Russell DeborahHon Dr DEBORAH RUSSELL (Associate Minister of Revenue): I rise to offer a moment of calm and quiet and rational analysis on this excellent bill the Taxation (Annual Rates for 2022-23 Platform Economy and Remedial Matters) Bill (No 2). The annual rates bill happens every year as a matter of law. Every year the Parliament is required to confirm the rates of tax that are paid. It has to be done by the end of the tax year and that happens to be 31 March. Today is 28 March; we're getting in with three days to spare on getting that one done. So we simply do have to confirm the annual rates and it's a fairly routine and regular process each year. I want to talk a little bit about the problems that the Opposition has alleged exist in this bill which I think really demonstrates misunderstanding on their part; just a bit of misunderstanding. Let me talk first about the platform - based tax. Now the idea behind this tax—it is not a new tax. All it is is applying GST to people who provide goods and services via a platform. And there's an important point here: ordinarily a small business can opt out of the GST rules. So as a matter of law there is a threshold set in the Goods and Services Tax Act. It's in section 51 of the Goods and Services Tax Act and it sets a threshold of $60000 and any business or any activity that has a turnover that is more than $60000 is required by law to be registered for GST; to charge GST on the goods and services they supply. They can always claim back the cost that they themselves pay in GST as well. So thinking about it for a moment Mr Speaker you of course will realise that any motel will likely have a turnover of more than $60000 each year—will collect more than $60000 in sales. Taxi drivers will collect more than $60000 in sales every year. So motels and taxi drivers are required by law to be registered for GST. So that means any ordinary old business is paying GST in that space. Now I just want to go to another section of the Goods and Services Tax Act for a moment. It's section 6 of the Goods and Services Tax Act. Now any entity that is engaged in continuous or regular activity supplying goods and services or services in return for a consideration is actually caught by the GST rules—so that would be any activity is caught by the GST rules. Even someone who has a very small business that turns over only $10000 a year is actually caught by the GST rules except that later on in section 51 under that $60000 threshold those very tiny micro businesses can opt out. And that was really put in place as a matter of convenience. So what's the point of imposing those kinds of costs accounting for GST on a very very small business? And what is the point from the revenue's point of view of trying to collect those very very small amounts of GST? So as a matter of compliance cost as a matter of the efficiency of the tax system that threshold sits in there so that tiny businesses are not required to register. Now when Airbnb-type businesses started out—so accommodation-sharing businesses started out—and when ride-sharing businesses started out they were actually promoted as part of the sharing economy which was a way that a person could share a ride in their car; they could share a room in their house—perhaps if they were going away for a weekend they could rent it out; perhaps they could allow their spare room to be used from time to time. It was very much based around the concept of sharing. But these days accommodation providers providing via an app and ride-sharing providers doing so via an app are not part of the sharing economy; they're part of the economy full stop. The businesses over the years since they first started have changed in their nature so that now people will buy a house and rent it out over Airbnb as a matter of course. People now will earn a full-time income from driving an Uber. So those sharing services are now just services full stop. But of course the services that were operating via an app weren't collecting and paying GST and that put the more traditional providers—the moteliers the taxi drivers—at a real disadvantage. So what this platform tax does is it evens up the playing field. Now technology has changed the way we do business and because technology has changed the way we do business our tax system needs to change to meet it as well in order that it remains fair for everyone. And that is what the platform tax is doing. It's very very straightforward. It is simply a matter of fairness. I want to address the issues around the deductibility of interest or not which were raised by the Opposition. And again that's an interesting point for tax technical reasons. Now traditionally a business or a person can deduct expenses to the extent that they were incurred in earning assessable income. Now of course someone who buys a property—uses a mortgage to finance it; pays some interest—is of course earning two types of income. They are earning rental income and they are earning capital gains on that property. And we know that in recent years in New Zealand the capital gains on property have far far far outpaced the rents that people earn. In fact the reason really that people have invested in investment properties is not because of the rental income; it is because of the capital gain the untaxed capital gain and yet they claimed an interest deduction—they claimed an interest deduction. So you could try to apportion that interest deduction but it's rather hard to do. So what has been done is we've gone and said—but for two very good reasons—we have a housing crisis that has been exacerbated by the demand for investment houses driving prices up so that young people cannot afford homes. So we have tried to address that by looking at some of the issues around interest deductibility and it is in fact a pretty sensible thing to do. And what we have done is we started to remove the capacity to leverage up your investment by getting that interest deductibility. So it's actually quite a sensible thing to do. And I want to remind the Opposition of this: if an investor sells their property within the 10-year brightline and makes a profit on it well that's fantastic. You know that's a good thing. Making a profit is always a good thing. Now they will pay tax on that profit that they make but they can at that stage claim the interest deductions as well. All right? So quite clearly because they're paying the tax on the capital gain they can claim the interest deductions that's sitting in the law as it is. So that's a fair aspect of the law. And the reason that we have the carve-out in this Act for build-to-rents is because actually we straightforwardly need more housing. We need more housing that is provided at a level that people can afford to rent it. And that is what the build-to-rent market does; it provides another mode of finding accommodation in New Zealand not our highly highly distributed private rental market—not necessarily buying a house but sitting in that space of a build-to-rent. So that is what that carve-out does; it supports that way of addressing the housing crisis. The Opposition have raised concerns of the bill but I hope that they might realise that their concerns are in fact not justified. This bill takes some very very sensible measures to address a real need in our tax system and I'm delighted to see it does. I commend this bill to the House.