Taxation (GST And Remedial Matters) Bill

Published: Fri 26 Nov 2010 12:57 PM
Taxation (GST And Remedial Matters) Bill
Rahui Katene, MP for Te Tai Tonga
Wednesday 24 November 2010; 7.40pm
Before I start my speech I want to mihi to the whānau of the miners in Greymouth and say what a great tragedy it is, and to pass on my aroha and, I am sure, the aroha of other members in the House He mihi mamae he mihi aroha ki nga tini aitua. Moe mai i te Ariki. Ki nga whanau pani ma te atua koutou e manaaki e tiaki.
I am always pleased to speak to a bill whose purpose is described as designed to “maintain its integrity and fairness.”
I am even more pleased to make the connection between integrity, fairness, and GST because of course it would suggest to me that this bill may well be the opportunity to promote the groundswell of support that emerged out of my member’s bill, the Goods and Services Tax (Exemption of Healthy Foods) Amendment Bill, which of course proposes scrapping GST on healthy food. Healthy eating will save millions of dollars in costs associated with poor health. It is an investment in a healthy future and an investment in integrity and fairness, if ever I have heard one.
I want to share with the House the finding from Professor Tony Blakely from Otago University’s public health department. He has been looking into whether price discounts change people’s eating habits. The study found, from a survey of 1,100 shoppers, that a 12.5 percent drop in price increased people’s consumption of healthy food by 11 percent. Introducing the exemption of GST from healthy food is therefore designed to give New Zealanders a fair chance to get people off fast foods and on to healthy foods. I say sorry to Aaron, but he would have to come off those fast foods and start eating healthily. It would be a real encouragement for him.
What better way to do that than to send a clear price signal? The study basically concluded that people ate more healthy food if they were sent the right price signal. I could, with much pleasure, focus my entire contribution in this debate on the importance of removing GST from food. But at this stage it appears neither the Minister nor the Government has seen the wisdom of such a great approach, but hope springs eternal.
The focus then of this bill is about creating greater clarity to certain parts of the GST rules, to make it easier for taxpayers to understand their GST obligations. We fully endorse this approach. We are all for accountability, transparency, knowing what one’s obligations are, and one’s responsibilities. Although the intention of this approach is described as helping to reduce compliance costs for businesses, we also think it is about good government—assisting citizens to appreciate their entitlements and comply with their obligations.
An important initiative in this bill is the one to introduce measures by which to prevent so-called phoenix fraud schemes. In essence, this is when a registered purchaser receives a GST refund from the Inland Revenue Department, when in fact no corresponding GST payment has been made by the supplier of the transaction. The Māori Party supports this measure as a way to close off a loophole, to ensure fairness and integrity right across the taxation system.
We are concerned about the proposal to amend the definition of commercial dwelling and dwelling, within the Goods and Services Tax Act 1985. The definition for commercial dwelling is to be redefined to include homestays, farmstays, and serviced apartments. Dwelling will also be redefined so as to exclusively refer to a dwelling that is owned and occupied by its residents. In August 2009 Brian Fallow, the economics editor of the New Zealand Herald, suggested that it was time to add GST to rents and mortgages, as currently housing is perceived as a no-go zone for the taxman
This could all change with the bill’s redefining of the term “dwelling” to include only premises that are occupied by their owners. Rental properties will therefore be excluded from being defined as a dwelling, which could in effect provide for GST to be added to the mortgage payments of New Zealanders’ owner-occupier residents, without any effect to rental properties and their tenants.
Another one of the new measures introduced into this bill is to respond to the unintended timing problem for non-profit bodies accounting for GST when they supply a large asset, such as a house, to a person in need. I commend the Government for continuing to take into account the unique needs of non-profit bodies, by amending the Goods and Services Tax Act 1985 in order to reduce the negative impacts and timing problems created when accounting for GST.
As a constituent MP representing a Māori electorate I know that our non-profit bodies, our volunteers, and our voluntary groups are the unsung heroes of our community. In many ways they provide the essential fuel to keep our communities thriving, none more so than in Greymouth at this time. We see the Red Cross and Civil Defence volunteers out there, helping as much as they can, the students from the polytech, and of course all the people behind the scenes who are providing all of the cups of tea, and so on, that are helping the families and others to get through this hard time. It is very helpful to see the Government trying to support these volunteers in their mahi.
Non-profit bodies can often be resource rich, but cash poor—a bit like the Māori Party, actually. This can put real strain on their ability to plan and make good strategic decisions. These bodies work for a public good, and therefore it is important that the Government eases their financial pressure wherever it can. There are already some special rules for non-profit bodies listed on an Order in Council, when it comes to GST. They are eligible to use a payments basis, even if their turnover is over the normal threshold of $2 million.
The proposed amendment adds another welcome exemption in this complex area of the law. The legislation normally requires organisations that account on a payments basis to switch to an invoice basis when the amount payable for a supply of goods or services is both $205,000 or more and payment is deferred. This amendment grants an exemption to non-profit bodies. It is a most welcome amendment. The way the current system works, it is possible that in the case of a large asset such as a house, the non-profit body would have to account for the GST on the entire purchase price at the outset, therefore creating a significant cost to the non-profit body. Consequently, the operation of the rule may discourage non-profit bodies from providing goods and services over a certain value. The change proposed in this bill will therefore provide a solution to this concern in situations where the tax base risks are minimal.
Another detail of the bill is related to donee status. Keeping a donee list up to date is key to payroll-giving legislation, which came into effect earlier this year. Again, it is another important means by which communities can keep functioning.
The bill also introduces an interesting set of measures relative to the emissions trading scheme. The bill aims to clearly define the values of the emission units that will be traded through the scheme, as well as when these values will be applied to the units throughout the calendar and income year time frames, so that these values can be made available for income tax purposes. I will be very interested to learn what consultation the Minister has had with the Iwi Leadership Group about this particular measure. Brokering a relationship between the Treaty partners was a key feature in the Māori Party’s negotiations over the emissions trading scheme. The negotiations allowed us to bring together the two Treaty partners, iwi, and the Government. So Māori values are not only taken into account in this scheme, but in this country’s overall legislative approach to addressing climate change issues overall. It also provided the means by which the Crown would understand its obligation to consult. We look forward to seeing how this relationship will translate into a practical reality throughout the select committee. There are many varied aspects to this bill that ensure we will continue to have an active interest in the evolution of the Taxation (GST and Remedial Matters) Bill. At this point in time, we will support the bill at its second reading.

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