Robertson Grant: Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill — In CommitteeText is incorporated into the Bound VolumeRobertson Grant: Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill — In Committee[Sitting date: 12 April 2016. Volume:713;Page:10405. Text is incorporated into the Bound Volume.]GRANT ROBERTSON (Labour—Wellington Central): I want to talk first about the good bits of Part 3 of the Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill and then about the bits that have not been dealt with. The thing that is good is that we are taking a step forward here in understanding the new way that commerce is done. You know it has taken us a little while as a Parliament to catch up with that but the truth is that there will be very few parliamentarians and very few people listening to or watching the debate tonight who have not bought something online in the last year or so. It is now a very core part of how we do shopping. Everything from booking holidays to downloading your favourite tunes on to your iPod to use when you go out for your walks—all of those things are now part and parcel of daily life and so it is important that if we are to create a fair tax system that we begin to look at that.What this piece of legislation does as my colleague Stuart Nash has said is deal with what are called remote services or intangibles which are essentially e-books music videos and software that we purchase from offshore websites. So it is an important thing and there were certainly strong submissions made to the Finance and Expenditure Committee from people who do provide in that area. The easy one is to think about the difference between Netflix and Lightbox with Netflix being the international offshore provider of streaming television services and Lightbox being the one provided ultimately by Spark a New Zealand - based company. Those two companies will now be treated fairly under this piece of law and that is good for GST purposes. That is an important step forward for us and one that the Labour Party does strongly support.Where our concern arises is that the opportunity has been missed to then take that to the next logical step and that is around tangible goods. The reason why it should have been taken now is that we are now setting up a very very unfair situation. If I want to go out and buy a birthday present and buy a book and I go on Amazon—I personally do not own an e-reader but I prefer hard-copy books; I prefer to hold on to books and read them—and order online a hard-copy book and it comes into New Zealand for me that is not going to create a GST obligation. But if I download it as an e-book to an e-reader—if I did have one—then it would. That is the unfairness that retailers in particular across New Zealand have rightly come to the committee on and said: “Good on you for taking one step forward.” But if we really wanted to support New Zealand businesses and if we really wanted to support those main street retailers as Stuart Nash called them then we would have taken that extra step.The arguments that were raised when we raised this in the select committee were largely around compliance and around the cost of that at the border. But I actually think the wherewithal is there for us to step beyond that if we are serious about having a fair tax system. It was disappointing to us that some of the very very good submissions that came through to the committee particularly from the retailers were ignored by the Government. It is this part of the bill where we feel that the missed opportunity is the greatest because this was the chance to create that truly fair base to our tax system.There are rules that have been put in place. My colleague Stuart Nash mentioned before that the supplier of remote services to New Zealand consumers has to exceed $60000 worth of services in a 12-month period. That will capture those larger providers but the truth is that in terms of the ones that could really be effective for New Zealand we are not going to be reaching those because the system does not go beyond the intangibles. The suppliers of remote services by non-resident suppliers to New Zealand will not be subject to GST unless the supplier and recipient agree otherwise in which case the supplier will be zero rated. The supplier will then be able to claim back any New Zealand GST costs in making zero-rated supplies.Another change that has been made is that offshore suppliers will be required to determine whether a customer is a New Zealand resident on the basis of two non-conflicting pieces of commercially available evidence of residence. So we have to prove here that someone actually is in New Zealand for GST purposes. Those sorts of rules are useful.The Commissioner of Inland Revenue has got some discretion when working out whether someone is genuinely in New Zealand. I do know from some of the work that was put in front of us at the select committee and from the reading that I have done that those suppliers at the other end of the chain—the Amazons the Apples and so on—feel that sometimes with some jurisdictions it is quite hard to establish exactly where somebody is particularly now around the way in which telephone numbers can transfer across borders. So the idea that a billing address and a country code of a mobile phone SIM card are required to be able to establish whether or not somebody is actually resident in New Zealand is important. It is less of a problem in New Zealand I suspect. I do not think New Zealand phone numbers are used in quite the way that some other phone numbers are but that is an important aspect of deciding whether or not somebody falls under the provisions here.If a GST-registered business is inadvertently charged GST it will have to seek a refund from the non-resident supplier. However if the payment for the supply is $1000 or less the non-resident supplier will have the option to provide a tax invoice to the purchaser to allow them to claim a reduction rather than to refund the GST charged. This was raised in the committee by some submitters as effectively being a base threshold for involvement within this regime and again we were happy to accept that as providing the appropriate level of compliance burden.As I said the Commissioner of Inland Revenue does have the discretion to require a person to register and pay GST in cases where the person provides false or misleading information about themselves in order to avoid GST if the GST amount involved is substantial or the behaviour is repeated. There have been concerns again about where people appear to have a company that is based in New Zealand but actually they do not. This has not yet become a major issue but it could if somebody was genuinely working very very hard to avoid their GST obligations. We need to find a way and the committee felt that the Commissioner of Inland Revenue deserved a level of discretion to be able to deal with that.There are a series of things in here that are useful and that will make the system work for tangibles but I just return to the point that that is only half the story—in fact it is less than half the story because it is the movement of tangible goods that has the biggest impact on New Zealand businesses. There are good solid retailers across New Zealand that are struggling to compete with people because they are not being treated the same way. To me that is a fairly basic principle of what our job in Parliament is: to set the rules so that there is as level a playing field as there possibly can be.The Government is right in bringing forward a bill that makes that playing field level for those who supply intangible goods—digital goods. It is right to do that. But it has completely let down those who work hard every single day in the retail sector of New Zealand by not doing the same thing for tangible assets. It is not as hard as the Government is making out. This can be done with the appropriate thresholds. We always accept that there will be a threshold below which you do not go because compliance costs are too difficult but at the appropriate thresholds we could be supporting New Zealand small businesses today through having a piece of legislation that gives them the same GST treatment as their counterparts overseas. Government members might want to stand up take a call and tell us why they have not done that because in the absence of someone explaining it we have a piece of legislation here that is letting down a group of New Zealanders.