Genter Julie Anne: Land Transfer Amendment Bill Tax Administration Amendment Bill — Third ReadingsText is incorporated into the Bound VolumeGenter Julie Anne: Land Transfer Amendment Bill Tax Administration Amendment Bill — Third Readings[Sitting date: 10 September 2015. Volume:708;Page:6547. Text is incorporated into the Bound Volume.]JULIE ANNE GENTER (Green): The Green Party is interested in creating an economy that is cleaner greener and works for all New Zealanders not just those who are already doing really well. To that end we need a simpler fairer tax system and we need to ensure that there are not loopholes like the ones that have been partially driving the out-of-control housing market in Auckland.There are multiple factors at play in Auckland. One of them is the fact that we treat tax on capital very differently than we do the tax on income that you get from—well we treat it differently than on labour. So people go to work—they are a nurse or a doctor—and earn a pay cheque. An engineer a teacher—whatever they are they have to pay tax on their income. But if one person buys a house and later sells it and makes $100000 as is regularly happening right now in Auckland no tax is paid on that income.There is an intention test where we say: “Well if the house was purchased specifically with the intention of making a profit then you should pay tax on it. But if you don’t have that intention one doesn’t pay tax on that.” So now the Government is trying to ensure that people who are buying and selling within a short period of time will be subject to that tax if it is not their main home and so there are several bills that are going to enable this to happen. One is the Taxation (Bright-line Test for Residential Land) Bill which is currently before a select committee. That means that anyone who buys or sells property within 2 years for investment purposes will be subject to tax.But in order to carry this out we needed information. The Inland Revenue Department in its regulatory impact statement on the original bill the Taxation (Land Information and Offshore Persons Information) Bill states: “Although we do have provisions that impose income tax on certain property transactions and also on rental income earned from property it is very difficult to assess compliance because there is no linkage between the property sales transaction data and tax identification.”So this bill exists to now require a tax identification number if the person is from overseas or an IRD number here in New Zealand on all property transactions except it does not. It would be really useful if it did because it would give us a lot of data and there are no real compliance costs associated with it. In the regulatory impact statement it says “Collecting an IRD number and linking that to the LINZ property sales transaction data would maybe take an extra 1 to 4 minutes for conveyancers.” and it may I think add $1 to $4 to the cost of the transaction. It is a transaction that obviously costs a lot more than that. So it is a tiny percentage overall. But it would be incredibly useful and actually simplify our ability and the officials’ ability at the Inland Revenue Department and at Land Information New Zealand to understand who is buying and selling properties.What happened here—and I am really disappointed about this process. It was as other members have said a truncated process and maybe it is for that reason that this bill has been changed I think through the process—or at least it does not reflect the advice provided by officials in the regulatory impact statement to exclude the main home from the IRD number.It is really hard to explain how unbelievable it is that the Government has made the exemption for the IRD number. Yes we understand OK that you are making an exemption for the main home in respect of the brightline test but why would you do that with the IRD number especially when in the regulatory impact statement the Inland Revenue Department says that its preferred option would be for it to apply to all property sales transactions? There are no additional compliance costs. That is something the Minister and members from the Government have claimed—that somehow requiring the IRD number for people buying and selling their main home would add compliance costs—but the regulatory impact statement says that the compliance costs would be maybe an additional minute of work for conveyancers for maybe an additional $1 to $4.When the regulatory impact statement laid out the options requiring IRD numbers and tax identification numbers to be provided to Land Information New Zealand for all property transactions was the preferred option. It said it “would enhance Inland Revenue’s abilities to enforce the income tax obligations of those who buy and sell New Zealand real property”. It would also “help prevent non-residents from evading foreign tax on their New Zealand land sale or purchase by ensuring that the foreign tax authority can match the transaction with the taxpayer.”So it is a good idea. It makes sense. Yet for some reason when the bill came to the Finance and Expenditure Committee and when it came to the Committee stage it had this bizarre exemption for the main home. Submitters certainly did not suggest that the main home should be exempted. We heard from Chartered Accountants Australia and New Zealand which said that actually this main home exemption does not make sense; it adds complexity to the rules and it means that we will have less complete information. We heard from Ernst and Young that the exemption should not be made and that it made it more complex. And here in the regulatory impact statement we see that it was the Inland Revenue Department’s preferred option to just keep it simple: get the IRD number and tax identification number for all property transactions.It makes sense right? But no this Government for whatever reason has chosen to make the rules more complicated. There is no reason to think there would be any additional compliance costs. As noted above in the regulatory impact statement it says: “A conveyancer is likely to spend an additional 1-5 minutes entering information into Landonline resulting in an additional cost of between $4 and $20 for purchaser and seller.” I know that under option 3—that is the option that the Government has adopted which was not recommended by officials and which was not particularly recommended by submitters who are experts in this area—compliance costs will be at the lower end of the scale for those exempted but it makes the rules more complicated and it means that we have less information. So the benefits of collecting the information which is the whole purpose of the legislation and is the purpose of the policy that the Government is implementing are reduced under this option.Under the brightline test there is a limit to how many times one can claim the main home exemption within 2 years. One can only do it twice because as it says in the regulatory impact statement: “some individuals who are purchasing their main home could still be subject to tax if they have a regular pattern of buying improving and selling their main home.” So the way to solve that is the brightline test which says that one is no longer exempt from the brightline test if it is one’s third time buying and selling one’s main home within 2 years. But of course how would we know that? How are officials supposed to know whether the buyer or seller has done it three times if they have not had the IRD number linked to the property transaction for the first two?It is a silly rule. It is a silly law. It adds complexity. It does not reduce compliance costs and yet for some reason the Government voted against my Supplementary Order Paper 121 which I introduced yesterday that would have removed the exemption for the main home from this legislation. Unfortunately ACT’s David Seymour voted against my Supplementary Order Paper even though it was right in line with what submitters recommended the charted accountants recommended Ernst and Young recommended and the officials recommended.So obviously the Green Party is going to be supporting the legislation but it is really a shame. It is a shame that lawmaking has come to this in this country—that the National Government gives us so little time to scrutinise legislation to actually make good law. It cannot agree with other parties in the House that are simply trying to make better law. It has got nothing to do with any ideological perspective. We just want to accept the advice of officials and that of submitters and get good information to make it easier for us to enforce tax law. Instead very typically of this National Government you have crazy exemptions that do not make sense that nobody recommended and that have no good solid factual basis for their arguments. Yet those members come in here and say “Oh it’s going to be less administration if we don’t require people to supply their IRD number.” which takes about 30 seconds. So I am just sorry. I am sorry that yesterday in the Committee stage we could not get some cross-party agreement on what would have vastly improved this bill—very very sorry. Thanks.