Robertson Grant: Taxation (Bright-line Test for Residential Land) Bill — Second ReadingText is incorporated into the Bound VolumeRobertson Grant: Taxation (Bright-line Test for Residential Land) Bill — Second Reading[Sitting date: 03 November 2015. Volume:709;Page:7597. Text is incorporated into the Bound Volume.]GRANT ROBERTSON (Labour—Wellington Central): Thank you very much Mr Assistant Speaker Tisch. I am sure given—how do I say this diplomatically—the stature of Minister Woodhouse who has just resumed his seat and indeed of the Assistant Speaker in the Chair you will forgive my taking a moment to congratulate Michelle Payne the winning jockey in the Melbourne Cup. She is the first woman to ride a winning horse in the Melbourne Cupin 155 years. I think it is a triumph worth noting.Hon Michael Woodhouse: It would never be me. I’m about 25 kilograms too heavy.GRANT ROBERTSON: I am sure that Mr Woodhouse if he looks for an alternative career in the coming years could find himself there—I do not know. But it was a wonderful effort by Michelle Payne—[Interruption] No that is right. But it was a wonderful effort by Michelle Payne to win that race—and yes I also note that the Labour Party’s racing spokesperson Kris Faafoi did manage to somehow or other fluke a win by betting on that horse. Obviously drinks are on Kris this evening—thank you very much Mr Faafoi. We could actually put that as an amendment to the bill—to include Kris Faafoi’s generous contribution to our evening entertainment.To return to the matters at hand the Labour Party believes that this piece of legislation is a political response by the National Government to a very serious issue of speculation in the housing market. It is an inadequate response. It is a response that is driven by trying to look as if the Government is doing something without actually taking on this issue. It is a token gesture where something far more serious and far-reaching was needed and if any proof of that was needed we learned in this process that officials have said that the implementation of this 2-year brightline test will raise an additional $5 million per annum. That is it—that is it. That is the extent of how much this will raise and we heard time—Hon Phil Goff: And the extent of its effectiveness.GRANT ROBERTSON: Of the effectiveness—that is right Mr Goff. We heard time and time again in the Finance and Expenditure Committee from every submitter bar one that this legislation was inadequate that it would capture the wrong people that it was confused and that it was incoherent. One of the senior partners at one of our largest tax accounting firms said he was “professionally confused” by the Government’s approach. That is one of the senior partners at one of our largest tax firms who said he was professionally confused by the Government.Government members know that this is inadequate. Government members know that this is a political response because we learnt that in the build-up to the Budget. When the Budget papers were released in July we looked to what happened in the build-up to the Budget. There were no papers on this because the Government rushed this through because it thought it had better look like it was doing something. And here we are in November passing the legislation for a bill that gets implemented on 1 October. It is completely hopeless. It is hopelessly implemented and it is hopelessly designed and the Government really should hang its head in shame.One of the core elements to emerge during the select committee process was exactly who would be captured by this legislation. Who would be captured? Is it the speculators whom we are really concerned about who are driving up the cost of housing in our biggest city Auckland particularly? Today when we look at the price of houses in Auckland we have Quotable Value telling us we have got an average house price of $980000—essentially a million-dollar average house price in Auckland—putting that out of reach for most first-home buyers. The data shows us that Auckland house prices have risen by $21500 a month in this last year. There has been a 25 percent increase in the cost of houses in the last 18 months. This is an Auckland housing market out of control affecting the financial stability of our country and at the speculation end the Government arrives with a very damp bus ticket because that is as good as this gets.What the submitters told us was that if you are a person who is genuinely in there speculating you will just wait out the 2 years. It is a 2-year brightline test. You will just say at the end of 2 years: “That’s right. I can now move on and continue with the behaviour that I would have indulged in.” The people who will be captured are the people who may have bought one property as an investment property and then something has happened in their lives. Something happens that means they have to sell it. Perhaps they lose a job or somebody has to move or somebody’s circumstances change which means that they do not feel that they want to have that investment property any longer. They will be the people captured by this legislation. Every single submitter acknowledged that. Every single submitter came to the committee and said: “If you’re trying to get the real property speculators you’ve got this wrong.” Two years is just a short amount of time to wait if you’re in that business. After 2 years and 1 day you are away.No doubt Government members will get up and say that that is all right; speculators will be captured by the intention test. There is a logical flaw in that argument. The reason we are here debating this legislation is that the Government tells us the intention test does not work now. So why will it suddenly work at the end of a 2-year period? And it is not just the submitters who said this. When Treasury was asked for advice about this from the Government it told the Government 2 years was inadequate. Actually it said 3 years was inadequate as well. It said it “should not be pursued as it is likely to yield very little revenue while generating significant behavioural distortions.”Treasury went on to say it considered a 5-year period “would be the minimum at which the gains of taxing the income outweighs the costs that the test would incur through behavioural changes.” Treasury went on to say that if you look internationally these kinds of rules and tests are applied and are useful at the 5-year mark but that advice was ignored because the Government was not really serious about this—because the Government was not really serious about dealing with speculation. It just wanted to look and appear as if it had done something. So that inadequacy around the length of time really does fundamentally undermine what the Government claims are its goals.The other point that submitters to the select committee were at pains to make was that the legislation fails the basic test for tax law: to be clear and simple to implement. A number of submitters raised their concerns about the legislation being inconsistent with other aspects of property law in its definition and coverage. Why does this matter? It matters because that means that tax accountants—those who advise people those who said that they were professionally confused by this legislation—will struggle to be able to interpret what it means and loopholes will end up being created.The legislation is beset with definitional difficulties and in the Committee of the whole House stage we will work through these and I hope be able to improve the legislation that the Government has put up. But obviously there are concerns about the definition of “main home” which arose from the previous legislation that this House passed. That definition of “main home” continues to be so subjective and so unrealistic and so easy—Chris Bishop: Oh rubbish.GRANT ROBERTSON: Well it is. It is so easy to get around. Everybody acknowledges that and by putting that in and bringing that through into this legislation that adds to the question.Minister Woodhouse mentioned the question of the dates of acquisition and disposal of land being the bookends of this process. That is inconsistent with other aspects of property law and no doubt will cause problems. There are difficulties around the definition of “residential land” which we will come back to and also the questions around farmland.This legislation could have been the beginning of something useful for Parliament to do to take to the speculation that is driving up property prices and that is causing those ridiculous prices that I talked about earlier in this speech but it has failed. It was rushed. It was ill conceived. The finance Minister Bill English got up in this House and said he did not even know if it was going to work. That is as good as it gets from the Government when it comes to cracking down on speculation because it does not want to crack down on speculation; it is not in its interests.This is a half-hearted attempt. It is a token gesture when something comprehensive was needed to ensure that we clamp down on speculation. Speculation in the Auckland housing market driven both from within New Zealand and by those who are offshore is putting home buying out of reach of many New Zealanders. That is the issue that we are actually debating today: the opportunity for young New Zealanders to live out the New Zealand dream of buying that house of having that security and of being a part of their community and today the National Government has failed. It has lost the opportunity to do this. This is a token gesture when something meaningful was needed. It is a huge disappointment.