Parker DavidTAXATION (ANNUAL RATES FOR 2022-23 PLATFORM ECONOMY AND REMEDIAL MATTERS) BILL (NO 2)First ReadingHon DAVID PARKER (Minister of Revenue): I present a legislative statement on the Taxation (Annual Rates for 2022-23 Platform Economy and Remedial Matters) Bill (No 2).SPEAKER: That legislative statement is published under the authority of the House and can be found on the Parliament website.Hon DAVID PARKER: I move That the Taxation (Annual Rates for 2022-23 Platform Economy and Remedial Matters) Bill (No 2) be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill. At the appropriate time I intend to move that the bill be reported to the House by the committee by 2 March 2023.The borders have opened up. Growth is up. Inflation has peaked and is heading down. Tourism is bouncing back. Even before that GDP was back and higher than it was pre-COVID days and the economy is returning to normal. Unemployment is at 3.3 percent and we have had a fantastic health and economic outcome as we come out of the COVID pandemic. Mask mandates are gone vaccination mandates are on the way out except in the health sector and life is starting to return to normal. As it does we need to ensure that our tax rules are appropriate and operating as intended. The Government wants to ensure that the tax system minimises compliance costs that it places on taxpayers. The tax system also needs to keep up to date with modern business practices and changes and new developments abroad. In addition this bill aims to keep New Zealand's tax rules in line with global developments led at the OECD. There are many aspects to this bill that I can't go into in detail but I will provide members with a quick overview. The term platform economy" in the name of the bill refers to the relatively new part of the economy which uses apps to hail a car to take you to your destination to have food delivered to your door or to find a short-term holiday home. The platforms serve as a facilitator between New Zealanders who are purchasers and the people who are providing them with goods or services. It's a fast-growing part of the economy and it's got some great features and it's encouraged many people to participate in economic life. For many who do they're not fully aware of the tax implications. Of course this isn't unique to New Zealand and the OECD has been working on the issue and considered a range of options that could be considered for implementation to ensure tax systems remain fit for purpose—fair to all participants be it taxi drivers competing against Uber drivers or Uber drivers competing against taxi drivers. It will be at motels and hotels in a traditional form or Airbnb accommodation. This bill therefore contains proposals to implement an information reporting and exchange framework developed by the OECD on digital platforms. As these platforms typically operate across borders and are based in other countries this information measure will provide tax authorities with information about income earned by sellers on the platforms that's crucial to the functioning of the tax system. It proposes that digital platforms will be required to collect and return GST on short-stay and visitor accommodation ride sharing and food and beverage delivery services. This supports New Zealand's broad-based GST system and ensures that services delivered through these platforms have the same treatment for GST as services delivered through other business models as I've discussed. It's necessary to ensure that the GST system continues to function efficiently minimises compliance costs for businesses especially small businesses. So the bill also provides a legislative framework for determining how GST is applied to goods and services funded by charges fees and levies paid under the legislation. The bill as originally introduced also included measures to regularise the claiming of GST inputs by providers of financial services. This was misrepresented by the Opposition as being a GST on contributions to KiwiSaver or KiwiSaver funds or withdrawals from KiwiSaver funds; it never was. It was also misrepresented as GST being introduced on fund managers' fees. It was never that either. What it was was regularising the GST input credits that are claimed by some fund managers but not others. It didn't land well and we thought that the risk of undermining KiwiSaver should not be taken and so we hastily withdrew that provision of the bill. I would note that the tax changes to KiwiSaver in the last decade have come from the National Party who removed the tax-free status of employer contributions and added tax removed the $1000 kick-start payment and removed the annual subsidy for fees. We didn't do anything on that; we started and believe in KiwiSaver. And so whilst we believed that rule change to be fair when we introduced it we weren't going to put at risk the KiwiSaver system. It wasn't that big an issue.In respect of apportionment rules for GST when business assets are used for both business and private purposes we wanted to clarify that the part of the usage devoted to business purposes can be claimed back but the rest shouldn't. The private benefit shouldn't result in a GST claim so these apportionment rules limit the GST claimable to the business use of the assets. The current apportionment rules can be complex for businesses particularly smaller ones to comply with and we're improving that to make it less onerous and less complex to do the right thing as part of our general commitment to reducing complexity the tax system where appropriate. The bill also proposes to modernise and enable greater flexibility in the rules that apply to the tax treatment of cross-border workers and clarifies how pay-as-you-earn withholding tax fringe benefit tax employer superannuation contribution tax and non-resident contractors tax rules apply to such workers. Continuing on the international theme. Some New Zealand companies are concerned that they may have inadvertently become a tax resident in Australia due to recent changes in the Australian interpretation of its corporate tax residence rules. The bill proposes amendments to provide more certainty to New Zealand companies by ensuring they retain access to loss grouping consolidation and imputation credit account rules. It's also important to resolve integrity issues identified with the application of domestic dividend exemption and corporate migration rules to dual resident companies. The proposed amendments to these bills aim to strike a balance between ensuring the integrity of the rules and limiting the risk of overreach. Closer to home the bill at last exempts public transport fares from the fringe benefit tax (FBT). These can be subsidised by an employer mainly for the purpose of their employees travelling between their home and work. Currently we've got an imbalance in the system where employers don't have to charge FBT on car parks provided to employees but do in respect of subsidies for transport fares. That's obviously an undesirable inconsistency. The last Government under National tried to neutralise that by charging FBT on car parks but they got a backlash a bit similar to the one that we got in respect of the fund management fees issue I just referred to and retreated from that proposal. Since then we've had this imbalance between car parks and public transport and we think the way through in this climate-constrained world is not to charge FBT on public transport. The bill also proposes to extend the exemption of the interest limitation rules on build-to-rent assets. Members will also recall that the original interest limitation measures enacted provided for an exemption for new builds for 20 years. The policy objective here of changes to interest limitation rules was to discourage investors leveraging a portfolio of assets to outbid a first-home buyer or someone who just wants a house to live in which was the increasing trend that we've seen in New Zealand as the concentration of housing assets has continued over the years. That change is actually working well and since we did that we have seen the number of first-home buyers in the market increase relative to people buying buildings to rent. We haven't seen the rapid increase in rents that was forewarned by the National Party. That hasn't happened and indeed rents are now increasing in Auckland at a lower rate than inflation because we're getting ahead on supply because of our massive house-build programme. So we believe we've got this right and it's never been our intention to disincentivise investor demand for new rentals—for new housing to be put into rentals. And therefore we're proposing to extend the build-to-rent exemption in perpetuity. Finally the bill also contains that crucial requirement of the tax system and that it sets the annual tax rates for the 2022-23 year. Those rates have not changed from the prior tax year. So that's a quick overview of the bill. It gives me great pleasure to amend—commend this bill to the House."