Seymour David: Taxation (Bright-line Test for Residential Land) Bill — Second ReadingText is incorporated into the Bound VolumeSeymour David: Taxation (Bright-line Test for Residential Land) Bill — Second Reading[Sitting date: 03 November 2015. Volume:709;Page:7610. Text is incorporated into the Bound Volume.]DAVID SEYMOUR (Leader—ACT): The German Chancellor Bismarck said that those who like public policy and sausages should not observe either being made—and is this bill not a prime example of that. I regrettably support the Taxation (Bright-line Test for Residential Land) Bill because it is part of a Budget and part of a confidence and supply agreement and I have been wholeheartedly convinced by the Opposition that it is certainly in the best interests of New Zealand for me to keep that agreement going. However make no mistake this bill is mediocre and poor public policy and let us count the ways and the reasons that that is the case.First of all it stems from a misdiagnosis of the reason that house prices are high. It stems from the belief that it is the demand side that is the problem not the supply side and that a capital gains tax can successfully quell housing prices. Well you only need to ask the people of Sydney Vancouver Los Angeles or London whether or not a capital gains tax has any noticeable effects on price levels in housing markets. In actual fact in large markets such as the US and Canada where we have a range of land-use planning policies and yet the same tax monetary and foreign investment policy nationwide what we discover is that it is the supply elasticity of buildable land that affects house prices. So the first problem is total misdiagnosis of the problem it seeks to solve.The second problem is that it is politically foolish because it is the acorn that may grow into the tree of a capital gains tax. We have actually heard from the Opposition members who given the opportunity say the first thing they would do is expand 2 years to 5 years. Who knows maybe that would not be enough then it is 10 and all of a sudden we more or less have a capital gains tax on residential housing.Not only have we planted an acorn of a capital gains tax—which I can tell you as an electorate MP Jami-Lee Ross people do not want on their homes—but it actually will not achieve any of the outcomes that it is supposed to achieve. Kevin Hague did actually give us a number that tells us that that is the case: $5 million of revenue is expected per year. I know real estate agents who make more than that in royalties each year. It will make so little revenue because it will capture so few transactions and as the Law Commission as the accounting firms and as the major law firms of New Zealand told the Finance and Expenditure Committee the reason for that is that anybody engaging in so-called property speculation with any kind of scale can very easily arrange their affairs so that they do not sell the same house within 2 years of purchase. It will be that very small minority of people having bought an extra investment property who find themselves overextended and find themselves forced to make a sale and having to pay this tax when they are in dire financial straits. So it will not affect real so-called speculators it will affect those unfortunate enough to find themselves caught within this brightline test.In conclusion this is a fundamental misdiagnosis of the problem with the housing market in Auckland in particular. It is in addition to that a dangerous precedent that will grow into even worse public policy in time to come. It is executed in such a way that it will have absolutely zero effect if there was to be any at all.In closing I would like to pay tribute to the submitters to the select committee: the Law Society the law firms and the accounting firms. In many countries such people would quietly welcome a more complex taxation system because of course it fattens their fees. In New Zealand we have an enormous amount to be thankful for because at very short notice we received very high-quality submissions from the very people who would stand in a narrow self-interested way to benefit from this bill and for that I think we should all be very grateful. Thank you.