Wagner Nicky: Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill — First ReadingText is incorporated into the Bound VolumeWagner Nicky: Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill — First Reading[Sitting date: 08 December 2015. Volume:710;Page:8640. Text is incorporated into the Bound Volume.]Hon NICKY WAGNER (Minister of Customs) on behalf of theMinister of Revenue: I move That the Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill. This omnibus tax bill proposes some wide-ranging reforms to the tax system all aimed at improving the integrity of the tax system and making it fairer. The bill proposes a new withholding tax: the residential land withholding tax or the RLWT. The objective of the residential land withholding tax is to act as a collection mechanism for the new brightline test which requires income tax to be paid on any gains from the disposal of residential land that is acquired and disposed of within 2 years subject to some exceptions. The residential land withholding tax is aimed at the sale by offshore persons of New Zealand’s residential land and this is because it can be difficult to collect tax from the proceeds of such sales from foreign owners with no or limited presence in New Zealand. When a property has been bought and sold with the intention of making a gain those gains have always been taxable.The new brightline test helps to supplement this rule by creating an easy-to-enforce objective test. The objective of the measure in this bill is to help ensure that the tax that should be paid is collected. New Zealand already imposes withholding tax on payments where the recipient is likely to have a tax liability and where there are also collection concerns. With the introduction of the brightline test it makes sense to do the same where foreign owners of residential properties sell within 2 years. It is proposed that the residential land withholding tax be imposed at the point where New Zealand land is sold by an offshore seller so as to improve the collection of the annual income tax liability for brightline residential land income the offshore person might have. The residential land withholding tax is intended to be collected from the offshore seller by the residential land withholding tax agent of that seller. This person is usually the seller’s conveyancer. The agent would be responsible only for collection but would not themselves be liable for the residential land withholding tax. It is proposed that the residential land withholding tax would be payable from 1 July 2016. There will be exemption for disposals of inherited land as well as relief for property transfers as part of a relationship agreement. The residential land withholding tax will support the effectiveness of the brightline test—[Interruption]The ASSISTANT SPEAKER (Lindsay Tisch): Order! I am sorry to interrupt the honourable Minister. Interjections are about the person speaking across the benches not other discussions and comments being made. I would ask you to confine those.Hon NICKY WAGNER: The residential land withholding tax would support the effectiveness of the brightline test and contribute to the integrity of the tax system. This is a good measure because it helps ensure that a lawful amount of tax that should be paid is collected.Another measure in this bill is also aimed at collecting tax due where currently the full amount is not collected. The strength of our GST rules is that the tax is applied equally and with very few exemptions. This helps ensure that the tax is fair efficient and simple. However currently GST is not collected on most cross-border services and intangibles including internet downloads and online services. The growth and uptake among New Zealanders of services on which no GST is currently collected such as online entertainment have significant implications for the tax base. In addition there are concerns about the impact that this uneven GST treatment may have on the competitiveness of domestic providers. The amendments in this bill address the non-taxation of cross-border remote services and intangibles in order to maintain the broad base of New Zealand’s GST system and to help level the playing field for domestic and offshore suppliers. The bill proposes that GST be applied to cross-border remote services and intangibles supplied by offshore suppliers—this includes e-books music videos and software purchased from offshore websites—to New Zealand resident consumers by requiring the offshore supplier to register and return GST on these supplies. Non-resident suppliers will be required to register and return GST when their supplies of remote services to New Zealand exceed NZ$60000 in a 12-month period. This is of course not an issue faced only by New Zealand. The Organization for Economic Cooperation and Development the OECD has developed guidelines to establish an international set of principles for determining when countries should have the right to tax these supplies. This is expected to minimise the potential for double taxation or double non-taxation. The amendments proposed in this bill are consistent with these guidelines.The bill also contains a proposal to help improve student loan repayment compliance of New Zealand borrowers living in Australia. Most student loan borrowers do the right thing and repay their student loans but borrowers living overseas have a lower rate of compliance than those living in New Zealand. The majority of student loan borrowers living overseas are believed to be in Australia. The proposal in this bill therefore is to allow certain information on student loan borrowers living in Australia to be shared between the Inland Revenue Department and the Australian Taxation Office. Having current contact details is important for encouraging borrowers to meet their obligations so the proposal in this bill will allow the Inland Revenue Department to stay in contact with borrowers living in Australia. This will help the Inland Revenue Department to keep borrowers engaged with their obligations to improve the collection of outstanding payments.Another measure in the bill also focuses on student loan borrowers. Borrowers who work overseas for approved charitable organisations in approved aid activities as volunteers or for token payment are entitled to be treated as if they were physically present in New Zealand. This means that they are not charged interest on their student loans while they are volunteering overseas for up to a maximum period of 24 months. However Cabinet’s approval is currently required for a charitable organisation to be listed in the Student Loans Scheme (Charitable Organisations) Regulations 2011 and this can take time which means that some borrowers are denied the full benefit of this provision. The bill therefore proposes to revoke these regulations and delegate the authority for approval of charitable organisations for this purpose to the Commissioner of Inland Revenue.These are the main features of this omnibus bill. Together these measures will help improve the integrity of our tax system by strengthening it and making it fairer for taxpayers more generally. It now gives me great pleasure to commend this bill to the House.