Nash StuartTAXATION (ANNUAL RATES FOR 2019–20 GST OFFSHORE SUPPLIER REGISTRATION AND REMEDIAL MATTERS) BILLSecond ReadingHon STUART NASH (Minister of Revenue): I move That the Taxation (Annual Rates for 2019–20 GST Offshore Supplier Registration and Remedial Matters) Bill be now read a second time.I'd like to thank the Finance and Expenditure Committee for considering the submissions on the bill which has broadened scope and contains a variety of measures to make the tax system fairer. Many changes have been made to the bill in response to public submissions. These together with the committee's recommendations make this a better bill by making important adjustments. First and foremost this bill proposes a solution for the Government to collect GST on low-value imported goods in a cost-efficient manner and without holding goods up at the border.Right now it is not economic for customs to collect GST on goods of very little value. Under the proposed offshore supply registration offshore suppliers and online marketplaces that supply more than $60000 worth of low-value goods to New Zealand consumers will remit GST directly to Inland Revenue. This limit of $60000 of course is the same limit that New Zealand businesses have to reach before registering for GST. With a steady growth in online shopping from offshore suppliers a significant amount of tax revenue is being lost. Initial forecasts project this initiative will boost revenue by $112 million per year by 2022. But in my view this is not so much about increasing the revenue but rather about the integrity of the tax system. It evens the playing field between all suppliers of low-value goods and local retailers in particular will benefit as they will no longer of course be at a 15 percent disadvantage having to charge GST.There are about 26000 small businesses in New Zealand employing more than 62000 people in the retail sector. Many are in competition with foreign firms who sell exactly the same product into our market without collecting GST. This changes that. We also want to make sure this works well for offshore suppliers and following significant consultation with affected parties the select committee proposed pushing back the application date from 1 April 2019 to 1 December 2019 and Ministers are still consulting on this pointThis measure also simplifies compliance and reduces administration costs by removing tariffs and border processing charges on imported consignments of less than $1000. Broadening the GST base is simply one of the many initiatives this Government will bring to bear on cross-border transactions to make the tax system fairer for all Kiwis. Last year we legislated to crack down on base erosion and profit shifting and we've recently released a discussion document on options to more fairly tax digital service providers who operate in New Zealand. All entities who supply goods and services to New Zealand need to pay their fair share of tax regardless of their origin.This bill is also about fairness so I'm pleased that this bill proposes to ring-fence tax deductions on rental properties so they cannot be used to reduce tax on other income. Currently the tax is applied on a person's net income which means if a property investor makes rental losses those losses reduce the overall income and therefore their tax liability and it's my understanding that investors collect about $600 million in losses. The persistent tax losses that many property investors declare on their investments indicate that they rely on capital gains to make a profit which we don't believe makes for a healthy housing market or encourages sound investment decisions—aren't I right Mr Twyford?Negative gearing benefits property speculators to the detriment of most other sectors of New Zealand's productive economy. By removing the ability of investors to gain a tax advantage from leveraging rental properties we're incentivising investment in more productive areas while giving more opportunities for first-home buyers to enter the market. This bill also proposes to empower the commissioner of Inland Revenue to address errors or gaps in tax legislation that do not reflect the policy intent. Normally such inconsistencies are addressed through remedial amendments and taxation bills passed once or twice a year. However where there is a good case it makes sense to provide certainty to taxpayers by allowing for an Order in Council or a commissioner's exemption to modify the application of tax law without having to wait for literally months for the wheels of Parliament to turn.Taxpayers will not be disadvantaged by the proposal as it will include a number of safeguards including limiting the application period of the Order in Council or the commissioner's exemption to three years and any changes will be optional for the taxpayers to apply in all cases. These measures were originally intended for the recently passed Taxation (Annual Rates for 2018-19 Modernising Tax Administration and Remedial Matters) Act 2019. However the Finance and Expenditure Committee rightly identified a need for more consultation to gain the confidence of the law and tax communities. I believe that following for further work with the Legislation Design and Advisory Committee and others within the tax community this proposal strikes the right balance between protecting taxpayers and enabling efficient tax administration.This bill makes several smaller policy improvements to the tax system. Businesses and community groups will now be able to retain tax records in New Zealand's first official language Te Reo Māori. It is time Parliament codifies Inland Revenue's current operational practice which has been in effect for over 20 years and I'm pleased to amend the Tax Administration Act to achieve this. This bill proposes making it easier for the commissioner of Inland Revenue to exempt victims of sexual offences from paying child support for children born as a result of sexual violence. At present exemptions can only be given where an individual has been convicted of a sex offence. Penalising a victim of sexual assault simply because the perpetrator hasn't been convicted is a perverse outcome and is at odds with a cultural shift this Government wants to see away from victim blaming.This came about due to three letters I received as the Minister of Revenue outlining women's cases who had conceived as a result of rape and as we know there are very few—about 10 percent I think—of sexual assaults that are actually reported to police let alone convictions. So this is fantastic because it deals with a situation of inherent fairness for a small group of women who have had a very very rough time and until this change the IR had no ability to not seek child support from this group of women so I'm pretty proud of this actually.The bill will also allow Inland Revenue to collect student loan deductions from schedular election day and casual agricultural income to reduce end-of-year repayment obligations for student loan borrowers. The bill contains a number of smaller remedial amendments to ensure our tax system continues to work effectively and efficiently for taxpayers and businesses. Finally this bill sets the income tax rates for the 2019-20 tax year with no change from the previous year.In conclusion I would like to thank the policy officials and drafters who worked on the details of this bill the organisations and individuals who made submissions on the proposed legislation and the Finance and Expenditure Committee for its consideration and recommendations to improve the workability and fairness of the provisions. This is a good bill for New Zealand and I'm proud to commend it to the House. Thank you.