Woodhouse Michael: Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill — Second ReadingText is incorporated into the Bound VolumeWoodhouse Michael: Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill — Second Reading[Sitting date: 31 March 2016. Volume:712;Page:10119. Text is incorporated into the Bound Volume.]Hon MICHAEL WOODHOUSE (Minister of Revenue): I move That the Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill be now read a second time. As the title of this—[Interruption]The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! Can we have a bit of politeness for the speaker please Mr Lotu-Iiga.Hon MICHAEL WOODHOUSE: As the title of this bill makes clear this tax bill addresses three diverse aspects of the tax system that together make the system fairer. A strength of the New Zealand tax system is the fact that taxes are applied fairly and evenly and there are very few exceptions. Policy settings therefore also aim to continually address inequity in the system. The proposed new residential land withholding tax and the GST measures in the bill are two such examples. I will recap the contents of this bill briefly.Tax for the proceeds of the sale of New Zealand residential land by offshore vendors can be difficult to collect from foreign owners with no or limited presence in New Zealand. The proposed new tax—the residential land withholding tax or RLWT—is therefore intended as a means for collecting tax on that sale. It is proposed that the residential land withholding tax would be payable from 1 July 2016.The second major component of the bill proposes that GST be applied to cross-border remote services and intangibles supplied by offshore suppliers including e-books music videos and software purchased from offshore websites to New Zealand - resident consumers by requiring the offshore supplier to register and return GST on these supplies. This would come into force on 1 October 2016.This bill also contains a proposal to allow certain information on student loan borrowers living in Australia including current contact details to be shared between the Inland Revenue Department and the Australian Taxation Office. This will help the Inland Revenue Department to keep borrowers engaged with their obligations and improve the collection of any outstanding payments. A number of other measures in this bill also focus on student loan borrowers including simplifying the process for the approval of charitable organisations for the purposes of the student loan scheme.I want to acknowledge and thank the Finance and Expenditure Committee under the able chairmanship of David Bennett for its consideration of the bill and its recommendations which improve it. Firstly the committee recommends changes that will ensure the residential land withholding tax will be appropriately targeted at offshore vendors. Secondly the committee advocates the introduction of exemption certificates for offshore land developers that meet certain criteria. This will ensure that the residential land withholding tax does not impede the supply of new housing. Exemption certificates will also be available for offshore vendors disposing of their main home which will reduce compliance costs.The residential land withholding tax proposal is part of a suite of measures introduced by the Government to improve tax compliance amongst property investors. Following submissions from the public the select committee has made recommendations on one aspect of those earlier measures: the requirement for a person who is an offshore person to have a functioning New Zealand bank account in order to apply for an IRD number which supports identity verification. The committee’s recommendations will ensure that certain compliance costs are mitigated while maintaining the integrity of the requirement for identity verification. I have directed my officials to explore the issues raised by submitters with any subsequent amendments that may be required being included in a future tax bill.On the GST measures in this bill the committee made a number of recommendations mainly aimed at reducing compliance costs and simplifying the proposals. The main recommendation was to introduce a transitional provision for some fixed-term contracts such as contracts of insurance that span the date of the rule’s introduction. The effect would be to suspend the usual GST rule which treats periodic payments as successive supplies and applies GST to each payment. Instead such contracts could be treated as not successively supplied for the term of the contract or for 396 days whichever was earlier.I should point out that the feedback from the public has been supportive of the proposals and it pointed out that the proposals are in alignment with OECD guidelines and similar rules that apply in other countries including the European Union and the proposed rules in Australia. I want to thank those submitters and the Finance and Expenditure Committee for its consideration of the bill and recommendations on points raised by submitters. The bill has been improved by that feedback and it gives me pleasure to commend it to the House at its second reading.