Nash StuartTAXATION (ANNUAL RATES FOR 2019–20 GST OFFSHORE SUPPLIER REGISTRATION AND REMEDIAL MATTERS) BILLThird 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 third time. This bill is broad in scope and proposes several initiatives to make the tax system simpler and fairer and to improve the integrity of our tax system. First and foremost the bill enables the efficient collection of GST on low-value imported goods. Right now customs does not usually collect GST on imported items that are worth less than $400 simply because it is uneconomic for them to do so. So this is not a new tax; it's simply that we now have the ability to collect it. The technology has matured to the point where offshore suppliers and market places of low-value goods can use their ICT systems to collect GST and remit it directly to inland revenue (IR) and this is what this bill proposes and enables. This is but one of several improvements to cross-border taxation that the Government is leading in a globalised 21st century system. Maintaining and improving the integrity of our tax system is a major focus of mine. This Government has already passed legislation to reduce base erosion and profit shifting activities of multinationals and we've begun consultation on the best way to tax offshore digital and social media giants who supply services to New Zealand. We're not alone in this endeavour and this issue is exercising the minds of tax experts all over the OECD and hopefully it will end up in a consensus agreement. But collecting GST on all imported goods is one of the more critical pieces of the puzzle. The tax system must keep pace with a globalised world where more and more people purchase goods and services online and from offshore suppliers. By not collecting revenue on a growing trade sector more and more of the tax burden falls on wage earners and business owners. So as well as protecting the revenue base this is also about fairness—fairness to local retailers who have to pass on 50 percent extra to consumers when their offshore competitors don't. It is simply not fair that offshore suppliers have an immediate 15 percent competitive advantage against bricks and mortar retailers who are doing the hard yards in our towns and cities around the country. The sooner this measure comes into force the better for retailers and the greater the integrity of the tax system. But offshore suppliers need time to ensure that their systems work which is why last week Cabinet agreed to push back the start date two months to 1 December 2019. Australia has required offshore suppliers to collect and remit GST on low-value goods since July 2018. So this is not a step into the great unknown for these large multinationals and indeed many other jurisdictions are considering similar rules. It's a sensible and predictable response to changes in consumer behaviour and the global market place. Again it's about companies paying their fair share—nothing more nothing less. New Zealand is still one of the first countries to implement the system for collecting GST on low-value imported goods ahead of the EU whose proposed rules are due to apply from 2021. As well as these new rules to broaden the GST tax base this bill makes several other improvements to our tax system which I am pleased to summarise. This Government has committed to a number of policy measures aimed at making the tax system fairer and improving housing affordability for owner-occupiers by reducing demand from speculators and investors and removing tax incentives that exist in the property market. We've already increased the brightline period from two years to five years and yesterday I announced that a new measure would be added to this bill to require nearly all buyers and sellers of property to provide their IRD number as part of the transaction process when they are selling their main home.Previously those buying or selling their main home did not have to provide an IRD number. This is a small change which will provide the Inland Revenue Department with better information and make it easier to identify taxpayers who are buying and selling property. In fact about one-third of the people currently transferring their main home already disclose their IRD number on the property transfer form even though they are not currently required to do so. Taxpayers are accustomed to disclosing their IRD number when they open a new bank account or start a new job so this is not a big ask for them to also provide this when buying or selling a property. However significantly it will enable inland revenue to better identify those who may be buying and selling property with the aim of making a profit. This was a recommendation of the Tax Working Group.I was told by a property investor friend of mine that this is one of the largest rorts in the property investment sector. His advice to me was to require people to put down their inland revenue number and IR will stop a number of the rorts that are occurring at the moment because of course if there was no IRD number then the inland revenue does not have the information. So again it is about maintaining the integrity of the tax system. In addition this bill also proposes ring-fencing losses made from residential rental properties. This means that investors will no longer be able to offset tax losses from their residential properties against their other income—for example salary or wages or business income—to reduce their income tax liability. This measure will make the tax system fairer and level the playing field between property investors and owner-occupiers. Of course I understand that people will still invest in property but we want people to invest in property for the right reason—i.e. a balanced portfolio or whatever as opposed to simply tax structuring. Currently first-home buyers can struggle to compete against investors who have part of the cost of servicing their mortgage subsidised by reducing tax on their other income. The loss ring-fencing rules will address this unfairness and improve affordability for first-home buyers making it easier for them to transition from rental properties into their own home. Earlier this year we passed new legislation to better enable the flow of information between Government agencies while protecting the privacy and rights of individuals and businesses. We also introduced short-process rulings so small businesses and individuals can more easily obtain binding advice from the inland revenue to help them get their tax positions right the first time. There are still binding rulings of course but these are expensive and often out of the reach of the vast majority of the small to medium sized enterprise (SME) sector so this is just another measure this Government has put in place to help the SME sector and enable it to get the tax obligations and responsibilities right. But there is more we can do to improve the administration of the tax system. Sometimes tax law does not align with intended policy outcomes and that can be a barrier for both taxpayers and the inland revenue. The proposed new processes in this bill will allow for an Order in Council or a legislative exemption to be made to align the law with the intended policy outcomes. There are safeguards to ensure no one is disadvantaged by this proposal including it being optional for taxpayers to apply in all circumstances. Changes made using these powers cannot apply for more than three years either which should be enough time for changes to be made to primary legislation considering it takes about two years on average to pass remedial legislation. This proposal has the benefit of reducing taxpayer compliance costs by providing certainty earlier. We also are proposing to give the Commissioner of Inland Revenue the discretion to consider a wider range of information in order to grant the victim of a sexual offence permanent exemption from paying child support. In some cases the person offended against finds themselves in a situation of having to pay child support for a child born as a result of sexual violence which is absurd. The proposal therefore is to loosen the requirement that there be a conviction and to allow the Commissioner of Inland Revenue to consider other information when deciding whether or not to grant an exemption. Let me give you a very brief praecipe of how this came about. As the Minister of Revenue I have received about three letters from women who conceived as a result of rape. They did not report this rape; therefore there was no conviction and they were being chased by inland revenue to pay child support. I thought this was hugely unfair and I required my officials to undertake a process to change the law. So those who say that writing to an MP or a Minister makes absolutely no difference—well they are wrong because in important issues a letter from a constituent can make a huge difference and can actually get the law changed. A couple more points. I'm pleased that this bill will enable entities to retain their tax records in Te Reo Māori. This of course has been an operating practice among some Māori organisations for some time and it is the inland revenue's operational practice but this Government believes that codifying the practice is an important recognition of the language of our tangata whenua. These are the main features of the bill and it is a bill which makes the tax system fairer. So I commend the Taxation (Annual Rates for 2019–20 GST Offshore Supplier Registration and Remedial Matters) Bill to the House.