National have moved to clarify the situation surrounding their proposal to tax foreign house buyers.
In doing so they have had to tacitly admit that what they implied in their policy launch last Wednesday was wrong.
The National leader’s office has released to POLITIK some of the advice they received when they developed the policy which shows that there is a way they can tax the foreign buyers.
They would have to discriminate on the basis of residence simply applying a tax to non residents.
But even that has its own problems since it would conflict with some of New Zealand’s international tax agreements.
The advice came from Robin Oliver a lawyer and former top Inland Revenue official who has an international reputation as a tax consultant and advisor.
It was coordinated by National’s trade spokesperson, Todd McClay.
Its “Back Pocket Boost” policy document said that lifting the foreign buyer ban on properties over $2 million and applying the 15 per cent tax would help people “who do not hold a resident class visa in New Zealand.”
Strictly speaking Oliver’s advice would seem to suggest that may be correct.
However National’s policy document released last Wednesday also said: “National has sought legal advice on whether the replacement of the foreign buyer ban with a foreign buyer tax is consistent with New Zealand’s existing free trade agreements – that advice confirms such a replacement would be consistent with those agreements. “
It may be – but it is not the free trade agreements that are the problem.
It is New Zealand’s Double Taxation Agreements.
Many of the existing 40 Double Taxation Agreements include a “Non-Discrimination” clause which prevents New Zealand imposing a tax on anyone overseas that is more onerous than a tax on a New Zealand resident.
The implication in National’s rhetoric has been that wealthy overseas people would be allowed to buy property but they would have to pay a 15 per cent tax surcharge were they to do so.
But the advice from Oliver to the party says: “You can discriminate on the basis of residence but not nationality.”
Oliver suggests that there would be problems applying a non-resident tax to buyers from Australia, Austria, China and Japan and National has already identified Singapore as a no-go because of our free trade agreement.
Non-residents from those countries would be people who spent less than 183 days a year in New Zealand.
That would mean a foreigner buying property in New Zealand would not be able to spend more than 183 days here each year to qualify as a non resident and therefore pay the tax. If they stayed longer than that they would not have to pay the tax.
National has cited New South Wales as an example of a jurisdiction where a tax on foreign buyers was able to be applied.
But that surcharge was lifted in July — two months before National presented its policy — because it was inconsistent with Australia’s Double Taxation Agreements.
National released its advice after its policy launch and after Luxon had faced a series of questions about the tax at a post-launch press conference.
It seemed he was not aware of Oliver’s caveats on the proposal and dismissed criticism of it as Labour Party politicking.
“I am rock solid and confident in our assumptions around our plan for our tax plan,” he said.
“And I would just say to you we’ve had independent advice.
“We validated it and I appreciate the other side want to play that game.
“That’s an easy game for them to go to, but we are rock solid.”
During a tense question and answer session, Luxon kept referring back to the party’s legal advice.
“We’ve had independent legal advice to say that we think there’s a way through all of that,” he said.
“We’ve been really clear.
“We’ve had a really good set of an external assessment on all of our tax planning.
“We’ve gone and got independent legal advice which Todd McClay and others have participated in securing that advice over the last few weeks and months and we are very confident that we can implement that.”
Luxon conceded that he did not have the detail of the tax advice.
Otherwise National’s launch yesterday was a high revving display of ethnic dancing and videos featuring the party’s top spokespeople.
But perhaps surprisingly, the party unusually for a campaign launch had no new policy to release.
The only downside was that the party had booked the 3000-person capacity Due Drop Events Centre in Manukau City and filled only about half of it.
Labour, on the other hand, probably had fewer people at their launch in the 2000-seat capacity Kiri Te Kanawa Theatre at the Aotea Centre.
But they are firm believers in what they call “Jim Anderton’s First Rule of Politics” (named after their former president and founder of the Alliance) – always book a venue that is too small.
But what was important at Labour’s launch was who was there; and who wasn’t.
The party reached back to former Prime Minister Helen Clark to introduce Prime Minister Chris Hipkins.
Jacinda Ardern was conspicuous by her absence.
Maybe this was Labour’s way of saying it was returning to its base as a party focused on what Leader Chris Hipkins calls “bread and butter” issues.
Clark’s mission was simple; to convince Labour Party faithful that it was 2005 all over again and that the party could recover from being around five per cent behind National at the start of the campaign to ending up two per cent ahead after the election as it had done in 2005.
“It can be done,” she said.
And Hipkins reached right back into Labour’s past to unveil a new keynote policy; free dental care for the under 30s but qualified by soi many restrictions that we are unlikely to see much of it in action till the last year of the next government, if Labour gets that far.
When the late Labour leader, Arnold Nordmeyer and Dr David McMillan drew up what became the Social Security scheme of the first Labour Government they had always imagined that free dental care be included.
It never was.
But now Labour is proposing that from June 2025, basic dental care be free for under 24s and from July 2026 for under 30s.
The scheme will cost $65 million in 2025 rising to $160 million a year in 2027 – 28.
But as National has pointed out, a substantial slice of Labour leader Chris Hipkins speech to his Aotea Centre audience was an attack on National.
It was a tough speech but also, at times, offering the kind of inspirational rhetoric that Labour audiences love.
“I hope New Zealanders know my values,” he said.
“With me, what you see is what you get.
“I’m about bringing New Zealanders together, because I know we’re at our best when we’re united. “
And he went on from there to draw a comparison with National.
“I’m up front and clear about our plans and our goal of taking our country forward.
“You don’t see that with our opponents.
“You see parties that want to win at all costs and bugger the consequences.”
His speech was disrupted four or five times by protesters from Brian Tamaki’s Freedom Coalition, but the Prime Minister seemed to draw energy from the audience response to the interjectors.
The audience chanted “Let’s go Labour” while the interjectors were removed in scenes reminiscent of old-time political meetings in contrast to the made for TV productions they have now become.
And maybe that played into Labour’s hands just as the selection of Helen Clark was deliberate and so was the dental policy.
It all fitted a “back to basics” Labour agenda, a distance away from the politics of identity that dominated the Ardern years.
But before National can challenge this with its own calls for a New Zealand that looks to the future, it will have to sort its policy details out first.