Why do I get the impression that this story just screams desperation, from this government?
Aside from the fact that many sceptics voiced doubts last year about National’s optimism to “balance the books”, and considered it nothing more than election propaganda for gullible voters, Dunne’s comments on this issue beggar belief,
“‘We just had public consultation on the use of mixed assets such as holiday homes and launches, and we’ve been doing other work looking at the tax treatment of various forms of activity.”
”That programme needs to be ongoing… what we should be doing is making sure we are collecting all the existing taxes which are due and if there anomalies and loopholes we need to be closing those to make sure the system is fair to everyone.’
It was estimated the Government was missing out on hundreds of millions of dollars of revenue a year.” – Ibid
“We just had public consultation on the use of mixed assets such as holiday homes and launches…“
“…what we should be doing is making sure we are collecting all the existing taxes which are due and if there anomalies and loopholes…”
Isn’t this precisely what Labour was suggesting last year with it’s Capital Gains Tax?
The Green Party certainly made that connection,
” “Bill English has failed to close the single largest remaining loophole in our income tax system. A comprehensive tax on capital gains (excluding the family home) is hugely progressive and would help close the growing gap between rich and poor,” said Green Party Co-leader Dr Russel Norman.
“Treasury advice to Bill English in 2009 made it clear to him that capital assets are owned disproportionately by higher income families. The advice said not taxing this income is regressive. That’s Treasury’s way of saying that a capital gains tax is incredibly fair.
“Both John Key and Bill English have consistently defended the tax loophole, however, preferring to ignore growing inequality in our society…”
…“The largest proportion of capital gains is earned by those at the upper end of the income spectrum. This income currently remains untaxed,” said Dr Norman.
“This tax loop-hole for those that can afford to own multiple properties needs to be closed.” ” – Source
So much for John Key stating last year,
“Scrapping the top income tax bracket reduced the value of highly leveraged investment properties as a tax shelter, while tougher rules on depreciation and LAQCs also reduced their relative attractiveness as investments.
Labour, Prime Minister John Key declared on Monday, is “fighting a problem they had when they were in office, not a problem we have today”. ” – Source
Yeah right, Prime Minister. Unfortunately, simply saying that didn’t make the problem go away, did it?
Gareth Morgan pointed all this out to us, last November,
“It’s difficult to detect any sort of principle – liberal or otherwise – in the economic policies we could reasonably expect to address the widening income gap. Gaping loopholes in our tax system permit those with wealth to earn tax-free gains – putting them further ahead than ever.
While the Government sees fit to give a handout to working families earning $100,000 per year (nearly twice the average wage), those who can’t meet bureaucratic hoops miss out on support altogether and we have abandoned targeting in toto for the politically powerful (the elderly).
Equally worrying, current tax policy incentivises investment for capital gains, causing excessive investment in property at the expense of business – something which has hindered the long-term outlook for incomes and jobs.” – Source
So for United Future leader Peter Dunne to try to excuse their inertia by saying “that the Prime Minister could not have foreseen a dramatic slide in global economic conditions“, is disingenuous.
No. Not disingenuous. Let’s call it for what it really is: bullshit.
National’s tinkering with the tax system is not going to address the shortfall in government revenue. We will simply see more of the above headlines in future media, as the core-problems in our taxation system go unaddressed.
National simply does not have the intestinal fortitude to address taxation problems in any meaningful way. If they did, they would,
- Implement Labour’s capital gains tax
- Stop Trusts from being tax havens
- Reverse the 2009 and 2010 tax cuts for those earning above $70,000
- Implement a Financial Transactions Tax
- Review Working for Families payments for families earning over $100,000
Unfortunately, none of the above will happen. Generally, only reformist Labour governments have the inclination to make radical changes when they become blindingly obvious as necessary.
It also takes a collective frustration from Voterland to “connect the dots” and realise that voting for National will not achieve longterm reforms.
In the meantime, Dunne will tinker; National will continue cutting services; government workers will continue to be sacked; and we’ll see more of the following, as our economy stumbles along like a diabetic with low blood sugar,
In a somewhat weak attempt to allay fears over National’s stated intention to partially-privatise several state assets, Bill English has stated that he “believes only 10 to 15 per cent will initially go to overseas buyers”.
However, tellingly, National refuses to actually pass any legislation to prevent this from happening;
National says it will “cap” single investor’s holding to 10%.
But National refuses to explain how it will engineer this “cap”.
It doesn’t take a rocket scientist to figure out that a corporation could easily employ five “shelf companies“, each buying a block of 10% of the shares. These “dummy” companies would each own a block of shares – in name only. The parent company – owning each dummy company – would be the real owner.
Result: a foreign corporation owning a sizeable chunk of each SOE.
Case in point: Contact Energy.
In 1996, Contact Energy was split of from it’s parent SOE, Electricity Corporation of New Zealand and fully privatised in 1999 as part of the then-National Government’s plan to “reform” the energy sector and make it more “competitive”. Energy Minister, Max Bradford,. assured New Zealand that the splitting up of ECNZ, and privatisation of Contact Energy, would introduce competition and drive prices down.
The opposite actually occurred and power prices doubled during the following decade.
When Contact Energy was privatised in 1999, 40% of the publicly offered shares were purchased by Edison Mission Energy. That 40% was subsequently increased to 51%. Edison Mission started with a minority shareholding – which was soon increased to a majority sharehold. (Starting to sound familiar?)
In 2004, Edison Mission sold it’s 51% stake to Australian company, Origin Energy.
“The terms of this float were such that sharebrokers earned a greater commission from issuing shares to overseas shareholders than they did from issuing them to local shareholders. Many of the shares went to shareholders overseas (Gaynor, 1999). After the float, Gaynor assessed Contact as about 62% overseas owned.” Source
In reality, despite “assuring noises” made by Bill English and John Key, there is no way to prevent much of the proposed 49% sell-off of the SOEs, from falling into foreign ownership. This will not help New Zealand’s balance of payments, as profits are repatriated overseas, to offshore investors. It will mean that our most critically strategic assets will have owners who have no interest in New Zealand, except as a source of profits.
And importantly, we will lose approximately half of the profits made by these SOEs.
In 1999, Max Bradford promised New Zealanders that power prices would be “driven down” by competition.
That promise failed to materialise.
This year, English and Key promise that “only 10% to 15%” of shares will go to overseas investors.
Do we believe them sufficiently to “tick National” at this year’s general election?
I certainly will not.
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Warren Buffet is regarded as one of the most successful investors in the world. He is ranked among the world’s wealthiest people and was ranked as the world’s wealthiest person in 2008. He is the third wealthiest person in the world as of 2011.
He is not a disaffected socialist, nor “random leftie” – he has serious money in his bank account(s). So when this guy warns us that the wealthy are not paying their way, and have been “coddled by billionaire-friendly governments” – you know he’s saying something important.
And that we should take note…
Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.
These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.
Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.
If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.
To understand why, you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.
Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.
I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.
Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.
The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains. Some of my brethren may shun work but they all like to invest. (I can relate to that.)
I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.
Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.
Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.
But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.
My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.
(Warren E. Buffett is the chairman and chief executive of Berkshire Hathaway.)
Buffet’s analysis holds true for New Zealand as much as it does for his own country, the USA.
In April 2009 and October 2010, this government awarded the highest income earners and the wealthiest the most in tax-cuts.
At the same time, the top ten wealthiest people in NZ (and probably others throughout the world also increased their wealth by 20 percent) – whilst the rest of the global economy was wracked by the worst recession since the 1930s, and millions lost their jobs.
The old excuse that the “wealthy work hard and should be rewarded for their labours” no longer deserves to be taken seriously. Most of us work hard, and long hours.
It is time that governments stopped coddling the rich. It’s not like they can take their wealth off-planet to Mars or elsewhere. The rich will still invest their vast wealth.
But it’s time they paid their fair share as the price of living in societies that gave them the opportunities to create their wealth.
It’s high time National looked at a fairer taxation system, and paid for the social services and job creation-friendly policies, rather than the top 10% of the population and middle-class rich-wannabees.
Otherwise, prepare yourselves for a society of growing inequality.
So far, the indicators are not good…
Well, I think the ‘message’ is reasonably clear for all but the most ideologically-blind. Question is – what are we going to do about it?
(Hint: more of the same will probably not work.)
This is must-read stuff…
It is worth noting that, here in New Zealand, recent tax cuts gave $2.5 billion a year to the top 10 per cent of earners and “practically nothing to the bottom 20 per cent of earners, who got 3 per cent of those cuts”.
It is also worth noting that, as a country, we are having to borrow $380 million per week to – in part – fund those tax cuts. That’s $17.6 billion this year alone.
Far from being a “prudent fiscal manager”, National is being highly irresponsible as it continues to woo the Middle Class for their votes.
Only thing is: eventually it all has to be paid back. Even selling all out SOEs won’t cover that debt mountain, as we simply don’t have enough state assets left after the 1980s and 1990s.
A neo-liberal is one who knows the price of everything and the value of nothing. In this case, this National government are slowly strangling good, quality broadcasters like RNZ and TVNZ7 – whilst feeding us a daily diet of brain-cell deadening, pseudo-news on TV1 and TV3 and apalling programming that consists mostly of American sitcoms, cooking programmes, and bleak crime shows.
If only New Zealanders were as passionate about the lack of governmental support for quality broadcasting as we were about stranded penguins; “Wellywood” signs; and books by Ian Wishart.
Oh, but that would mean thinking about complex issues, wouldn’t it? Jerking the knee with superficial, emotion-tugging, issues is much easier: no effort required.
The state-owned broadcaster registered itself as the Radio New Zealand Charitable Trust with the Charities Commission last month.
Some of its charitable purposes, which were listed on the commission’s website, included education, research, fundraising and providing grants to a number of individuals and groups.
A spokesperson for Broadcasting Minister Jonathan Coleman said the broadcaster still received $34 million a year but couldn’t say how long it had been receiving that amount.
A financial review of Radio NZ for the 2009/10 financial year showed it had a net deficit of $498,000 after tax, compared to a surplus of $13,000 the year before.
The review said RNZ had been too cash-strapped to participate in the 2010 New Zealand Radio Awards or put in a bid for the Rugby World Cup 2011 coverage.
Kedgley said she first thought the charity registration was a joke.
“I am appalled to discover that it is serious proposition and that the Board of Radio New Zealand has been forced by the Government’s funding freeze on Radio New Zealand to set up a trust so that it can go out with a begging bowl to the public,” she said.
“The move suggests there is quiet desperation at Radio New Zealand. The broadcaster simply cannot make ends meet under the Government’s funding freeze.”
Curran said the move raised some “serious questions”.
“Not the least of which is why the whole of RNZ has been registered as a charity, and what the long-term intention is,” she said.
“Radio NZ’s survival should not be dependent on it having to solicit donations. It is our state radio broadcaster and holds a special place in New Zealand.”
Broadcasting Minister Jonathan Coleman couldn’t be reached for comment and neither could RNZ chairman Richard Griffin.
Griffin told Fairfax earlier this year that RNZ could only survive a funding freeze for another two years.
He said the current freeze put the public broadcaster in a “more than difficult” financial position.
“If we’re left in a position where every year costs increase and funding remains static, we’re going to wither.”
It was believed that the charity was mainly to fund its concert station.
It is an unbelievable, bizarre state-of -affairs when a public service such as Radio New Zealand , has to register itself as a charity. If this doesn’t ring alarm bells with us, then we are truly asleep.
It should also give us cause for concern that National will be closing down TVNZ7. This free-to-air; advertising free; public network is a wealth of news, documentaries, and offers an un-commercialised look at ourselves and the world around us.
TVNZ7 treats the viewer with intelligence and respect. It is television as it should be – and not the mindless rubbish that we are now served up every day on other channels. (Parliament TV excepted – that contains very mature, erudite debate from our Honourable Members of Parliament.)
It is a great shame that two quality public services – TVNZ7 and Radio New Zealand – can be put in jeopardy through the lack of political support from the government-of-the-day, and because of public apathy. If New Zealanders were as passionate about their own public broadcasting system, as they were about wayward penguins, oh what a much more mature society we would be.
But we are like children, it seems, and easily enthralled by the latest distracting trinket.
New Zealand has often been described as a “young country”.
That is truer than we realised.