A whole series of loopholes has now been identified in the Government’s plan to require overseas property purchasers to provide IRD numbers from October 1.
Though the Government refuses to call the plan a register, Housing Minister Nick Smith has spent the weekend promoting it as the answer to Labour’s claims about the impact of Chinese buyers on Auckland house prices.
But this week the Finance and Expenditure will begin its Wellington hearings on the Bill.
And it will hear details about loopholes in the Bill that will enable foreign buyers to avoid its provisions that have been discovered by major accounting and law firms and the major banks.
Treasury papers released a week ago show that the whole idea of the IRDA numbers was dreamed up and agreed to by the Government in just over a fortnight before the Budget.
That haste has clearly led to the loopholes in the Bill.
Two directors from the accounting firm EY (Ernst and Young), Aaron Quintal and Angela Williams say the bill contains contain a confusing mix of tax, immigration and overseas investment concepts, “which are likely to give rise to a number of technical and practical issues.”
Ernst and Young are not convinced that overseas buyers will not be able to evade the provision to supply an IRD number.
”We consider it may be very easy for New Zealand citizens and some resident individuals to
avoid being “offshore persons” by making flying visits here at pertinent times and we suggest the criteria be further considered,” they say
Another of the “big four” accounting firms, PWC, addresses the same issue by suggesting that the bill should contain a minimum residence requirement before someone is considered an “offshore person”.
The law firm, Chapman Tripp, says there is nothing in the Bill to stop “Offshore Persons” from purchasing a New Zealand company that already has an IRD number and using it to buy and sell property.
And they also make the point that some banks require that customers have an IRD number before they open an account whereas the Bill requires that overseas property purchasers have a bank account before they get their IRD number – which will be mandatory.
The ANZ bank is worried that the Bill will make it more difficult for overseas person to open bank accounts in New Zealand.
But perhaps surpassingly the Bill receives a total endorsement from the Real Estate Institute of New Zealand which may suggest that offshore buyers are not quite as important to real estate agents as much speculation suggests.
And that speculation continued over the weekend.
The Government has consistently refused to setup a register of foreign land ownership and Housing Minister Nick Smith was once again defending that position on TV3’s “The Nation”.
“I still reject the idea of having a register, where you can look up and see whether the property in Mt Eden Road or a particular address is owned by a New Zealander or not. I’m not playing that game,” he said.
He was asked by interviewer, Paddy Gower if he was “playing a game with words”
“You don’t want to call it a register because it looks like a U-turn.”
Mr Smith: “No, what we’re going to do is we are going to collect better information.”
Meanwhile former Labour Deputy Leader, Michael Cullen, defended Labour’s use of data purporting to show how many house buyers in Auckland were of Chinese ethnic origin.
“I think everybody feels that it’d be useful if we had much better information about who’s buying the houses in Auckland.<” he told TVOne’s “Q+A”.
“If there is, as there appears to be, very significant offshore buying into the Auckland market, then that must be a factor in pushing prices up. “
He said he didn’t see Labour actions as xenophobic.
“If it was, I’d be deeply concerned about that.
“I do see it as an issue of who is buying these houses, and it does appear from all anecdotal evidence that a great deal of it’s coming from mainland China.
“And that’s not ethnic.
“I mean, the fact that China’s inhabited by Chinese happens to be a fact of life. If that’s where the pressure is coming from, I’m afraid one’s talking about that particular group. “
With Labour support surging by six per cent and the Government dropping by 6.5% in last Friday’s Roy Morgan poll it would seem the Government was already in trouble before Labour released its Chinese house buying data.
The Morgan poll was taken between June 29 and July 12 but Labour only released its data on July 11.
With Parliament resuming on Tuesday and the Select Committee hearing the Bill submissions meeting on Wednesday this issue still has considerable political mileage in it.