Russell DeborahDr DEBORAH RUSSELL (Labour—New Lynn): Several of the members of the Opposition have proposed alternative names for this bill which is always an entertaining thing to do. So I am going to propose an alternative name for this bill as well: Taxation"—we'll keep the "Annual Rates for 2019–20" because that's a straightforward constitutional requirement. So "Taxation (Annual Rates for 2019–20"—and then I would call it—"A Practical Response to a Changing World) Bill" because that is what this bill is about. It is a practical pragmatic tax response to a world that is changing.Let me talk about how that works. Let's start with the GST measures—the GST measures that are supported across the House. When GST was first introduced when it first became something that New Zealanders had to deal with on 1 October 1986 the internet barely existed. The internet was barely there. It was nothing like the world we live in today where we can go online and at the drop of a hat buy 20 ties at a time by sheer chance by pushing a button or go and buy books buy records. The world has changed and now it is very easy for New Zealanders to buy goods from overseas GST-free.It's not happening just to New Zealanders. It's happening in any place in the world where there is a value-added tax of some sort. So the Australians are facing this issue as well as we are. Other countries are facing it—the issue that they're not being able to collect the value-added taxes on goods and services that are consumed within their country. So like the Australians we are introducing some rules around the collection of GST—not a new tax. GST existed already—a tax on consumption in New Zealand and the consumption is indeed happening in New Zealand. All we are doing is collecting the tax.It's a straightforward practical response and just like other countries around the world we will be requiring overseas retailers who sell more than $60000 worth of goods and services into New Zealand a year to register for GST and remit that to us. In Australia it's a little bit different. They are going to impose it on goods and services above $75000 because that's their GST threshold. It's a very practical response to a changing world and it is an idea that is supported across the House. May I suggest in response to the previous speaker perhaps somewhat tongue-in-cheek that the rules around racehorses are also a practical response to a changing world—a changing world for the racing industry.But let me move on to another practical response to a changing world. I intend to remind members of the House about the Taxation (Budget Measures) Act of 2010. Colleagues which party was in power when that particular Act was passed—the Taxation (Budget Measures) Act 2010? Who was in power? It was the National Party. And the interesting thing about that particular piece of legislation is it contained a very practical response to a changing world—a practical response that in the parlance that is used across the other side of the House "introduced a new tax" to the rental property market. They are not shy about doing it. They are not shy about taking a practical response to a changing world.What it did that particular Taxation (Budget Measures) Act 2010 when the National Party was in power was it removed depreciation on buildings and it had a direct effect on the rental property market. It increased the amount of tax that rental property investors had to pay. They are not shy about it. They are not shy about taking practical responses to a changing world and the changing world was that building values were going up and up and up instead of down and down and down so they took a practical response. So if they are so fond of practical responses to a changing world why then are they opposing the rules around ring-fencing?Kieran McAnulty: Now that's a good question.Dr DEBORAH RUSSELL: And it is a good question. So let me tell you what is going on with this ring-fencing. The way I want to talk about this is to focus on something that the Hon Amy Adams said and that other speakers from the other side have repeated saying that no other asset class has its losses ring-fenced. Why the Opposition speakers are saying is the Government imposing special rules—very special rules they think—for rental properties? In order to answer that question I need to go back a step or two.Look anyone is entitled to run a business. Anyone is entitled to run a business and to make losses. The interesting thing is that the IRD doesn't require people to be good business people; it just requires them to be in business and if they make losses then those losses can be claimed against any other income that the business person might have. So there's no need to be a good business person. But in most circumstances there is a natural barrier to the amount of losses that can be claimed year after year against any other income if it might exist. The business person who is making losses year after year eventually runs out of money—kaput gone; sad event—and it's pretty rough; there's no doubt about it. But there is a little bit of a difference when it comes to rental properties because at present there is no natural barrier to the losses being claimed.At present what is happening is that asset values have been going up and up. So someone who invests in rental properties can incur losses year after year after year and expect to recoup them when they sell the rental property for an untaxed capital gain. So there is no natural barrier to spending more and more and more on a rental property and getting the taxpayer to subsidise those losses through writing the losses off against your other income.So we are taking a simple practical pragmatic measure to limit the amount that ordinary taxpayers have to subsidise rental property losses. We aren't denying the deductions altogether. A person who makes a loss on a rental property can carry that loss forward and set it off against future profits on a rental property or if they're operating within a portfolio of rental properties they can set it off within the portfolio. So the deductions are not being denied. All that is happening is that they are expected to make a profit in the long term. They are expected to at least break even or to make a profit. Isn't that what you want an investment to do? Surely someone makes an investment in order to make money not in order to claim tax losses.So this is a very practical response. It's a pragmatic response. All it is attempting to do is to ensure that those who invest in the rental property market will in the longer term look to make a decent return off that and good on them if they do that. That's tremendous. We're just not going to let other taxpayers subsidise it. This is a practical response to a changing world and that is why I commend this bill to the House."