Archive

Posts Tagged ‘tax avoidance’

Look what the nice man offered me!

25 February 2019 2 comments

.

 

.

From an email recently received;

.

from: Edwin Gichana <edwin@valsenfiduciaries.com>
to: “fmacskasy@gmail.com” <fmacskasy@gmail.com>
cc: David Morema <david@valsenfiduciaries.com>
date: 9 Jan 2019, 06:53
subject: Seychelles International Trust with Bank Account
mailed-by: valsenfiduciaries.com
Signed by: valsenfiduciaries.onmicrosoft.com

.

Dear Esteemed professional,

We trust this email finds you well.

We are writing to you to inform you of the availability of a versatile wealth management structure in Seychelles. “The Seychelles International Trust”

We set up and administer Seychelles trusts at very competitive rates while providing you or your clients a highly personalized service.

Below are some of the landmark features of a Seychelles International Trust

a) Zero tax on Trusts

b) Pocket friendly prices – some of the lowest prices across all jurisdictions

c) Speedy formation

d) Light annual compliance

e) Re-domiciliation is permitted

f) No access to public records

g) It comes with a bank account to support operations

Popular Uses of a Seychelles International Trust:

ü Used for asset protection, tax planning and as a family and succession planning vehicle

ü Used for collective investments (Mutual Fund) structures

ü Can be used for the benefit of employees (ESOP)

ü Can do commercial transactions through Seychelles IBC

For more information Seychelles Trusts and other Estate Planning solutions please visit our website or contact us on the details below.

We look forward to hearing from you.

.

 

.

Firstly, it’s deeply and amusingly ironic that a dodgy outfit sending out random, spam solicitations to unknown people expects confidentiality and “legal privilege”.  It’s a miracle they didn’t email an official at Interpol, FBI, or other law enforcement agency.

Secondly, me being a polite bloke, I emailed back, declining to participate, and offering certain observations;

.

from: Frank Macskasy <fmacskasy@gmail.com>
to: Edwin Gichana <edwin@valsenfiduciaries.com>
date: 9 Jan 2019, 14:43
subject: Re: Seychelles International Trust with Bank Account

.

Kia ora Edwin,

Thank you very much for taking the time to email me regarding your offer of a tax-dodging Trust in the Seychelles.

No doubt you have many wealthy clients who partake of your services, thereby avoiding/escaping paying taxes in their own country.

You may wish to ponder that the avoidance of paying tax is one of the leading causes of sovereign governments unable to provide basic health, education, housing, and transport services for their people. This creates poverty and a rising sense of hopelessness.

It also provides fuel for extremist right-wing and ultra-religious organisations as the powerless; the poor; the disaffected seek answers and solutions from outside the mainstream.

So the next time there is a riot or civil war or some other social upheaval – just ask yourself what part you and your colleagues played in the struggle between the Haves and the Have Nots. As with drug trafficking, cross-borders sex-slave trade, child-porn websites, and international arms industry, your profession is not one that I would encourage my own children to engage in.

I have dozens of dollars and will be investing them in ethical services and paying my fair share of tax on them.

I sincerely hope you find an honest job soon. (We have vacancies for fruit-picking here in New Zealand.)

Regards,
-Frank Macskasy

.

Ok,  taking-the-piss out of tax-dodging companies, touting for business via spam-mail, is one thing.

Foreign companies touting for business that would erode our own country’s tax base by shifting company and personal wealth to secret tax havens – is another. In some ways, it should be considered a hostile economic act.

New Zealand has diplomatic as well as commercial dealings with the Republic of Seychelles since 1992. We also – apparently – have  something called a “Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS” (Base Erosion and Profit Shifting) – which supposedly includes Seychelles.

The Multilateral Convention replaced a Tax Information Exchange Agreements (TIEA) that was being negotiated by MFAT (Ministry of Foreign Affairs and Trade) in 2010.

According to MFAT;

Double Tax Agreements (DTAs) reduce tax impediments to cross-border trade and investment and assist in the prevention of tax avoidance and tax evasion. Tax Information Exchange Agreements (TIEAs) are a limited form of DTA that are concerned only with assisting in the prevention of tax avoidance and tax evasion.

Those negotiations were never concluded, and the Multilateral Convention came into effect instead.

Organised through the OECD, the “Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS” stated in it’s opening paragraph;

The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the Convention) is one of the outcomes of the OECD/G20 Project to tackle Base Erosion and Profit Shifting (the “BEPS Project”) i.e. tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid.

In effect, the OECD Multilateral Convention was designed to close down (or restrict greatly) the activities of tax havens, as revealed in the millions of leaked documents from Panamanian law firm, and corporate tax-dodging service provider, Mossack Fonseca in 2015 (aka, the “Panama Papers“).  Both New Zealand and Seychelles were revealed to be complicit in international tax evasion practices.

Seychelles signed the (OECD) Multilateral Convention on 7 June 2017;

.

.

However, as far as the author can ascertain, Seychelles has opted-out or reduced it’s obligations to the OECD Multilateral Convention through a raft of exclusionary clauses in it’s document, “Status of List of Reservations and Notifications at the Time of Signature“.

For example, amongst the many provisions Seychelles has exempted itself is the salient raison d’être for the very existence of the OECD Multilateral Convention – “Article 10 – Anti-abuse Rule for Permanent Establishments Situated in Third Jurisdictions“. This paragraph refers to income earned in one jurisdiction (Country “A”)  being treated as non-taxable by a second jurisdiction (Country “B”) under a “Covered Tax Agreement” (a previous agreement between countries which allowed profits not to be “second taxed” – or taxed at all).

The OECD Multilateral Convention would have prevented an Income Earner (eg, a corporation) from using Country B, purely for low or nil taxation purposes, and insisted that said Income Earner pay tax in Country A;

“In such a case, any income to which the provisions of this paragraph apply shall remain taxable according to the domestic law of the other Contracting Jurisdiction, notwithstanding any other provisions of the Covered Tax Agreement.”

Seychelles declined to bound by that simple statement.

The language of the Convention and the Seychelles document are framed in legalese, and are difficult for the lay person to interpret.  But the upshot is that Seychelles remains a tax haven – despite being a supposed signatory to the OECD Multilateral Convention.

Indeed, Seychelles’ status as a tax haven is currently touted by several firms specialising in tax dodging activities:-

From Offshore Protection.com;

Seychelles diligently encourages local and foreign investment; thus it offers:

  • Low government fees
  • Tax-resident low-tax and non-resident tax free structures
  • A growing matrix of tax treaties used for investment into other countries
  • An international trade zone

[…]

If you are looking for a tax haven with a solid secrecy policy, attractive offshore business laws, Seychelles may be the perfect choice for your next offshore company formation.

From Taxhavens.biz;

Seychelles as a tax haven is one of the most desired tax havens available to date. The government of Seychelles has invested a lot in the country in order to make it the tax haven that it is today. Seychelles as a tax haven has seen the modification of legislation which led to a modern but very strict offshore sector in the islands. The laws which govern the offshore tax haven of Seychelles provide asset protection, reduction of tax liabilities, privacy and confidentiality for individuals and corporations.

Disturbingly, Taxhavens.biz also promotes our own country on it’s website;

Although New Zealand is said not to be a tax haven there are certain features which make people associate the jurisdiction with tax havens. The fact that the country has offshore services which includes offshore business entities and offshore trust formation tend to qualify New Zealand as a tax haven.

No wonder New Zealand featured in the Panama Papers with links to tax dodging. Economist Shamubeel Eaqub condemned our secrective Trust laws as “firmly in a moral grey zone” and that “we have a moral duty to ensure our rules and regulations do not facilitate dishonest practices by others”.

From Fidelity Corporate Services Ltd;

Seychelles International Business Company (IBC)

Seychelles IBC – an International Business Company – is the most popular and versatile type of offshore corporation available in Seychelles. Similar to other classic offshore companies, Seychelles IBC is designed to engage in international business. Being an IBC, it is subject to minimum red-tape. While being obliged to keep internal records and registries in good order, a Seychelles IBC does not nave to submit any financial reports to public file. There is also no mandatory audit requirement.

[…]

Zero tax

A Seychelles IBC, by the definition of the law, is not subject to any tax or duty on income or profits. Article 361.(1) of the Seychelles International Business Companies Act, 2016, states as follows:

361.(1) A company, including all the income and profits of a company, is exempt from the Business Tax Act.

In a similar fashion, a Seychelles IBC is also also exempt from any stamp duties on all transactions relating to its business, in particular on any transfers of property to or by the company, and on any transactions in respect of the shares, debt obligations or other securities of the IBC.

Essentially, a Seychelles IBC is a completely tax-free offshore corporation, insofar as it complies with a few simple rules of operation. The main requirement is that a Seychelles IBC should not pursue business within the territory of the Seychelles (except, of course, it may enter into business with any other Seychelles IBC`s). The law provides that all exemptions for a Seychelles IBC shall remain in force for a period of twenty years from the date of incorporation of the IBC.

These provisions are enshrined into PART XXI of the Seychelles IBC Act (Articles 361, 362 and 363).

To strengthen secrecy, “virtual offices” are offered to companies utilising Seychelles as a tax haven;

In standard configuration, a Seychelles IBC would only have a Registered Address and Registered Agent in Seychelles, thus meeting the mandatory minimum domestic presence requirements. However, the usage of the Registered Address for routine business purposes is usually very limited. An additional functionality can be provided to an IBC by choosing some of the optional virtual office services.

A virtual office facility may include mail and fax forwarding service, shared or dedicated telephone and fax numbers, telephone call handling service, document preparation and re-mailing service. Using one or more of these optional services will contribute a more substantial “bricks and mortar” appearance for Your Seychelles IBC.

“Virtual offices” are a hallmark of tax-havens, giving the appearance of a company or individual being based in a jurisdiction, but often it is little more than “mail and fax forwarding service, shared or dedicated telephone and fax numbers, telephone call handling service, document preparation and re-mailing service” to create the illusion of a “substantial “bricks and mortar” appearance for Your Seychelles IBC”.

And if the above weren’t enough, Seychelles compounds secrecy using “International Trusts”, which can further obscure companies, individuals, and their income;

Seychelles International Trusts are commonly used in conjunction with the Seychelles International Business Companies. By using a trust to hold shares in the IBC, an additional layer of legal protection is provided for the owner. Moreover, this can enable beneficiaries to defer or avoid any possible tax on the profits of the IBC for an indefinite period.

One promoter of laissez faire tax-free jurisdictions, “Nomad Capitalist” has gone so far as to warn of the extreme nature of Seychelles as a tax haven;

I’m all for the creation of new tax havens. It’s refreshing to see governments coming to the realization that their bread is best buttered by business being conducted in their country…

[…]

…I’ve seen a number of small business owners set up shop in the Seychelles, often with disastrous results. Just recently, I advised an internet marketer get almost $100,000 from a frozen merchant account because the company refused to pay offshore companies in shady places like the Seychelles.

[…]

Any jurisdiction that doesn’t require you to keep books, maintain records, undergo any type of audit, pay any type of tax, or report your activities in any way is either on everyone’s blacklist or about to be on it. Seychelles falls into that category, which is why I get quite a few emails each year from people who have a mess to clean up there.

When even a free-marketeer, low-tax capitalist looks askance at a tax haven like Seychelles, it should ring alarm bells.

Seychelles has not taken it’s obligations seriously under the OECD “Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS”.

Seychelles continues to operate internationally as a Privateer-Pirate, seeking to loot other countries of their tax revenue (ie, “Base Erosion and Profit Shifting”).

Seychelles tax-dodging firms are touting for business in countries like ours.

So why do we still maintain diplomatic as well as commercial ties with Seychelles? What possible gain do we get from ties to another country – albeit a fellow Commonwealth member – that is practically waging covert economic war against our our tax base?

I put that question to Finance Minister, Grant Robertson;

.

from: Frank Macskasy <fmacskasy@gmail.com>
to: Grant Robertson <g.robertson@ministers.govt.nz>
date: 12 Jan 2019
subject: Tax havens

.

Kia ora Mr Robertson,

Would you be able to comment on the following story regarding Seychelles’ ongoing activites as a tax haven (see [above] ).

A recent email to me touted for business, offering to set up a tax-dodging trust in the Seychelles. Naturally, I declined the offer.

However, that raises serious questions why we continue to have links with Seychelles when they remain a tax haven and are not fulfilling international commitments under the OECD’s “Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS”.

Specifically, why do we continue to have diplomatic links with a country that actively undermines our tax base by offering it’s services to New Zealand citizens as a tax haven?

What benefit do we gain by continuing diplomatic and commercial links with Seychelles?

Will your Coalition Government undertake specific measures to combat Seychelles’ ongoing tax haven activities, especially as they relate to our country?

Will your government lodge a protest with the Seychelles’ government for their country’s tax-haven companies approaching New Zealand citizens to engage in tax dodging activities?

I look forward to your response at your earliest convenience.

.

Regards,
-Frank Macskasy

.

If there is no possible benefit to maintaining contact with Seychelles, and if that nation continues to actively allow it’s citizens to undermine our tax-base, then we should cut ties immediately. A country that threatens our economic activity is not a friend – it is a hostile force.

The letter to Grant Robertson was forwarded to Minister of Revenue, Stuart Nash. Five weeks later, Minister Nash responded.

He began by stating;

The OECD, and its monitoring agency the Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum), are working to implement a global standard for transparency and exchange of tax information. I can assure you that New Zealand continues to be a strong voice in what has become a significant international effort to ensure all Global Forum member jurisdictions comply with these standards.

In 2009, the Global Forum was commissioned to undertake comprehensive peer reviews and other monitoring, to assess compliance with the new international standards. The G20 stepped in after the global financial crisis to asist the OECD and establish oversight. The Global Forum now reports directly to the G20, which is positioned to apply sanctions if necessary to ensure compliance. This development has resulted in a significant change in international attitudes, with jurisdictions typically now making stringent efforts to address identified deficiencies to avoid being treated as non-compliant.

Note that Minister Nash claims there has been “a significant change in international attitudes“.

It is unclear how “significant” that “change” has been when – as pointed out above – Seychelles’ law specifically allows for any International Business Company  to “not [be] subject to any tax or duty on income or profits” and furthermore is clear in that IBCs are “a completely tax-free offshore corporation, insofar as it complies with a few simple rules of operation”.

Furthermore, Minister Nash then claimed;

The breakdown of secrecy has marked the end of tax havens, given that the key feature protecting tax havens was secrecy. Schemes will no doubt continue to be developed and promoted with the intention of facilitating tax avoidance and evasion, but in the current international environment these will become more difficult, costly and risky for the taxpayers to use.

Minister Nash’s insistence that there has been a “breakdown of secrecy” which has “marked the end of tax havens” appears to be premature. These are not just random “schemes” being promoted. They are carefully planned business structures supported by Seychelles’ law.  The legal use of “virtual offices” under Seychelles’ law does not “breakdown” secrecy – it facilitates it.

Whatever sanctions might apply from the OECD or G20 has not deterred Seychelles officially promoting itself as a tax haven.

The point I made above remains unanswered: Why do we still maintain diplomatic as well as commercial ties with Seychelles – a country that is practically waging covert economic war against our our tax base?

The government appears pre-occupied with other matters. Like China.

Postscript

Seychelles has a listing on both Wikipedia and Encyclopaedia Britannica. Curiously, neither make any reference to Seychelles’ notorious reputation as a tax haven. If any such references have ever been made on those entries, they have been ‘scrubbed’ clean.

.

.

.

References

Seychelles News Agency: Blue economy, climate change top the agenda between Seychelles, New Zealand.

IRD: Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (the MLI)

IRD: Tax treaties – recent changes

MFAT: Double Tax Agreements

OECD: Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS

Wikipedia: Panama Papers

Wikipedia: Panama Papers – New Zealand

Wikipedia: Wikipedia: Panama Papers – Seychelles

OECD: Signatories and Parties to the Multilateral Convention to Implement Tax Treaty related measures to prevent Base Erosion and Profit Shifting

OECD: BEPS – MLI Position – Status of List of Reservations and Notifications at the Time of Signature

Offshore-Protection.com: Seychelles Offshore

Tax Havens: Seychelles

Tax Havens: New Zealand

Fairfax media: Panama Papers – More New Zealand links to come

Fairfax media: Shamubeel Eaqub – Panama Papers show NZ is complicit in criminal behaviour

Fidelity Corporate Services: Seychelles International Business Company (IBC)

Fidelity Corporate Services: Virtual Office Facility Service Description And General Conditions

Fidelity Corporate Services: Seychelles International Trusts

Nomad Capitalist: Four offshore company jurisdictions to avoid in 2018

Wikipedia: Seychelles

Encyclopaedia Britannica: Seychelles

Additional

NZ Herald: IRD rubbishes Oxfam claims of tax evasion by big drug companies

Business Insider: How the super-wealthy hide billions using tax havens and shell companies

The Guardian: We’re losing $240bn a year to tax avoidance. Who really ends up paying?

The Guardian: Tax havens shielding companies responsible for deforestation and overfishing

TV1 News: Panama Papers investigation – ‘NZ absolutely, conclusively is a tax haven’

International Consortium of Investigative Journalists: The Revolution Will Be Digitized

Other blogs

The Standard: Why was John Key singled out by Panama Papers hacker?

Previous related blogposts

Panama Papers: Matthew Hooton’s Alternate Universes on Twitter and Radio NZ

Dodgy tax havens and even dodgier Peter Dunne’s memory

.

.

.

.

This blogpost was first published on The Daily Blog on 20 February 2019.

.

.

= fs =

Advertisements

That was Then, This is Now #28 – John Key on transparency

22 April 2016 4 comments

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

.

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

.

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.”

.

IRD - capital gains tax - investor - speculator

Source

.

IRD - new zealand does not have a capital gains tax

Source

.

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.

.

IRD - crackdown on cashies jobs

.

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;

.

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

.

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;

.

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.

.

“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.

 

.

.

= fs =

The more things change…

27 August 2012 4 comments

.

From 1999, the final year of  the Shipley-led National government…

.

Source: Otago Daily Times

.

To 2012 – some thirteen years later – and now led by a smiling, waving shark from  the commercial sector that kindly gave us the Global Financial Crisis and fifteen million unemployed, worldwide,

.

Full story

.

Some things that we can always rely on, when National is elected into power; poverty will worsen; unemployment remains high;  taxes will be cut for the rich, and welfare beneficiaries – the victims of National’s policies – will cop the blame.

Eventually,  the realities of National’s mis-management filters through to the television-distracted middle classes and a mixture of guilt and fear prompts them to switch their votes from the Tories to Labour/Greens/NZ First.

Thus it was in the 1990s – and thus it will be in 2014 (if not earlier).

In the meantime, while it takes umpteen bad news-stories to awaken the TV-addled brains of  baby-boomers, we continue to waste lives and the locked-in potential of people trapped in poverty, unemployment, and a stagnant economy. Child poverty remains New Zealand’s dirty little secret, to the rest of the world.

For National and their rabid ACT supporters, the fault lies elsewhere,

See: Poor better off than before: Kerr

See: Where is welfare policy heading : Muriel Newman

The Right is very ‘big’ on personal responsibility. Except when it comes to failed Right Wing policies. Then it’s someone elses’ fault.

Meanwhile, the real bludgers in our society continue to live their lives, enjoying the fruits of a developed nation, but not paying their fair share of taxes,

.

Full story

.

One of the constant refrains of the neo-liberal establishment and sycophants for the rich & powerful is that New Zealand society cannot afford things like decent housing and school meals for our children.

Of course not.

When the rich are not paying their fair share, they are denying society of the means to address poverty-related issues.  At the same time, they enjoy living in a society built up with the taxes paid by others.

That’s bludging.

See previous blogpost:  Greed is good?

In the meantime, our society income/wealth gap widens and we move further and further away from any notion of egalitariansism we once had.

If  that’s the sort of society New Zealanders want, then let’s be 100% up-front and honest about it. Let’s prepare ourselves for outbreaks of disease; increased crime; drugs; beggars in the streets; and eventual outbreaks of mass violence.

See: England riots: was poverty a factor?

I doubt, though, that Middle New Zealand could stomach an overtly class/wealth-stratified society – especially if poverty becomes so entrenched that it becomes more visible and inescapable. We prefer our poor to be out-of-sight and out-of-mind, so we can focus on who is going to win “The Block” or “The Voice” or “The Whateverthefucktelevisionisdishinguptoustotakeourmindsofreality“.

As long as Middle New Zealand is prepared to accept such a bleak future, then the rest of us can plan and prepare accordingly.

.

.

Or, we can turn our backs on that vision, and instead look elsewhere for inspiration.

The Scandinavians and French may be a good start.

Or are we, as a nation, so gullible and thick that we keep going around in circles, decade after decade?

.

*

.

Additional

Baby boomers clogging the job market

.

.

= fs =

Greed is good?

28 August 2011 54 comments

.

.

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;

.

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

.

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

.

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

.

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.

.

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…

.

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

.

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…

.

.

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

***

.

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

 

.

.

.

.