Huo Raymond: Taxation (GST and Remedial Matters) Bill — First Reading 
Huo Raymond: Taxation (GST and Remedial Matters) Bill — First Reading 
[Volume:665;Page:13326] 
RAYMOND HUO (Labour) 
: 
 Kia ora. 
Dr Ashraf Choudhary 
: Start in Chinese. 
RAYMOND HUO 
: Ni hao. The Taxation (GST and Remedial Matters) Bill makes a number of tax-related amendments and introduces some sensible changes and a number of remedial amendments. Labour will support the bill’s referral to the Finance and Expenditure Committee. 
Broadly speaking the bill makes a number of amendments to GST including zero-rating land transactions where both parties are GST registered. There are adjustments for changes in use nominated persons and the GST treatment of accommodation. It also makes a number of other changes to the KiwiSaver legislation the tax treatment of Government-allocated emissions trading scheme units portfolio investment entity schemes and the tax treatment of superannuation funds. 
A basic element of the GST system is that transactions between businesses should be GST neutral. However infrequent transactions of significant assets such as land often create GST consequences for which businesses may not have planned. There is also a substantial risk to the tax base through phoenix fraud schemes that involve new revenue for the Government. So clause 10 requires GST-registered suppliers to charge GST at the rate of zero percent on the supply of land when the purchaser is also GST registered. A transaction between a registered supplier and a non-registered purchaser remains subject to the existing rules. So that is the first point. 
The second point is that adjustments are made for changes in use. The current change-in-use rules that apply when assets are used for both taxable and non-taxable purposes will be replaced with an approach that apportions the input tax deductions according to the attributes of goods and services. The third point is on transactions involving nominated persons. GST is a tax on transactions and most transactions involve only two parties—that is a vendor and a purchaser. The legislation is not designed to cater for arrangements in which a purchaser nominates another person to receive the goods or to settle the transaction or both. 
The fourth point is that commercial accommodation provided by GST-registered persons is GST taxable. Broadly speaking accommodation in a dwelling is excluded from the tax base because if GST was applied to rent owner-occupiers of residential dwellings would have preference over tenants who reside in rental properties. The definition of dwelling is intended to apply in circumstances that have a reasonable level of sustainability between renting and owning a home. This goal is not currently achieved because of the potentially wide interpretation of the term “dwelling”. 
This bill amends the definition of “dwelling” and “commercial dwelling” to clarify what types of accommodation fall within the ambit of the definitions and to ensure a better alignment of the GST treatment of equivalent types of accommodation. Interestingly this bill makes a number of amendments to KiwiSaver. It is regrettable that the Government did not use this bill to undo the damage it did to the superannuation scheme by cutting KiwiSaver. National gutted KiwiSaver by halving the amount of money that the Government put into it so it decreases the amount that people will save. 
We have been talking about the savings problem in New Zealand for some time now. National’s response was to cut KiwiSaver which had been the first real attempt to lift private sector household savings in New Zealand. It also cut payments to the Superannuation Fund. Bill English has spent the last couple of days bemoaning our level of indebtedness to the world. Unfortunately for him after 2 years in Government both Treasury and the Reserve Bank are forecasting the problem to get worse. National’s belated decision to set up a savings committee is an admission that it knows it has been caught without a credible plan or milestones to catch up with Australia. Two years two Budgets and now it plans to set up a committee. Labour understands and always has that the biggest difference between New Zealand’s economy and our neighbour Australia’s economy is Australia’s better savings record. KiwiSaver spearheaded Labour’s commitment to turning this round but National gutted the scheme as soon as it came into office and suspended contributions to the Superannuation Fund. 
I will quote the  
New Zealand Herald  
editorial entitled “Compulsory super best way forward”: “So compelling is the case for compulsory superannuation that it is a mystery why the Government is setting up yet another working group. It needs only look across the Tasman where the concept has proved so successful over the past two decades that almost two-thirds of Australians now support an increase in contributions to their compulsory scheme from 9 to 12 percent. … The core issue is the sustainability problems of NZ Superannuation as the baby boomers move into retirement. The Government’s response to this has been sharply constrained by two acts.” The  
New Zealand Herald  
cited the two acts: “The first was the Prime Minister’s unfortunate remark that he would resign if his administration ever changed the entitlements for national super. The second was the Government’s suspension of Cullen Fund contributions. Another road that pays for retirement needs will have to be carved out. Importantly compulsory superannuation would provide the added benefit of building a much-needed savings base and reducing the country’s reliance on borrowing from overseas.” 
On that note there are two other intrinsic issues. The first one is that our young people are struggling and our elderly Kiwis struggle to make ends meet. If someone is on a middle income and is not one of the privileged few but one of the many ordinary New Zealanders then that person is struggling too. Another problem as observed by Bernard Hickey is that around 62 percent collectively of our extra savings is invested overseas. Currently 69 percent of the Superannuation Fund is invested offshore once the cash invested here is included in the total. It is 81 percent without that cash. Just over 40 percent of the $5.5 billion invested in KiwiSaver has been invested overseas as well. To sort out the problem the obvious answer is to save more domestically and the obvious mechanism is to make KiwiSaver compulsory while also retaining the current universal New Zealand superannuation system as a safety net. Thank you very much.