Parker DavidTAXATION (ANNUAL RATES FOR 2022-23 PLATFORM ECONOMY AND REMEDIAL MATTERS) BILL (NO 2)Second ReadingHon DAVID PARKER (Minister of Revenue): I present a legislative statement on the Taxation (Annual Rates for 2022-23 Platform Economy and Remedial Matters) Bill (No 2).ASSISTANT SPEAKER (Hon Jacqui Dean): That legislative statement is published under the authority of the House and can be found on the Parliament website.Hon DAVID PARKER: I move That the Taxation (Annual Rates for 2022-23 Platform Economy and Remedial Matters) Bill (No 2) be now read a second time. The second reading of the bill is of course on the form of the bill that reflects the changes that have been recommended by the Finance and Expenditure Committee following public submissions as well as a small number of other changes that were included as raised by officials. The main provision in this bill other than the setting of annual rates is addressing a gap in the GST treatment of the platform economy—that is services where an app on a phone or a computer is used by a customer to order for example a driver who provides ride sharing or the app is used to hire a holiday home from a host. Of course members will know that the services that are provided are being provided in New Zealand they're being paid for by a New Zealand customer they're being delivered by a New Zealander but because technically some of those transactions can be through the platform said to be contracted outside of New Zealand notionally they do not attract GST according to current rules. The OECD recognises this is an issue of global concern and it's leading a multilateral effort to assist it. So the bill does this by requiring digital platforms to collect and return GST on the supply of those services like ride sharing and short-stay accommodation. Not implementing rules like this would mean that New Zealand - based competitors are at a disadvantage against those who are providing services through apps. Now in New Zealand GST applies to almost all goods and services supplied in New Zealand. It's what makes it simple and fair and efficient and it's impossible to justify why GST shouldn't be charged on holiday accommodation or ride-share services where their competitors are paying GST. It's one of the reasons why submitters like Hospitality New Zealand submitted in favour of this bill—as did the New Zealand Taxi Federation. I'm not the first to make comments to that effect and I'm going to make some quotes made earlier. This is a quote from Nicola Willis on 1 September 2002: It's about fairness ensuring motels are treated the same as Airbnb and Ubers are treated the same as taxis." This is exactly what Nicola Willis said then but has now resiled from. I would quote the former revenue Minister Todd McClay who in 2015—when National introduced GST on online services which became known as the "Netflix tax"—said that the bill was "about creating a level playing field for collecting GST and putting New Zealand businesses and jobs ahead of the interests of overseas suppliers." And then in May 2016 the former revenue Minister the Hon Michael Woodhouse said "Currently New Zealand providers are at an unfair disadvantage because they must apply GST to their services whereas overseas providers do not. This creates an unfair playing field which this legislation will eliminate." Those were all valid comments then and they remain valid now. There's been a bit of misinformation parleyed about including by members of the National Party who claim that this is going to result in a 15 percent increase in cost to those providers and that this will then cause an increase in prices of 15 percent. They're wrong for a number of reasons. A credit is given for the GST inputs that are on average incurred by an Uber driver for example so they get effectively a notional refund paid through their platform supplier of 8.5c of that 15c in the dollar so you're left with 6.5c so the maximum increase in price there could be but for competition issues would be 6.5 percent. But even so many of the competitors of these providers of services are already paying GST so they're not going to be putting up their prices and they will grab market share from—you know the motels will do a bit better than the Airbnb person if the Airbnb person tried to put up their price in response to this issue. In fact the distortion that we have currently is the exclusion of those platform services to the likes of Airbnb and Uber that currently avoid GST. There are some other changes that are made to this bill including reporting obligations. There has been a call from some people to say that there should be a delay in those reporting rules. I'm advised by the ministry that because other countries are already in accordance with these OECD requests for imposing similar obligations if New Zealand doesn't require this we'll be creating complexity for New Zealand - based platform operators that instead of returning this information to the Inland Revenue in New Zealand would have the more complicated obligation of returning that sort of information in Canada or the United Kingdom for example. There have been some other changes recommended by the select committee in terms of some fine changes to the—to the change in the rule. Sorry I was tongue-tied there. Another change in the bill is to remove fringe benefit tax (FBT) from public transport fares that are reimbursed by an employer. At the moment you don't charge FBT on a car park but you do charge FBT on a bus fare and that's obviously distortionary. There have been requests to include the total mobility scheme in the proposed exemption. The select committee recommends that we do that. We think that that's a good change. We also are confirming that on-demand services are covered by the proposed exemption. These are increasingly offered by public transport providers in areas of lower demand. It's booked rather than provided on a set timetable so we're making those changes too. We're also making some changes to address concerns about compliance and cash-flow problems for certain cross-border employers in respect of their fringe benefits and employer superannuation contributions. This proposal was intended to clarify who should have those obligations where a person works remotely from New Zealand for a non-resident employer which does not have a presence in New Zealand. To address this the bill now proposes that the tax obligation should rest with the employer in the first instance supported by a mutual agreement clause whereby the employee could take on that liability. These are some of the adjustments and additions to the bill. They are in response to public feedback and consideration of the Finance and Expenditure Committee. Can I thank the committee for their careful consideration of the bill and resulting improvements. I'd also like to thank the policy officials and drafters for bringing the bill to the House for its second reading and I look forward to hearing the contortions and somersaults that we hear from the Opposition who were about to reverse their position from earlier positions in respect of GST. I find it so hard to accept that they would undermine the core principles of the GST Act and ignore the OECD advice to this country which over the years I have heard them espouse as being worthy to follow.ASSISTANT SPEAKER (Hon Jacqui Dean): The question is that the motion be agreed to."