Ardern JacindaJACINDA ARDERN (Labour): I want to pick up where my colleague Grant Robertson left off around new Part 4 and the amount of information that we have around what the effect of this legislative amendment would be. We are reliant on the analysis that the Government originally undertook when it implemented the 2-year brightline test. Of course as those who are familiar with regulatory impact statements will know usually we are given an indication of the range of options that were canvassed by the Government. Actually to be honest even when the Government has already got an idea of where it is going to go it is incumbent on officials to provide a range of options points of comparison to understand whether or not where you have landed is going to best give effect to your goals. I went back to the regulatory impact statement which Grant Robertson touched on a little bit. What is phenomenal I think really is the lack of information in this regulatory impact statement around the alternative options. The Government said right from the outset in this regulatory impact statement that doing nothing was not an option because the Government already said it was introducing something. So a press statement had gone out the Government was introducing a brightline test and then it was a matter of doing the policy work. When trying to measure where most of the sales sat in Auckland and when the houses were sold—within 1 year 2 years or 3 years—the share of sales within 1 year was roughly 8.4 percent. I am assuming that might be as a proportion of the total sale price because we have information in the next paragraph down that says that between 2009 and 2013 59 percent of all new titles were disposed of within a year within Auckland—59 percent is a huge amount—and 29 percent of new developments in North Auckland were traded within 3 months. The statement then goes on to talk about the share of sales between 3 and 5 years. That is the only area where we have any data though. When you flick over into the regulatory impact analysis—and this is important because here we are proposing in this amendment to move from 2 years to 5 years—the only two options in the regulatory impact statement were option 1 which was a 2-year brightline test and option 2 which was a 3 to 5-year brightline test. So it was an option that was on the table. That is interesting of course and useful for us but let us delve further and see what level of comparison and detail there was because we are now on new Part 4 taking option 2 from this regulatory impact statement. From the outset option 1 was the officials' preferred option but where I get confused is that it is not entirely clear to me how that decision was made. There were three policy objectives with the brightline test: (a) provide an easier rule for the Inland Revenue Department (IRD) to enforce to target short-term speculation—so that is about ease of implementation—(b) minimise the number of sales made taxable that were required without an intention of resale which is difficult to determine and I do not think you can simply say that because we have got a greater percentage of sales we are therefore potentially reaching purchases that were made without the intention of sale so a very arbitrary decision that you make just looking at numbers; and (c) minimise compliance costs for taxpayers in order to comply. So those are the three tests. You would think that the objective would be to go through option 1 and option 2 and say which best meets those objectives. But when you look at the analysis for option 2 which was the 3 to 5 years—which is what we are proposing here—it says in paragraphs 29 and 30 This option would create a bright-line similar to option 1 however with a period for the bright-line being longer at potentially three or five years rather than two years. This option has similar impacts as option 1 but with greater effect owing to its longer period."—that is a given—"It would best meet the objective of creating an easy to enforce rule and would have the greatest positive fiscal and administrative impact." So on at least two of the policy objectives that were set out by IRD option 2 or the 3 to 5-year brightline test had already received a tick—a clear definitive tick—when compared with the preferred option. But here comes the counterpoint which is the important one. "However this option has the greatest risk of capturing sales that were acquired without an intention of resale." But my point here is there is no data there is no analysis that really quantifies that or that puts any detail behind that—[Bell rung] Thank you Mr Chair. Thank you for not disturbing my flow. There is nothing that tells us really anything beyond just an assumption that because it is longer and there is a greater number of sales by default that meant it would be capturing houses that were purchased without the intention of resale. How do we know? We do not. There was no qualitative analysis around that assumption and yet that one line was the basis on which the Government made the decision to go with option 1 which was a 2-year brightline test. That one line—I will read it again: "However this option has the greatest risk of capturing sales that were acquired without an intention of resale." As a result this is not the Inland Revenue Department's preferred option. That is it—no data no analysis. I mean I guess to be fair I want to go just a little bit further because there was a table provided in the regulatory impact statement that again actually set out its objectives which are fiscal economic administrative compliance fairness and the impact. It went through both of these options. Just to further highlight that I am not misrepresenting what has happened in this regulatory impact statement I want to read that for the 3 or 5-year brightline test the department acknowledges that it "Best meets objective (a)" that it "Partially meets objective (c)" which is what the 2-year one did as well but it "Least meets objective (b)" and that was the one around capturing sales—again though no data. It admitted it had no estimate of the revenue gain that would be made and that is interesting because if you cannot estimate the revenue it will gain you cannot estimate the number of sales that would fall into the 5-year category which again highlights that the department actually did not know that it would capture unintended sales. It said: "This option would have similar lock-in effects to option 1. This option would have the greatest impact in reducing the administration costs involved in applying the 'intention test' [and that it] Provides the easiest to enforce measure of the options." In fact I would have to say that if you did not have the subjective statement in there—the bracketed statement around option 1 "This is Inland Revenue's preferred option."—and if you read this document without that bracketed paragraph then actually you probably would think that it would come down on the 3 to 5-year option. That is what the evidence and the objective test it set for itself would tell you would be best to do. I want to come to consultation because that is what is so fantastic about this amendment. We are putting forward on the Table an amendment here to extend the brightline test to 5 years which has actually really already gone through a select committee process of sorts. It has had submissions which is more than what we had for the debate on the bill so far. So we did not have select committee papers—sorry I should clarify. We did have an issues paper released by Treasury and Inland Revenue Department. We had an issues paper that went out on the brightline test—Chris Bishop: That's right—that's right.JACINDA ARDERN: —on 29 June 2015. There were 14 submissions that were received. I know Chris Bishop will know these submissions intimately so he will be able to tell the Committee that there were as many submissions promoting a 5-year brightline test as there were supporting a 1-year brightline test. There were only 14 submissions however—it has to be said—but at least that was more submissions than on any other part of the bill that we have debated in this Committee so far. So there was a submission process and there was support for extending the brightline test to 5 years. And in fact by and large again those policy objectives—as I set out—at the beginning of the regulatory impact statement were most submitters seemed to accept largely achieved by the proposals that were being put forward by the Inland Revenue Department in its issues paper. I really just want to conclude by highlighting again that the basis on which the Inland Revenue Department and the Government settled on a 2-year test had no data. It had no evidence. All we know is the percentage of sales within that period. I know of houses in Auckland that have sat empty for more than 2 years simply to accumulate capital gain. They were not even bought as rental investment properties they are not even occupied by people who desperately need houses and they have been that way for more than 2 years. If we want an effective brightline test we should be sending a clear message: a 5-year provision. That is exactly what new Part 4 would do. It would do more to improve affordability and access to the market for first-home buyers than anything else in the bill that the Government has put forward."