Sage Eugenie: Taxation (Bright-line Test for Residential Land) Bill — Second ReadingText is incorporated into the Bound VolumeSage Eugenie: Taxation (Bright-line Test for Residential Land) Bill — Second Reading[Sitting date: 03 November 2015. Volume:709;Page:7604. Text is incorporated into the Bound Volume.]EUGENIE SAGE (Green): Tēnā koe Mr Deputy Speaker. Yes Mr Bishop Parliament does make law but it should make good law not bad law like this bill. The Green Party is supporting the Taxation (Bright-line Test for Residential Land) Bill only because it is better than nothing and because we support the bill’s intention which is to target speculators who are not meeting their income tax obligations and to ensure that the existing law on property sales is actually better enforced. But it has so many defects which could have been corrected if the Government was not in such a rush to pass retrospective law and if it had not been in such a rush to push it through the Finance and Expenditure Committee with minimal time for submissions and minimal time for the select committee to consider the bill and actually improve it. So it is an example Mr Bishop of poorly made law that had the potential to be so much better.It is another example of the National Party’s empty gesture approach to policy making and law making. National’s polling told it that it has a problem in Auckland with the housing bubble: that that is of major concern to voters with the demand that speculators and offshore purchasers are putting on the Auckland housing market and how that is contributing to the soaring and unaffordable house prices in the city. So the Government stepped in to be seen to be doing something about it. But the step that it is taking is so small and ineffectual that it will not create real change. It will not cool the housing market in Auckland. It will not make houses more affordable. The Government had the opportunity to do so much more.Hon Maggie Barry: Rubbish!EUGENIE SAGE: In 2010 Treasury made strong representations Minister Barry to put in place a capital gains tax. National rejected that and so we have got this bill which is another example of the Government just making a gesture and putting that into law.If the Government had been serious it would have done what the New Zealand Law Society suggested. If I could just quote from Stephen Tomlinson the society spokesperson he said that “the proposed test [in this bill] should not be enacted as it is unlikely to be effective in achieving its stated objective. If officials are concerned about difficulties in enforcing the existing land gain taxation provisions then there should be a comprehensive review of those provisions rather than the reform being made on a piece-meal basis.” That is what we are seeing with this bill and its companion bill. It is bad because it is retrospective law. The select committee had a very limited time to consider it. I think it called for submissions on 9 September they closed on 17 September and then the bill had to be reported back in mid-October. It is bad too because tax law should be simple it should be coherent and it should be comprehensive if it is going to be effective. But this bill is not those things and many submitters said that it is overly complex and it is likely to lead to inconsistencies and difficulties in enforcement.One of the first issues is that it applies only to residential land sales with exceptions obviously for the owner’s main home inherited property and the transfer of property in a relationship settlement. But this application only to residential land sales is despite the fact that the existing tax rules around property speculation apply to all land. Most submitters agreed that it would be a much simpler clearer piece of legislation if it applied to all land equally. It is also inconsistent with the intentions test that is in the existing law because that applies to all land not just residential land. So that is likely to create quite a significant problem for the Inland Revenue Department with enforcement and potentially creates a loophole. One of the other difficulties with this being confined to residential land is that by creating that loophole it may encourage speculation in non-residential land that is eventually used for subdivision.One of the other issues is the 2-year period. Under the bill people must pay tax on any income they receive from the sale of residential land if they dispose of that land within 2 years. That holding period is far too short. It is quite likely that people will wait it out and then dispose of the land. Treasury recommended at least a 5-year holding period. Many OECD countries have a 5-year holding period. Yet again the Government in making legislation that is only a gesture stuck on 2 years and did not go to the 5 years that was recommended by Treasury and applies elsewhere. And it is not fair when we have got nurses teachers plumbers—anybody who is paid for their work and receives a pay cheque pays tax. Why should it be any different for someone who receives income from buying and selling property? Why should they not have to pay tax if they sit on residential land for 2 years and then are able to sell it? They are earning income. They should be subject to tax in exactly the same way that other working people are.Alastair Scott: They’re taxable already.EUGENIE SAGE: Only by the intentions test and that has been shown to be a problem which is why we have got this bill.Alastair Scott: That’s why we’ve got the brightline test.EUGENIE SAGE: But the brightline test has got that 2-year holding period and as I have said before that is too short. Other countries in the OECD have a 5-year period or longer.So this bill is not really about addressing the housing crisis in Auckland. If the Government was serious about doing that it would have adopted some of the Green Party’s solutions which are to put in place a capital gains tax that exempts the family home to restrict foreign ownership to reduce the inflationary impact that we are getting with foreign capital coming in and to pass—Alastair Scott: What inflation?EUGENIE SAGE: He is saying: “What inflation?”. Why are we getting this huge increase in house prices in Auckland that is making them beyond the reach of most first-home buyers? If the National members are asking “What inflation in Auckland house prices?” they obviously have got their heads in the sand on the issue. The Green Party would also ensure that we have a warrant of fitness for rental properties and much more protection of tenants in rental properties. We would significantly increase the State house stock and we would ensure that our planning laws encouraged medium-density housing around public transport routes instead of doing what the National Government is doing: encouraging more urban sprawl through the special housing areas and removing the provisions in the Resource Management Act to ensure that those subdivisions’ environmental effects are reduced. So this bill is too little too late. It is retrospective the process has been bad and we are voting for it only because it is better than nothing.