Nash StuartTAXATION (ANNUAL RATES FOR 2019–20 GST OFFSHORE SUPPLIER REGISTRATION AND REMEDIAL MATTERS) BILLFirst ReadingHon STUART NASH (Minister of Revenue): I move That the Taxation (Annual Rates for 2019–20 GST Offshore Supplier Registration and Remedial Matters) Bill be now read a first time.I nominate the Finance and Expenditure Committee to consider this bill. I'm also making an assumption that that applause was not for this tax bill that is about to be introduced to the House but it does deliver a number of very important pieces of policy. The bill delivers benefits to the New Zealand taxpayer across the spectrum of the tax and transfer system. For the benefit of members I will give a brief introduction to some of these proposals.First GST. The headline item in this bill is a proposal that offshore websites and other suppliers of low-value imported goods are required to register for GST and then collect GST and pay that to the Inland Revenue Department. Members will remember that this is the second phase of GST reforms which began with a similar requirement for offshore suppliers of remote services. These reforms ensure our tax system reflects our changing world.It is increasingly common for people to use the internet for a wide range of purchases whether it be to watch a movie through a streaming service or to buy a new pair of shoes. As this practice becomes more and more common it means the Government is being denied the GST it should be collecting on those purchases. The consequences of not collecting GST on online purchases are that domestic retailers are at a competitive disadvantage as they are required to charge GST on goods that they sell and in competition with big overseas retailing giants many small businesses face an unfair barrier to competitiveness. So this is clearly a problem that needs to be sorted in the interests of fairness and equity.There are a number of ways this could be addressed but we always need to be mindful of compliance costs and the need for simplicity. This bill therefore proposes that from 1 October 2019 offshore suppliers will need to register for GST when their supplies of goods and services into New Zealand exceed NZ$60000 per year. This means they will collect and return New Zealand GST on imported goods valued at or below $1000 supplied to New Zealand consumers. GST on imported goods valued at above $1000 will continue to be collected by customs when those goods enter New Zealand. In certain circumstances market places and re-deliverers may also be required to register.People importing goods and consignments valued at or below $1000 will no longer pay customs tariffs or border security and biosecurity fees which will simplify compliance and administration costs at the border. This proposal levels the playing field by ensuring GST applies to purchases from offshore websites in much the same way that it applies to local retailers. We've consulted the public on these proposals and this is the best and fairest option we believe to address the issue. It's not an issue that is unique to New Zealand of course. As an example most recently Australia has enacted legislation covering similar measures to what this Government is now proposing today. Australia's new rules have been successfully applied since 1 July 2018.Te Reo: another development is that the bill addresses the growing interest in using Te Reo Māori as an everyday language including by businesses.Fletcher Tabuteau: Well done.Hon STUART NASH: Thank you. It has long been inland revenue's operational practice to allow tax records to be kept in Te Reo Māori. While this is a good thing it is not formally recognised in the legislation that taxpayers could hold their records in Te Reo. Instead they are allowed to do so at the discretion of a Government department. This bill therefore enshrines the right to keep tax records in Te Reo Māori in legislation. Rental loss ring-fencing: currently investors with loss-making rental properties have part of the cost of their mortgages subsidised by reduced tax on their other income sources helping them to outbid owner-occupiers for properties yet these investors often make tax-free capital gains when these properties are sold. This bill proposes to address this unfairness by introducing new rules which would mean that owners of residential rental properties will no longer be able to offset rental losses against their other income such as salary and wages. This proposal will make the tax system fairer and help level the playing field between property speculators and investors and homebuyers therefore improving housing affordability for homebuyers and bringing a little bit of fairness and equity into the system.Child support—Madam Assistant Speaker let me now turn to a different matter. A humane and effective justice system is one of the Government's objectives for New Zealand and the tax system has a role to play in promoting it. We're proposing to give the Commissioner of Inland Revenue the discretion to consider other information in order to grant the victim of a sex offence permanent exemption from paying child support. In some cases the person offended against finds themselves in a situation of having to pay child support for a child born as a result of sexual violence. This is wrong and unfair and there are four letters that have come across my desk in my time as Minister which really are manifestly unfair. This will address that and it's fantastic.Since 2006 a permanent exemption from paying child support has existed for such a parent but to qualify for that exemption the rules as they stand require that the offender must have been convicted. The truth is that for a variety of reasons very few sex offence cases are reported and even fewer result in a conviction. The result is that since 2006 only two individuals have been granted an exemption from payment. The proposal therefore is to loosen that requirement and allow the Commissioner of Inland Revenue to be able to consider other information when deciding to grant an exemption. I'd like to acknowledge the work of my New Zealand Police officials who were consulted and who supported inland revenue in the development of this compassionate proposal. This will make a difference in a few cases where a manifest injustice has been committed.Student loans: there are also proposals aimed at making life a little easier for some student loan borrowers. The IRD is working towards a future where most people will not have to do anything in order to meet their tax obligations and their tax refunds for instance will be completely automatic. This happy state of affairs is thanks to a system of taxation called withholding taxes where tax is deducted at source but some student loan borrowers earn income from which student loan repayment deductions are not made—for example when they work over the holidays. It means that the borrower ends up with an amount to pay at the end of the year and often may be required to make an interim payment the following year.As the payments are quite often not as prompt as they should be the borrowers are more likely to fall into debt and therefore incur late interest payments. That's one of those sorts of cascading waterfalls that just end in a bad situation. We are therefore proposing that student loan deductions be made from scheduler election-day and casual agricultural income. These borrowers will find that their end-of-year repayment obligations will be smaller or not required and fewer will be required to make interim instalment payments. As these repayments would be on time fewer would go into debt and incur interest.The bill also tidies up an anomaly where student loan borrowers based in New Zealand do not pay interest but because of the limitations of the IRD's outgoing technology platform interest has to be initially charged and then reversed out to make the loan interest free. This baffling situation caused confusion and consternation for borrowers. The switch from the old technology platform to the new one allows us to rectify this and we're proposing that only overseas-based student loan borrowers be charged loan interest rather than charging interest to all borrowers.The measures in this bill bring benefits to different sectors of our community. The tax system must collect the revenue we need to build vital services but we must do so in a careful manner to avoid imposing undue costs. The tax system can also help to support businesses by providing the environment that nurtures growth. This is a good bill for New Zealand and I am proud to commend it to the House. Thank you.