Cosgrove Clayton: Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill — First ReadingText is incorporated into the Bound VolumeCosgrove Clayton: Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill — First Reading[Sitting date: 08 December 2015. Volume:710;Page:8645. Text is incorporated into the Bound Volume.]Hon CLAYTON COSGROVE (Labour): I think Kris Faafoi my colleague said it all—that that was an inspirational delivery by that member David Bennett. That member who purports to be a guru on tax bills is the chair of the Finance and Expenditure Committee whose first utterance was to provide us with a complete series of irrelevant information and a capital gains tax. What he did not say though in his sort of obsession with online services as he wants them to be was that when we look at the GST on online services this was going to be you recall the big hit for the Minister of Revenue. The Minister of Revenue came out with a discussion document and he was going to get tough with those people in respect of putting GST on online services. He was going to “level the playing field” I think the words were for the retailers of New Zealand—level the playing field.The Retailers Association and others stood up and applauded him and said this was a wonderful thing and then he delivered this bit of piffle in here which effectively—and I challenge those members to go and ask. They may have been visited by the Retailers Association—I have; other colleagues have—to discuss this and other issues. The Retailers Association is on record as basically describing this bill as piffle. Because what it does—it is not the big hit; it does not level the playing field for all retailers—is it selects the low-hanging fruit in respect of e-books music internet movies and videos and that sort of stuff.If you are competing with Apple iTunes you are probably not going to be the local music seller from down the road on the corner with one staff member. No you are going to be the big end of town—The Warehouse and those big retail providers. This bill does not deal with any of the things like for instance purchasing clothing overseas. It does not deal with any of those imported purchases that the vast majority of small to medium sized businesses are competing with because it does not touch on or impose GST on any of those areas.So the Minister Todd McClay came out with a big hiss and a roar and a discussion document saying that he was going to level the playing field and what did he do? He picked out e-music e-books and one or two others and said: “Isn’t this wonderful?”. Well it will be very interesting to see the Retailers Association and its submission to the select committee when this goes through because I know there is gross disappointment amongst retailers that the Minister did not keep his promise and did not go far enough.Yet again the modus operandi of this Government is that when a problem comes up and it is politically difficult it holds off and holds off and holds off until it reads the opinion polls and works out: “Hang on”—a bit like the property issue in here—“the people have had a gutsful of this. We’d better be seen as a Government to actually be doing something practical.” So what it does is take a minimalist approach—we will get to the brightline test in a minute—to do just enough to be seen to be doing something or anything and then it tells the people: “It’s all a done deal.” Well people are not silly and those new members over there who have been elected ought to realise that.We come to the brightline test—the resident withholding tax issue. Again it is worth reminding these members in Government that the 2-year withholding tax—I think the figures are that 15 percent of property in Auckland is sold within 2 years. Most property is held for longer than that. Those who have studied a bit of economics over there Mr Bayly and co. will know that if you are making 24 percent per annum on an investment—he is awake. I would argue that Auckland property unless Mr Bayly has got another investment hidden away somewhere in that great portfolio of his that is making more than 24 percent—I reckon that he would agree with me that that is the best game in town. A 24 percent annual return is the best investment you are going to get in New Zealand bar none and possibly bar none in many respects in a global sense.Most people of course are going to hold for 2 years. Why would you not hold if you are making 24 points a year? So as we said about the last pieces of legislation that went through around this area it is not going to work. People will hold for 2 years and 1 day. The professional property investors of course will simply change their modus operandi hold for 2 years and 1 day and then flick and they will take 24 percent per annum or 48 percent or 50 percent over the 2-year period. They will take it and they will bank it. This measure will not work.As evidence of that it is worth recalling the Treasury advice that was provided to the Minister—and possibly to Mr Bayly and certainly to Mr Bennett being the chair of the Finance and Expenditure Committee and a guru on these matters—where Treasury said: “No. If you are going to actually do this you should put in a 5-year period.” Likewise with regard to the resident withholding tax put on those domiciled overseas who flick the property within 2 years the Treasury advice is the same: the Government should be imposing a 5-year period and that in itself may have some sort of effect in changing people’s behaviour.But oh no. Again what these folks in Government wanted to do after their feet were put to the fire on Auckland house prices after people—young people especially and certainly maybe a number of young people listening to this debate and maybe the odd one in the precincts of this House may one day wish to take part in the Kiwi dream and actually own their own home. Well when those people started jumping up and down and saying “This is not on.” the Government again read the Crosby/Textor polls and after denying there was any housing crisis over the last 7 years—there was no crisis no problem and people should be grateful to the Government it said for what it had done for them in respect of housing which was zero—it thought: “Hang on people are up in arms. We’d better be seen to be doing something.” So what did the Government do? It picked out this little doozy—the previous legislation and this bill—and said: “OK we’ll say to folks that you’ve got to hang on to your property for 2 years or if you’re domiciled offshore you’ve got to hang on to it for 2 years. Otherwise we’ll hit you with a marginal rate of tax.”The interesting thing is that there has not been an outcry all over the parish. Why? Because most people have said: “Well we’re going to hold for 2 years and that’s what we would have done anyway. And”—as I have said—“if we’re getting 24 points per annum in capital gain why wouldn’t we hold on for 2 years? We’ll just hold and flick.” The professionals as I have said will just simply modify their behaviour and hold and flick after 2 years and 1 day.Hon Nicky Wagner: They’re professionals. They have to pay tax anyway.Hon CLAYTON COSGROVE: Ms Wagner is sort of nodding or shaking her head or gesticulating or something. Obviously to be fair to her she is not the Minister of Revenue. He presumably is planning his inaugural trade mission to parts unknown rather than taking a call in this debate. But the point is that this is another mechanism—the third bill—that we I suspect will be back in 18 months or 2 years to amend.The other aspect of this bill is in respect of student loans. I do not think people would argue with that to any great extent. It is a fact. I have had a student loan. I got my first degree under the old system when I think it cost about 300 bucks a year and you got about—Kris Faafoi: Jeez what does that make you?Hon CLAYTON COSGROVE: —not that old—$1500 a year under the old bursary which generally I am sure Mr Assistant Speaker and a few others over there will recall kept you going at the student bar occasionally over the academic year. My second degree was under the student loan system.It is right that if we incur those debts to the taxpayer and we get the benefit of a tertiary education we pay those back. There are always equity arguments around the fringes as to the extent and the process and the burden that is visited on those young people if they cannot get decent-paying jobs in New Zealand but it is appropriate that they do pay that money back and it is appropriate that we look at the process of information sharing between the IRD and the revenue service of Australia.The only qualification I would put on that is there have been a number of occasions when the IRD has not got its act together in terms of information sharing within the family of Crown agencies and one could argue that it should ensure that it gets its act together within that sphere of intra-Crown agencies before it advances off outside the Crown jurisdiction to Australia. But as a first principle it is appropriate that if a student loan is incurred people should be meeting their commitments there.So I say we will support the bill’s referral to a select committee. I know there are other aspects to this bill. There will be some very interesting submissions. No doubt the Retailers Association will come and say “Hey we had high hopes for a level playing field for our members and we were sadly disappointed.” but it will be very interesting to see the explanations coming from the Minister and his successor as to why they did not meet their so-called commitment.