole, what they’ve had to do is borrow more money in order to cover the revenue hole, and it doesn’t make sense—it really doesn’t make sense—given that we’ve heard, time and time again, the Minister of Finance say that we don’t need to borrow for these tax cuts. It was pretty crystal clear in the Half Year Economic and Fiscal Update that the Minister of Finance had had to borrow for those tax cuts, but, again, it’s all come at a choice. These cumulative choices that the Government has made have meant that we are standing here in the House not supporting a bill, because all the choices that those members have made since they’ve come into Government have had a huge impact on Kiwis. They have meant that more people are waiting and that they can’t afford their GP fees. [Interruption] Every member on that side of the House will have a chance to respond, but these are the stories that we are hearing from the different electorates which we represent, and these are all the different—

Grant McCallum: Which electorate are you in?

Hon BARBARA EDMONDS: I’m still the MP for Mana until 2026. At least I know where Mana is, unlike Tim Costley from Ōtaki.

Therefore, we do not support this bill. It provides pitiful choices for everyday New Zealanders, and this bill is a travesty because it is creating a bigger hole in our revenue system.

Members, the time has come for me to leave the Chair for the dinner break. The House will resume at 7.30.

Sitting suspended from 5.57 p.m. to 7.30 p.m.

Members, the House is resumed. The question before the House is that the Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Bill be now read a third time. There are four calls remaining. The next call is a National Party call.

Madam Speaker, thank you for reading that entire, long name of the bill for me. I’m standing to support and to commend this bill to the House. A little bit of myth busting, because our Opposition members seem to think that 3.4 percent of New Zealand taxpayers get most of the tax cuts and pay less of the tax income, but that is not the truth—they pay 30 percent of New Zealand’s tax income. That is, on average, $112,000 per person, compared to the remaining taxpayers, who are the 96.6 percent of taxpayers, who pay, on average, $9,000 per person. Regardless, this bill is to make sure that our tax system is more efficient, more up to speed, and more up to date for the modern society and for New Zealand as a whole, which will benefit all New Zealanders, no matter where you live and who you are. That’s why I’m commending this bill to the House.

Thank you, Madam Speaker, for the opportunity to stand and speak in the third reading of this bill. Our spokesperson on this matter has already made Labour’s position clear that we will not be supporting this bill in its third reading, and highlighted how going through a strong democratic process has truly teased out these important matters that find themselves locked in bills like this. It’s easy to have a look at the title of this bill and think it only adjusts the annual rates. It makes mention of the emergency response matters and other remedial matters. But it is important, as we move to pass this—well, as the House considers this bill—that we make sure that those matters within the bill are interrogated. It is true that the devil is in the detail.

I want to pick up on a couple of points made by Government members in the third reading of this bill. The first point I’d like to make is regarding a New Zealand First member who said that Labour’s stance on this bill is, at least to their mind, unfathomable. I can’t recall the word exactly that he used, but he did say that he found it odd that Labour supported bits of the bill as it was going through the committee of the whole House, but, in the third reading, opposes the bill in its entirety. It is the right of the Labour Party and all parties in this House to take a considered position on this bill. But I do highlight to that member and his party: it’s a lot like saying, “We support the Treaty principles bill but it’s dead in the water.” It just doesn’t make sense, on a scale far greater and far more costly than the accusations that were put towards the Labour Party just before the dinner break.

So to this bill. We spoke at length about some of the emergency matters in this particular bill, about how it was designed to streamline the way that we are able to respond with respect to tax matters during emergency events. I know members canvassed it well, but I still want to place this caveat for consideration, as members consider this bill in its third reading but also its implementation into the future. And that is this: every emergency situation is unique. Now, it’s easy for one to say a flood’s a flood, a drought is a drought, or whatever, but the fact of the matter is every single one—and, Madam Speaker, no stranger on the West Coast—no flood is the same, no particular emergency is the same. As we consider the application of the parts of this bill looking towards streamlining emergency response and support, in particular with regard to tax and business matters around regulation settings, we must make sure that we continue to remind ourselves that there are different circumstances as we look towards emergency matters.

Another part in the bill is we look towards adjusting the annual rates, and we’ve heard a lot of figures in this House, on both sides, speaking of what’s in there, what’s not in there—how, if you tinker, it looks like this; how, if you had made wholesale changes, it looks like this. One of the firm beliefs I’ve always had, and I said it in my second reading speech on this particular bill, is that Kiwis just want to understand that when they work hard and they go about their daily business, the tax system is going to do what it does, and it does it well and it does it fairly. One of the challenges—and my colleagues have pointed out how, in particular, if you tinker around the edges, there is also the fear that many of our taxpayers or all of our taxpayers out in New Zealand continue to be far more confused by what’s happening as a whole; but also the minor changes around the edges that we see dotted throughout this bill.

Just in the final 40-odd seconds that I have left, it was spoken about the World War I war memorial in Le Quesnoy—Le Quesnoy? I’m pretty sure?

Dan Bidois: Le Quesnoy.

Hon PEENI HENARE: Le Quesnoy. I remember the Rt Hon Sir Don McKinnon was a big supporter of this particular matter, and I sat on a number of boards with him where he would continue to grab my ear and continue to talk to me about why this was an important matter. I was defence Minister at the time. I’m really pleased to see that that particular matter has come through this particular bill. But as I stated at the start of my contribution, we will not be supporting this bill.

The matters involved in this bill have been traversed extensively through this House. In fact, we spent more time at the committee stage in this House than we did in the select committee process, and all we heard from the committee stage is “More tax” from the opposite side. We are a Government that believes in an efficient tax system but, ultimately, a minimal tax system, and that is what this bill tries to do.

I commend the Finance and Expenditure Committee, of which I am a proud member, for doing the due diligence on this bill. I acknowledge and just want to shout out to my dear friend and colleague Cameron Brewer, who is dealing with the loss of his father today. Our thoughts are with you, Cameron. I commend this bill to the House.

Thank you, Madam Speaker. I want to echo what my colleague the Hon Barbara Edmonds started with in her contribution: on this side of the House: we give our well wishes to the chair of the Finance and Expenditure Committee, Cameron Brewer. It’s never easy to lose a parent, and our thoughts are with the whānau as they work through this.

My colleagues have stood in this House and they’ve made it clear that Labour won’t be supporting this bill, and we’ve made clear our reasons. Although it doesn’t look like it—it sometimes looks like a very dry, very technical piece of legislation, when you have a tax bill in front of you—it is in taxation legislation where the values of Governments really are laid bare. And that’s what we see with this bill. The Taxation (Annual Rates for 2024-25 Emergency Response and Remedial Measures) Bill is laying bare the values of this Government. We’ve heard members of the Government stand up and say that this is a bill that is about going for growth, despite the fact that, when the Minister was in the chair for 7½ hours in the committee stage, when we examined this bill, he could not point us to where the growth was coming in this bill; how we were going to create wealth in New Zealand. There is nothing in here. Seven and a half hours, the Minister had, to tell us where that was, and he couldn’t show it.

What we were able to drill down into—what we’re seeing in this bill—is the fact that there is not sufficient revenue to pay for what New Zealanders need. I think all of us have just spent a recess week back in our electorates. What have we heard? I’ve had people coming into my electorate office who are homeless. That’s not the celebration of saying you’ve reduced the number of people in emergency accommodation. This is now kids who are living in cars. These are people who cannot be housed. This is me going to visit one of my constituents in Hornby who had Kāinga Ora (KO) coming round to visit her that day because her KO house is now for sale. That’s the kind of Government that we have. Instead of building our public housing stock and people’s houses, what are they doing? They are reducing them.

Simon Court: Labour sold thousands.

Hon Matt Doocey: Did you sell KO houses?

Hon Dr MEGAN WOODS: I can hear bleating from the Government benches that they are increasing it. No, all they are doing is building out the funding that Labour put in. What we saw in this Budget, from these revenue measures, was insufficient revenue going into housing, going into keeping New Zealanders safe in their homes, and providing them the most basic of shelter and safety that they need. So, when the Government talks about how many houses have been delivered, make no mistake: these were houses that were planned, contracted, and funded under Labour. It is from June 2025 this year that we will see this Government’s values come into play, and that is the fact: that their growth in public housing is miniscule. In fact, what we will see is again State house sell-offs, and I know because I’ve spoken to constituents who have had KO visiting them. So do not stand here and tell us you’re increasing houses; the Government is running down the funding that a Labour Government put in to make sure that New Zealanders had that security of a home.

I don’t think there’s one of us that sits in our electorate offices and doesn’t hear and listen to constituents talking about the health system. We had a Government, during the campaign, that waxed lyrical about how they were going to fix the health system. Well, I’m having constituents come in who are waiting longer than ever before to see a specialist. I’m having constituents come in who are going to face increased charges at general practice. I’m having constituents come in who actually just cannot access that health system. What are we seeing? We’re seeing just a constant barrage of headlines about a Government that is not generating sufficient revenue to adequately fund a health system. Instead, we’re seeing headlines about job losses within our health system. We’re seeing the fact that people on sick leave won’t be covered. We’re seeing that vacant positions won’t be covered. These are front-line workers. These are the front-line workers of our health system that are required to make New Zealanders feel safe when they enter their health system, not to have it run down.

What else have we seen? We’ve seen people that are losing their jobs, and we’ve heard in this House today—we’re reminded about Nicola Willis who gloatingly said that we’re going to see a reduction of people walking down Lambton Quay wearing a lanyard. What we’re seeing is thousands and thousands and thousands of construction sector jobs disappearing overseas because this is a Government that has got its priorities wrong. It’s got its priorities wrong when it comes to taxation. We’ve seen that: we saw tax cuts for landlords rather than actually stimulating a housing market. We’ve seen pulling back on infrastructure projects. And it is inevitable that those workers who are not going to find work—and secure work—in New Zealand are going to up sticks and they’re going to move to Australia, and they are voting with their feet. We are seeing that. We are seeing the loss of that, and we are seeing the loss of that because of decisions that this Government is making.

When it comes to that job security, something that New Zealanders should be able to rely on their Government to have their backs when times are tough, we’re not seeing it coming from this Government. Instead, there are tax cuts for landlords and there are tobacco tax cuts in the Budget. That’s what we’re seeing in terms of the priorities. Meanwhile, our health system is crumbling and is not being adequately funded, and we certainly are not seeing the investment we see in that most basic of need: a home for New Zealanders, to make people feel safe.

There are other cuts, and the Government is trying to dress up these cuts all over the show. One that I’m most aware of is one that has just occurred in Christchurch, where the Government came down—the Minister of Transport and the Prime Minister came down—and said, “Christchurch, you are so lucky. Our largesse is going to mean we’re going to reinstate a project we’ve cancelled.”—that Labour had fully funded. What they did not tell the people of Christchurch is that they were robbing funding that had been put in place to pay for improving the public transport system in Christchurch—$78 million that Labour had put in place to improve public transport in Christchurch—has been pilfered by this Government to pay for other projects. The people of Christchurch deserve better. They deserve both projects, because that is what Labour had delivered for them. All we’re asking—all we’re asking—is that they do no harm. They haven’t put any additional funding into Christchurch. All we’re asking is they don’t take away what Labour had already put into Christchurch. They are halving what the people of Christchurch are getting. National is not backing the South Island, and it certainly is not backing Christchurch.

Hon Matt Doocey: More money than you did.

Hon Dr MEGAN WOODS: Instead of putting money in, it is taking away money that a Labour Government put there for the people of Christchurch, and any amount of yelling across the House that “it’s more money that you’re putting in” simply does not stack up. It is simply incorrect, and it is simply, at best, disingenuous to say that is the case. Christchurch people can count; they can see, when you take away funding from one project and then reinstate it by cancelling another, that it’s half of what you had before. That is exactly what the National Government is delivering to the people of Christchurch.

So, when it comes to what people should expect of their Government through a taxation bill, it is about generating enough revenue to pay for homes, to pay for an adequate health system, to make sure the kind of things that are going on—that we can have a place where people have security of work and feel like they aren’t going to have a Government that is going to start putting in measures that is going to cause them to up sticks and leave, like we’ve seen with 13,000 construction workers. And what we also think people deserve from their Government is for them to be transparent and honest about where funding is coming from. So, when you come to town and are delivering a funding cut, have the backbone to front up and tell people that’s exactly what you’re doing, rather than trying to dress up a funding cut—not you, Madam Speaker—as some kind of largesse, because people are not buying it. What we have is a Government that has laid clear its values. It certainly is not on the side of New Zealanders, and it is a Government that is letting down New Zealanders.

Thank you, Madam Speaker. It’s an honour to be the final speaker in this third reading of the Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Bill. I commend the bill to the House.

It’s an even bigger honour to be the final, final speaker on this bill. The reason that we reject this bill is that even though it has a technical sounding name and it has many, many technical elements to it—as we have heard through the 7½ hours of committee of the whole House stage—actually, the substantive part in the bill that would have afforded this Government to show that it cared for New Zealand is contained in Part 1, and they did nothing to make sure that they had enough money to look after the needs of New Zealanders.

I want to focus my comments on the key areas of jobs, health, and homes, because what this bill basically does is reinforce the movement from New Zealand to Australia of many of our most qualified people—including the 13,000 mentioned by my colleague the Hon Dr Megan Woods—who have gone to Australia or elsewhere from the construction sector because there is not enough money to be able to support the pipeline of construction projects.

When we look at health, there are numerous examples of where there has just been enough money in the last Budget to keep the lights on and there is no more money to support surgeries. We’ve heard this morning in the media about the Government contributing an extra $50 million to, essentially, buy private services to try and ease the waiting lists in the healthcare system because there has not been enough money put into health. The effective investment in health, despite what the Government says—and the new Minister Simeon Brown got it wrong and had to be corrected by my colleague the Hon Dr Ayesha Verrall about the funding for health—the effective amount of health that has gone in to all the regions is a cut of between 4 and 16 percent across each of the regions.

No wonder we are hearing the social services saying that there is just not enough money to provide the services that Government need—either through the Public Service or through the NGO sector—which the Government funds. That is clearly the message that I heard when I was at the seniors sector expo last week, where there were numerous Government agencies talking about cuts to the front line—what it meant for them—which was cuts to NGOs, cuts to the type of services they can give, for example, to support families who have had people impacted by stroke or other debilitating medical conditions. So that is the area of health.

We’ve got Dunedin Hospital—months and months of waiting to get a half-decent response on the hospital because there was not enough money from the tax take to be able to simply go ahead and give the southern region the hospital that it needed. And still today there is no solution for pathology in the Dunedin Hospital. In fact, there was a picket at the front of Parliament because the pathology unit is not in the hospital, and pathologists in the public sector do not get paid the same amount as in the private sector because some time ago, under a National Government, pathology was privatised.

This is the kind of direction of travel we’re seeing from this Government. Now, they could have corrected that in this taxation bill by simply making sure they had enough tax revenue to look after the needs of ordinary New Zealanders, but they’ve chosen not to do that. That is why we are seeing in the education system the school lunches debacle—trying to squeeze lunches down to something like $3 a lunch rather than the previous providers under the last Government where there was no problem with the lunches being provided. The Government has shown that it simply cannot afford to provide the services that were provided under the Labour Government and so instead it is moving to what I believe is a privatisation agenda.

Finally, we look at housing. Every New Zealander deserves to live in a warm, safe, healthy home. What do we have in Dunedin, in the Octagon? We have, at the moment, NGOs trying to get tents for people who are homeless living in the Octagon because of this Government’s cruel and shameful approach to housing.

Now, all they had to do was make sure they had enough tax take to be able to afford a baseline for New Zealanders to get the services they need. They had that opportunity in Part 1. They have failed to do it. This is all about choices, and they can say this is a technical bill but they have failed New Zealanders on this bill and that is why Labour very proudly does not support this bill. We will do better in Government.

Members, the House is in committee on the Taxation (Annual Rates for 202425, Emergency Response, and Remedial Measures) Bill. When we were last debating this bill, we had finished the debate on Part 3. Members, we now come to Part 4. Part 4 is the debate on clauses 154 to 186, “Amendments to Goods and Services Tax Act 1985”, and Schedule 1. The question is that Part 4 stand part.

It’s good to be back here debating the committee stage of this bill. Just to remind the committee, we have been working through it clause by clause—

David MacLeod: Question.

Hon Dr DEBORAH RUSSELL: —in a pretty orderly fashion—a very orderly fashion, Mr MacLeod.

I note that we have now been moved into urgency because this whole bill must be passed, as a constitutional matter, by 31 March. The GST section itself doesn’t need to be passed, but the whole bill does. However, I do want to go through some of the amendments that are being made to the Goods and Services Tax Act 1985. Of course, many of the terms used in GST are very similar to the terms used in income tax and other taxes, but there are some notable differences and some real attention to our accounting detail in the GST Act.

So, just to begin with, I have a fairly simple question for the Minister of Revenue, but, I have to say, it is one that as a former accountant—and I know that the Minister is a former accountant, as well; Mr MacLeod looks quite interested over there, too—I find quite interesting. I want to draw the Minister’s attention to clause 155, which is on page 153 of the bill as reported from the Finance and Expenditure Committee, and it has got a very simple set of changes to definitions in section 2 of the Goods and Services Tax Act. But the one that I’ve found interesting is that in clause 155(2) and (3), we’re repealing the definition of a “credit note” and repealing the definition of a “debit note”. Now, it does seem like a very, very small change, but, of course, in order to account accurately for GST and in order for a business to account accurately for it, they need to be able to work out what the GST portion is on each transaction and record it in the GST section of their accounting system. Then, where money goes flying back and forth and where, perhaps, goods are returned so there’s a credit note, and further goods are sold, or all sorts of things go on, so that there’s a debit note, it just seems to me that those credit notes and debit notes are basic bookkeeping records.

No matter how much we have transferred our bookkeeping away from the old-fashioned books and ledgers and the old-fashioned writing it out by hand—which, frankly, is the way that I first learnt to do accounting, which does date me a little bit. We use computers and very sophisticated software to do our accounting, and a lot of the time people can’t even track where a transaction happens. Nevertheless, sitting right beneath it all is that old-fashioned system of books of account, of journal entries, and of those documents of first record, and in the event of an audit—

Hon Simon Watts: So what’s your question?

Hon Dr DEBORAH RUSSELL: I’m getting there, Minister; I’m getting there. In the event of an audit—

Hon Simon Watts: Yeah, come on—we’re wasting time.

CHAIRPERSON (Barbara Kuriger): No, you can’t call from the chair.

Hon Dr DEBORAH RUSSELL: —we actually need to know where those items go back to. We need the evidence of them, and yet here we are, repealing the definitions of “credit note” and “debit note”—some of these basic accounting records.

So, presumably, something has changed, whether in accounting systems or the like, and those definitions are no longer needed. But I would like the Minister to explain exactly why we actually no longer need something which has been an integral part of our bookkeeping systems for a very, very long time.

Thank you, Madam Chair. I have a series of questions which relate to clause 159(1). These are of particular interest to communities in South Auckland who both rely on the port and the airport for jobs. We are very proud to have 16,000 jobs at the Auckland Airport, and half as many at the two ports that function together at the Auckland port and the Wiri port. So I’m asking here about zero-rating of vessels, which is impacted by these rules, but I’m going to ask the Minister of Revenue some particular questions about the impact on workforce because of these changes.

Just to explain this, GST has always been intended to be a tax on goods and services consumed in New Zealand, so it would make sense perhaps to zero-rate goods and services that are associated with vessels which are not intended to be in New Zealand for any length of time. This is a change that makes that sort of update, but it will have an impact on not only those places in South Auckland but also on the people who work around them. This bill changes the GST zero-rating rules for international vessels.

It’s a technical change, but the real-world impact is that for these people who work in these areas, particularly in the marine jobs, and are represented both by the Maritime Union of New Zealand and other unions in this area and in the aviation sector by the Public Service Association and by E tū, there are some real questions around how jobs will be affected, or if they will in fact have more opportunities to work on international vessels that are here in New Zealand and are sort of transiting because of this effective tax treatment they’re getting.

So the services provided directly to commercial vehicles that are temporarily in New Zealand are zero-rated under this. That means that—I assume and want to test with the Minister—repairs, maintenance, refuelling are all included in that. My question is really about: if there is no tax take on those activities, what is the expected outcome on the number of those activities and the impact on those industries, and should this as well include other vessels? Did the Minister consider the effect—if it’s aircraft and ship vessels, does that also include, say, military vessels? Does it apply to goods transiting through Auckland as well, say through China through to South America and using Auckland as a hub? What will be the expected impact of that?

The workforce questions in particular are around, you know, New Zealand’s strong maritime workforce. We’re incredibly proud of that workforce. Engineers, dock workers, wharfies, fuel supply—all of those people might be impacted by this, and we wanted to flesh out with the Minister how they will be impacted. Does this change bring more ships into our ports to New Zealand for servicing, and, if so, will it increase those work opportunities?

Thinking through the impact of, say, our maintenance and repair industries, what’s our workforce plan there? These are some of the construction jobs that just this question time we were asking about the impact from the perspective of making sure that we have enough people to work in our maritime industries now. Do we expect the workforce to have significantly different sorts of opportunities, given New Zealand might be more effectively used as a hub for these sorts of services? We know already that many of our ports around New Zealand are used in this way for transiting vessels, and so is there an opportunity here to increase that, and, if so, what is the likely impact on the workforce going to be?

In our shipbuilding industry as well, are we expecting more work in this area, particularly around those shipbuilding hubs like those in Auckland that have grown up over the years with our incredible reputation on the world stage as yacht builders? Will we expect any change there?

My final question to the Minister on this is: how do we ensure that any impacts on our industries around the sector—particularly our maritime and ports—make sure to prioritise those skilled workers in New Zealand here first? In many of these large-scale projects with construction and maintenance and skilled work that requires machinist skills in New Zealand for many decades, we have had a reliance on the migration in this sector. So I want to ask the Minister: what will the impact be of these changes and can they be used to benefit New Zealand workers first?

Thank you very much to the members for their questions. The first question raised was in regards to subclauses 155(2) and (3), the removal of “credit note” and “debit note”. This is in regards to the supply correction information changes that were introduced as part of the 2022 omnibus bill, which means that, as a result, these two elements are now redundant, and that aspect has replaced that concept within the Goods and Services Tax Act.

The second question that we’ve had is in regards to the zero-rating of GST on commercial vessels coming through temporarily. I mean, what this is doing is fixing a disparity between the GST treatment that’s applied to the services that are provided to those vessels that are temporarily here in New Zealand. It’s obviously not the intent or the policy intent for GST, too, to be applied to services, particularly where the vessels are merely passing through New Zealand to get to their ultimate destination. The reason for this change is because the consumption of goods and services will most probably occur outside of New Zealand in that context. And ultimately, the change that we’re putting through reduces the compliance costs on foreign entities that operate commercial vehicle vessels here. It is only limited to shipping vessels; it isn’t more broad than that. I do know that the Finance and Expenditure Committee did get into this point in significant or in a reasonable amount of detail, but I won’t repeat that.

Thank you, Madam Chair. I thank the Minister of Revenue for his answers there. As my colleague the Hon Dr Deborah Russell indicated, we are working through this clause by clause. In particular, I want to now, I guess you could say, leap forward to clause 157 and ask the Minister some questions around that, particularly as it pertains to the transfer of an emissions unit and the rules for transferring assets. So what we have here, an emissions unit, for the purposes of the Goods and Services Tax Act, is a unit as defined in section 4(1) of the Climate Change Response Act. And the supply of an emissions unit is almost always zero-rated under the GST Act. However, the technical notes to the bill say there’s an error with the interaction between one of the deregistration provisions in the GST Act in the zero-rating rules. What the bill’s commentary doesn’t go into any detail around, though, is specifically which deregistration provision in the GST Act—what is the mischief that we’re trying to rectify here through these amendments in clause 157?

I guess, as well as that, there are some broader questions around that. Why are emissions units deemed to be equivalent to assets; in what circumstances are they like financial services, which is the broader area that it’s falling under here; and how is the ownership and transfer of emissions units determined? Further to that, just in terms of the policy formulation of this part, whether or not there was interplay between the Minister’s own streams of advice in terms of the market for emissions in terms of what advice he may have received from the example of the Climate Change Commission around what it might do in terms of the ebb and flow of emissions. I mean, we’re obviously talking about secondary markets, but I do just want to clarify that this is just pertaining to the secondary market for units and won’t affect the options as they go through. So it’s quite a small area and there are some very specific questions there. I think, in terms of that zero-rating rules and the deregistration, we are looking for some more clarity on exactly which of those provisions in the primary legislation is the mischief that is trying to be rectified through this clause.

Following on from my colleague’s very learned question, I just want to go back to clause 156, because I do have a couple of questions around 156. Now, what 156 is is it amends section 3A, and that is the meaning of input tax. For people watching along at home, input tax is the amount of GST that’s charged when a business buys goods for use in their own business. So it’s the amount that the business itself pays. It’s a tax on the inputs to the business.

There’s a difficulty for people who buy second-hand goods for use in their business—second-hand traders, obviously, because they’re buying from people who aren’t registered for GST. And typically you can claim an amount of GST you’ve paid because someone has charged you an amount of GST. But, of course, if you’re buying from the garage sale down the road, where the person isn’t registered for GST, the way it’s sorted out is you claim a notional input tax deduction, so it keeps all the GST records fair and square and enables businesses to claim what they could ordinarily claim. It’s a nice point and the stuff around that input tax deduction to the purchase of second-hand goods has been there right since the Act first came in 1985.

But there’s an interesting little bit going here in replacement section 3A(3BB)(b), inserted by , and it seems to contemplate a scenario where the GST-registered person who buys a second-hand good or buys a good or a service from someone who is—well, it’d have to be a good—unregistered can claim a greater input tax deduction than would ordinarily be the case. This is where I find it hard to follow—in the circumstance where the particular good has changed hands several times between unregistered people. It might particularly apply to land where it happens. So it seems to be that through the way that the law was written, it contemplated allowing this deduction, but the way it’s written enabled a circumstance where people could possibly swap back several times, swap land around several times, and then the eventual purchaser gets a rather more substantial input tax deduction than they ought to have gotten.

It’s a little complicated and probably needs diagrams to show exactly what’s going on and the flows of money back and forth or input tax deductions back and forth and so on. But in terms of putting this sort of clause in, you’d have to think that there had been some mischief actually going on. It’s a good point for us lawmakers. If you look at—just bear with me for a moment—Henry VIII’s court, Henry VIII issues repeated regulations banning small dogs from his court. So he’ll ban the small dogs, but then just a few months or a year or so later, the same ban is out there again, and then they creep back in and the same ban is there again.

Hon Dr Megan Woods: Did he tax them?

Hon Dr DEBORAH RUSSELL: No, he didn’t tax them. The point is you only make bans against something that’s actually going on. So this is a rule that’s been put in place. But what I want to know from the Minister of Revenue was whether there was any actual mischief going on or whether it is just a possible mischief that could have gone on. So I get that we need to shut down possible loopholes as well as actual loopholes or loopholes that are actually being exploited, but if the Minister could just give us some insight into what was actually going on and whether it was a significant amount of revenue that was involved. Of course, if it was something that was actually going on, well, it’s great to see that particular loophole being shut down. People should pay their taxes—no more and no less than they ought.

I thank the members for those questions. I’ll start with clause 156 and then come to clause 157. The member may recall, from select committee proceedings, that the New Zealand Law Society identified a scenario on this exact point. The purpose of the amendment here is to address an integrity issue where taxpayers could potentially generate unintended GST refunds, in certain circumstances, by selling the same land multiple times between a chain of associated persons. That’s the purpose of what the amendment’s doing. The Law Society identified a scenario where that could play through; hence, the select committee made some amendments but accepted and put this change through, and it’s got retrospective impact back to 30 March 2022, in order to remove that risk. So it is a remedial item to deal with a scenario which may eventuate, and that’s what it does.

The member’s question in regards to clause 157(1)—a question, I recall, in regards to amendments to ensure that there’s a deemed supply in regards to emissions units, particularly in the circumstances when these emissions units are deregistered from GST—the purpose here is to ensure that, when they are deregistered from GST, this is zero-rated instead of standard-rated. Now, the member noted, in regards to emissions units—I mean, these are generally always zero-rated for GST purposes; however, there is a minor technical error with the interaction between deregistered provisions within the Goods and Services Tax Act and the zero-rating rules, and so this technical amendment here is dealing with that error. There is a potential risk with the current law, as it can derive unintended consequences around a deemed supply in regards to those emissions units; hence, the proposed amendment, which the select committee considered and didn’t make any changes to, will deal with this.

Thank you, Madam Chair. I just want to continue the debate in relation to Part 4, specifically in relation to the Minister of Revenue’s Amendment Paper 247, which he has tabled. I think it’s always important that if an Amendment Paper has been tabled by the Minister, we do have the ability to scrutinise it a bit more, because it hasn’t gone through the select committee process. There’s a number of pages here, so I do want to try and work my way through the Amendment Paper just to get a bit more information around the policy intent of the changes which the Minister intends with the Amendment Paper. Again, we weren’t able to contest it as part of the Finance and Expenditure Committee. It’s quite clear that since the report back and the revision-tracked version that the select committee put through, there were additional changes which officials recommended to the Minister.

Why I say this, why we need to debate the Amendment Paper in particular—I remember many, many, many, many moons ago, having to be an IRD official in the place of the Minister’s officials and having to ensure that, actually, if there was a remedial amendment that was put through a Supplementary Order Paper, you can’t depend on the select committee report to provide you with the policy intent. You, basically, have to go through Hansard, through the times where the bill’s actually debated in the House, to figure out, OK, first of all, hopefully, the Minister has talked about that Amendment Paper, and then, second of all, about the provision.

So I just want to ask some clarifying questions for the Minister in relation to his Amendment Paper, particularly around new clause 155B. New clause 155B, which is on page 12 of the Minister’s Amendment Paper, brings in, within section 3 of the Goods and Services Tax Act (GST Act)—basically, provides the definitions that are used within the GST Act. It says section 3 has been amended, the meaning of the term “financial services”—so it’s obviously a subparagraph in there. It says “services provided by the collection agency under section 24 of the Resale Right for Visual Artists Act 2023.”

Now, we have debated the reason, in previous clauses, around this particular provision, the resale right for visual artists, but I want to be able to ask the Minister: does this mean, by including it within the definition of “financial services”, if you look further down into the clauses—you look at clause 157 and it adds a new subsection (29), that “The amount of a resale royalty retained by the collection agency under section 20 of the Resale Right for Visual Artists Act 2023 is treated as a fee paid by the right holder for the collection agency’s services.”

Then again, at clause 170, there’s a new insertion there, new subclause (1B), and then a new subparagraph (ib), “in the case of a registered person who receives a resale royalty during the taxable period for the resale of an original visual artwork under section 18 of the Resale Right for Visual Artists … the tax fraction of the amount of the resale royalty retained by the collection agency under section 20 of that Act; and”. Then, it continues with new clause 176B, inserting new section 26B, “Resale royalties”, and then it says, “This section applies to … registered [persons]” and then it gives a breakdown of those registered persons, how they fit into that test.

So just while I go into those tests, my question to the Minister is: are you clarifying—because, again, this is a new Amendment Paper—that services provided by the collection agency under section 24 of the Resale Right for Visual Artists Act is now a financial service and is therefore subject to—because financial services are exempt under GST. So are you saying it doesn’t apply for GST? Then it talks through the different—again, under clause 157, 170.

So just while the Minister considers that, I’ll go through the test for resale royalties where it does apply—new clause 176B, and that’s “This section applies to a registered person who—(a) receives a resale royalty under section 18 of the Resale Right for Visual Artists Act 2023 … and (b) was notified by the collection agency under regulation 10 of the Resale Right for Visual Artists Regulations … that the resale of the original … artwork which gave rise to the resale royalty was not a supply that was charged with tax under section 8.”

Then there are some qualifying subsections underneath it, such as subsection (2), which says “subsection (3) applies, the registered person must add to the output tax under section 20 for [that] taxable period in which they receive the resale royalty an amount equal to the tax fraction of the amount of [that] resale … including any percentage”—I won’t continue with that particular clause, because it is quite long, but if you go down then to subsection (3), “If the resale of the original visual artwork was zero-rated under section 11” of the GST Act—or is it the resale royalty Act?—it’s “paid to the right holder by the collection agency [and it] must also be zero-rated.”

So my reading of this—and, again, it’s an Amendment Paper by the Minister—under the GST Act, financial services are zero-rated. So they’re subject to GST, but, actually, the amount is zero. Are we bringing in, via the transaction for services provided through the Resale Right for Visual Artists Act, are we saying that that third transaction—so it’s been sold, a royalty’s been paid, then it’s been resold after that; is that not subject to GST because we’re now classing it as a financial service and we’re clarifying under clause 176B what is not a financial service, unless those other criteria apply? Or are we saying it’s subject to GST, it’s a financial service, it’s zero-rated, however it is not classed as a financial service because under clause 176B, if it meets those tests, which I’ve set out, under subclauses (1), (2), and (3), actually it is subject to GST at the 15 percent rate?

I do have a follow-up to the discussion we had a little bit briefly on clause 156. I was asking what mischief there was amongst this that was actually there, and the Minister of Revenue, on 156, did actually say that there was no particular mischief that had occurred, but the possibility was there, that it had been brought to our attention by the New Zealand Law Society, and so the fix was in.

But I guess the follow-up question to that is just the point: why weren’t the existing associated persons rules sufficient? Because we do actually have associated persons rules already sitting in the Income Tax Act 2007—I just can’t recall whether the Goods and Services Tax Act 1985 ones just piggyback on the Income Tax 2007 ones or not. But there are associated persons rules all through our tax legislation, so why were those rules insufficient to deal with this particular potential mischief?

Again, I’m just concerned that—I appreciate the New Zealand Law Society might have identified this particular potential issue, but whether or not we really needed to go to the extent of changing the law to fix it is a different matter, because, surely, our associated persons rules could have dealt with it, because, as the Minister said, the particular mischief only arose in the case of a number of associated persons being involved. So why weren’t our existing rules good enough, Minister?

Thank you very much to the member, and I just acknowledge those at home watching this; hopefully you’re enjoying it as much as we are here. In regards to technical queries in the Goods and Services Tax Act 1985—isn’t it exciting? Those particularly in the gallery watching, I’m sure are intrigued.

The point that you were raising there, if I recall back around the New Zealand Law Society, was in a scenario where you’ve got a farmhouse that sits on a piece of farmland and, in effect, the potential for the farmhouse to have a different categorisation under GST purposes than the farmland. That was the scenario that was played through and hence what triggered the amendment around a potential loophole. So that’s the background context around what was going on there.

We had another question by a prior member in regard to clauses, I think, 155B, 170, 157, and 156—

CHAIRPERSON (Barbara Kuriger): Clause 176.

—clause 176, that’s right, and 185. Anyone, any other bids? No, that’s all.

CHAIRPERSON (Barbara Kuriger): It’s good coverage.

Hon SIMON WATTS: They will relate to artist resale royalty tax changes. So just for the member’s interest, the amendments that we’re making across all of these clauses will ensure that GST is payable on the resale royalties that are payable to artists under the Resale Right for Visual Artists Act 2023. What we are simply doing here is ensuring that the artists and right holders of that artwork are entitled to a resale royalty on the resale of qualifying artwork, and that that is subject to the Act that I noted before, and then making sure the appropriate GST, where appropriate, is considered.

In effect, these changes are ensuring that there is an economically equivalent position—I think you would refer to it as—to non-GST-registered artists and right holders. So the amendment would ensure, in effect, that the appropriate GST treatment of amounts is withheld by the collection agency from the resale royalties by classifying them as fees. So, in effect, that’s what those amendments are doing. As I recall, the Finance and Expenditure Committee spent a bit of time on these clauses, obviously, and didn’t look to make any changes in regards to that.

Thank you, Madam Chair. I will take a brief call on both the Minister of Revenue’s answers to the clause 156 questions and to the clause 159 questions, which have really only just begun. Firstly, I will mention clause 156, given the Minister’s answer about farm land and farmhouse land being treated differently for GST purposes and that not being a change which is about intra-group transactions, which would be covered by the added persons rule, which my colleague Deborah Russell spoke about; I want to ask him: is this change going to have an unintended consequence on those businesses that are in the trade of second-hand sales? For example, an excellent Manukau business, 266 Bikes, will buy up second-hand bicycles from community groups, organisations, churches, and individuals and families as well as accepting donations, and then repurpose those to different uses, whether it’s parts of other repair cafes or to sell on to, say, the school bike programme at Manurewa High School—an excellent programme too.

Is this this technical change for an integrity issue about another thing that will then affect some sellers who make a business from transacting with second-hand goods that might have an unintended consequence for some of these smaller retailers? I do think of every electorate MP here in this House who will have experience of these businesses that do great work to repair, and this Parliament is moving forward on further legislation that will actually incentivise more of this sort of retail where businesses are encouraged to be able to repair and prepare parts for repair for consumer use.

My further question is on clause 159(1). He answered that this was simply about fixing a disparity for those vessels that are not intended to consume those goods and services in New Zealand, because that’s not what GST is for. But my question to him was: then doesn’t this rule in the legislation now create further disparities around similar sorts of vessels that are not covered? I think his mechanism makes a remedy to the Customs and Excise Regulations 1996, but those regulations don’t cover all of the sorts of vessels that might logically be included in this change. It doesn’t cover, logically, military vessels, for example, where the consumption will certainly not be in New Zealand. It doesn’t cover certain types of air vessels. There are certainly lots of other categories now that will be knocking on his door, and I want to know what advice he has had about this being a logical extension of these GST rules—so where should he be drawing the line?

I also want to ask him this: Auckland Airport has a real aspiration to be an airport hub for many of the routes that will travel past New Zealand. Is there an impact here on goods that will be transiting through that service—for example, if you are fumigating goods in the whole of craft, should you be exempting that and should you not be exempting services that are to do with those goods? I want the Minister to clarify for us where he has drawn the lines here and whether that does make sense. If he says that it’s about fixing a disparity, then, surely, there shouldn’t be more disparities after he’s done with his amendments.

Thank you, Madam Chair, and thank you very much to the Minister of Revenue as well for his response in relation to clauses 155 to 167B. If I understand the Minister’s response, it’s, effectively, that it is subject to GST unless clause 176B(3) applies, which is where the original visual artwork was zero-rated under section 11, then it must also be zero-rated. So, therefore, economically, it’s the same equal treatment, if I’ve got that right. I just want to acknowledge the Minister for his response and I bet you a policy analyst or a senior policy analyst in 30 years’ time, when they look at this bill, will be very thankful for that response.

Going now to the Minister’s Amendment Paper and to amendments to Student Loan Scheme Act. This is the wonderful about tax omnibus bills.

CHAIRPERSON (Barbara Kuriger): Sorry, that’s actually in the wrong—

Hon BARBARA EDMONDS: OK. My apologies. That goes back to clause 185B, so I will wait for that call to go through that and I will let the member take another call before I go to the next call.

I’m going to take another call from the Hon Dr Deborah Russell, but I would like perhaps more questions than—we’ve had a reasonable period on this part, and I’m happy that there might be some more questions, but I want questions rather than, you know, full speeches on this piece. And I’m not pointing at that member; I’m talking generally here. I’m listening for new questions but not speeches.

Thank you for that direction, Madam Chair—I notice that you’re always a very fair Chair.

CHAIRPERSON (Barbara Kuriger): Well, I just think this is what the committee of the whole House stage is—it’s about opportunities to ask questions of the Minister. So I think we’ll home in a bit on that.

Hon Dr DEBORAH RUSSELL: In that case, I do want to move on to a clause we haven’t mentioned at all yet: clause 157, immediately after clause 156 which we have discussed. In particular, it’s around the meaning of the term “supply”—a supply is an amount you supply and you pay tax on it. But clause 157 amends section 5 of the Goods and Services Act, and subclause (2) adds, as far as I can tell, new subsection (6E)—oh, no it’s a replacement. But it adds a little bit of information there, that “a payment in the nature of a grant of a subsidy—(a) includes a suspensory loan or advance when the loan or advance becomes non-repayable by reason of its conditions for non-repayment being satisfied:”. So that’s really quite straightforward. It’s basically: had a suspensory loan, the conditions for which the suspensory loan suspends entirely play out, so, in effect, it turns into a grant, and therefore that gets a different GST treatment.

But, again, the question is the same as the one I raised in relation to clause 156, which is, again: was there any mischief being done in this case? Was it something where officials noted that there was a potential for mischief and therefore it should be tidied up, or was it a case where there was an actual problem, where people had noticed a way around the law by sort of using suspensory loans and then converting them to grants, that enabled people to do something was perhaps not quite, shall we say, as straight as we’d like people to be with their tax law?

So a pretty straightforward question there: what mischief was being done, if any; how much of an impact was it having; and why was it worth us taking the time to change the law, unless there was some particular mischief being done this circumstance? So if the Minister of Revenue could answer that, that would be fantastic.

Thank you, Madam Chair. I just want to allow time for the Hon Dr Deborah Russell, the member who spoke previously, to have her question responded to. I just want to check, in relation to clause 161, which amends section 15B of the Goods and Services Tax Act, “Taxable periods aligned with balance dates”—so it’s a remedial change. And it’s a taxable period—for those who aren’t aware—for GST purposes. It’s basically the time period, whether it’s a month, two months, or six months, that people use for accounting for GST. So it basically allows people to align their taxable period with their standard balance date for income tax purposes.

I just want to check in with the Minister of Revenue: is there a scenario where the provisions under clauses 161; 162—I won’t go through it—163; 164; and 165, which replaces section 15EB, would differ in any other case? Again, just making sure that we’ve covered all the different scenarios, because they had come through in submissions. Also, these provisions operate with the Commissioner of Inland Revenue’s approval, so are these circumstances—and, again, it’s a discretionary measure; there are some different discretions within the different tax Acts for the commissioner to use. But clarity is so important, whether that be in a tax information bulletin that’s published by IRD or a standard practice statement, which basically explains when the commissioner’s discretion will be used. Certainty is so important when it comes to tax, particularly around your taxable period, because you could get penalties or you could get use-of-money interest applied. So are there circumstances that the Minister is aware of—knowing that, again, it’s a discretionary measure; we don’t have those tax information bulletins or standard practice statements because usually they’re not released until after the bill—where the Commissioner of Inland Revenue would refuse to allow someone to change their GST taxable period?

So I have two particular questions in relation to clause 161. Would it differ in any other case, in relation to that taxable period? And given it’s at the commissioner’s discretion, are there circumstances in which the commissioner would refuse to allow someone to change their GST taxable period, given we don’t have the supporting documents in order to clarify the intention of the commissioner when applying this discretion in the future?

Thank you very much, members, for your questions. The question in regard to second-hand goods was raised—clause 156. Just clarifying that this amendment would not impact a typical second-hand goods business, as identified by the member within her electorate.

There was a question in regard to non-taxable Government grants and subsidies, under clause 157(2), (3), and (4)—just out of interest, it does impact clauses 185 and 186 as well. In effect, what we’re doing here, these aren’t policy changes, they are consequential changes to move and improve the accessibility of some of the definitions. So, in effect, we’re moving the content into the Goods and Services Tax Act and removing it out of what was an Order in Council. The reason is Order in Councils can be difficult to find and aren’t that accessible; again, the Finance and Expenditure Committee considered that, thought that was sensible, and put that through.

I think there were some other questions in regard to clause 157(8)—again, that relates to artist resale royalty tax changes—and I think the question was in regard to: “Why?” I mean, in effect, this was a matter, and that’s why it’s in there. Why in the Amendment Paper? Well, basically, the issues relating to artist resale royalty tax changes were identified subsequent to the bill coming into the House, and hence why it was put through as an amendment. But, again, the impacts of that deal with points that, in effect, are remedial in nature and improve the effectiveness of the bill.

The last question the member raised, in regard to clauses 161, 164, 165, and the discretion of the commissioner: well, it sort of goes without saying that the commissioner does have discretion, and we’ve got a very competent commissioner of IRD who’s well respected. Obviously, there will be circumstances where the commissioner may use their discretion to refuse a situation—again, that’s an operational matter that’s within the discretion of the commissioner, obviously, but we’re simply allowing that to ensure that appropriate decisions are made in regard to taxpayers’ situation.

Thank you, Madam Chair. A further question to add to my colleague the Hon Barbara Edmonds’ questions around the taxable periods and the circumstances in which people can get the commissioner to approve a change in their taxable period—sometimes it’s aligning with balance date; there are various reasons why. I just want the Minister of Revenue to think for a little bit and to consider the circumstances in which a GST-registered person could repeatedly change their GST taxable period. I think these rules allow the space that a person could change one month and then change back the other way a few months later, and then change again.

Of course, the backstop against that would have to be the commissioner’s approval, but the rules do seem to contemplate that a person is able to do that—that it is permissible within these rules. So, unless the Minister can point me to a particular clause that says a person may do it, say, only once within a particular calendar period—I couldn’t see it sitting in these rules in here, but perhaps it is elsewhere within the GST Act. It would be useful to know. There would be the opportunity for some interesting tax planning there if the commissioner’s discretion was fairly freely granted. So I want to know what protections are in place against that particular sort of behaviour—whether it’s within these clauses. I couldn’t find it within the Act itself. Or are we just relying, in that case, on the commissioner’s discretion?

Well, obviously, taxpayers have the flexibility of choosing what their reporting requirements are in the Goods and Services Tax Act. The circumstances may and can change, hence why there’s flexibility around that. In regard to taxpayers that are deliberately using that for purposes that are deemed by the department as either avoiding or evading tax, then there are provisions within the broader tax system to enable the Inland Revenue Department to deal with those circumstances, which they do regularly.

I move, That debate on this question now close.

The question is,