Tabuteau Fletcher: Taxation (Bright-line Test for Residential Land) Bill — First ReadingText is incorporated into the Bound VolumeTabuteau Fletcher: Taxation (Bright-line Test for Residential Land) Bill — First Reading[Sitting date: 08 September 2015. Volume:708;Page:6337. Text is incorporated into the Bound Volume.]FLETCHER TABUTEAU (NZ First): It is with some frustration that I stand today because New Zealand First would normally support a piece of legislation like this in its referral to the select committee but what I have seen and what New Zealand First has seen in this piece of legislation—just like the piece before—is that it is so facile and so vacuous that it serves absolutely no point whatsoever and will achieve none of the stated objectives of this Government. We know from experts we know from our own experience and we know from talking to the people in Auckland that these measures will achieve absolutely nothing. This is another token gesture that achieves nothing.Here is a bright idea: 82 percent of New Zealanders want a ban on foreign ownership. New Zealand First wants this Government to listen to the people for once—and in fact to listen to its own support base—who want something to be done and done now. So I put it to the members on the other side of the House that what we need right now is a moratorium on the sale of land and houses to foreign investors and foreigners full stop. We need to stop this freefall into foreign ownership. Only Kiwis should be able to buy Kiwi land and Kiwi homes.Alastair Scott: You mean Chinese don’t you? You only mean Chinese don’t you? That’s what you meant to say—Chinese. Just say it. You don’t like Chinese.FLETCHER TABUTEAU: Well the Chinese—the honourable member points out—do not let you go over and buy Chinese land over there either and the Prime Minister would be the first to admit that you cannot go and buy land in Hawaii if you are not a person of Hawaiian descent. So let us just be consistent with what is happening with the rest of the world. There is a huge problem going on. Let us put a moratorium on this. Let us stop it now. Let us create some real understanding. Let us get some real data so that we can address an issue that we all know New Zealanders understand to be a huge huge problem.This Government needs to stop talking about foreign investment. It is not investment when we sell off strategic assets and homes and lands to foreigners. It is not an investment to New Zealanders and it is of no benefit to New Zealanders; it is in fact the complete opposite. Yet again we have legislation that achieves nothing—as well as being completely redundant—because the legislation is already there. There are already powers to address these issues and Mr Bennett himself spoke about them previously. This National Government refuses to have them applied and so we have this huge housing crisis in Auckland for example right now. This Government is deliberately tinkering around the edges. Experts are in accord with New Zealand First when we insist that this bill will achieve absolutely nothing.Here is a brightline test definition: a brightline is a clearly defined rule or standard composed of objective factors that leave little or no room for varying interpretation. The purpose of a brightline rule is to produce predictable and consistent results in application. This Government says we need a brightline test because the current legislation and intention test is too difficult to enforce because of its subjectivity. New Zealand First says this new bill will only muddy the waters even further and will add another level of complexity to an already difficult and complex set of rules.We insist that this will be of no economic benefit to the country either. We are talking about a tax take of next to nothing. We also insist that the Inland Revenue Department’s unwillingness to apply the current legislation becomes a self-fulfilling prophecy and that poor enforcement of the current Act simply contributes to the perception that the intention test is too difficult to apply although it is not hard to understand the confusion. Mr Bennett’s contribution earlier in his examples of the problems that will only get worse ahead highlighted the confusion that is prevalent throughout New Zealand.I will read just one of the intentions of the bill: “This Bill proposes a new objective ‘bright-line’ land sale test to improve compliance. The bright-line test will require income tax to be paid on any gains from the disposal of residential property that is acquired and disposed of within 2 years subject to some exceptions.” So it is not much of a brightline test already within its own description.In a report it says: “The bright-line test will apply where a taxpayer did not buy property with a purpose or intention of resale but due to financial or other circumstances (such as loss of employment relationship breakdown [etc.]) … is required to dispose of the property within the two year period.” Even if there is no economic benefit and there is no intent—it has just simply happened that they have fallen within the 2-year period—they are going to be taxed and yet there was no intention.This legislation does not change that confusion it simply adds to it and already that level of complexity is ranked up with just that one example. The Minister of Revenue Todd McClay spoke about removing ambiguity but as stated New Zealand First believes that this new bill does not achieve what the Minister wants. The application of the main home test will introduce greater uncertainty. This legislation makes no effort to clarify at what point or over what time frame in the “dim-line” time period a property must be the main home. It speaks about a main home being exempt but nowhere in the legislation does it clarify that if you are in it for 2 years—but does it have to be 2 years? Can you be there for just a certain period of time in the 2 years? Does it become your main home then? The confusion and the complexity continue to mount.I will quote from a KPMG report. It notes that “a full two year period of occupation for the main home exemption to apply will not be feasible if the start date for the bright-line test is the date of the contract to purchase as recommended. This is because the property is unlikely to be occupied between the contract date and date of settlement.” So you are getting experts just querying: “Where’s your time line? Where’s the definition? Where does it begin and where does it end?”.Then we have the question around trusts. A lot of good well-intentioned people have their main home in trust. They own it and they probably own it with their children. This piece of legislation will add to the complexity because we do not know how the rule will apply because trusts are supposed to be able to be taxed under this legislation but what if it is the main home? We just do not know that at all.Then we have the question around farmland versus lifestyle block use. The statement is that farms or lifestyle blocks do not fall under this legislation. So if a person buys a small lifestyle block as an investment—maybe he wanted to retire on it—and rents it out and then because of unforeseen circumstances he sells it in 2 years actually he does not have to pay and he is not liable for the tax under this legislation. Where is the consistency? Where is the fairness?The other one that struck me when I was reading the legislation and doing the analysis was the example of people whose career it is to go and do up homes. They intend to sell their property and make some money out of it but if they are living in it and if it is their main residence then under this legislation they are not liable for that tax component. So this as far as a brightline test goes just makes no sense whatsoever.Just to conclude I think this Government is deliberately missing the point. There is nothing wrong with New Zealanders owning New Zealand land and just New Zealanders owning New Zealand land. Overseas speculation does not add any real value to the New Zealand economy. This Government is keeping its head in the sand. It knows that this and the previous legislation the Taxation (Land Information and Offshore Persons Information) Bill will achieve nothing. Therefore New Zealand First cannot support this bill any further. Thank you.