Russell DeborahDr DEBORAH RUSSELL (Labour—New Lynn): Mr Speaker I am delighted to take the final call on the Taxation (Annual Rates for 2019–20 GST Offshore Supplier Registration and Remedial Matters) Bill. It's a tax bill and it's a very interesting one.The Opposition has raised in essence three major concerns with this bill—three reasons why they feel they may not be able to support it. The first is to do with tax rates the second is to do with the date at which the new rules for offshore suppliers start with respect to GST and the third is to do with ring-fencing of losses on rental properties. I intend to deal with each in turn.With respect to tax rates what the Opposition demonstrated first and foremost was simply how out of touch they are with ordinary New Zealanders. Let me tell you what the Hon Amy Adams said. She said that the average wage is approaching the top tax rate. Wrong—simply wrong. The average wage at the moment is something like about $50000. The top tax rate cuts in at $70000—40 percent more than the average wage; a simple matter of maths which the Hon Amy Adams couldn't get right.The Rt Hon David Carter showed that he doesn't understand numbers either when he ranted on I suppose about the ballooning of the tax take. The tax take was going to get enormous and huge because we weren't adjusting for bracket creep. Wrong—just plain wrong. If the Rt Hon David Carter had bothered to look at the percentage of the tax take over the next five or six years as set out in the Budget Economic and Fiscal Update delivered to this House just a week or two ago he would have seen that in 2018 the tax take would be about 28 percent of GDP. In 2019 it'll be about 28 percent of GDP. In 2020 it'll be about 28 percent of GDP. In 2021 it will be about 28 percent of GDP. In 2022 it'll be about 28 percent of GDP. In 2023 it'll be about 28 percent of GDP. I sense a theme here but whatever the theme is it is not a ballooning. A simple check of the figures would have revealed that.But the Opposition were concerned that we weren't adjusting that we weren't cutting taxes and they said that if we don't do this then taxpayers will miss out year on year. Those were the words from the Hon Amy Adams. Indeed they will miss out year on year if we do cut tax rates. They will miss out on hospitals if we don't take in sufficient tax revenue. They will miss out on education if we do not fund that properly. They will miss out on mental health care if we do not fund our Government properly. They will miss out on the work that is being done to reduce domestic violence if we do not fund our Government properly. They will miss out on the extraordinary work we are starting to do at long last on responding to climate change if we do not structure our tax system properly.It is all very well to talk about cutting tax rates willy-nilly but the question always has to be what services will be cut instead. I suggest that the Opposition needs to think a little bit harder about the purpose of tax.SPEAKER: Order! Order! I'm going to suggest the member get back to the third reading of the bill which is focusing on the bill as it emerged from the committee stages. It is not an opportunity for a general tax treatise.Dr DEBORAH RUSSELL: That's very disappointing Mr Speaker but I will obviously take your advice. SPEAKER: Order! The member will resume her seat. The member will stand withdraw and apologise and she will refrain from commenting on my rulings in the future. Dr DEBORAH RUSSELL: I withdraw and apologise Mr Speaker. The Opposition are refusing to support the tax rates in this bill. I reject their arguments and I support the tax rates that are outlined in this bill. Moving on to the second issue that the Opposition raised and that was the issue to do with the new rules for GST on offshore suppliers. It's a simple proposition for which as the Opposition have pointed out the work actually started under the previous Government. The idea is that when people in New Zealand consume goods and services—and in this case particularly goods that are bought from overseas—that they must pay the GST on it. This will be collected by the offshore suppliers and remitted to the New Zealand Government. The system is in place in Australia already; it has been well signalled by us. What the Opposition wanted was for us to allow more time—they said we had to give these offshore suppliers more time to get these rules in place. There were a number of submissions on this during the course of the hearings at the Finance and Expenditure Committee and indeed the Government did move to allow some more time in response to those submissions—another couple of months in order to get those systems in place. It is a reasonable response to the submissions and I think that on the whole it is a sensible change and one that ought to be supported. The third issue that the Opposition were concerned with was ring-fencing of rental property losses. They raised a number of arguments as to why we should just allow people to claim losses on rental properties against their other income. They said that if we did this then landlords would just sell the houses. To whom I wonder. Might it be to the renters themselves? I suggest that this is actually a good response to the rental crisis. They said that landlords would just put rents up but that is an extraordinary view to think that the price of something is determined only by the cost. Rents are set in a market situation. They are set by the market as much as they are set by cost; that is basic economics. As a Government we are taking a whole suite of measures in respect of the high price of rental accommodation of houses in this country and ring-fencing is just one of those responses. They told us that it won't bring in much money; but $190 million—that sounds like a fair chunk of money to me and quite a useful sum of money to bring in. Then they said that other assets aren't treated this way and that is because there is a fundamental difference between houses and other assets. I want to explain it because the Opposition seem not to understand this—usually when a person invests in a business they expect to wear losses for a while. It does take some time to get a business up and running but typically if money doesn't start coming in the door if a person doesn't start making a profit on that business then the business folds. Unfortunately the person makes a loss and of course that is a very difficult situation for that person. The difference with rental property houses is that a person can wear losses year on year on year if they expect to sell that property for what is an untaxed capital gain. They wear the losses because in the long term they expect to make a profit. That is how it works and that is the difference between rental property investments and investments in other assets and it merits a different tax treatment. The old treatment does give rental property investors a tax break. It gave them a tax break but it was a tax break that was not serving the country well. So that is the reason we have brought these ring-fencing rules in and with that—people did it because it gave them a tax advantage but there is a simple rule of tax planning: never ever enter an investment just because it gives you a tax break because that tax break may not last. This tax break is not lasting because it does not serve our country well. This is an excellent bill that tightens up several anomalies in the tax legislation and brings in some significant and much-needed change. It is a bill that underpins the strength of our Government and that underpins our need to fund our Government properly. I commend this bill to the House.