Nash Stuart: Taxation (Land Information and Offshore Persons Information) Bill — In CommitteeText is incorporated into the Bound VolumeNash Stuart: Taxation (Land Information and Offshore Persons Information) Bill — In Committee[Sitting date: 09 September 2015. Volume:708;Page:6437. Text is incorporated into the Bound Volume.]STUART NASH (Labour—Napier): I would just like to pick up on what the last speaker Fletcher Tabuteau was talking about and also what Mr Scott alluded to. He said that the main connection in new section 156A(1) in clause 4 is very easy because it is where the heart is. But when we were in the Finance and Expenditure Committee this is where the problems really arose. Obviously “where the heart is” is not a definition at all but the concern that Labour members had was that often it is not where the heart is but perhaps where the wallet resides. So what we actually did is we asked the Inland Revenue Department as well as our expert adviser to go back and provide us with a number of examples of how this might work in certain circumstances. The Inland Revenue Department to its credit obviously came back with a whole lot of examples that laid out “main dwelling” but I suppose my point for relaying this story is that it is not an easy test. Mr Robertson pointed out that members in this House are often very much in the same position. We spend 3 or 4 days a week in Wellington and 3 or 4 days a week in our home electorates. We could claim theoretically that our main dwelling is in Wellington because the one that is owned in Eketāhuna is not worth nearly as much as the one in Wellington. So I am just saying there that there is the possibility for a little bit of moral hazard.I would like to also talk about what Julie Anne Genter was discussing in her Supplementary Order Paper 121. The point she made was actually quite an interesting point. She said: “If you have to give your IRD number on only the third time you do this then why would you do it?”. Well the simple answer I have got is that that is the law and under the law you have to do it. But what it does introduce is a level of moral hazard in that if everyone says “Well you know it might be the law but you know I travel at 55 kilometres in a 50 kilometre zone. It doesn’t really matter. It might be breaking the law technically but it doesn’t matter.” then what you actually end up with is a piece of legislation that does not meet the intended purpose.We just think that it is quite easy to remove that moral hazard. There is something called the sale of purchase agreement. It is a standard agreement. It is actually put together by the Auckland District Law Society which is in the middle of a review process at the moment as we speak. We discussed this with the Inland Revenue Department. We discussed it at the select committee. We thought it would be very easy just to add in a field “IRD number”. There are about 10 or 12 different clauses in this agreement. You just tick the box for the IRD number and you enter it in. It just removes any sort of moral hazard and it removes any complexity.The reason I say that also is that the Minister for Land Information herself stood up and said: “Well we want to remove complexity from legislation. We want to remove complexity from the whole process of buying and selling property.” I found that slightly interesting because there is something called Landonline and it is acknowledged actually as one of the top pieces of land transfer software in the world. New Zealand is rated usually first or second in the world in electronic transactions. As it is at the moment every land transaction that occurs in this country has to be registered online with the Minister’s own department. So what we are not doing here is asking for added complexity; in fact I would argue the opposite. What we are actually doing is removing the level of complexity of asking people to make a choice or a decision around whether they have to provide an IRD number or not. We just say let it be compulsory. Let us make sure that everyone has to provide an IRD number. Then there are no questions there is no instance of moral hazard and there is no complexity.When we talk about complexity I would like to come down to section 156D in clause 4. This talks about omissions and errors. I have a couple of concerns here because what it seems is that we are getting into the intention test yet again which I think has bedevilled a little bit of the whole question of whether we do or do not have a capital gains test in this country. Obviously we have to have a clause in the legislation that governs omissions or errors of information.David Bennett: Is this in the bill?STUART NASH: Yes it is. It is new section 156D “Omissions and errors”. What it says here is: “An omission or error … must be corrected …”. That is true but section 156D(2) says—and this is where I am slightly perturbed—“An omission or error in any tax information provided in accordance with section 156B(2) or (3) or any other failure to comply with sections 156B and 156C does not—(a) affect the validity of any registration of an instrument to transfer a specified estate in land;”. So what this is actually saying is that if there is an omission or an error then the contract is still binding—the contract is not void.I have come across this before in other land information legislation where what is happening with overseas investors for example is that they are just doing things retrospectively but where it gets a little confusing for me is when you go down to section 156E where it talks about false or misleading tax information. It defines what is actually false or misleading. It says “to that person’s knowledge or with intent to deceive”. I wonder whether that “or” should be “and” because I do not know whether you could actually have an intent to deceive without having that person’s knowledge if you know what I mean. So what I am saying here is that if you have an intent to deceive then you are doing that with knowledge.This is where I come back to—I am jumping around a little bit but it is still in the “Omissions and errors” section. Where it talks about omissions and errors to me there is a difference between an omission and an error. For me an error is something that is done—how do I say this—without malice and without intent whereas an omission I would argue is actually done with intent. So an error denotes a mistake; an omission perhaps implies something more sinister. So actually I would have liked to see new section 156D(2) talk just about an error and then section 156E talk about an offence of providing false or misleading information with an omission included under there because I actually think an omission is a proactive action as opposed to just a general mistake.But the interesting thing is that it talks about the fine for committing misleading information—keeping in mind that it does not affect the validity of registration. So the fine for committing an error does not exceed $25000. I know on the face of it $25000 sounds like a lot of money but in essence when we are talking about large-scale property deals even if we are talking about buying a house in Herne Bay or a single dwelling in Auckland a $25000 hit if you give false or misleading information is not a lot. The deal still goes through and I assume this is governed by the—what is that piece the contracts administration—Grant Robertson: Credit contracts.STUART NASH: Credit—no. Anyway what you could actually do—and again it comes to that moral hazard—is you could say: “You know what? I’m going to provide that misleading information or false information. I’m going to take the hit for $25000. It’ll go through I’ll pay the fine and then what I have to do under this legislation is go ahead and correct that information. So I’ll do that but the $25000 hit is actually worth it.”What happens is if an investor provides false or misleading information a second third or fourth time that fine increases to $50000—well I should say that it does not increase; it does not exceed $50000. So again we may find that $50000 for jaywalking would be hugely excessive but $50000 for providing false or misleading information when we are talking about a high-end property deal in a place like Auckland or even Tawa—this is not just defined to residential property—is actually a price that people are prepared to pay to get that deal to go through. I actually would have in this case—and I am pretty liberal on this—liked to see those penalties be a lot harsher. The one thing I really would have liked to see in fact for false and misleading information is that the deal is automatically void so that what it really does is it deters people from entering into that sort of moral hazard of providing false or misleading information but taking that hit which I think is actually quite important.We have had a number of speakers talk about main homes and again I just want to come back to this because it is important and it did take up an inordinate amount of the select committee’s time. I think Julie Anne Genter’s Supplementary Order Paper 121 is in essence talking about a main home register. But where the confusion arose and I think where the—