Tabuteau Fletcher: Taxation (Bright-line Test for Residential Land) Bill — In CommitteeText is incorporated into the Bound VolumeTabuteau Fletcher: Taxation (Bright-line Test for Residential Land) Bill — In Committee[Sitting date: 10 November 2015. Volume:710;Page:7833. Text is incorporated into the Bound Volume.]FLETCHER TABUTEAU (NZ First): Thank you Mr Chair. You have thrown me into disarray there. I did not expect that at all. I just want to make the point in starting my contribution to this debate this evening that we are talking about tax policy that has been introduced with three pieces of legislation and here we are tonight debating one part of that three-part package. So that in itself puts a huge amount of confusion around just exactly what is being debated tonight and what will be debated in the future.Alastair Scott: It’s the second part.FLETCHER TABUTEAU: Oh it is the second part—well done to you. What that member perhaps needs to realise is that in order for this legislation to be enforceable and useful we must and we need to debate the first part or the third part for example so that we can have the full picture. I wanted to make that point to the Committee.This legislation and I commend Labour’s contribution tonight is weak it is insubstantial and it will not achieve its stated objectives. Treasury has told us that it will not capture the speculator. It told us that 5 years ago. Treasury made a submission to the Government. It said that this type of legislation this brightline test will actually not capture the speculator.Homeownership without any doubt in New Zealand is falling backwards. Less and less New Zealanders are able to afford—Hon Ruth Dyson: Fewer and fewer.FLETCHER TABUTEAU: Fewer and fewer. Thank you for that correction; I do appreciate it. So the stated objective of this piece of legislation is to discourage speculation and with that in mind to bring down the price of property particularly in Auckland so that the average first-home buyer can actually buy a home in Auckland. That is the stated objective of this piece of legislation but it will not achieve that stated objective.I will just grab a few quotes. Chartered Accountants Australia and New Zealand said quite simply that this is not sound tax policy: “The overall package of reforms lacks the coherence it requires and will not provide taxpayers with the appropriate degree of certainty.” The New Zealand Law Society said that this legislation should not be enacted as it would not meet the stated policy objectives.This is not New Zealand First simply standing up and opposing legislation for the sake of opposing it. Unlike this National Government we listen to submissions we listen to the experts and we acknowledge their contributions. To add to that they told us that this bill would not dampen speculation. Specifically they spoke to the fact that avoidance would be the main reason for it. So a brightline test gives us that 2-year period. The reality is that speculators will simply avoid that. So 2 years 1 day—one of the issues that I will talk to actually later on in the evening is about that practical application of time: when does the measurement start and what is the 2-year period in actual fact?The other educational point for the members opposite—has been spoken very specifically to—is the tax take from this legislation: $5 million. That in itself just highlights how ineffective this legislation will be. I think it was Mr Twyford who outlined the total value of speculation in New Zealand and the contrast between the take from this to disincentivise speculation is just glaring. This bill will not stop rampant house price speculation.So I just wanted to address Mr Bennett who said that the intention test will still apply. He was yelling it out quite abusively while someone was contributing this evening. He said that the intention test will still apply. So there is one of the confusing facts that the member needs to be aware of. It has been stated many times that tax needs to be simple and it needs to be transparent and clear. So now we have two pieces of legislation that will run in tandem. We will have the brightline test saying 2 years will apply with all transactions although I will come to the fact that just what comes into those transactions is a hugely debatable point. But then Mr Bennett told the Committee that the intention test will still apply. It was this Government’s contention—and I will point this out to Mr Bennett—that the intention test is actually supposedly not working and yet he is using it as a reason to say: “Well it will still apply.”So the reality is and one of the contributors put it quite eloquently—I cannot quite reach the quote now so it is not verbatim. They said that the only people who will be captured by this test are those who are caught by unavoidable circumstances. The reality is that if you are a speculator if you know what you are doing and if everything is going well you will avoid this tax; you will simply avoid it. The point was that the speculation itself will still take effect. So the bill will not achieve what it sets out to achieve.I was going to come to the point about the date of disposal. I am speaking specifically to clause 4(1) which inserts new section CB 6A and clause 15 which speaks about the change of the definition of the date of disposal and it now talks about the brightline date to avoid complication. Yet I make the point again that this will simply complicate issues. Then I draw the member’s attention to the fact that sales of contingent interests off-the-plan sales will have a completely different definition which runs counter to the intent of the date of disposal section. Within the legislation itself the off-the-plan sales will run counter to the intent in terms of date of disposal.And then I want to raise the issue that Mr Cosgrove brought up before around the definition of farmland. The reality is as pointed out previously that farmland in itself will have houses on it. One of the issues raised by submitters was about unused farmland. We are talking about economic units that must be making a profit—that is not quite the right terminology but they must be ongoing concerns and they must be running as a business as it were.But when you talk about a small parcel of land that would be exempt if it were not used in combination with other land for farming business. The definition in the bill as introduced uses the concept of an economic unit which would have ruled out such a provision or situation. So I just put it to the Minister that in regard to the definition of “farmland” we have ongoing confusion and we will need further clarification there.I would like to comment on the contribution from Miss Genter. The reality there is that the definition of “residential land” is that the relevant land-zoning rules would apply. So initially we were talking about how residential land would be defined as including bare land that because of its area and nature is capable of having a dwelling erected on it. But as was pointed out again in an earlier contribution that definition of residential land even within councils’ land-zoning rules is ambiguous and quite broad. Exceptions within that can be brought into play either by those wishing to avoid this or by those who are caught unintendedly because they were not sure of just what is meant in the definition. The courts are going to require a great amount of time to define and outline just what it is we are talking about here. Thanks.