National’s finance spokesperson Nicola Willis is confident her party’s plan to tax foreign buyers of residential property won’t lead to challenges under international tax treaties.
New Zealand has a range of agreements with other countries on tax, which sit alongside trade agreements, many of which include ‘non-discrimination’ clauses so that overseas nationals cannot be taxed by the New Zealand government in ways New Zealanders would not be.
In an analysis published on 1News.co.nz, University of Auckland law professor Craig Elliffe wrote that there are significant risks the policy would spark either economic or diplomatic repercussions.
“There would also be a significant political and legal risk with our treaty partners. The treaty partners could terminate the double tax treaty or negate various parts of the agreement,” wrote Elliffe.
Willis said these fears are unlikely to come to pass because of the political realities of such a policy.
“There are other views which interpret those tax treaties differently. There’s clear evidence that many of the countries he’s listed already do these charges themselves,” said Willis.
“And finally, and this is really important, let’s get into the real world.”
“Do you really think China is going to have a diplomatic incident with New Zealand because we say, you know how we banned people from your country buying houses altogether – well, now we’re going to let them, but the condition is that they have to pay a charge.”
“Actually, that’s a step forward with regards to their rights in New Zealand, not a step backwards, and so we are confident this can be diplomatically managed,” said Willis.
“I do not think this is going to trigger the kind of legal disputes that your professor has referred to.”
Currently, Chinese nationals are not allowed to buy residential property in New Zealand after the Labour-led government introduced a ban on foreign buyers.
National has argued the ban should be lifted, and instead, foreign buyers would pay a 15% tax on house purchases over $2 million.
In a statement provided to Q+A, China’s ambassador in New Zealand, Wang Xiaolong said the embassy is currently studying the proposal.
“We have noticed the recommendations in New Zealand regarding the purchase of New Zealand properties by overseas investors.”
“Currently, we are studying the specific details and implications of these recommendations and look forward to gaining further details of the recommendations.”
“We hope that the final legislation that will be introduced is consistent with international standards and agreements signed between China and New Zealand,” Ambassador Xiaolong concluded.
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