Taxation (Land Information and Offshore Persons Information) Bill — Second ReadingText is incorporated into the Bound VolumeTaxation (Land Information and Offshore Persons Information) Bill — Second Reading[Sitting date: 08 September 2015. Volume:708;Page:6308. Text is incorporated into the Bound Volume.]Taxation (Land Information and Offshore Persons Information) BillSecond ReadingHon TODD McCLAY (Minister of Revenue) on behalf of theMinister for Land Information: I move That the Taxation (Land Information and Offshore Persons Information) Bill be now read a second time. I thank the members of the Finance and Expenditure Committee and particularly its chair David Bennett for their report on the bill. This is no mean feat given the very short time frame the committee members had to thoroughly consider the bill and the public submissions that were received on it.As members of the House know the bill will enable the implementation of a number of measures announced in Budget 2015. It does so by proposing amendments to the Land Transfer Act and the Tax Administration Act to improve compliance with tax law.Mr SPEAKER: Order! I apologise for interrupting the Minister. There are too many conversations being carried—[Interruption] Order! Would those people having conversations at the back of the House leave the House immediately and allow the Minister to deliver his contribution.Hon TODD McCLAY: Thank you Mr Speaker. Everyone here will agree that it is perfectly reasonable to expect that everyone who has an obligation to pay tax does so. As such the proposed changes in the bill are designed to enable the collection of information to ensure that people who buy and sell property for profit including overseas buyers and short-term speculators pay their fair share of tax. At the same time we have been careful not to unfairly impact on New Zealand owner-occupiers who have worked hard and saved to buy a family home. It is envisaged that the changes proposed in this bill will be implemented by 1 October.This said the Finance and Expenditure Committee had the significant task of analysing the bill and all public submissions in a truncated time frame as I mentioned earlier. I am pleased to say that the committee has done an exceptionally good job. Its recommendations have resulted in a number of additional provisions being added to the bill by way of two simple questions to determine firstly whether a property buyer or seller or a member of their immediate family is a New Zealand citizen or holds either a resident work or student visa and if so whether they intend to live in the property being transferred.I have also been sure to listen to the views of the New Zealand Law Society whose members will be directly impacted on by the requirements in this bill. I intend to propose an amendment to the bill by way of a Supplementary Order Paper during the Committee stage so that the new requirements will apply only to contracts entered into on or after 1 October with the information having to be provided after 1 April 2016 irrespective of when the contract was entered into.This bill will help us better understand the residential property market and will inform housing policy accordingly. New Zealanders have a right to know that everyone who should be paying tax does so. This bill will make sure that this happens. I commend this bill to the House.GRANT ROBERTSON (Labour—Wellington Central): Well that contribution from the Minister of Revenue kind of sums things up really. He could not find his notes he did not know what to say and he sat down after 2 or 3 minutes. That is the Government’s commitment—its rock-solid commitment—to getting to the bottom of who it is who is buying houses in New Zealand. It says it all about this bill and this piece of legislation which is all about being seen to do something. It is about the fact that public pressure has built up on the Government and so it knows it has to act in some form or other. So it puts up a half-hearted confused piece of legislation designed to make it look as if it is dealing with the question of speculators look as if it is going to provide some decent information for us to be able to assess what is happening in the New Zealand property market but when in reality it has completely failed to do so.The Minister told us that he was going to take some notice of the submissions of the New Zealand Law Society. I welcome that and I hope that when we see those amendments we will be able to support them. What I would ask is that the Minister take notice of some of the other submissions that he received on this bill—or even in fact whether he would take notice of some of the advice that he received from the Inland Revenue Department because we found ourselves as Opposition members during the progress of this bill in the Finance and Expenditure Committee being the advocates for the Minister’s own department. The Inland Revenue Department in its regulatory impact statement gave a number of pieces of advice to the Minister about how this bill could be improved and the Minister decided not to go there. Actually my understanding is that the Minister himself probably quite wanted to go there and quite wanted to accept the advice of his officials but other members of Cabinet overruled him told him that he could not do that and watered the bill down.When we look at the Inland Revenue Department’s statement the first issue that it had is one that all of us on the select committee had which is that time constraints meant that the Inland Revenue Department was not able to consult with potentially affected parties or estimate the compliance costs for this piece of legislation. So let us just stop and think about that for a minute. Here we are imposing a new regime on buyers of property in New Zealand and the Inland Revenue Department tells its Minister that it has not had time to consult with the people who are affected and it does not know what level of compliance costs are going to be imposed. That is the standard of legislation that this Government is bringing back to the House today. We on the committee felt that we were under a time pressuretoo. We did not get all of the information that we needed I believe to make this piece of legislation into what it should be. I say this: I believe that we will be back in this House within months correcting elements of this legislation because we have not had the time as a Parliament to get this right. The Minister is coming up with Supplementary Order Papers that he wants to put through in the Committee stage on the hoof and there will be more in the future.The other concern that the Inland Revenue Department raised—and it was raised by a large number of the submitters to the bill and is also in the minority report of the Labour Party and the Green Party—is around the definition of “main home”. The Government tries to explain away its desire to exempt the main home in its comments in the report. But what the Inland Revenue Department said was that it did not believe that exempting the purchasers of a main home would reduce compliance costs as almost all those people purchasing a main home here in New Zealand would have an IRD number anyway. That is the bottom line point. If you are going to be buying a main home you are going to have it anyway.But rather than accept that advice from the Inland Revenue Department the Government said: “No no we know best and we are going to exclude that.” Therefore the quality of information is fundamentally compromised from the get-goby doing that in this piece of legislation. The excuse that somehow or other this was going to place this outrageous burden upon New Zealanders that they would have to actually have an IRD number and a New Zealand bank account is completely ridiculous. It is not justifiable at all. The Inland Revenue Department in its advice to the Minister said that—because obviously this is linked to the next piece of legislation. I know we are not supposed to talk about an upcoming piece of legislation but the next piece of legislation—Hon Ruth Dyson: Just in passing.GRANT ROBERTSON: Oh is that right? In passing—right OK. The brightline test—the Government tried to link it up and say that it was important for that reason. The Inland Revenue Department has told it that that is not the case. We believe that the exemption for the main home is actually going to increase compliance costs. It is certainly going to create loopholes in terms of the kinds of data that can be collected.We also believe that the definition of “main home” within this piece of legislation is fundamentally flawed too. It is vague and it is open to interpretation. The Government has come up with the idea that a person’s main home should be the place of residence with which they feel the greatest connection. The problem with this is twofold. The first is that that phrase “with the greatest connection” has never been used in New Zealand tax law before. Nobody actually knows exactly what it means and there will be wholesale interpretation issues over the next few years. If somewhere is your “principal place of residence” that is I believe a clear and readily used phrase.The inconsistencies that arise from someone having a “greatest connection” may be that they do not necessarily live there full-time. Certainly if they live in other parts of New Zealand and travel from time to time to a place that they regard as their main home is that the place that they have the greatest connection to? Is it where their children go to school? Or is it where they work? We teased out some of these ideas with officials and quite frankly the officials were not able to answer because this has never been used before because the Government has come up with a brand new definition that we believe is subject to considerable loopholes.The Inland Revenue Department also told the Minister that the requirement to have a New Zealand bank account to obtain a New Zealand IRD number is unnecessary for individuals and of limited benefit as the department already has the power to require relevant identification verification upon application for an IRD number. The bottom line here is that the IRD number is what is the useful thing—the thing that will actually be able to be tracked. Opening a New Zealand bank account? Well yes it might be interesting but it really does not tell you very much at all in terms of where somebody is resident.We had a range of issues given to us by submitters during the select committee process. Some submitters said to us that the requirement for a New Zealand bank account for an offshore party to obtain an IRD number is unnecessary and will provide no net benefit whatsoever. We also agreed with the Inland Revenue Department which advised in the regulatory impact statement that it is unlikely that any anti - money-laundering checks carried out by a New Zealand financial institution would have any greater impact or give any greater information than the department would already get from the provision of an IRD number. So this is the worst of both worlds. On one hand we have got a series of unnecessary compliance and on the other hand we are not actually assessing the full range of information in terms of people who purchase their main home. So what started out sounding to most members of Parliament as being a good idea turns out to be an idea full of holes and one that does not give the right information that New Zealanders would expect to see coming from the Government.On balance the Labour Party members of the committee have agreed to support this bill. It at least begins the process of identifying a major gap in our information about the way that housing is purchased in New Zealand. It is inadequate. It fails the test of good legislation by being rushed through the House. The Minister has failed to take the advice of his own officials about how to take the strongest and best approach to getting this information.As a Parliament we have a responsibility to New Zealanders I believe to get the best possible information about who is purchasing homes and what rate of purchases is being undertaken by foreign speculators. Looking at the Quotable Value New Zealand data we know that speculators were responsible for around 41 percent of the purchases of homes in the Auckland area in the last year or so. That is an interesting piece of information but David Bennett will probably stand up and say to me: “Well that’s inadequate.” I agree but this bill should have been the piece of legislation that brought to the House a comprehensive register of home purchasing in New Zealand that we could all use to understand the origin of those purchases and what impact that is having on the housing market in New Zealand. Instead what we have is a half measure a confused bill which we will no doubt have to improve very soon.DAVID BENNETT (National—Hamilton East): That last speech was one of rhetoric but no substance and it is typical from that member Grant Robertson in his finance role. If Labour members had so many concerns about holes in this legislation surely in the Finance and Expenditure Committee they would have made those known and they would have sought to have them adjusted. They did not do so. They do not see any particular holes because it is all rhetoric that they are talking about. When we talk about the main home test—that is the exemption for ordinary New Zealanders that is in this bill and will be in the Taxation (Bright-line Test for Residential land) Bill as well—we have got to look at it from the perspective of the ordinary New Zealand purchaser as well and we do not want to put undue compliance on ordinary New Zealanders when they are purchasing properties. The register notion that the previous speaker talked about is a very Soviet-era type of approach where everything and anything that anybody does has to go through Government agencies before it can be approved.This bill is one that sets the information flows for the Government around those land transactions—the purchase of property—but that also sets some rules around what some purchasers have to engage with and deliver. The first thing is that buyers and sellers will be required to provide IRD numbers at the time the property is transferred. This tax information will be provided to Land Information New Zealand as part of the conveyancing process and then forwarded to the Inland Revenue Department. People who are tax residents in another jurisdiction will also be required to provide their foreign equivalent of an IRD number.The second part of the bill requires offshore persons as defined in the bill to have a New Zealand bank account before obtaining an IRD number. That is the second requirement. This ensures that offshore persons are subjected to New Zealand’s anti - money-laundering rules and it is an important part of the reasons behind this bill.There are some clauses in the bill that were the subject of some submissions. I think that 13 submissions were received by the committee and some of those presented were around the “offshore persons” definition the “main home” definition and suchlike. This is tax legislation that cannot be overly prescriptive. It needs to give the ability for the Inland Revenue Department to have some discretion in how it interprets some of that wording. They are new tests in some ways but at the same time they are tests that enable the Inland Revenue Department to be able to apply the principles and policies that this bill seeks to achieve through its application of the meaning of those tests rather than be totally explicit in this legislation which is something that tax legislation fails on many times because people just use those explicit definitions as a mechanism to get around it. There is a little bit of broadness in the way it is structured around that terminology but that is to provide the Inland Revenue Department with the ability to deliver the policy that this legislation seeks to achieve which is the information around IRD numbers and around those offshore persons and at the same time not putting undue requirements on New Zealanders who are buying their main home and who are exempt from those requirements.This is a good bill and it will be part of a suite of legislation that will deliver in this area. Thank you.Dr DAVID CLARK (Labour—Dunedin North): Labour will support this bill because we back the policy objective that is behind it which is to collect information on offshore residential homebuyers. However as my colleague Grant Robertson has already begun to canvass there are a large number of loopholes and weaknesses in this bill and that is as a result of a Government obsessed with wanting to look like it is doing something and actually making sure that it is not. There is no clearer example of that of course than the paper boy tax legislation that we saw in a previous Budget where the Government shifted things around to make it look like it was doing something but it actually created a grey economy where there was none before and created extra red tape and overheads for many who were doing those part-time jobs and for employers as well. Likewise with child support—requiring employers to collect child support arrears where they did not previously is an extra red tape burden that this Government has imposed on employers.Here we have an example of additional red tape but it is red tape applied without an offsetting assurance that we are actually achieving the policy objective. That is worrying because poor legislation does introduce costs to an economy and places an individual burden of costs on people on ordinary citizens. When no offsetting gain can be guaranteed that is a worrying thing. It is Parliament’s job to try to get this legislation right to make sure that we do make sensible decisions that do not cause extra compliance for ordinary citizens and to try to solve the problems that we see as a country. But no one these days would say that offshore property speculation is not a problem in New Zealand. I think even the Government acknowledges that offshore property speculation is a problem. At least that is the rhetoric and at least that is the driving reason behind bills like this one. But as to actually doing something about it in a sensible measured way and in a way that answers the questions of policy advisers well that is a different matter altogether.What we saw in the regulatory impact statement and in the advice from the Inland Revenue Department was advice that it was unable to estimate the compliance costs or consult on this legislation because there was not enough time to do that. So the department has not estimated what the cost of this legislation is what the overhead that goes with it is and whether in fact it is going to be as effective as it could be because the Government has placed time constraints on this legislation in order to rush it through Parliament to be seen to be doing something about the problem that we are facing as a country. The Inland Revenue Department also recommended to the Government that it not exempt main homes from the register because that will not reduce compliance costs for purchasers of a main home as almost all would have a New Zealand IRD number anyway and it would make rules more complicated for purchases and conveyances and create loopholes.There is a whole set of reasons why this legislation should not have been rushed through why it should have been given a second look and why the Government should have taken its time to make sure that it was right and was actually achieving the stated goal of cracking down on overseas property speculation. But of course what we on this side of the House suspect is a certain amount of cynicism from the Government opposite. We know that the Government is not particularly interested in cracking down on property speculators. We have seen little evidence of it. National has been willing to take a bit of a political hit on it over the years whereas it has been so responsive in other areas to polling and to its focus groups and so on. In this area we begin to suspect that it has other interests at play and so it is not wanting to crack down in this area in the same way. So it seems to be quite happy to let some of those loopholes remain and I think people can probably draw their own conclusions as to why that might be.We will support the bill because it is a first step towards achieving the goal. We recognise that when we are in Government a Labour-led Government will have to tidy this up and tighten it up to make sure that it does what the stated policy intention originally was.A Government that is not straight with New Zealanders is going to run into problems over the longer term. I think it is fair to say that this theme of the Government saying it is going to do one thing and then not delivering on it is wearing a little thin with New Zealanders who are now seeing this Government as being increasingly out of touch.The bill says that it supports the Government’s yet to be introduced legislation to create a new 2-year brightline income tax test for Auckland—the test that is not a capital gains tax but supports that tax on property gains over time. We will be debating that later I believe; in fact it might be the next bill on the Order Paper. We see it as part of a package that the Government is putting together to be seen to be doing something in this area. But we are mindful on this side of the House that although these new measures will improve the current complete lack of information regarding overseas house purchases they are but a part measure. They are needlessly weak and as Grant Robertson said in his contribution those on the select committee heard ways in which the legislation could be made stronger and we can deduce only that the select committee itself by burden of a Government majority decided against putting that recommendation through to Parliament and opted instead to adopt the weakened bill that we have before us.It is disappointing that Parliament and the select committee will need to visit this legislation again in the future to amend the inadequacies of this bill. Implementing a full and proper overseas homebuyers register the first time around would save wasting a whole lot of parliamentary time. The cost of putting a bill through this Parliament is quite extraordinary. I remember seeing an estimate. It is hundreds of thousands if not millions of dollars to put a bill through this Parliament when one takes into account the staff time all of the salaries sitting in this room the lighting the advisers for the select committee process and so on.It is a huge amount of money to put a bill through this House so that is why we find it frustrating that the Government wants to put through a half measure that will almost certainly have to be revisited. It is so obvious as we put it though this House that it is a half measure that it is needlessly weak and kowtows perhaps to property speculator interests rather than taking a principled stance and saying: “How do we rebalance the New Zealand economy? How do we make sure that we tackle the issue of a housing market in Auckland that has been out of control for some time where we have homelessness in our streets and growing social issues as a consequence? How do we make sure that the market is set to respond? How we make sure we actually have a country that is focused on productive activity that sets the incentives up right and that makes sure that overseas speculation does not drive our currency and our housing and our economy? How do we get focused on the issues that matter and on generating a better New Zealand?”.So for all the cost involved in putting this bill through Parliament we would have liked to see proper strong robust legislation. Instead we have the kind of legislation that you might expect from a Government that is arrogantly pressing ahead saying: “We’re not going to listen to anyone. We just want to be seen to be doing something. Tick that box. Move on.” We have a Government that is increasingly out of touch with ordinary New Zealanders. Those in the middle are getting squeezed and here again they will get squeezed by this legislation. Middle New Zealand will be the ones who comply with this legislation while the speculators find the loopholes and carry on as they were.Mr Bishop I am sure is going to stand up shortly and say that this is all wrong. But if he addresses the questions that have been raised by both Mr Robertson and me adequately now it will be a wonder to many that he did not do that in the select committee.CHRIS BISHOP (National): I just want to respond to the charge from Dr Clark who has just spoken that this is a cynical Government. The only thing cynical around offshore buyers that has happened in this Parliament and in this society in the last 3 months was the cynical cheap crass and outrageous attack on Chinese migrants by the Labour Party. That meets the very definition of cynical: exploiting and demonising an ethnic minority for cheap and craven political purposes. The Taxation (Land Information and Offshore Persons Information) Bill is not a cynical piece of legislation. This is a well-intentioned and well-meaning attempt to obtain tax information from people buying and selling property in New Zealand by amending the Land Transfer Act 1952 and the Tax Administration Act 1994 to improve the enforcement of non-residents’ tax obligations. The key change that the bill provides is to require buyers and sellers of property to provide an IRD number or the equivalent tax number in the case of residents of other countries. Individuals buying or selling a main home are exempt from that requirement and in my brief contribution to the House I just want to canvass that exemption which is in the piece of legislation we are considering and which came in for some pretty robust debate at the Finance and Expenditure Committee as has been alluded to by Mr Robertson a few moments ago.There was some suggestion from members opposite and some suggestion from others at the committee that we should include all property transactions within the scope of this bill—in other words all property transactions in New Zealand whether or not they include a main home or whether or not they do not include a main home; all buyers and sellers of property would be required to provide their IRD number. Why did the Government decide not to do this? The first reason and the most fundamental reason is that the proposed brightline test—which as members will know is in the companion legislation to this bill that we will consider in a few moments’ time—exempts the main home. So there is little point in requiring everyone who buys and sells a property in New Zealand everyone who buys and sells a main home or buys a property with the intention of living in it as their main home to supply their IRD number when they are going to be exempt from the brightline test which is the major point of the legislation we are about to consider. That is the most fundamental reason.The supplementary reason which relates to the main reason is that it would greatly increase the volume of information that people would have to provide through Land Information New Zealand and the Inland Revenue Department. We also believe on this side of the House that it would make people worry needlessly about whether or not a transaction was taxable. In the vast majority of cases when people buy and sell a main home—a place they are living in a place they have a great connection to—those transactions are not going to be taxable but the requirement for people to supply an IRD number needlessly will make people worry about whether or not that transaction is taxable. That is why we are exempting the main home from this legislation.Grant Robertson said that the officials advised against it. That is I have to say a little bit rich. Governments are entitled to listen to what officials have to say and they are entitled to take a different course. In fact the previous Labour Government made a virtue of ignoring Treasury advice year after year. It ignored the official advice from Treasury and the Inland Revenue Department about a whole range of matters. In fact it made a virtue of it. Michael Cullen used to turn up in this House and talk at length about how Treasury had had an ideological burp and other such matters. So yes Governments are entitled to listen to the official advice but that is actually why Governments and parliamentarians are elected: to weigh up the competing advice to weigh up what officials have to say and actually to apply their minds as to whether or not a piece of legislation is a good idea. Officials are entitled to have their say but actually officials do not run the country. We do not have a Government of the bureaucracy in this country; we have a Parliament that makes laws and we have a Government that is made up of lawmakers elected by the people who are responsible to Parliament. The official advice in this circumstance here has been listened to but the Government decided to take another path.This is not a cynical piece of legislation; this is a good bill. Members over the other side are politicking as they are wont to do with pieces of legislation around non-resident buyers and as they are wont to do with migration and the role of non-residents generally in this society. It is regrettable that the Labour Party and Mr Twyford have such little regard for migrants to this country and for foreigners but sadly that is the way it is. I commend this bill to the House.JULIE ANNE GENTER (Green): The Taxation (Land Information and Offshore Persons Information) Bill is one part of the Government’s “not a capital gains tax” tax that was announced around the time of the Budget. The Green Party is supporting that whole policy package if you will because it is taking a step in the right direction but we do not believe that this bill really is as good as it could have been unfortunately. What the bill does is it starts the very first steps towards getting information on what is actually happening in the housing market. This has been a very long time coming. It has made it very difficult for us to assess what exactly is causing the underlying inflation in house prices in Auckland because we simply do not have enough information.I remember asking the Governor of the Reserve Bank a year and a half ago—maybe 2 years ago—when he came before the Finance and Expenditure Committee whether the Reserve Bank had information on what proportion of sales were to overseas buyers and that was just to understand how much foreign capital is coming into the market because that can be one of the factors in price inflation. It is really important to have an understanding of whether or not that is making a difference and we simply did not have the data at all so we did not know to what extent house price inflation was caused by supply problems or whether it was caused by demand-side problems like the influence of speculators or a whole heap of foreign capital coming in and bidding up our market. The Reserve Bank at that time said it did not have that information it would very much like to have that information and that it required action from the Government in order for it to collect that information. Finally a year and a half later we have a bill that is going to start collecting that information and it is very useful and that is why the Green Party will be supporting this bill.Why is it important to understand this? It is because there are multiple factors at play in housing affordability. Everybody I think agrees that it is incredibly important for every person in New Zealand to have a warm safe secure dry place to call home. That is fundamental. It is important that people are not prevented from having this because of not having enough money to pay the rent or to pay the mortgage. It is also important that we do not have an overvalued bubble in Auckland because the amount of debt tied up in housing in Auckland becomes a liability for the whole economy and that is certainly something the Governor of the Reserve Bank has been worried about for quite a while now and we are finally seeing some very small steps in the right direction by this Government but it has failed to take action for a significant number of years.Back in 2010 Treasury was lobbying the Government to implement a capital gains tax which it failed to do and of course that would have had an impact on demand in the Auckland housing market and might have limited the bubble more. Obviously it is not a silver bullet and it is not the only solution but we do know for very understandable economic reasons that when you do not have a tax loophole on housing—as we currently have had and continue to have to a certain extent—then there is a perverse incentive to put more money into houses rather than into productive sectors of the economy and there is a perverse incentive for people to own more houses. When you do not have protection for renters there is also a perverse incentive for people to become landlords and not look after their properties and to make a loss on the rent because they are anticipating future capital gains that will not be subject to tax. It is simply not right that people who go to work in a hospital or at an engineering firm or whatever else they are doing have to pay tax on their salary but people who sit back and make a hundred grand simply by flipping houses in Auckland over a period of a few months pay no tax on that income. It is not right it is a distortion and it is something that we could fix and that we clearly understand how to fix.The relevant information that is going to be collected because of the changes in this bill has to do with understanding how much money is coming in from overseas. That is important to understand exactly what proportion of the house price inflation is being driven by that incoming capital. Lots of other comparable jurisdictions have already started to impose things like a stamp duty or a limit on foreign buyers in order to protect their own housing markets and that is something that we have failed to do in New Zealand. The previous speaker Mr Bishop insinuated I think that Opposition parties bringing this up are just simply politicking and they are playing on racism and fear of migrants. As a migrant myself I can say that that is certainly not why the Green Party has a policy that would limit sales of property to citizens and residents. It is not because we are afraid of migrants—we have been lobbying for an increase to the refugee quota and we have a very open and tolerant immigration policy—but it is important for the sovereignty of New Zealand that the people who are buying property here have a stake in the future of the country. It is for that reason that we would say it is important to be a resident or a citizen and it is entirely possible for many people to become a resident and a citizen even if they were not born in New Zealand.So it has nothing to do with racism and the fact is that we know that in comparable cities all over the world like Sydney Vancouver London and Hong Kong—places where house price inflation has been equally as high or higher than in Auckland—house price inflation is driven to a certain extent by capital coming out of China because it is a very big country and it is a very big market. There is nothing specifically against the Chinese it is just acknowledging the fact that there is a lot of capital coming out of China looking for a safe haven and looking for safe investments and given the tax-free status on housing in New Zealand it is certainly a very safe place for them to invest money. The issue for us is that actually it starts to impact the ability of New Zealanders to have a safe warm dry secure place to live. So it is important that we understand the problem and in order to understand the problem we have to have the information. That is what the Governor of the Reserve Bank had asked for a year and a half ago and that is what the Green Party asked for.This bill starts to do that so we are going to support it but I have to say that it really is not perfect. I think the single biggest problem with the bill is this main home exemption. What we heard from officials and other submitters is that making an exception for a person’s main home adds complexity to the rules—why would you want to add complexity to the rules—and limits the amount of information that is available about property transactions. So for that reason most of the Opposition MPs on the Finance and Expenditure Committee argued against the main home exemption and we have put that in our minority view. When it comes to tax and regulations simpler is better. Putting in exemptions just creates unnecessary complexity and loopholes which can then be gamed.The previous speaker Mr Bishop said that there was no point in collecting data because people for whom the property was their main home would be exempt from the brightline tax but that does not mean there is no point in collecting the information. It is certainly not onerous to collect the information. I would say that more information is better and I do not think it is credible to say that people are going to be terribly worried that they may have to pay a tax simply because they have to provide their IRD number. It is just not credible. It is not a big deal and it is certainly not a reason for making more complex legislation which is going to be more difficult to enforce and is going to leave us with less information that we could then use to analyse what is going on in the property market. So for that reason the Greens are not happy with the bill as drafted and we put it to the Government that a simpler regulation is better. More information is better. People are not going to be terrified by the fact that they have to provide their IRD number and given that they are not going to be taxed it does not make sense that we would say to them: “You don’t need to provide your IRD number. We’re not going to collect this data because we’re afraid that you might be scared that you have to pay a tax you do not have to pay.” That is just ridiculous. That is in summary the Green Party’s view on this bill. Thank you.FLETCHER TABUTEAU (NZ First): I would just like to take the opportunity to reply to some of the previous speakers because it is quite frustrating to hear the Minister for Economic Development talk about how the sell-off of New Zealand assets and land is coined as an investment. It just does not make any sense whatsoever. And then it was frustrating to be completely honest to see the Hon Todd McClay speaking on behalf of the Minister in charge of the bill the Hon Louise Upston and then the chairman of the Finance and Expenditure Committee David Bennett stand up and simply go through the motions. But as was noted before the Taxation (Land Information and Offshore Persons Information) Bill is a bill that is simply going through the motions and it does not achieve any of the stated objectives which the National Government has actually mangled in order to turn the legislation into something non-offensive. It does not even achieve what it set out to do in terms of identifying where the problem is and what we can do to help real New Zealanders cope with this almost maniacal rise in property prices in the Auckland housing market.The Minister spoke about the short time frame that he and the Government had to get this through but that just highlights an ongoing dilemma that New Zealanders are facing every single day more and more often in terms of the select committee process: there seems to be no time for consultation. There seems to be no time to listen to real New Zealanders. As it turns out there was no time for the Minister’s own department. There was no time for the Minister’s own department to do a detailed analysis of the cost-benefit and what the pros and cons of this legislation would be because it has been so rushed. The Inland Revenue Department said it itself.There was a statement from the Minister that said that the intent is to capture those who are evading their obligations to pay tax but what we are not being told about are the unrealistic demand-side pressures that we are seeing from overseas investors coming in to this country and artificially inflating the prices of the property market. It is a “waste of time” tax anyway. It is going to be the “dim-line” test which will achieve absolutely nothing. The experts on tax in New Zealand have said that it will achieve nothing. New Zealand First says that it will achieve absolutely nothing. This bill does not help us to understand New Zealand’s residential property market and where the pressures are.The Minister himself said that the Inland Revenue Department was ignored in terms of its advicegiven. The Inland Revenue Department said that there was no reason to exempt main homeowners from the requirements. There are too many loopholes already and so to exempt main homeowners and buyers—it has been raised so many times on this side of the House just pointing out the reality of the situation. The information is already there; it is not an extra collection of anything. It is simply a consolidation of that data so that we understand the property market. It would not increase compliance costs. The definition of “main home” is the place of residence with which people feel “the greatest connection”. Where on earth does that come from? There is no precedent in any legislation for that terminology for that definition. And this Government talks about reducing compliance costs and not wanting to confuse people. Goodness’ sake! This new definition which comes out of nowhere will do that very thing. It will confuse everyone and it will in fact confuse pieces of legislation that are trying to achieve some objective which New Zealand First suggests will not be achieved at all.The Minister spoke about money-launderers. This bill will not help the Inland Revenue Department to identify or do anything with the money-laundering issue that New Zealand has. Funding the police properly might be a good start to that but that is not what we are here to talk about today. But unfortunately I have to disagree completely with my Labour and Green colleagues—this bill does not start us down the track. This bill starts us down a pathway that is not so much filled with potholes and crevices; this bill starts us down a pathway that goes all of 2 feet and ends in completely empty air. Mr Bishop spoke about the bill being well intentioned and well meaning. Perhaps he did not actually read the bill. This bill dodges the whole point of the legislation around trying to identify what the problem is and how we address it because we know that foreign investors—not new New Zealanders but foreign investors—are creating a real problem in terms of young Kiwi couples for example wanting to buy their first home in Auckland.All New Zealand First wanted was a comprehensive register so that we could have a meaningful debate and discussion on that problem. We know it is a problem. Mainstream New Zealand economists know it is a problem. But this Government refuses to allow for a meaningful compilation of data so that we can have a meaningful debate about it. It does not even actually achieve the National Government’s mangled attempt at the objective in terms of identifying who these investors are because there are so many loopholes—which I will get on to in a moment—that anyone can drive through them. Then even if the legislation did what it said it was going to do we come to the brightline test—which is better termed a “dim-line” test—which will achieve nothing in terms of collecting a tax or dampening down the Auckland property market. Mr Bishop speaks of people worrying and misinterpreting the legislation around their being taxed for their personal homes and yet National refused to give New Zealanders a good and meaningful consultation period in the select committee process. It is just an overall farce.This Government continues to deny the demand side of the equation. Government members keep talking about a lack of supply but we know that demand for Auckland property is huge and it is not just Kiwis playing in that market. We have 60000 to 70000 new immigrants coming into New Zealand but apparently only 10000 to 12000 of them are actually skilled labourers those new Kiwis whom we actually need to help grow this economy. This Government is deliberately missing the point. This is a National Government that is led by a global trader. It is adamant and it insists on allowing the rest of the world to buy up our productive land our assets and our homes. We know why everyone around the world wants to buy our land but why is this Government so insistent on selling it off and allowing it to be sold off to foreign investors? It talks about investment but it is not an investment in New Zealand. I just wanted to point out to the Prime Minister that they do not let this happen in Hawaii. To buy land to buy a residential property in Hawaii you not only have to be an American citizen but also have to prove your heritage to the Hawaiian whakapapa—your background there—in order to buy land there. So it just does not make any sense.New Zealand First wants a full and comprehensive register so that New Zealanders can know the truth about this situation. This bill lacks substance. It is full of so many loopholes that although New Zealand First supported it through the first reading to select committee so that we could have a robust debate and flesh out the issues none of those were addressed. In fact it has become even more vacuous and so New Zealand First cannot support this bill. Thank you.ANDREW BAYLY (National—Hunua): It is a pleasure to be talking on this Taxation (Land Information and Offshore Persons Information) Bill. I think that this is a very good piece of legislation. In fact I think that this is a very smart piece of legislation and I am pleased to see that many of the Opposition parties are actually supporting it. The reasons why I believe that this is a good piece of legislation are fivefold. The first one is that—Fletcher Tabuteau: Oh goodness!ANDREW BAYLY: Yes that is right. The first reason is that this legislation reinforces the tax obligations that everyone has but that many people seem to forgetfor some reason. The issue is that when you are in the business of buying and selling houses and there is an intention test and you have a view that you want to buy and sell with the intention of making money then that is a taxable activity and it always has been in New Zealand. It is the same when you are buying and selling shares. Basically what this bill does is say that all property transactions sold within 2 years are captured by this bill unless: one the seller is selling their main home—and we can talk about the definition of that which we have expanded and have been clearer about—two the property has been inherited as part of a deceased estate or three it has been transferred as part of a matrimonial property settlement. So being absolutely clear about this is a very important component in terms of making sure that our tax system in New Zealand is robust transparent and operating very effectively.The second reason why this is a good bill is that it adds to our knowledge about the level and extent of transactions taking place in New Zealand with regard to non - New Zealand residents. I know that the Opposition has been very strong on this matter although it seems to want to apply it to everyone. So where this bill is being quite sharp and smart is that we have focused it on just the right area which is those people who are buying our properties from offshore or who are basically non-residents. What we have set in this bill is the ability for information on those transactions to be shared between the Inland Revenue Department and the Land Information office. There are two steps to it. One is the generic sharing and publicity of information which can be done on an aggregate basis and which will aid in terms of generally assessing the extent to which transactions are occurring with offshore parties. Also at a detailed level there is the ability for information to be transferred at a personal level which for tax purposes will aid in tracking people who may not want to meet their obligations. I think that this a very good thing and I believe the Opposition is very keen to see this take place as well.The third reason why this is a good bill is that it is a pragmatic piece of legislation. What we have done is exclude ordinary New Zealanders from supplying their information to the Land Information office unless they sell a house more than three times in the course of 2 years. This is where we seem to have a point of departure particularly from the Labour Party which wants to make sure that every transaction of every New Zealander is captured by this information and the excuse is that it should not take that much more work. Well the reality is that it will take a lot more work and we do not want to burden ordinary New Zealanders who want to go about buying and selling their houses without the encumbrance of all the issues that we want to impose on people who are non - New Zealanders. I think that is a fair and appropriate exclusion because at the end of the day many New Zealanders buy houses only a few times in their lifespan and we do not need to be watching and monitoring them like Big Brother.The fourth thing about this bill is that the select committee has considered carefully the implementation issues. The information is collected at the time of the conveyancing by the person responsible for managing that conveyancing. We had a number of submissions on this issue during our select committee hearings. Generally the conveyancing industry is happy with that obligation. We have been careful about the liabilities so we have made sure that the person doing the collection at the point of conveyancing is not encumbered with undue liabilities. What happens is that we have got a professional independent party collecting the information which is then supplied to the Land Information office.Finally the fifth reason why this is a good piece of legislation is that it meets our international obligations—principally relating to money-laundering. For all those reasons I believe that this is a bill that we should be supporting and that it is a good piece of legislation. No doubt when we talk about the next piece of legislation to be introduced into the House regarding brightline tests this is going to be a composite package to deal with this issue. Thank you very much.Mr DEPUTY SPEAKER: I call Eugenie Sage—a 5-minute call.EUGENIE SAGE (Green):Tēnā koe Mr Deputy Speaker. I am pleased to take a brief call on the Taxation (Land Information and Offshore Persons Information) Bill. We have heard at length from Mr Bayly and Mr Bishop about why the Government did not take the advice not only of the Inland Revenue Department but of tax specialists like Ernst and Young and is insisting on making this legislation more complicated creating potential loopholes and potentially increasing the compliance costs. Mr Bishop said that the Government did not want to increase the volume of information that people would have to provide and it did not want people to have to worry about whether they would be taxable and that was the reason for rejecting the Inland Revenue Department’s advice that this requirement to provide IRD numbers should apply to all transactions. It is a basic principle of tax law that it should be clear. But what we are getting here as Ernst and Young described it is “a confusing mix of tax immigration and overseas investment concepts which are likely to give rise to a number of technical and practical issues …”.The bill is a mishmash. Because the Government is rushing the legislation through—wanting to get it passed by 1 October because that is when it wants the new brightline disposal test for residential properties other than the taxpayer’s main home to apply—it is failing to take into account all of the concerns of submitters. It is a poorly drafted bill. There have certainly been some improvements at the Finance and Expenditure Committee but those improvements are not enough. The fact that there is this exemption for a main home as Ernst and Young said “may simply reinforce [the] ignorance and the lack of appreciation as to when there might be an income tax liability …”. The definition of “main home” as being somewhere that a person “has the greatest connection” with is just another example of the law being poorly drafted. That term “greatest connection” is not something that is used in tax law and it is not used in New Zealand law generally so there is no common or accepted understanding of what it means and how it should be interpreted and applied. Also when we are dealing with tax law something like that is far too subjective. Yes the Government is saying that there will be advice provided but this “greatest connection” test is likely to lead to disputes about whether someone has the greatest connection with the home that they spend the most time in or has the greatest connection perhaps with a holiday home because they have got much more of a heart connection with the place where they spend their holidays because these are much more memorable. When you have got subjective tests like that in tax law it is not good law. It is going to lead to disputes; good income for tax lawyers potentially but it is not clear.The Green Party is nevertheless supporting the bill because it is a very small step—and taking into account Fletcher Tabuteau’s comments—to getting tighter controls on overseas investment and the offshore purchase of New Zealand land and a bit more information on that. Of course the Green Party has been calling for a register of purchasers of New Zealand land by offshore investors for some time because it is ridiculous that we do not know that—that in this the 21st century we cannot have a register that is publicly available so that there is certainty around the percentage of New Zealand land that is being alienated to offshore interests. So although we support the objectives of the bill about obtaining more timely information from people who are buying and selling land and about improving compliance with the land sales provisions and tax legislation the unclear exemption in the bill the number of loopholes and the subjective nature of some of the drafting will not reduce red tape which this Government says the bill is about and it will not provide for better government because it is a mishmash of concepts and it is likely to increase the compliance costs because it is confusing.Mr DEPUTY SPEAKER: Phil Twyford—a 5-minute call.PHIL TWYFORD (Labour—Te Atatū): As my colleagues have pointed out Labour is voting for the Taxation (Land Information and Offshore Persons Information) Bill but as with so much Government legislation we are voting for it because it is better than nothing—but not by much. This is typical of the kind of housing policy legislation and initiatives that we have seen from this Government while Nick Smith has been the housing Minister. He is the “Minister of Grudging Half Measures” and this is a classic of the genre.We have got two main criticisms of this bill. One is that it is incoherent that it is shot through with loopholes and that it falls well short of what it could have done. The other main criticism is that this bill is pretending to be something that it is not. This bill is the National Government going into contortions trying to convey to the electorate of New Zealand that it is doing something about the housing crisis. But as with so much legislation that this Government brings to the House it is simply there to convey the idea that it is doing something.New Zealanders desperately want to see action on non-resident foreign buyers bidding up the cost of New Zealand houses and contributing to young Kiwi families being locked out of the housing market. Under that Minister Nick Smith we have got the lowest rate of homeownership in 64 years and he is responsible. He is responsible for that. Let us think for a moment about what New Zealanders want to see. A recent New Zealand Herald poll told us that 77 percent—77 percent—of New Zealanders want to see Labour’s policy of a ban on non-resident foreign buyers buying existing houses implemented. Only 15 percent support the National Government’s policy; 77 percent support Labour’s policy of a ban on foreign buyers buying existing houses. Fifteen percent of people support Nick Smith’s policy. 3 News did a poll in July last year that showed that 61 percent of New Zealanders support a ban on foreign buyers 54 percent of National Party voters support a ban on foreign buyers and 82 percent—82 percent—of New Zealanders support a register on foreign property ownership. That is why this bill is before the House: the polls got so bad on this issue for the National Government that it decided that it had to do something. Kiwis are sick and tired of seeing their land and housing sold out from under their feet under this National Government.The National Government however does not want to see a proper register of foreign property ownership that is transparent and that is clear because it does not trust New Zealanders with the information. It does not want New Zealanders to see it. That is why we have got this bill because it wants some half-hearted weak-kneed bill that does not actually collect the data that is needed. And it will not be data that is actually made accessible and transparent to New Zealanders because Nick Smith wants to release his half-hearted data selectively—for spin for his own political reasons—because he does not trust New Zealanders with that information.As Julie Anne Genter said earlier in this debate all over the world particularly in Pacific Rim economies offshore money is overheating domestic real estate markets. That is why the Australian Government has a policy like Labour does of banning non-resident foreign buyers from buying existing houses. That very successful policy—that very successful policy—is channelling Chinese investment into the building of apartments in Sydney and Melbourne something that it would actually be quite nice for us to have in Auckland right now. Tony Abbott has got that policy. David Cameron has the policy of a fully searchable and transparent register of foreign property ownership because he is concerned about money-laundering. But this Government is not.I think it is interesting to ask why the National Government is taking this position. Why is it being so blind to the desires of New Zealanders for some controls on offshore ownership in our real estate market? I think there are two reasons. You can find one reason in the recent report in the New Zealand Heraldof a couple who were on the electoral roll as students but who had amassed $26 million worth of property in Auckland. And do you know what that same report said in the New Zealand Herald? It said that the couple donated $370000 to the National Party’s last election campaign. That gives you a little clue as to why the National Government is not interested in shutting down this mile-wide loophole—Mr DEPUTY SPEAKER: Sorry to interrupt this member but his time has expired.ALASTAIR SCOTT (National—Wairarapa): What a shame that contribution from the previous speaker Phil Twyford. He is not interested in land information or offshore persons information; all that he is interested in is wanting to ban the Chinese. He talked about foreign owners and foreign investors but really he just meant the Chinese. He wants to pick on that group and to pick them out despite the fact that these people with Chinese-sounding names have been in the country for generations—they have been here since the gold rush.For him to speak as he has done is just a disgrace because this is about gathering facts not gathering hearsay evidence—not going to one real estate agent and gathering an opinion piece from one selected piece of data. This is about real information around who is buying property in New Zealand. There are two very simple requirements if you are an offshore person: an IRD number and a bank account. It is very simple with a home exemption. It is a very simple piece of legislation and I commend this bill to the House.Hon DAMIEN O’CONNOR (Labour—West Coast - Tasman): It is indeed an honour—and a responsibility in fact—to speak on this piece of legislation. I have to say that it is with some concern that I see we are supporting the bill. I guess half a loaf is better than none.I was just up on the Kāpiti coast today talking about the Pike River tragedy and I did a little bit of homework and referred back to notes on the 1992 health and safety legislation. You see it was a proposal by the then National Government to step in and provide a new regime that would give better security in health and safety. I do draw some parallels with this piece of legislation because the Government is pretending once again to come in with a new regime of accountability and accounting for what is a growing level of overseas ownership of New Zealand homes and in fact farmland as well.We cannot lose sight of the fact that it was Labour—and we are very proud of itin fact—that stood up back in the 1930s for the right to a home for each and every New Zealander. And although a lot of time has passed and there will have been many many hours of debate—millions of hours I guess—in this Parliament we are now in the situation in 2015 where the Labour Party is having to battle for the right to protect New Zealanders’ access to homes. This Government would have sat on its hands and done absolutely nothing if it had not been for my colleague Mr Twyford being prepared to take it on the chin and expose the growing reality of investment levels into the Auckland housing market in particular and the flow-on effect right throughout the country.The Government hastily rushed around like chooks with their heads chopped off trying to work out a way of coming up with a piece of legislation that might look OK that might do something but that would not offend any of its mates who were happy to come and invest their millions and millions of dollars—hundreds of millions actually—into the New Zealand real estate market.The drivers of that investment are still here. That is there is no capital gains tax in this country—no capital gains tax. And until that is resolved there will be ongoing interest in investing in our country. That must be put on the table. Until we know accurately who owns the houses now who is trading the houses and who is interested again we will be in the dark and will leave the door open for opportunistic investors who have the option.In Europe if you want to deposit your money in the European Central Bank you will be paying that bank for the privilege of looking after and securing your money. You will be paying them a fee—not receiving interest but paying them a fee. If you go elsewhere around the world you will see zero or very very low rates of interest. So for anyone with some capital looking for a place to park it New Zealand is a very positive proposition. It has no capital gains tax. It has got interest rates that drive up house prices across the board so that people can afford to pay back their loans on the basis of a capital gain and it is this merry-go-round that is driving up the price of houses in Auckland at an unrealistic and ridiculous rate.What we have got here is a situation that will not in any way be subdued by this token piece of legislation but what does the Opposition have as an alternative? Well we do not have one at the moment. We have put up some very good ideas for the Government that have been rejected. We have put up good ideas and will do so in the Committee stage of this piece of legislation no doubt. But for the moment the best that we can do is to support this piece of legislation but point out the flaws in it and hope that the Government is prepared to make the proper amendments in the Committee stage to give it some real teeth because at the moment it does not have the proper teeth.The confusion over things like offshore or active overseas investors is a bit beyond belief. These things should be very clear. We welcome migrants. In fact we are now welcoming refugees and I welcome that. More refugees today—we welcome these people into the country. So people are coming in who want to reside in and commit to New Zealand and we want to provide them with an opportunity to buy a house at an affordable rate. But if you want to park your backside in Zurich or in Berlin or in London or in Chicago or in Shanghai then we say that we do not really want you. We do not want you inflating our market to the point where New Zealanders can neither buy nor afford to rent homes. That social dislocation and the uncertainty caused by that have huge flow-on effects.Although the members of the National Party will jump up and down about the costs of social welfare the costs of special education and what they are having to do through so-called charter schools and the rest—all of these things can be improved and can be assisted by providing people with a home with access to a house that they can then turn into a home. When we have got legislation that does not even define accurately a main home that does not even clarify exactly whether a person is offshore or onshore or whether they are a Kiwi or not I say to you that the register the Government is going to form here will not be worth the paper that it is written on.We need decent legislation in this area. There is no doubt about that. We need homes now as much as we did in the 1930s. I say that everyone in New Zealand should read carefully the minority report of the Labour Opposition on this bill pointing out that we do support it at this stage but pointing to the flaws in it.We believe that all parties anyone involved in a residential property transaction—because after all you have got to pay the lawyer; you have got to go and check your land information memorandum with the local council; you have got to go through all this rigmarole to buy a house—should have to meet the same requirements. If there is an overseas tax number that should provide information as part of the transaction as well. That is so that people will be identified by who they are and where they live. They do not necessarily have to state what they have bought the property for. That may become evident because if they live in Zurich as their main home it is unlikely they will also be buying a property here in New Zealand for their main home. That would then deem the person to be an investor and I guess would add weight to the view that Labour has that the doors are too open.Access into the New Zealand property market has been encouraged by the National Government because it does not care where money comes from; it just wants to see money. Under the current structure that it has for this economy the money flows to the people at the top and makes it harder for those people at the bottom. That kind of Tory philosophy is part and parcel of every piece of legislation that this Government passes in this House. Let us not forget that. This piece of legislation does nothing to stop that flow or the division that is occurring in this country between those people who have the capital—those who can invest in rental properties assisted by overseas investors—who then come in and pay a bit more and then we give them a bit of profit and allow them to go. And so the merry-go-round continues.But what about the young Kiwi family? What about these refugee families that John Key is going to let into the country? What chance will they have of buying a house and turning it into a home if the Government continues to have an open-door policy for foreign investors? This piece of legislation is tokenism. It is tokenism to try to get New Zealanders who are struggling to buy a home to believe that the Government really does care.Hon Dr Nick Smith: Well why don’t you vote against it? Have some courage and vote against it.The ASSISTANT SPEAKER (Hon Trevor Mallard): Order!Hon DAMIEN O’CONNOR: That member down there is calling for more land in Nelson—a ridiculous statement he made on the front page of the paper down there. He made a fool of himself. The Government is making statement after statement that is wrong and that is misleading in this whole area of homeownership and security for New Zealanders. This piece of legislation will be exposed for what it is but the Opposition must support it as one small step in the direction in which we need to go—that is accurately identifying who is buying houses what they are buying houses for and what that is doing to prevent New Zealanders having their own homes.TIM MACINDOE (National—Hamilton West): I thank members who have spoken in support of this sensible measure and I commend this bill to the House.A party vote was called for on the question That the Taxation (Land Information and Offshore Persons Information) Bill be now read a second time.Ayes 109New Zealand National 59; New Zealand Labour 32; Green Party 14; Māori Party 2; ACT New Zealand 1; United Future 1.Noes 12New Zealand First 12.Bill read a second time.