Faafoi Kris: Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill — In CommitteeText is incorporated into the Bound VolumeFaafoi Kris: Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill — In Committee[Sitting date: 12 April 2016. Volume:713;Page:10409. Text is incorporated into the Bound Volume.]KRIS FAAFOI (Labour—Mana): I rise to take a call on Part 3 of this piece of legislation the Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill. Before I look towards a specific clause I do want to just point out one thing that the previous speaker Alastair Scott said. I am going to have to look back at some of the media reports at the time when the National Government increased GST from 12.5 percent to 15 percent because I did not see it pushing very hard that GST had to go up to incentivise savings. I do not remember that being one of the John Key lines—“We need to increase GST so more Kiwis will save.” I will come back to the Committee and see how that Google search goes for how many times the Prime Minister or the Minister of Finance said that GST had to go up so Kiwis could save more. “We do not want people to spend so much”—God forbid we go out there and buy food—“so GST has to go up from 12.5 to 15 percent.” That was what the member who just resumed his seat said.The CHAIRPERSON (Lindsay Tisch): Yes well come back to the bill now.KRIS FAAFOI: I do want to go to clause 48 of the bill—it is something that no one else has raised—and subclause (1) which inserts a new section 5(10B) in the Goods and Services Tax Act. I think the Minister in the chair may take some interest in this. For the benefit of the Committee that says: “For the purposes of this Act when a person who is resident in New Zealand pays an amount of money to participate in gambling or in a prize competition through a supply of remote services”—which have already been described in this debate—“that are physically performed outside New Zealand the payment is treated as a payment for a supply of services by the person who conducts the gambling or prize competition as applicable.”In English that means that if someone resident in New Zealand were to go and gamble on a race on an online betting site based in Australia or in the UK currently my understanding is there is no GST charged on that bet. If they were to use their phone and place a similar bet on a race here in New Zealand they are charged GST. So there is a disparity between the experience with the New Zealand TAB which we all know as a place to go and put a bet on and overseas betting websites that take bets from New Zealand.There was a submission from the New Zealand Racing Board—and I think this is a good part of the legislation—where it talked about the imbalance there and some revenue that the Racing Board could be missing out on. If I can turn to the submission from the Racing Board because I think it is a good one point 4.1 said that the Racing Board estimated that New Zealanders are betting $58 million annually—and that is 15 percent of the total betting expenditure by New Zealand—on overseas websites. It went on to say that “The New Zealand community receives no benefit from this activity”—because all that money goes overseas there is no GST so none of it comes back to New Zealand—“but does incur any costs associated with problem gambling.” It went on to say that it has calculated that the loss of GST revenue on that $58 million could be close to $8 million. So the forgone revenue from not charging GST on bets placed on overseas gambling websites could be close to $8 million which the Government would miss out on.The Racing Board believes that if that money went back to New Zealand then not only would there be obviously that $8 million for the Government in revenue but also sports—the likes of rugby rugby league basketball and cricket which do allow sports betting on their events—would get an additional $5 million of that $58 million because the Racing Board pays them a fee on those events. The racing industry itself would get close to $40 million more if that revenue was staying here in New Zealand which I think within this piece of legislation is a good thing. It is my understanding that GST will now be charged on betting on overseas websites. The Racing Board went on to say later on in its submission that GST was a factor in this differential in competitiveness and that “In this respect NZRB is no different to any other retailer in suffering a competitive disadvantage in being required to charge GST while offshore providers do not.”I think that this is a good addition and a good change to the piece of legislation because it does give that New Zealand entity—the TAB or the New Zealand Racing Board—the ability to take away that competitive disadvantage that it is experiencing with the leakage of the betting money going overseas. It is not just an issue around GST. I think they are now predicting that it is somewhere around $500 million that we could lose over the next 5 or 6 years from the sports betting industry itself—and a big chunk of that obviously is in the racing industry—if we do not attend to the issue of leakage from New Zealanders betting on overseas websites.Can I turn now to the other issue around retail in general that has been raised by other members on this side of the Chamber. I am a bit of a laggard. I like to see and feel things when I buy them from the shop. I do not buy a lot online unlike Fletcher Tabuteau who I believe downloads his CDs online. I do not know how that happens—maybe he has got one of those 3D printers and that is how he does it. I do not do a lot of online shopping. I like to support local business and make sure that I can see things and that they fit. Or books—like my colleague Grant Robertson here I like to hold the book. I do not like to have a tablet or something to read the book.I think that this piece of legislation that we see here today is a start but it misses a trick because it has not gone far enough. I think Retail New Zealand in its submission made that point strongly in that yes we have made a start with these intangible goods or intangible services—the likes of Netflix. I think that the likes of Spark will be happy because its alternative Lightbox was charging GST and again like the TAB example—that puts it at a competitive disadvantage to the likes of Netflix not only with its content—which has arguably a bigger range so there is a competitive advantage there but also with its pricing. It is having to price with a GST component worked into its pricing which was not so for the likes of Netflix.My mother always was a good gardener. She said that if you start a job do it properly. That is why she never let me do the garden because I would never do it properly. I think that we have got another example of this here in this piece of legislation. It is a good start but we have not gone far enough to make sure that we are looking seriously at the issue around the tangible goods that could be picked up from online purchasing.I pick up on the point that many other people on this side of the Chamber have made which is that online purchasing has worked to the detriment of retail—certainly in my area of Mana where I think we have seen some retailers really struggling on the street now because people are looking offshore because the range and the price may be better. Retailers may have to deal with that and look at how they compete product to product but when you are looking at a 15 percent price differential that is hard to go up against. I think that is probably why you will see an increase in the number of people like me—I might have to start looking at shopping online as a more serious option.But I think that we need to cut those small to medium retailers a break as was submitted by Retail New Zealand and say that if we are going to start this process let us do it properly and not just take the low-hanging fruit of the intangible services which is contained in this piece of legislation. Let us do it properly and look at how we deal with this issue to make sure that small businesses that do want to set up in our cities and in our towns do not have a massive disadvantage there. I would like to maybe ask a question of the Minister in the chair Nikki Kaye about what work has been done and how much priority this Government will put on that continuing work—which I think is the hard stuff instead of just concentrating on the easy stuff here which is the intangibles—to make life better or easier for those retailers in our small towns and in our cities.