Russell DeborahDr DEBORAH RUSSELL (Labour—New Lynn): The Taxation (Annual Rates for 2017-18 Employment and Investment Income and Remedial Matters) Bill has followed a familiar pattern with tax legislation. There are several tax bills that come into the House every year. It's regular work for this House and it's regular work for the Finance and Expenditure Committee. As is usual with this particular bill both sides of the House worked on it together. The Opposition before the election and the Opposition after the election agreed in large part with this bill. There were some quibbles some tidy-ups some corrections that came through in the select committee process but actually it was pretty much a matter of joint work between all the parties in the House and all the people who worked on it. So it's an example of fantastic Government across all the branches of Government from all the people who participate in governing in our democracy from the officials to professional bodies to experts to actors in civil society and to politicians working together to get it right. So there's a lot of agreement on this bill and when we look at the reasons why we agree on a lot of the measures in this bill it goes straight back to basic tax principles.Now earlier my colleague Marama Davidson talked about the way that people do try to get around the tax system. So like motorists are always trying to find a faster route or a rat-run through the suburbs tax accountants and lawyers always will find a way through tax legislation to ensure that their clients are better off and that results in unfairness. Now at least some of the measures in this bill are to do with evening out the tax Act again.I think the employee share scheme rules which both sides of the House agreed on are an example of this—ensuring that there is fairness between income earned as salary and wages and income earned in the form of employee share schemes. It's a basic fairness measure. The demergers that my colleague Mr Bayly referred to are an example of fairness—of trying to achieve fairness in the tax system. The petroleum mining decommissioning clauses—again it's about achieving fairness in the tax system. I think that's why there's been a large amount of agreement on both sides of the House.Some of the new rules in this tax Act are to do with reducing compliance costs making it easier for employers to pay tax. I think one example of that is the treatment of advanced payments of holiday pay. That could be a bit tricky for employers to manage but those advance payments of holiday pay are now covered under the extra pay rules. It's quite a technical point but it makes life easier for employers. And of course there is a whole lot of work in this bill that is to do with getting the Business Transformation up and running at IRD. Again that's a matter of reducing compliance costs making our tax system run more fairly and all sides of the House all parties in the House agree on these rules.There is in fact only one major difference between the Opposition side of the House and the Government side of the House on this bill and that's the reason they're proposing to vote it down. The point of difference is to do with the brightline test and I actually struggle to understand why the Opposition is opposing the brightline test. Look it cannot be the structural mechanism of the brightline test. It cannot be the actual rules around it because the Opposition when they were in Government were the very people who put those rules into place. So it cannot be to do with the way that the rules are structured and more to the point there was a full-scale consultation process about the way those rules were structured when the brightline test was brought in by the then Government now the Opposition. So it cannot be the structural nature the structural mechanisms of the brightline test.It cannot be the complexity of this change. Now Mr Bayly has told us that there was a seven-page Supplementary Order Paper as though this somehow hinted at complexity. But when you read that Supplementary Order Paper 13 you will see that consistently all it is doing is changing the number 2" to the number "5". Now Mr Bayly may regard that as a complicated measure but I assure you it's quite a simple matter to change a "2" to a "5". That is not a complex issue. So it cannot be the complexity of the issue that is the reason for their opposition to this bill.It cannot be the idea of taxing property sales. Property sales have long been taxed in various ways by our Income Tax Act. In fact the Act has a plethora of rules for taxing property transactions. If you buy with the intention of resale you are subject to tax on any gain you make. If you buy and sell in the course of business you are subject to tax on any gains that you make. If you are a property developer and you subdivide a property you are going to be subject to any gains that you make there. There is no prohibition against taxing the gains on the sale of property in the Income Tax Act; we actually think it's a good thing to do. It cannot be just the very idea of taxing property sales so the only thing I can think of that they object to is the change from two years to five years. Somehow they see there is a huge and massive change in that that was not already in the tax Act.I think it would help them to understand a little bit about what this brightline test actually does. Now I've just spoken about the rules for taxing property in the Income Tax Act and they are complicated and difficult. In particular when it comes to taxing a property that has been bought with the intention of resale absent the brightline test you have to be able to understand what the intention was when the property was purchased. Now that's a hard thing to do—to get into someone's mind—so what the brightline test does is it is a deeming provision. It simply deems that if you buy a property and then sell it within two years you are deemed to have bought it with the intention of resale and therefore you will be subject to tax on it. All we have done is shifted it from two years to five years. The deeming now occurs for properties that are sold within five years. It's a simple and straightforward matter.But what objections have they raised to this? I think one objection—in fact the major one they've really made—is that they think somehow it is going to be unfair. They said "What about people who get sick? What about people whose financial condition changes? What about people who fall on to hard times?"—interesting to hear the National Party caring about that. But you know let's just remember what's going on here. If you have fallen on hard times and you have to sell your investment property you will only be taxed on it if you make a gain. Taxing it is a sign that you have actually made a gain. Tax only occurs on income. You have actually made a gain on sale; something good has happened. Far from falling on hard times you will recover your investment and a bit extra. It's only the little bit extra that's going to be taxed like any other form of income.Then we had the Hon Judith Collins and she was terribly worried about investors who might have bought a property and fallen on hard times and then they find that the rent they charge didn't cover the interest expense. Now I'm just confused by that. Because you see what sensible investors go in to an investment knowing that the income they get from it will be less than the expenses? That can't have been an investment; they must have bought it for some reason. They must've bought it for the capital gain because there can be no other reason to enter in to an investment if you're going to make a loss on it every year. Now frankly if you are buying a property in order to get the capital gain then I suggest that that gain needs to be taxed. Frankly it is generous—it is generous—ensuring that only properties that are sold within five years are subject to that capital gain. And I sincerely hope that our Tax Working Group will sort some of these issues out.I am very pleased to have the last words—the last words—in this debate and to say that this brightline test is an example of the fairness and the integrity that the members of the Opposition were touting as signs of a good tax. I urge them instead of continuing their opposition to this Act to see sense to see reason to stand up and vote for this excellent bill."