Nash Stuart: Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill — In CommitteeText is incorporated into the Bound VolumeNash Stuart: Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill — In Committee[Sitting date: 12 April 2016. Volume:713;Page:10418. Text is incorporated into the Bound Volume.]STUART NASH (Labour—Napier): Just talking to Part 4 I am going to have a look at clause 72 here. This is talking about residential land withholding tax certificates of exemption. Again this was an area where we discussed in some detail at the Finance and Expenditure Committee why people would get certificates and what the reasons and the rationale would be and basically there are three of them. What I am talking about of course is residential land withholding tax. This is by and large covered in Part 2 of the bill but because this is amendments to the Tax Administration Act it this falls just under the purview of this part.So there are three requirements for people who may apply for an exemption to residential withholding tax under this Act and this includes in new section 54E(3) in clause 72 “a person who carries on a business of developing land or dividing land into lots or erecting buildings;”. The reason we did this is that we did not want to how should I say it dissuade anyone—an overseas investor—from coming over here and erecting residential dwellings especially in a place like Auckland where there is a need for residential dwellings. Perhaps we will reach a stage where it is hard to get domestic funding and therefore overseas funding will be a requirement to allow any sort of development to occur and under this sort of circumstance we thought that the odds of them—well it would be easy for the Inland Revenue Department (IRD) to track them down and have them pay their required amount of tax anyway. As we talked about in the purpose of this we thought that the residential withholding tax is really there to stop people from avoiding their tax obligations so this would make it—well we think it would be very hard to avoid your tax obligations if you were undertaking this sort of work.The second area is where they have already “had tax obligations under the Inland Revenue Acts before when applying for a certificate;”—i.e. this is an overseas investor of good character they have a track record with the IRD and there is no reason whatsoever for the IRD to suspect that they might skip the country or not honour their tax obligations. So it is the good track record—it is the good character test in essence. The good character test is around in a lot of legislation so we thought that that was appropriate.The third one is “has complied with all tax obligations for the 2 years before they apply for the certificate and the Commissioner is satisfied that the person will continue to so comply.” Again this goes back to what I was talking about—the good character test. There is no reasonable belief to think that this person or this investor—whether that be a person a company a trust or whatever sort of entity—will welsh on their New Zealand tax obligations.We did think that those three categories were deserving of the ability to apply for an exemption to the residential land withholding tax. Of course it is not guaranteed. There is a process that has to be gone through but if an investor fits one of those categories then the odds are pretty good that they will get one.There is clause 73 “Section 81 amended (Officers to maintain secrecy)” as well. Actually secrecy was talked about a lot in the select committee in a number of instances and we have alluded to this before in a speech today. It is my understanding and it was certainly reinforced by the IRD that there are a number of checks and balances in place in the contracts of IRD employees to make it very very clear that they do operate under—well I was going to say “a veil of secrecy”. What I mean is that the integrity of the tax system and the integrity of the IRD is completely reliant on the fact that an individual’s tax business will be kept absolutely secret. I have absolutely no reason to suspect that that is ever going to be compromised.In fact I was talking to a very long-serving and just recently retired senior IRD employee. I asked him whether he thought this was an issue in the IRD at all and whether we needed to be a little bit tougher on this to be a bit more transparent or to put better rules in place and he said: “No. Everyone knows that if they break the secrecy clause in their contract then they are gone before lunchtime.” So there is a pretty good culture in the IRD for this.The rest of Part 4—as Mr Robertson and I think every speaker has alluded to—is administration. It is the nuts and the bolts. It is pretty boring to be fair. Not that tax is boring—how could I even suggest that. What I mean is that compared with the student loan stuff or the land withholding tax—Part 4 agreed to.