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Posts Tagged ‘IRD’

Why should tradies be prosecuted for doing “cashies” and not paying tax?

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“My name is Mr Smith. I am from Inland Revenue and Bill English sent me to help.”

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Before we go any further, just to remove all doubt from certain quarters, as the IRD points out with crystal clarity;

“New Zealand does not have a capital gains tax.”

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IRD - capital gains tax - investor - speculator

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IRD - new zealand does not have a capital gains tax

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Meanwhile, the IRD today (5 May) announced a crack-down on ‘tradies’ and other businesses who  do “cashie” (cash) jobs whilst not declaring that income with Inland Revenue and subsequently not paying their full measure of tax.

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IRD - crackdown on cashies jobs

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First of all, let me state that  everyone should pay their taxes. Without a comprehensive taxation system, our infra-structure would never have been built and our social services would be non-existent.

We need taxes for our education system; our public healthcare; judiciary; housing; police; DoC; border controls; public transportation, et al. As Inland Revenue’s marketing and communications group manager, Andrew Stott, stated in a NZ Herald report;

“Tax in New Zealand pays for many of the things that we enjoy about this country and so it’s important to encourage everyone to do that.”

But it’s a bit “rich” (excuse the pun) for the IRD to be clamping down on an underground “cash” economy  when we have – in broad view of the entire nation – a massive tax loop-hole costing society billions in lost tax-revenue.

I refer to a lack of Capital Gains Tax (CGT).

A tradesman is expected to pay tax on thousands or tens of thousands of dollars received for sub-contracting jobs.

An investor/speculator can pocket hundreds of thousands (perhaps millions)  of dollars in Auckland’s over-heated property market – and not pay one dollar in tax on profit;

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People making more on their homes than they earn at work - nz herald - auckland property market - daily blog - capital gains tax

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In effect, the current taxation system rewards doing very little work. For “Jonathan”, a property investor/speculator, he will just sit back in his Italian-leather recliner-rocker; and watch property inflation increase values. Then cash-up and make a tax-free windfall.

Meanwhile, “Gazza”, a tradesman living across town  to the property investor/speculator, gets up at 6am; goes to work in cold or shine; rain or fine; puts up with the risk of workplace injuries (or worse); goes home; and repeats the next day. For his efforts, he is taxed. And if he dares pocket a dollar without paying a percentage to the Taxman – he can be fined 150% plus interest; taken to Court; perhaps even bankrupted.

The latter is called “a mug’s game”.

Let me demonstrate this  with a highly complex, detailed,  financial diagramme;

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Taxpayer and Speculator

(L-R) “Gazza; works six days a week; earns $150,000 p.a.; pays income tax on earnings plus GST on any new home he builds – “Jonathan”; works in his garden tending to his geraniums; made $1 million selling three houses in Auckland he bought a few years ago; paid nil tax.

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“Gazza” then gets a letter from IRD saying he’s being audited because he  may have done a few “cashies” sometime in the last few years when things were a bit lean after the GFC. Seems he forgot to pay tax on a few thousand dollars.

Meanwhile, “Jonathan” thinks he and his wife will enjoy a round-the-world cruise with their tax-free gain.

“Gazza”, who built the houses, paid tax on every cent he earned (except for the “cashies” he  may or may not have done elsewhere).

“Jonathan”, who has lifted a hammer only to put a picture up on the wall, who built nothing, and simply bought and sold existing houses – paid nothing in tax.

Only in New Zealand do we have a law going after the battlers like “Gazza” – who actually get up each morning to build new houses. National and ACT think this is a perfectly sane state of affairs.

“Mr Smith” from the IRD is knocking on “Gazza’s” door.

“Gazza” wonders why he bothers getting up in the mornings.

“Jonathan’s” geraniums are  doing very well.

Addendum

Stuart Duncan sold his 1982 fibre-cement home at 116 Oaktree Ave in Browns Bay in November 2013 for $751,000.

Now the new owners have on-sold for $1,205,000 – despite doing little work on the property – giving them a 16-month profit of $454,000 – about $940 a day.

“I’m still in shock,” Mr Duncan said after learning how much his old property fetched. “It’s just disbelief.

“It was an 80s house, three-bedroom do-up. Where is the market going? God help New Zealand.”

NZ Herald

I doubt if we’ll be receiving much assistance from an invisible supernatural deity. Not when New Zealanders seem unwilling to help themselves sort out this crazy mess. And not when we, as a nation, keep re-electing a government hell-bent on doing nothing about a crisis that has spiralled out of control.

We have only ourselves to blame.


 

References

IRD: International

IRD: Residential Property

Fairfax media: Cash jobs crackdown by IRD

TV3 News: IRD launches campaign to crack down on cash jobs

NZ Herald: IRD chases down tradies’ cashies

NZ Herald: People making more on their homes than they earn at work

This blogpost was first published on The Daily Blog on 6 May 2015.

 

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OIA Request points to beneficiary beat-up by Minister Chester Borrows

13 December 2013 6 comments

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In National’s on-going war against the poor; the unemployed; solo-mums; widows; etc, Associate Social Development Minister, Chester Borrows, recently trumpeted “new” developments in the campaign against “welfare abuse”.

He proclaimed  “new” measures by this government to detect and deal to (alleged) fraudsters,

“The information sharing, which compares MSD records with Inland Revenue data to identify working age beneficiaries who have not accurately reported their income to Work and Income, started in March this year.”

Source: Information sharing continues to stop fraudsters

However, as I pointed out in July of this year, Borrows appears to be somewhat “loose with the truth”. The MSD has had the ability to share information with other government departments going back to 2001 – if not  earlier (see:  Benefit fraud? Is Chester Borrows being totally upfront with us) .

The initial evidence for this fact lay with two letters  from an acquaintance, who luckily keeps every piece of correspondence from government departments.

The other evidence was a startling admission from Borrows – detailed later in this blogpost – in an OIA request lodged with the Minister’s office in July.

The first of two letters was from 2009,

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winz-letter-2009

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[Published with permission.]

The letter clearly states,

We regularly compare our records with other government agencies…”

and,

The Inland Revenue records indicate that you commenced employment: 16 March 2009…”

(Note; the over-lap that so concerned the MSD was a matter of two weeks, and centered more around confusion as to when the WINZ “client” was deemed to start work.)

Obviously, the MSD had data-matching with the IRD going back to at least mid-2009.

The second letter is from 2001,

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WINZ letter 2001

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[Published with permission.]

Even in 2001 – twelve years ago – WINZ and the NZ Customs Service (not Immigration Dept as I mistakenly wrote) were comparing information.

So for Borrows to claim that “information sharing, which compares MSD records with Inland Revenue data to identify working age beneficiaries who have not accurately reported their income to Work and Income, started in March this year ” – shows either that he has poor knowledge of departmental policy, or is wilfully misrepresenting the truth.

If Borrows is lying, it would be part and parcel of National’s disturbing agenda to demonise welfare recipients and make them the scapegoats of this Tory government’s failure to create jobs.

On 19 July, I lodged an OIA request with Borrows’ office.  I asked ten questions from the Minister through the course of two emails. Here are the questions and responses I received on 12 September;

1. Over what period of time were these 3,139 cases detected?

Borrows replied; “From 18 March to 14 July 2013 the information sharing agreement detected 3,139 cases of benefit fraud which resulted in the cancellation of a benefit.”

2. When did IRD and WINZ begin sharing information?

Borrows; “In May 2012 an Order in Council was passed that allows for Inland Revenue to share information with the Ministry of Social Development. To support this a memorandum of Understanding was signed by the Chief Executive of the Ministry of Social Development and the Commissioner of Inland Revenue.

This has led to a new programme of work in which Inland Revenue provides the Ministry of Social Development with income and employer information for all working age people in receipt of a benefit. In September 2012 a test of the information sharing agreement was undertaken to ensure data integrity and system compatibility. Full information sharing for the detection of undeclared earnings commenced in March 2013.”

However, further on in Borrow’s letter, he presents this chart of two government departments and the dates they commenced data-sharing with the MSD,

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information sharing with MSD - borrows

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Note the years given for the IRD (1992) and NZ Customs Service (1996). This ties in perfectly with the letters from WINZ and MSD above.

3. Does WINZ and the Dept of Immigration also share information on WINZ beneficiaries who travel overseas whilst in receipt of a benefit?

According to Borrows; Yes. Though with NZ Customs, not the Immigration Service. My bad.

4. When did that WINZ/Immigration Dept arrangement, in respect to Q3,  begin?

According to Borrows; from 1996 onward.

5. What other government ministeries, departments, SOEs, and other bodies does WINZ share information with?   6. When did those arrangements, in respect in Q5, begin?

Borrows listed the following as data sharing with the MSD; ACC (2005), Corrections Dept (1995), Department of Internal Affairs (2004 onward), Housing NZ (2006), Inland Revenue (1992 onward), NZ Customs Service (1996 onward), and Ministry of Justice (2013)

7. Of the 3,139 illegitimate benefits  found, what was the time period involved with people receiving a benefit and earning income from another source?

How many were within the following periods;

– 1 week

– 2 weeks

– 3 weeks

– 4 weeks

– 2 months

– 3 months

– 6 months

– Over 6 months – under one year

– Over one year

This was probably the most pertinent question, and Borrows point blank refused to answer it, stating;

Your request for information about the amount of time a client was in receipt of a benefit whilst earning income from another source is refused under section 18(f)  of the Official Information Act.This would require the Ministry to undertake a manual search of each of the individual  client’s files to collate the information. As such I am refusing this part of your request as responding to it would require substantial collation or research.”

This is an unbelievable response!

For one thing, it indicates that the Minister has no information as to how long a welfare recipient was earning both a benefit and other income.

Was it one week? Or one year? Two weeks?  Or two decades?

There are many cases of a brief overlap, as the 7 July 2009 letter above shows (where the over-lap was a fortnight before the recipient advised WINZ). There was a gap of  just over a week between the job interview and job offer, and the person’s first induction course.

Borrows simply has no knowledge of how long these over-laps were. If the majority were one or two weeks, this can be put down to human error or a mis-understanding of employment start-dates – not planned fraud.

Worse was to come.

8. How many prosecutions have been undertaken of all nine cohorts listed above?

Borrows replied,

Information about the number of prosecutions undertaken is refused under section 9(2)(f)(iv) of the Official Information Act. This part of the Act allows me to refuse your request as the Ministry is still in the process of deciding whether to prosecute these individuals, therefore this matter is still under active consideration. While I understand that there is a significant public interestin the functions of the Ministry, I believe that in this case the public  interest does not outweigh the necessity to protect the Ministry’s investigation and prosecution process.”

I take it from his response that “as the Ministry is still in the process of deciding whether to prosecute these individuals, therefore this matter is still under active consideration” – that no prosecutions have taken place up until the time of the letter being written.

Not one single person out of the  3,139 cases was prosecuted.

Not. A. One.

So the alleged fraud was either of an insignificant nature (one or two weeks) – or the cases were so flimsy and ill-defined that a Court would have thrown out the charges.

Or they weren’t “fraud” at all.

9. How many have been convicted?

Borrows’ response,

Prosecutions stemming from these cases are still in progress, and I am advised that none have yet been resolved. As such there have been no convictions to date.”

No convictions?

So much media hype surrounding 3,139 cases – and not a single prosecution or conviction.

It seems apparent that this was little more than a propaganda exercise and useful only to beef up National’s ‘tough-on-welfare-abuse” image. Any serious fraud is never countenanced by any government and prosecutions are relentlessly pursued,

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Alleged identity theft for pension

Source

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And lastly, I asked,

10. How many were in actual employment whilst receiving a welfare benefit, as opposed to some other source of income?

Borrows replied,

In every instance of the 3,139 alleged benefit frauds, those in receipt of these were also employed.

Note the Minister’s use of  “alleged”. Without a single court case leading to a single conviction, nothing has been proven. There was no fraud, as such, because no one has been convicted of any such offence.

We have only a  politician’s word that this has happened.

And thus far, Mr Borrows seems to be lacking in any credibility whatsoever.

It is also interesting to note that whilst Borrows knew the answer to Q10 – he had no data on Q7.

If the mainstream media had the time or inclination to delve further behind the press releases, they might uncover the same situation I have; that this has been part of a propaganda exercise by government ministers to boost National’s reputation as being “tough on welfare cheats”.

New Zealand has a dark side to it’s much vaunted “fair go”. We can  be quick to judge; easy led to indulge in prejudice; and punitive to a nasty level.

National’s strategists and spin-doctors are well aware of this nasty side to our collective psyche and play it like a maestro.

We may not force jews to wear the yellow star of David and ship them off to death camps – but when a Tory government re-victimises the poorest and most vulnerable in our society, simply to gain a few polling points, and seemingly gets away with it – then you know that this is a country that is willing to be led into darkness.

And all the while with a complicit media, only too eager to be the government’s unquestioning, obedient, mouthpiece,

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Susan's Editorial Benefit fraudsters stealing from you and me

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Whatever happened to journalists looking behind government utterances?

Or is the new policy Don’t Question Authority?

At the very least, journalists like Susan Wood should have expected payment for her blatant  towing of the National Party-line.  She has shown herself to be a Good Citizen. Obedient. Unquestioning. Loyal.

So when do we start shipping welfare beneficiaries off to work camps?

Would that satisfy that subconscious, punitive urge for New Zealanders?

Or would that finally – finally – be a step too far?

And in the meantime, how many more times will gullible New Zealanders fall for National’s get-tough-on-welfare-fraud propagandising?

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This blogpost was first published on The Daily Blog on 6 December 2013.

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References

OIA letter from Chester Borrows

Scoop media: Information sharing continues to stop fraudsters

Radio NZ: Thousands stopped from getting benefits not entitled to

Dominion Post: House call plan to nab benefit fraudsters

NewstalkZB: Susan’s Editorial: Benefit fraudsters stealing from you and me

NZ Herald: Alleged identity theft for pension

Additional

Gordon Campbell: Ten Myths About Welfare – The politics behind the government’s welfare reform process

TV3: Courts tougher on benefit fraud than tax dodging – study

Previous related blogposts

Benefit fraud? Is Chester Borrows being totally upfront with us?!

A letter to the editor

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What was the point of this?

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treading water

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Two years ago, National awarded $7 million in grants to local businesses. As then-Science and Innovation Minister Wayne Mapp said,

… research science and technology was the way to create jobs, economic growth and a higher living standard for the country.

“To that end, it is vital that high-tech, exporting companies maintain their competitive edge in global markets.”

Of  a total figure of about $50 million, $7 million was awarded to high-tech companies;

Core Technology: $629,400

Open Cloud: $2,394,920

Xero: $4,040,000

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$7m grants for Wellington tech businesses

Acknowledgment: Fairfax Media – $7m grants for Wellington tech businesses

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So far, so good; National assisting small-medium businesses to build and hopefully hire more staff.  What could possibly go wrong, you ask?

Well, this is the National-led government we’re talking about here…

Fast forward to 2013, and on 1 May, Revenue Minister Peter Dunne announced

… the Government’s biggest ever overhaul of a Government IT system – a $1.5b upgrade of the department’s “First mainframe” computer system.

Mr Dunne admitted the system was “fully stretched” and a 10-year project to upgrade the system was required.

He said he wanted to make sure a Novopay-like situation could be prevented in the roll out.

“It’s fair to say the revenue system is at capacity, and the Government recognises the need for a substantive transformation programme to shape Inland Revenue to best serve New Zealand in the future”.

Acknowledgment: NZ Herald – $1.5b upgrade for IRD’s ‘fully stretched’ computer system

Aside from the extraordinary cost of such a project – $1.5 billion!?!? – which even rightwing blogger, David Farrar has questioned (see:  Drury on IRD computer system) – this would be a prime opportunity for local IT businesses to get stuck in and tender for the project.

Companies like,

Core Technology

Open Cloud

Xero

These companies, remember, have been given $7 million of our taxes to grow their businesses.  The IRD project would be ideal to fulfill those expectations of growth.

Except – and remember, this is National we’re talking about – the criteria for tendering excludes most (if not all) local IT companies,

The information technology industry is crying foul over the criteria set by Government departments to work on multi-million dollar contracts.

A lobby group, backed by the Green Party, says the Inland Revenue Department is making requirements too hard for local companies to meet so contracts are going offshore.

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Local firms say the criteria meant they couldn’t bid for the job.

You have to have $400 million worth of assets for example, it makes it very very difficult for New Zealand ICT companies to get over those bars,” Green Party co-leader Russel Norman claims.

Acknowledgment: TVNZ – IRD under fire for hiring international firm

What New Zealand company holds $400 million worth of assets?

Not many, if any, to quote The Scribe.

Unsurprisingly, the criteria was written by  French multinational Capgemini – one of the world’s largest IT consultancy companies.  The same company,  Capgemini, has also been hired to  “advise” on the tender process which is worrying the  IT industry that it  will be cut out.

This, to put it mildly was met with disgust and derision by local New Zealand IT companies such as Xero CEO, Rod Dury, who wrote a scathing op-ed for the NBR on 2 May,

The New Zealand Government has recently agreed to spend $1.5 billion to redo the New Zealand tax system.

To anyone in IT this is an obscene amount of money to spend on any software project.

From the outside it seems like a slow moving train crash reminiscent of earlier Big Bang projects that always blow out if they are ever delivered.

It reeks of global consulting firms winning the business and then rapidly hiring a bunch of grads and putting them up in hotels for years.

It’s just not smart.”

Acknowledgment: NBR – Dear IRD: how to shave $1b from your $1.5b software spendup

Rod Dury points out,

“A $1.5 billion  injection into local service companies, that are world class, would grow an industry. Government spending of this magnitude should see numerous other benefits.

It’s easy to say nothing but the fact is government officials have no idea what’s reasonable. The companies with the budgets to win these projects are the people officials meet.

To a well meaning amateur $1.5 billion seems a massive amount of money for a relatively moderate volume transaction system.”

Acknowledgment: IBID

Far from being a nay-sayer, he then offers four positive, practical, constructive suggestions how the IRD (and National) should proceed on this issue.

This blogger concurs with Mr Dury.

We’ve  had previous disasters with INCIS (American IBM); Novopay (Australian); and problems with imported locomatives (Chinese) – projects  which could, and should,  have been built here in New Zealand, with money going to local workers and firms.

This is not left-wing fantasy, this is fairly obvious common sense. We can do it; we have the skills; the nous; and the determination.

Aside from generating local  jobs and business growth here in New Zealand,  Xero’s Rod Dury sez we can build a new system for IRD for far cheaper than the $1.5 billion mooted by Peter Dunne and others,

But rather than just criticise here’s some practical suggestions I’d offer to to see if we can save $500 million to $1 billion in spend.

Acknowledgment: IBID

Rod Dury did not mince his words,

This just flies in the face of best practice in the way New Zealand companies have been building world-class software really for the last five or 10 years.”

Acknowledgment: TVNZ – IRD upgrade another potential train wreck – expert

So why isn’t National giving local companies the opportunity to bid fairly for the contract?

Why give grants worth millions of tax-dollars to  local companies if this government is not prepared to subsequently support them with contracts?

What was the point of this?

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Addendum

When I contacted Rod Drury on this issue he responded via Twitter, he replied on 4 May;

Rod Drury ‏@roddrury 4 May

@fmacskasy @clarecurranmp the companies that should be doing it are Intergen, Datacom, Simpl, Optimation. Works class local services biz’s

He actually suggests other companies that could be involved – not his own.

This blogpost was first published on The Daily Blog on 4 May 2013.

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Budget 2013: How NOT to deal with Student loan defaulters

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barbed_wire_fence_by_archaeopteryx_stocks1

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1. Prelude

In my parent’s home nation in Eastern Europe, during the era of the Soviet Bloc, the citizens of Poland, East Germany, Hungary, Czechoslovalia, Bulgaria, Yugoslavia, Romania, and Albania were denied the right to travel freely to the West. (Mainly because 90% would not have returned.)

Travel outside of the Eastern bloc was severely curtailed. Those trying to cross borders to the West, without appropriate documentation, if caught, faced lengthy prison sentences.

Such was life under authoritarian regimes that used extreme measures to control their citizens.

In 1989, those regimes fell, and freedom returned to Eastern Europe. People were permitted to travel freely without fear of hindrance or arrest.

2. Welcome to the People’s Republic of New Zealand, Inc.

In 2013, New Zealand’s National government announced plans to adopt similar extreme measures. Powers of hindrance and arrest are to be issued to our Border security. Travel will be curtailed for a few.

During Bill English’s Budget speech today (16 May), the Finance Minister made one of the most extraordinary revelations that I have ever heard from a New Zealand politician;

Introducing the ability to arrest non-compliant borrowers who are about to leave New Zealand

Making it a criminal offence to knowingly default on an overseas-based repayment obligation will allow Inland Revenue to request an arrest warrant to prevent the most non-compliant borrowers from leaving New Zealand. Similar provisions already exist under the Child Support Act. This will be included in a bill later this year.

Acknowledgment:  IRD – Budget 2013 announcements

It is extraordinary because a loan defaulter is not a matter under the Crimes Act. It is what is known as a Civil matter.

If, for example, you, the reader, default on your mortgage, rent, or hire purchase, the Lender does not involve the Police. Instead, they apply to the Courts for a remedy.

The Tenancy Tribunal and Small Claims Court are examples where litigants can take their cases before a Court, and make their claims. Police are not involved. In the Tenancy Tribunal, there aren’t even any lawyers (generally).

For National to intend issuing arrest warrants, for student loan defaulters, takes the matter of a civil contract into the realm of the Crimes Act.

One wonder if  banks, finance companies,  and landlords will eventually apply for similar powers?

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"Open up please, Mrs Jones. Your rent is two weeks in arrears!"

“Open up please, Mrs Jones. Your rent is two weeks in arrears!”

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The worst aspect – indeed, the dumbest aspect – of this new measure is that it appears no one in  National has thought through the consequences of such a harsh,  autocratic policy.

This law – if enacted – will not stop people leaving New Zealand. It will stop people returning to New Zealand.

Because the law involves ex-students with loans  who have moved overseas; who have defaulted on their loan repayments whilst overseas; return to New Zealand (perhaps for a funeral, holiday, or visit family) – and only then are arrested at an airport as they try to board a plane to fly out of the country again.

Under such circumstances; what loan-defaulting New Zealander will bother coming back to this country? Ever?

Well done, National. You have just provided a further reason (if any was really required) for expat Kiwis to remain – expat. In terms of economic policy, this wasn’t an exercise in rationality – it was an exile in perpetuity.

The message that Key and English have sent to every New Zealander, who owes money to the State, is: don’t come home. The police will  be waiting.

So not only have we lost any chance that ex-pat loan defaulters might one day return and pay back their debt – but we’ve lost their expertise and any fortune they might bring back with them.

The sheer lunacy of such an ill-conconceived policy beggars belief.

But then again, maybe not. This was the government that was so cash-strapped last year, that they raided the meagre earnings of paper boys and girls;

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'Paper boy tax' on small earnings stuns Labour

Acknowledgment: NZ Herald – Budget 2012: ‘Paper boy tax’ on small earnings stuns Labour

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This is a mean, desperate government we have, folks.

Make no mistake, they will do whatever it takes to get back into some form of  surplus by new year’s election. Because if they don’t – they are dog tucker  for sure.

Which is why I’m not holding my breath for Bill English’s “Big Announcement” in two weeks regarding the problem of hungry kids, and initiating a food-in-schools programme. Expect a massive disappointment on this matter.

Meanwhile, our Border Security will no longer be focused on searching for contraband, dangerous goods, or potential weapons being carried onboard airport. They will now be Border Guards tasked with keeping New Zealanders from travelling. Or escaping any other way…

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Our New Border Guards in New Zealand

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One wonders who will  next  be barred from travelling to and from New Zealand?

Consider also,  when we take this insane proposal and place it alongside  other laws, and proposed law-changes,

  •  the so-called Terrorism Suppression Act,
  • the Search and Surveillance Act,
  • the Crown Minerals Amendment Act which suppresses protest at sea and threatens protesters with large fines and terms of imprisonment,
  • the IRD sharing sensitive information with other government departments,
  • illegal spying by the GCSB – with no legal consequences for those in authority,
  • and instead,  extension of the surveillance powers of that same GCSB,

– we can see that our country has taken a path that we hoped, and feared, would never happen to us.

Well, it has happened and it is happening.

We are slowly but surely drifting ever closer to a police state.

3. An Open Letter to Labour, The Greens, Mana, and New Zealand First

As a citizen of this country, it is my deepest, sincerest hope that an incoming Labour-Green-Mana(-New Zealand First?)
coalition government will, upon taking office, make an urgent review of the spying powers of our “intelligence community”.

I submit that we have drifted from an open, free society, to one that is highly surveilled; copious data files kept on us;  and where police and  intelligence groups are straying far beyond their lawful mandates.

I also submit the following,

  1. We do not need the so-called “Terrorism Suppression Act” or “Search and Surveillance Act”.  The Police, with their normal powers, are quite adequate to deal with crimes.   They serve no useful purpose and instead give powers to the State which serve only as a prelude to even more Orwellian laws. It is time to take  several, big, steps back. These laws should be repealed forthwith.
  2. The Crown Minerals Amendment Act must be repealed forthwith. It is draconian legislation which serves the interests of corporations and threatens the right of New Zealand citizens to protest activity that is counter to the welfare of our nation and environment. This is a brazen attack of democracy and would be perfectly at home in a Third World dictatorship.
  3. Do not permit the IRD to share information with other government departments. There is no need to create a vast monolithic State apparatus that collects information on us and in the process, invades our privacy.  Allowing the IRD to share information with, say, the Police, will simply serve to drive certain activities further underground.
  4. Any extension of the GCSB’s surveillance powers should be undone and returned to it’s original purpose. (Or even get rid of it altogether. Precisely why are we spying for the Americans anyway?)
  5. We desperately need a more effective, well-resourced, oversight mechanism for the SIS, GCSB, and Police. Our Australian neighbours are more serious in the way they over-see their spy agencies and we need to look to them for guidance. If there is one thing that the current Prime Minister has illustrated with crystal clarity – we can no longer trust one person to hold the responsibility for these agencies. At some time in the future, we could have a worse Prime Minister, with even more incompetant or nefarious intent. We must prepare for that day.

Some might say, “if you have nothing to fear, you won’t mind being watched by the State”. If true, my fellow New Zealanders, we might as well put cameras into every home and workplace in the country. After all, if we have nothing to fear…

I would turn it around and say, “if the State has no cause to believe we are about to rob a bank or sell heroin to schoolkids, then it won’t mind keeping out of our private lives”.

Previous governments (including this current one) have gradually extended the power and surveillance capabilities of the State.

It is time to wind back that Orwellian clock and re-set the values which we used to hold for personal privacy, and allow State intrusion only for real (not imagined) criminal activities.

We don’t need to be monitored. We don’t need files kept on us all.

We are not a nation of 4.4 million criminals.

You don’t need to fear us.

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No more anarchy

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Greed is good?

28 August 2011 54 comments

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As we look back on the last 25 years of neo-liberal “reforms”, including User Pays; the canning of “Labour’s” superannuation savings plan in 1975 (by Muldoon – after being elected into office with his infamous “Dancing Cossacks”  TV ad); and National’s continuing high popularity in the polls, despite their avowed proposal to sell-down 49% of several State assets,  – it seems abundantly clear who has been  pulling the “strings”.

No, it’s not Washington. Nor the Bilderbergers. Nor the UN/New World Order/Illuminati.

The answer is mind-numbingly far more prosaic:  it’s us – the Baby Boomer generation. The 1960s and 1970s rebellious youth  weren’t just an “aberration” – they were a clear signal that the Baby Boomers had arrived; could be inclined to  incredible selfishness (hence the term the “Me Generation”); and we voted individually for personal gain – on a collective basis.

Yep. We have seen the “enemy” – and it’s us; graying; self-centered; resentful of the young (who we’ve well and truly shafted);  and looking back at ourselves in the mirror, wondering where it all went wrong.

The case of  Surgeons Ian Penny and Gary Hooper, who tried to rort the tax system using Trusts  and companies – even though they had graduated BEFORE student loans and fees were implemented in 1992 – is the clearest example ever of our collective unbridled selfishness.

To re-cap;

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A court battle is over for two surgeons who challenged Inland Revenue over claims they tried to avoid tax bills worth tens of thousands of dollars.

The Supreme Court has ruled unanimously against Ian Penny and Gary Hooper, saying they underpaid themselves from their own businesses to avoid the top personal tax rate.

The issue arose after the previous Labour-led Government raised the top personal tax rate to 39%, compared to the company rate which was then 33%.

The orthopaedic surgeons openly paid themselves a lower salary than the market rate, arguing that they had a choice about how they operated their business.

They tried to challenge a Court of Appeal decision that found in favour of Inland Revenue, which said the surgeons had paid themselves salaries too small to be commercially realistic.

It said they were therefore able to avoid paying the top tax rate, while the balance of their businesses’ profits went as dividends to family trusts.

The trusts funded items such as a loan for one surgeon, and a holiday home for the other.

Inland Revenue said using those business structures to create artificially low salaries amounted to tax avoidance, saving each man between $20,000 and $30,000 a year for three years, beginning in 2002.

Supreme Court Justice Blanchard on Wednesday delivered a judgement supporting that argument, ordering Mr Penny and Mr Hooper to pay Inland Revenue $25,000 in court costs.

Mr Hooper told [Radio New Zealand ]Checkpoint the court has created a salary benchmark that is higher than the one countless private practitioners have been using.

He says they have been following Inland Revenue advice and calculating their salaries based on public hospital rates.

An Inland Revenue deputy commissioner welcomed the ruling, telling Checkpoint it clearly states and reaffirms what the department’s commissioner felt was the case all along. Carolyn Tremain says IRD has yet to fully absorb the implications and consequences of the ruling.

PricewaterhouseCoopers John Shewan, who appeared as a witness for the surgeons, said the case is important for individuals and firms. He said tens of millions of dollars may now be claimed by Inland Revenue from cases it still has open on this matter.

Source:  Radio New Zealand

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Specifically,

Surgeons Ian Penny and Gary Hooper set up companies, owned indirectly through trusts, to buy their surgical services and paid themselves artificially low salaries.

After 2000, Hooper’s personal income fell from $650,000 to $120,000 a year. Penny’s dropped from $302,000 to $125,000, and then to $100,000, while the income of their companies grew.

Source:  Dominion Post

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What makes this case of case of tax avoidance stand out is that none of it was ever necessary in the first place.

Dr Ian Penny received his Bachelor of Medicine Bachelor (MB ChB) of Surgery from Otago University in 1981.  He became a Fellow of the Royal Australasian College of Surgeons in 1990.

Dr Gary Hooper received his Bachelor of Medicine Bachelor (MB ChB) of Surgery  from Otago University in 1978 and became a Fellow of the Royal Australasian College of Surgeons in 1985.

In simple terms, they graduated as doctors in the late ’70s and early ’80s. Tertiary education then was still nominally free. Plus,  student allowances were available to most students,

“Up until 1992, nearly every student (86.4 percent) studying at a public tertiary education institution in New Zealand received a living allowance or grant while they studied.

 Prior to the mid 1970s, student support was based on a system of bursaries and scholarships. In 1976, a new system of government-funded tertiary bursaries was introduced. This included a study or living costs grant that was available to most students.”

Source: NZUSA

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Student fees and student loans came into effect in 1992, during the Bolger-led National Government, when Ruth Richardson was Minister of Finance (and coincidentally the same year that Shortland Street came on air).

In simpler terms, Dr Penny and Dr Hooper enjoyed the benefit of near-free tertiary education before fees were raised in 1992. They had no student loans to repay, as  medical students currently do, and may well have benefitted from receiving a Student Allowance.

Contrast their free tuition with that of medical students, in the 21st Century:  “on average medical students will graduate with around $80,000 of debt and nearly 90% will have a student loan“, according to the  New Zealand Medical Students’ Association in April, last year.

So with a free education; in receipt of student allowances; and no student loan; Dr’s Penny and Hooper were, as Revenue Minister Peter Dunne stated;

… the important thing about this decision is to bear in mind the scale of what was happening. This wasn’t people minimising their income because they were reinvesting in their business. This was people minimising their income because they were actually minimising their tax liability but still enjoying the full benefits of the income they were in reality earning.

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So not only did these gentlemen benefit from a free education – but they were now minimising their income because they were actually minimising their tax liability [whilst] still enjoying the full benefits of the income they were in reality earning.”

God, you’ve no idea how sick this incident has  made me.  Let me explain why.

Prior to the introduction of “Rogernomics” in 1984 (and National’s addition from 1990 onward),  education in this country had been free (or as close as possible to free) to nearly all New Zealanders. Education whether at Primary School or University was funded by the previous generation; our Mums & Dads; Grandmothers & Grand dads. The idea was terribly simple; education was a right, and not to be determined by ability to pay.

In turn, as we graduated from schools and Universities, we – my generation, the “Baby Boomers” – were to fund our children through their education, through our taxes.

Except, it did not quite happen that way.

In 1984 we unknowingly elected a Labour Government that had been taken over by a secret cabal of neo-liberals, conservatives, and proponants of the Free Market. A raft of  radical changes were implemented throughout the economy and impacting directly on society.

Despite public objection; mass protests; and even vocal opposition from within the Government by some Labour MPs such as Jim Anderton, Labour was re-elected in 1987.  Curiously, they had increased their majority from 55 to 57.

During Labour’s two terms (1984 to 1990), they cut taxes twice, and implemented a new tax in 1986, called GST.

National followed, implementing User Pays in tertiary education whilst  cutting taxes in 1996 and 1998.

In 2008, despite evidence that the world was plunging into a global recession, John Key promised that National would again cut taxes. As New Zealand went into deep recession; unemployment rose; businesses closed down – National cut taxes in April 2009 and October last year.

Most of the public, it seems, will swallow User Pays if they stand to reap a benefit from tax cuts.

The social contract therefore, was well and truly broken between our (the Baby Boomers) generation, and our parents/grandparents.

We had taken their gift – that of free education which they had paid for – but we decided not to pass it on to our children. Instead, we accepted one tax cut after another. And social services were either cut or User Pays applied, to pay for those tax cuts.

To my generation of fellow Baby Boomers, I say this; we’ve well and truly  shafted our own children. We denied them the very same opportunities of a free education that our parents had bequeathed to us. Instead, we voted ourselves seven  hefty tax-cuts; instigated User Pays; and left our children saddled with $13.9 billion in student debt.

Is it any wonder that our children our leaving New Zealand in greater and greater numbers? They’re not just emigrating to seek better paying jobs – they’re sticking it to us for our unmitigated greed. Whether consciously or sub-consciously, our children realise what our generation has wrought, and by god, they are not happy.

No doubt there are some folk who will cheer on Drs Penny and  Hooper. These people  feel that paying taxes is “unfair” and that it is unreasonable for the State to take the money that they have worked hard for.

Perhaps I should take a moment to remind these people what their taxes were, and in many cases  are still, used for…

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Inter-island Ferry, Aramoana

Dams and other power generation projects

Our first television broadcast system

Roading and highways

Hospitals

University education

Dental care for our Children

Our Police and justice system

Railways and other public transport

Schools

State Housing

Infrastructure such as power transmission lines

Social welfare and superannuation

Bridges

Postal and telecommunications systems

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Many of these assets no longer reside in public ownership – but they were originally built and maintained by previous generations of taxpayers; our parents, grandparents, et al.

As the Baby Boomer generation, what have we built and left our children?

$13.9 billion in student debt?

No wonder they are departing our shores…

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But I leave the last word to this expat Kiwi, now living in Australia,

A Victorian-based Kiwi with a student loan debt, who did not want to be named because he did not want to be found by the Government, said he did not intend to pay back any of his student loan.

The 37-year-old’s loan was about $18,000 when he left New Zealand in 1997. He expected it was now in the order of $50,000. The man was not worried about being caught as the Government did not have his details and he did not want to return to New Zealand.

“I would never live there anyway, I feel just like my whole generation were basically sold down the river by the government. I don’t feel connected at all, I don’t even care if the All Blacks win.

“I just realised it was futile living [in New Zealand] trying to pay student loans and not having any life, so I left. My missus had a student loan and she had quite a good degree and she had paid 99c off the principal of her loan after working three years.”

Source: Dominion Post

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Further Reading

Greed of boomers led us to a total bust

New Zealand’s wealth gap widens

Over-55s own most of NZ’s wealth

 

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