Bennett David: Taxation (Bright-line Test for Residential Land) Bill — Third ReadingText is incorporated into the Bound VolumeBennett David: Taxation (Bright-line Test for Residential Land) Bill — Third Reading[Sitting date: 12 November 2015. Volume:710;Page:7998. Text is incorporated into the Bound Volume.]DAVID BENNETT (National—Hamilton East): The Taxation (Bright-line Test for Residential Land) Bill—this is the third reading—is a bill that is sponsored by Minister Todd McClay. I wish to acknowledge Todd and the work he has done in this area especially around tax. It is also a part of a programme of looking at the wider housing market in Auckland and is one of those initiatives to look at that market. When we look at it it is important to look at the fundamental principles of tax law that underpin this area. That last speaker Clayton Cosgrove ignored those in his speech. The fundamental principle is that if you sell a property within 10 years that property is taxable if the intention was to buy or sell within that period of time.When we hear the Opposition members they are always going to say the word “speculator”. They will say: “Speculators are exempt from this. They’re not getting caught by this legislation.” That is rubbish. That is absolute rubbish. The fact is that if someone is a speculator then they are in the business by definition of buying or selling a property. If they are in the business of buying or selling a property it is taxable under New Zealand law. If a property is sold within the 10 years then they have to explain that. All this bill does is say that within the 2-period you are deemed to be basically selling and buying as a speculator would or as a property developer would and so that is taxable.The Opposition is supporting this bill which is a bit weird if they have so many problems with it. You would wonder why they are actually supporting it. But I think that there are some big difficulties in the Opposition. First of all is that they had a programme of a capital gains tax and that capital gains tax policy failed at the last election. I know Mr Assistant Speaker you want me to talk about this bill and this is a taxation on the sale of property and the capital gains tax is exactly the same as that. The Labour members opposite in the last weekend at their conference have put that to bed. They have said that they are not going to have a capital gains tax and that is fine. They have obviously changed their tune but before that we heard from the Opposition—I think the Green Party still holds to a capital gains tax but the Labour Party does not.Hon Member: Yeah we love it. Great idea.DAVID BENNETT: Yes well the Green Party agrees with the capital gains tax but the Labour Party has put that to bed. But the Labour Party also talks about a 5-year rule—that it would be comfortable with a 5-year rule. Well what is the difference between a 2-year and a 5-year rule? You have 5 years and 1 day—same problem. It is exactly the same thing the same problem.Phil Twyford: I thought you were good at maths David.DAVID BENNETT: The member over there says “do the maths”. Well the thing is that member ignores the fundamental principle of tax law which we talked about—that if the intention is buying and selling within 10 years—it does not matter whether it is within 2 5 or 7 years. Within the 10 years if the intention is buying and selling then it is taxable. That is the thing. The 10-year rule is the pre-eminent rule. This is a subset of that rule. The intention—Phil Twyford: If the intention test is enough why bother with this bill?DAVID BENNETT: Well you are supporting it which is good to see. It is good to see.The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! The member is not asking me at all here.DAVID BENNETT: No exactly. The member should stick to the Standing Orders and not try to—The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! The member will now resume his seat. I was trying to help the member stop the unhelpful interjections. The member knows that when the Speaker makes a ruling even from his seat the member is not meant to refer to it.DAVID BENNETT: This bill is actually really important. The Labour Party is supporting it which is great to see but when members opposite talk about a 5-year test that makes no difference because the 10-year rule is the pre-eminent rule. It is the main test in this area of tax law. The 2-year rule is really deeming transactions within that period of time to be considered taxable under tax legislation.When we look at the connection test—well that will be something that will be defined through the interpretation of it. It is not something that the legislation would want to define in this sense because it is something that needs to take into account different circumstances and different factual situations that may arise. That is common in tax law. That is why we have tax definitions and help through the tax department with its recommendations of what would be considered in and out of such a test. Also it is something that gives a bit of flexibility over time to look at different circumstances that may arise. The Inland Revenue Department usually gives examples and it will do so as it provides more information in cases like this so that taxpayers are fully aware of what the situation is.The connection test is as would normally be expected in any tax law. It would not be expected to be defined to the extent that the last speaker asked for. If it was defined to that extent then that would actually create the opportunity for people to get around that definition because they would look at just getting around that part and it needs to have that flexibility within how the application of that test would be.This is an important piece of legislation. The Labour Party is opposing it in principle but then voting for it in practice and it shows its conflict when it comes to this area. The Labour Party does not have a consistent approach. We have seen that in regard to capital gains taxes. We are seeing that again in this House this afternoon. This is a piece of legislation that will have an important effect on the Auckland housing market as other pieces of legislation that were connected with this bill have shown to have had an effect. If we look at the last month’s property price information from Auckland we can see that stabilising and that is after the implementation of the last piece of legislation that connected with this. So it is important that we support this bill and we look forward to it going through the House.