Nash Stuart: Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill — Third ReadingText is incorporated into the Bound VolumeNash Stuart: Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill — Third Reading[Sitting date: 03 May 2016. Volume:713;Page:10727. Text is incorporated into the Bound Volume.]STUART NASH (Labour—Napier): The Minister of Revenue outlined a couple of points there that I think will require clarification. First of all he talked about the GST on online services. He said that what this bill does is it levels the playing field. If only it did level the playing field it would be a fantastic piece of legislation that we could support wholeheartedly. We are supporting this piece of legislation but only because it is better than nothing. There could have been so much more that the Government did with this legislation because the real tale here is that New Zealand consumers are buying so much more over the internet than purely online services. What about all the retail stores? You could have gone hard on the retail stores Minister.Hon Michael Woodhouse: Work in progress Mr Nash—work in progress.STUART NASH: Work in progress—we hear this the whole time. Why bring dribs and drabs into the House? Why not do this all at once? Why not just say: “OK we understand the issue.” As the Minister said the OECD understands the issue. The OECD is working incredibly hard on this with a whole lot of other issues in terms of global tax problems but the OECD has said this is a major problem. Other jurisdictions are implementing such rules but we are doing this in such a piecemeal way.The issue that really needs to be addressed is not so much the online services and at least we have started somewhere but it is the clothes it is the books—and I am not talking about e-books—it is the shoes and it is things that New Zealanders are now going online to buy because this is the 21st century. This is what 21st century commerce looks like. What this does is to immediately give overseas suppliers a 12.5 percent competitive advantage over New Zealanders. People may say: “Oh no well you know they have got to post them to New Zealand. Therefore that is more than 12.5 percent.” That is not right. That argument does not hold water because New Zealand retailers have imported things themselves.Hon Michael Woodhouse: 15 percent now Stuart. Keep up.STUART NASH: Fifteen percent—there you go it is even worse. It is even worse. That is interesting because the reason I said 12.5 percent is that I have this line that keeps playing in my mind the whole time. When John Key stood in front of the cameras in 2008 and said “No new taxes.” he then implemented a new GST tax and he has got a new tax here. So I just keep thinking that no no Mr Key does know what he is talking about but Mr Key is so out of touch that he keeps implementing these new taxes and keeps hammering middle New Zealand—hammering middle New Zealand.We have got to remember that a whole lot of the retailers who own shops selling stuff on main street to Kiwis are middle New Zealanders. They are struggling at the moment and the reason they are struggling is that their main competition is not the bloke the next street over and not the bloke the next city over but the faceless person on the computer over in some other country who has a 15 percent competitive advantage already. We should have closed this down. I would have thought that if this Government was working for middle New Zealand what it would have said is: “We understand there is a problem here. Let us level the playing field.”The Minister has said that it is a work in progress. We hear this too often. What does it mean and when is it going to be here? And why did you not just deal with the issue in one chunk? Why deal with it in a piecemeal way that just sends the wrong message? I just think it is a missed opportunity—there is no doubt about that.Let us have a look at the residential land withholding tax. It was good to hear the Minister say that this is a new tax. We all heard him and it is a new tax. It is one of those new taxes that Mr Key said he would never bring in but it is a new tax. But the Minister did say that this brings integrity to the tax base. It does not bring integrity to the tax base. This is the problem. In New Zealand tax law there is something called the intent test. This test is about the intention of the investor when they buy a house. If the investor buys the house to make a rental yield then there is no tax in it. If they buy a house to make a capital gain then they pay. But it is not working and this is the reason why we have had to introduce this new tax which is a withholding tax to ensure that people who are buying properties for capital gain actually pay the tax that is due to the New Zealand tax system.The interesting thing is that the Inland Revenue Department (IRD) believes that the rorts going on are worth—I am not too sure; the Minister will know—I think it is about $250 million to $300 million to our tax base. These are people who are buying properties under the law for capital gain but just not paying capital gains tax. I think I am right in saying and again the Minister can correct me if I am wrong that the IRD has prosecuted one person—one person—in the last 5 years under the intent test. The reason it has prosecuted only one person—and let us be honest various Governments including Labour gave the IRD a significant amount of money to chase these guys—is that it is incredibly difficult to prove intent. In fact all you have to do is say to your lawyer say to your accountant and say to all your mates: “I buy this house with the intent of making a rental yield.” Then 18 months later you sell it for a massive capital gain and the IRD says “Are you sure you bought this for that intent?” and you reply: “Absolutely. Ask my accountant and ask my lawyer. Thank you very much for the $200000—but it was all intent. They offered me a price I could not refuse. Oh well never mind.”We have to do something about this. There is a real problem with overseas speculators purchasing houses in the New Zealand market. It is distorting the market. It means that New Zealanders are being priced out of the market. What we do know is a lot of this overseas speculation results in houses remaining empty. We are marketed overseas as not having a capital gains tax—that is how the New Zealand housing market is sold to overseas investors—so we have stuck in a 2-year brightline test. The IRD wanted 5 years and the reason why it wanted 5 years is that it did a scenario analysis. It wanted 5 years because it knows that you can hold on for 2 years and 1 day and sell it and you are fine—there is no problem whatsoever. It did not think—and I agree with them—that 2 years was long enough. I do not think 2 years is long enough. We are supporting this bill because at least it is better than nothing but it could have been so much better.The interesting thing is that if you watch the faces of the Nats on the other side of the Chamber who were on the Finance and Expenditure Committee they know that this is not very good at all because these guys are smart—they know how business runs and they know that this is just a rort. I do not blame the Minister—I do not blame the Minister. He came in and he was given a hospital pass. This Minister was given a whole lot of hospital passes actually; it is quite interesting. He must be wringing his hands. But he inherited this bill. I would like to think that this Minister would have said: “No no 2 years does not work—5 years.” The Minister whom he replaced is off around the world—we never see him—so he is not held to account whereas this Minister has got to implement this bill which everyone knows really just does not address the problem in any way shape or form. In fact the interesting thing about this is that even the Minister of Finance himself said: “Well I do not know how much money this is going to bring in. I do not know whether this is going to make a difference.” Why are we wasting everyone’s time when the Minister of Finance himself has said: “I do not know whether this is going to make a difference.”?Surely when we talk about the integrity of the tax system we have to introduce legislation that actually does make a difference. That is what we are about over here but not those guys who have tended to forget about middle New Zealand and about how middle New Zealanders are struggling to afford a house and how they see these overseas speculators coming in cutting the guts out of the Auckland housing market and just pricing it way out of reach. It is just not right.The other thing that I will talk about are two missed opportunities relating to GST. “Online services” should have included charging GST on everything imported. The other thing is the residential land withholding tax—it could have been so much better.Student loan stuff: we all agree that if a student borrows money from the Government they are under a contractual obligation to repay it. We have set up a deal with Australia but why Australia? We all know that there are a whole lot of Kiwis who go to the UK. Why did we not do this with the UK? Why did we not say that these are the top four countries that New Zealand students go to and abscond from their obligations?If we had done this then that would have brought integrity to the tax system and that is what we need. We need a tax system that is seen not just by New Zealanders but by everyone overseas as having integrity. I am just really concerned that what this is going to do is put another piece of piecemeal legislation on our books that we are going to have to come back and revise I would say within 18 months to 2 years. We heard the Minister say: “Oh we will deal with the other issues later.” That is just not good enough. I can tell you that in the Finance and Expenditure Committee if we had had a bill that dealt with all GST on all imported goods we would have supported it. We would have gone hard.We are supporting this bill but it really is a bill of missed opportunity for charging GST on imported goods which would have helped our retailers. And for the residential land withholding tax we should have done something better to help New Zealanders and also for student loans. Thank you very much.