Robertson Grant: Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill — In CommitteeText is incorporated into the Bound VolumeRobertson Grant: Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill — In Committee[Sitting date: 12 April 2016. Volume:713;Page:10385. Text is incorporated into the Bound Volume.]GRANT ROBERTSON (Labour—Wellington Central): It is opportune because I also want to pick up and develop the ideas that the previous speaker Kris Faafoi was working on in particular looking at—I can see how pleased you are about that Mr Chair; it is great to have your endorsement—the amendments to schedule 3. I am looking here at clause 11—Dr David Clark: I want to hear from the Minister.GRANT ROBERTSON: Oh no I am coming to that. Clause 11 of schedule 3 inserted by clause 30 of the bill is titled “Borrowers who are settlors of trusts”. It is very important to go back and recognise that all of the amendments in Part 1 of the bill relate to borrowers—or the vast majority of them—who are offshore. So this is when you are in Australia and you still owe the money but you—The CHAIRPERSON (Hon Chester Borrows): Student loan.GRANT ROBERTSON: Student loans—that is right; student loan borrowers offshore. But in this case we are talking about borrowers who are the settlors of trusts. That is the heading in clause 11—The CHAIRPERSON (Hon Chester Borrows): Student loan borrowers.GRANT ROBERTSON: This is an interesting conversation we are having here but yes I think we are on the same page metaphorically and literally. So as my colleague has mentioned there is an expectation inherent in this clause that we know the income that the borrower is getting from the trust. That is actually what the clause is based on and the formula that my colleague mentioned in clause 11(4) and (5) of schedule 3 are generated by knowing the income of the trust. That is essentially what lies at the heart of this clause.That would be right if you were a New Zealand resident borrower because if you are a New Zealand resident borrower and you have a trust you have income tax obligations but not if you are not in New Zealand—not if you are not a New Zealander. Changes that have been made in recent years mean that if it is a trust where those who set it up are not New Zealand residents they have no income tax obligations.Dr David Clark: None.GRANT ROBERTSON: Whatsoever. So here we are with student loan borrowers who are the settlors of trusts and have a string of obligations put upon them which we can enforce—which the Inland Revenue Department can enforce—because it knows the income that that trust is generating. A tax return is returned and then we can judge from that how much the borrower—the student loan borrower Mr Chair—would be paying back. That is a fair system.Contrast that with the information that we have about other types of trusts: foreign trusts where there is no information like that that could even be used to work out whether or not somebody owes money. Once again we have our concern on this side of the Chamber about the absence of the critical element of a taxation system: fair treatment. New Zealanders should be proud in general of our tax system. It actually is robust and it does work well. But where deliberate decisions are made as they were in a tax bill that went through this Committee in 2010 to create loopholes through which we could for instance zero-rate a managed fund we then create the opportunity for that to be exploited—The CHAIRPERSON (Hon Chester Borrows): Come back to the bill.GRANT ROBERTSON: —and unfairness to join in our system.My question for the Minister in this regard is somewhat technical but it is relevant: at what point does somebody become a non-resident for tax purposes? If the issue that we know of in terms of the setting up of trusts is that if you are not a resident that is where you can exploit the loophole how long would a borrower who is the settlor of a trust need to be away from New Zealand to no longer be considered a resident? This is a serious question because we are dealing within clause 11 of schedule 3 here with exactly that kind of person: a person who has been in New Zealand—The CHAIRPERSON (Hon Chester Borrows): Who is a student loan borrower.GRANT ROBERTSON: That is correct but in this case it is a student loan borrower who is the settlor of a trust. I am pretty sure we are still on the same page. At what point after they have been away is that student loan borrower no longer considered a resident for tax purposes? This matters when it comes to the question of their obligations as a settlor of a trust because we know those obligations are in fact different depending on whether or not you are a resident or a non-resident in New Zealand.Again it is a question of basic fairness and the reason I am raising it with the Minister is that we do now know that a lot of young New Zealanders are spending longer away having graduated from university with a student loan. Should they have structured their affairs in such a way that they are the settlor of a trust can the identity of that trust change over time so that it effectively becomes a non-resident’s trust and therefore no longer subject to these obligations?