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:10421. Text is incorporated into the Bound Volume.]STUART NASH (Labour—Napier): There is one thing I would like to talk about—well a couple of things. But first of all as Mr Robertson alluded to clause 54(2) comes into force on 1 April 2017. This actually relates—and again it was talked about at great length in the Finance and Expenditure Committee—to when in fact the GST regime on online services comes into play. The reason this was—not debated; that is the wrong term—discussed at great length is that the issue was around how long it takes a foreign jurisdiction to gear up for the New Zealand tax system. We had some submissions that suggested it would take 9 months. Others suggested it would take 6 months. It is hard to believe that in this day and age of high-level computer programs—which of course all these suppliers are on—it would take any more than just a simple fix of a database. But apparently it does take a little longer than anyone would imagine. In Australia I think they have allowed 9 months—am I right Mr Robertson? You might remember.Grant Robertson: Yes.STUART NASH: They have allowed 9 months. This is why we have said that this does not come into force until 1 April 2017. It is not some way to avoid paying tax before then. I doubt we are going to see a massive download of iTunes songs on 31 March but you never know. But that is the reason why that clause is coming into play in a year’s time or just under a year’s time—we do have to allow these online suppliers enough time and the Inland Revenue Department (IRD) believes there are going to be about a hundred of them. As mentioned it believes it is going to raise about $40 million—or no not “raise”. We are missing out on about $40 million. The IRD is unsure of the impact that this sort of tax will have and whether it will change behaviours. I suspect it will not but let us see.The other thing as Mr Robertson alluded to is that the title is a little misleading. Let me explain why. The title includes the words “Taxation Residential Land Withholding Tax”. This is a capital gains tax; let us make no bones about that. The Government said it would not put in a capital gains tax but there is a capital gains tax and this is what it is. This taxes the capital gain on properties bought by overseas investors who buy and sell a property within a 2-year period. It is interesting that the IRD actually recommended a 5-year period because it thought that a 2-year period would be too easy to avoid and that it would allow a lot of gaming behaviour and aggressive tax planning to take place which we have seen in recent days and which is going on I think in a way that not many of us ever realised or contemplated or could imagine.This bill should probably be called the “Taxation (Capital Gains Tax GST on Online Services and Student Loans) Bill”. As Mr Robertson alluded to this is a missed opportunity in terms of online services. There are a number of reasons why the Government and the IRD say we should not be collecting tax on tangibles. Personally I do not think that many of them stack up. The reason I say that is what this does is it provides an immediate competitive advantage to online overseas suppliers as opposed to New Zealand ones. As well the argument is that we live a long way away and that with shipping costs of more than 15 percent it is more than easily made up. But that is simply not true in this day and age.I think that the Government has really missed a trick here. It could have gone all the way. It would have pleased the Retailers Association—of that there is absolutely no doubt. When we read in the paper that the IRD is concerned that in fact putting GST on online services might change the behaviour of New Zealanders—i.e. they may in fact now buy products from New Zealand suppliers as opposed to overseas ones or they may be put off buying products or intangibles from overseas because of price increases—well imagine what that would do to our retail sector. Imagine if the impact on our retail sector was that people would now go down to their local store and buy New Zealand - made products as opposed to going online. So this is a missed opportunity.This bill is a capital gains tax and it is a missed opportunity in respect of GST and student loans. The student loan stuff is reasonably pragmatic. I would like to see the sort of arrangement that we have got with Australia expanded. The reason I say that is as mentioned earlier when a student enters into a contract with the Government to undertake that student loan there are a whole lot of terms and conditions that I think are pretty clear—you start earning money and you start paying your loan back. If you live overseas again the IRD is very clear on that and I would like to see these sorts of agreements instigated with other countries around the world. Thank you very much.Clause 1 agreed to.Clause 2 agreed to.Bill reported without amendment.Report adopted.