Draft transcript - Thursday 12 November 2015First draft - subject to correction.Draft transcript - Thursday 12 November 2015Taxation (Bright-line Test for Residential Land) BillContinued Speech - Hon TODD McCLAYHon CLAYTON COSGROVE (Labour): I thank the Minister of Revenue for his charitable comments; I am not sure I can return fire on that score. This is a complete and utter waste of time—a complete and utter waste of time.Hon Todd McClay: But you’re going to vote for it.Hon CLAYTON COSGROVE: Yes—yes the Minister is right. We will put a tick in the box because even this bill which is not even a fig leaf—not even a shadow of a fig leaf—is better than nothing.Hon Simon Bridges: We don’t want to see you with just a fig leaf.Hon CLAYTON COSGROVE: I just read out the words of one Terry Baucher—what was that “Junior Gerry” in the front row?—who is an accounting professional who said quoting from a submission “ ‘We do not believe that the introduction of a bright-line test for residential land is sound tax policy.’ That was the Chartered Accountants Australia and New Zealand’s (“CAANZ”) opening sentence in their submission to Parliament’s Finance and Expenditure Committee regarding” this piece of legislation. It is complete bunkum. Even the Minister used the phrase “own home”. He could not even get his own definition right. The definition in the bill is “main home” but I have some sympathy because the definition in this bill is not consistent with the Income Tax Act or the Land Act and he has got another definition there of the “main home”. This was going to be the big hit. This was Mr Key and Mr McClay going away and saying: “Hang on. After years and years of the feet of this Government being put to the fire about the problem of Auckland and New Zealand house prices spiralling the polls have told us we cannot sit there with our hands behind our backs and do nothing. We have got to do something.” So in the usual Tory way they come out and say: “We will just do enough to make it look like we are doing something substantial.” Treasury said to them: “If you are going to do this and you actually want to limit the housing sale churn you have got to have 5 years.” That is what Treasury said—Treasury said 5 years. These guys said 2 years. Submitter after submitter—and these were not Joe Public; these were learned people from the accounting profession Ernst and Young Chartered Accountants Australia and New Zealand the Law Society and others—came before the committee and shot bazooka holes through this piece of legislation. [Interruption] Many of them said basically that it will have no effect except it will have a perverse effect for the ACT member in the front row David Seymour—I am sure he will listen to this—in that submitter after submitter said that his mates the property speculators of course will simply change their behaviour. They will hold for 2 years and 1 day and then start all over again. If it is Joe Average who falls on hard times—somebody passes away the income earner perhaps or something happens and a family or a property owner falls on hard times—and has to sell then they are nailed by this. They are nailed by this inside 2 years. There is no provision in here—unlike for instance in the KiwiSaver legislation where there are provisions I believe very tight ones around hardship—to deal with that. Then you look at the definitions. This is going to be the big hit—the big hit. Those members are going to go after the property speculators they said. As capital prices go up a thousand dollars a day in Auckland they are going to go after the big-time speculators. Then the Inland Revenue Department (IRD) and Treasury reported that the total amount of revenue they are going to raise from this is a mere $5 million. If you look at the figures and the house price inflation that has been reported in recent days—20-plus percent in Auckland—that is pitiful: $5 million is all they are going to get. That is absolute prima facie evidence that this is just a political pamphlet. This is just something to make it look like the Government is doing something. But the people who will get clobbered are Mum and Dad Joe Average who fall on hard times and are forced to sell inside the 2-year period. They are the ones who will get taxed. Then you come and you look at the definitions. I must say the Minister took a call today. Thank God for that. It took until the third reading for the Minister to take a call. He never took a call in the Committee stage—never took a call. He had every other portfolio Minister sit there and never answer a question—utterly indicative. I have sympathy for him. The poor old soul takes over from Peter Dunne the poor guy. The Prime Minister must have come to him and said: “Mate here’s a live grenade. Swallow this one brother.” And it is indefensible because the best the Minister could do was get up and read the IRD’s notes in the third reading not having answered one question. One of the other speakers for the National Party today might tell us because one of the questions we raised was what does this mean? One of the definitions of a “main home” is—get this—the home “with which the person has the greatest connection”. I do not know. Maybe there are a few hippies over there—a bit of the old psychedelic pūhā. Maybe they are levitating a bit. Maybe they are feeling their softer side.The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! The member will resume his seat. We have had some public comment about members making accusations about other members’ drug taking. That will not continue.Hon CLAYTON COSGROVE: Sorry Mr Assistant Speaker. Can I put it this way: maybe they are imbibing legitimate substances that are giving them a wee gee up but maybe they can tell us what “connection” means. What a wonderful word that is “connection”. How are they going to actually—actually how is the IRD going to sort of look through the crystal ball and in some socialised way tell us how someone is connected to a property? Is it that they go down to the local pub on the corner three or four times a week? Maybe they are there for a day maybe their kids are there—no definition no explanation from the Minister nothing. You have got to also look at Auckland. So you are getting what 20 points plus per annum—20 points plus per annum. I think the percentages are that 15 to 17 percent of properties are turned over inside 2 years and we know which end of town that is. But why would you not hold for 2 years and 1 day if you are getting a 20 percent return which is better than anything I have seen that the investment community can get? This is not going to stop—this is not going to stop. This might stop a few people. They might have a look. They might have a quick look and say “Maybe we’ve got to change our behaviour.” but this is going to have virtually zero impact.[Continuation line: So we will put a tick in the box on it]Hon CLAYTON COSGROVEWe will put a tick in the box though. It was rushed through the Parliament  rushed through the select committee process—a David Bennett special. He did not want any in-depth inquiries and official advice. Feel sorry for the officials because you always know when an official cannot answer a question what that means—or will not answer a question. It means that they do know the answer but the Minister has told them they cannot answer that question because it will be an embarrassment to the Government . They are very professional officials that we have. This legislation is bunkum  absolute bunkum. From the Law Society  from the Chartered Accountants Australia and New Zealand group right through everybody has said to a man and woman that this is not going to work. We have had a Minister who simply adopted I supposed the Peter Dunne philosophy of life which is to go down the burrows pull the lid over the top and hope that the grenades do not shatter over his head. Say nothing do nothing—pardon?Phil Twyford: Do burrows have lids?Hon CLAYTON COSGROVE: Oh well they do with this guy—sinking lids in this case. We will support the bill but I make this point: we will be back here I wager—I thought it would be 2 years a change of Government. I suspect we will be back here possibly as the courts deal with some of this legislation to fill the holes patch it up and try to make it work—try to make it work. I know who is going to be speaking next: that eminent chartered accountant that expert from Hamilton and Waikato  who knows everything about these sorts of—I humble myself before him. I would like him perhaps to deal with some of the questions we raised in the Committee stage—to deal with the main home definition.Phil Twyford: You’re dreaming.Hon CLAYTON COSGROVE: Well I live in hope. I am a charitable guy as the Assistant Speaker knows. I live in hope that some of the questions raised by the Law Society by Terry Baucher  and by others—the exemptions for farmland; you could drive a bus through those. The main home exemption the trust exemption—you could drive a bus through them. Given that Mr Bennett is such an expert I am sure he might do what his Minister has not done and actually get up and explain to us. Say for instance—to make it easy for him—what is the connection to the main home? What is that? What intangible concept is that which IRD is going to be dealing with? Why is there an exemption for farmland and how is it going to be administered? I will make a bet with him. I will make a bet. The accounting profession is out there today and it has got all the loopholes lined up—it is like a colander. They may as well deliver a briefing paper with their cohorts with a whole lot of holes in it. They are working quick fixes and workarounds to this legislation. It is an embarrassment to this Government. It will prove to be an embarrassment to this Government and I look forward to the speeches when they return to this Parliament and we have to amend it because this is not a big hit. This is not a small hit. This is what one could only describe as quality bull.[Continuation line: D BENNETT]