Income tax

How many Tax Commissars and Stasi operatives will Labour need?

Labour's new tax commissars line up outside IRD's Stasi HQ

Labour’s new tax commissars line up outside IRD’s Stasi HQ

Labour’s newest great idea is to establish a Tax Stasi, filled with Tax Commissars who will be “embedded” in businesses that Labour thinks are bastards.

They will be observing what is going on and reporting back to the Tax Stasi Gruppenfuhrer

This is an outrage…you can’t tell me that once the Tax Stasi have finished doing over multi-nationals that Labour won’t suddenly decide to implement more snitches and stasi agents and lower the threshold and rules down to businesses with say $30 million turnover.

What is more of an outrage is labour have exempted banks from the snoopy activities of having Tax Stasi agents roaming the corridors looking for evasion.

If National had done something like that Labour would be accusing them of cosying up to bankers, and corporate cronyism…like they do now over insurance companies?

You do have to wonder though if one of labour’s aor David Cunliffe’s major secret donors is bank or someone associated with banks.

There are serious questions though…surely if they are targeting tax dodgers and rorters then the unions should have Tax Commissars assigned to them, in particular Unite Union, with their history of non-compliance. Or will Labour except unions from having Tax Stasi Agents sitting in their offices.

In other matters you can tell they don’t know what to do about almost everything because they have retained their promise for us to trust them, they know what they are doing, look we will appoint an Expert Panel.

Expert Panel : An Expert Panel will be established to deal with issues that are technical in nature and involve areas where a high degree of specialised knowledge is required before a final decision can be reached.

This policy will raise an additional $25 million in its first year, growing in outyears to reach $1 billion a year by 2020/21.

Read more »

Rodney Hide demolishes Russel Norman and his Carbon Tax

Rodney Hide tears apart Russel Norman and his unwanted Carbon Tax.

Financial whiz Dr Russel Norman is promising a new tax, one that will make us rich. His CO2 emissions tax will make “New Zealand households … several hundred dollars better off every year.”

Cool. A tax to make us rich. I don’t know why other political parties haven’t thought of it. Their old-fashioned taxes only make us poor. They, too, should be doing a Russel-Norman.

I also don’t know why Dr Norman isn’t doubling his tax. Why be stingy? Doubling it would make us thousands of dollars better-off. If he quadrupled it, we could all retire.

But maybe that’s his plan. He says his tax will “initially” be set at $25 a tonne.

Politicians normally deliver a new tax promising it won’t go up. But not Dr Norman. His only promise is for the initial rate. He clearly has a higher rate in mind.

Good. The higher he cranks it, the richer we get.

Fascinating isn’t it. In the old days people who made promises like Russel Norman were called snake oil salesmen.

I don’t profess to understand how his tax works. Somehow he taxes us on our CO2 emissions but then gives us back the money through tax cuts. I sort of get that bit.

But I am struggling to see how he gives back more than he takes. That’s what he promises. There’s something about the Russel-Norman that multiplies the money as it passes through government.

It could be that taxing CO2 is special or that Russel Norman himself is special. Certainly, no other tax returns more than it taxes. But the Russel-Norman does.

All other taxes also distort prices leaving us making poorer decisions than otherwise.

Income taxes discourage investment and employment. Capital gains taxes discourage trade, investment and entrepreneurship. And so on.

The resulting cost is what is known as the deadweight cost.

But it seems there’s no deadweight with a Russel-Norman. Sure, it changes our behaviour. That’s its point. It’s to make us give up the V8 in favour of the bike. And to plant trees where we once grazed cows. Read more »

ANZ Bank mocks “Chicken Little” style commentary

The ANZ Bank has made mention in their NZ Market Focus newsletter of 22 April (PDF) that they are not impressed with the “Chicken Little” style commentary over housing.

The “bubble” is not about to burst, and we don’t find “Chicken Little” style commentary useful. That said, New Zealand is facing challenges, as we have highlighted many times before, and with euphoria sky high according to both business and consumer confidence surveys, it’s perhaps timely to remind readers of that. New Zealand is navigating a potent combination of legacy issues from the last business cycle (a weak balance sheet and high debt levels) and opportunity (high commodity prices and growing exposure to Asia) – while addressing a fairly urgent and demanding to-do list in terms of housing shortages and a city rebuild along the way. It’s an outlook fraught with tensions and frictions, and a bun-fight for resources. Net immigration is set to touch a decade high.

[...]

The so-called “bubble” is not about to burst. That’s our opening salvo in response to headlines over the weekend about New Zealand facing an economic disaster. Throw together rising interest rates, overvalued property prices, large household leverage, and the high New Zealand dollar and you have the so-called recipe for a crisis. If that’s the case, then major parts of the world are pretty well cooked. Somehow government debt made it on the list of 12 reasons as to why the bubble will burst – somewhat surprising given that New Zealand’s government debt is in the lower quartile across the OECD. For that matter the article also claims New Zealand is not an agriculture-based economy (“nothing could be further from the truth”).

If you strip out all the positives, the outlook will be negative. There is a reason why interest rates are moving up; the economy is moving forward. If New Zealand is going to have problems in terms of rising interest rates biting into leverage, the world should be very afraid: a host of other countries have interest rates at or near zero and government debt through the stratosphere! A 40-year peak in the terms of trade means the NZD should be high, though we’d still put it in overvalued territory. New Zealand has had an income boom that the article ignores. Yes, New Zealand has some clear issues in the housing arena; they won’t be sorted overnight but at least we’re seeing some action on the supply side. LVR restrictions were bought in precisely to curtail some of those systemic risks bubble trouble can lead to, and the RBNZ has other tools available as well. The OCR will be lifted a second time this week.

Nonetheless some clear challenges cannot be ignored, and it’s timely to remind readers that the NZ economy is going through a material transition – probably one of the most significant in fifty years. We’re moving from legacy issues to opportunity, amidst the demands of rebuilding our second-largest city, housing shortages in our largest city, and an overvalued currency. There will be bumps in the road. Read more »

Map of the day

Tax Time

 

This map indicates the time, in hours per year, it takes to prepare, file, and pay (or withhold) three major types of taxes: the corporate income tax, the value added or sales tax, and labor taxes, including payroll taxes and social security contributions.

A million here, a million there, before you know it, you’re talking real money

UPDATE:  This article has been subject to a complaint.  Please refer to the end for a correction.

Ben Heather is all over the place with this article.  Not sure if he had an off day or he doesn’t understand what he’s on about.

Headline: Millionaire number grows since loophole closed

More New Zealanders are earning millions, but the culprit may be a crackdown on tax dodgers rather than newfound wealth.

Latest figures show 830 Kiwis declared more than $1 million in income in the 2012 financial year, paying $510m in tax.

The number of self-confessed millionaires has been trending upwards since at least 2003, with the exception of a sharp drop in 2011, attributed to a tweak in tax rates.

In Wellington alone, there were 140 millionaires, nearly triple the number recorded in 2003.

Auckland had the most, with 430, and had experienced a steep rise over the past decade.

The figures, released under the Official Information Act, came amid increased concerns over inequality. Recent reports have highlighted growing child poverty, income equality and rising demand at food banks.

It’s all on here.  Where are we going with this?

  • People who declared an income in excess of $1M are millionaires
  • People who have assets exceeding $1M are millionaires (inferred)
  • Government tax reform is forcing more $1M income earners to fess up
  • Major cities are the cause (or result) of millionaires (unsure if income or assets)
  • This is the final nail in the coffin over income inequality

Talking about flailing about wildly.   Read more »

APN are corporate tax hypocrites, will Labour stop feeding them stories now?

APN/The Herald have an article covering that Apple NZ paid 0.4% tax on TURNOVER of $541 million – a story pushed by Labour and David Cunliffe.

Apple’s New Zealand division made sales of $571 million last year but paid only 0.4 per cent of that in tax.

Labour’s Revenue spokesman David Cunliffe said that’s akin to paying nothing at all, and letting a corporation get off “scott free” is something New Zealand taxpayers shouldn’t have to stomach.

Apple’s New Zealand sales topped the half billion dollar mark in 2012 after rising to $414 million in 2011, according to its financial results for the 12 months ended September 29. Apple is the world’s biggest tech company and makes iPads and iPhones.

Its local unit recorded a tax paid profit of $5.5 million in the year, down 40 per cent from its 2011 earnings. Income tax fell to $2.5 million, amounting to 31 per cent of pretax earnings, from $5.1 million a year earlier.

Nowhere in the story does it state want percentage of profit was paid in tax. The story seems to be pushing emotion while being light on facts and data.

But since APN think tax should be paid on turnover I thought I’d check what they paid. After all if you are going to point the finger at other corporates you had better be a corporate citizen than they are.  Read more »

Removing income tax entirely, can it be done?

English: Governor Bobby Jindal at the Republic...

Governor Bobby Jindal at the Republican Leadership Conference in New Orleans, Louisiana. (Photo credit: Wikipedia)

Could it be possible…no income taxes at all? Bobby Jindal thinks so:

Governor Jindal has unveiled a specific proposal.

The plan will eliminate two major tax types: personal income tax and corporate income and franchise tax. Eliminating income taxes in a revenue-neutral manner and improving sales tax administration will dramatically simplify Louisiana’s tax system and reduce administrative problems for families and small businesses. The effective start date of the program is January 1, 2014. …The plan will ensure revenue neutrality by…[b]roadening the state sales tax base and raising the state rate to 5.88%.

This is a superb plan.

Of all the possible ways for a state to generate revenue, the income tax is the most destructive.

That’s why researchers consistently have found that states without this punitive levy grow faster and create more jobs.

It’s also worth noting that jurisdictions such as MonacoBermuda, and the Cayman Islands manage to be very prosperous in the absence of an income tax, though the incredible wealth of these places is partly a function of bad policy elsewhere, so the comparison isn’t perfect.

Anyhow, Gov. Jindal expands on this research with some very powerful data.  Read more »

Random Impertinent Question

Random question from a reader

Whale

I was listening to Larry Williams on the ride home tonight from my day of wage slavery and heard the Shearer interview around 6pm.  In it he explained away this whole offshore UN slush account with another backstory about sitting down to do his income taxes with his Missus only to suddenly realise after three years of remembering and forgetting that he has not returned the account on his Pecuniary Register.

Question:

The obvious one is what is a bloke doing his taxes with his Missus for, but I haven’t even thought about my bloody taxes yet.  How can you do your taxes BEFORE the 31 March year end?  

Yes. I am wondering too.  It all seems too convenient, yet as with everything David Shearer, clumsy and a D for detail.

Shearer advised IRD of his hidden off-shore bank account, but wants us to believe he “forgot” to tell parliament

The IRD announced a crackdown on people with offshore accounts in 2011:

Group Tax Counsel, Assurance, Graham Tubb said Inland Revenue was aware of New Zealand tax residents who may have taxable offshore income held in an offshore bank account, which is accessible in New Zealand, and this income may not be returned in New Zealand for income tax purposes.

He said that people who conceal income offshore are cheating other New Zealanders by not contributing their share of tax. “They do this by paying less income tax and child support, can decrease their student loan repayment obligation, and may claim a larger entitlement to Working for Families Tax Credit than they should.”

“Some people hold credit or debit cards issued by a foreign bank and these cards are being serviced by funds held in an offshore bank account. The types of funds deposited into these bank accounts can include income paid by a non-resident employer, overseas life insurance policies, superannuation schemes, or equity investments held in portfolio accounts,” he said.

Mr Tubb warned that if people deliberately divert income into an offshore bank account to evade or avoid the payment of tax, or to claim a greater amount of Working for Families Tax Credits, they may be committing criminal offences under the Tax Administration Act 1994.  Read more »

Giving the left what they want

The Telegraph

David Shearer is a big fan of Finland, other Labour politicians love cherry picking scandanavian countries to prove obscure political points about how crap new Zealand is and how we would be all so much better off if we would just follow those countries examples.

New Zealand is not unique in having socialists gaze lovingly at other countries. In the UK Polly Toynbee has similar aspirations:

We’re all aware of Polly Toynbee, doyenne of the Guardian’s comment pages and conscience of the nation. It’s true that she comes in for a bit of stick at times, but I think it’s time we started to take her more seriously. Indeed, time that we create the sort of society she desires. Which is, as she tells us this morning, the following:

I want Britain to aim for the social and economic balance that thrives in Nordic nations.

Excellent! Let’s change policy to achieve that laudable aim. We should copy the Finnish education system, for example – it is, after all, the number one such system in the world. There they divide into academic and vocational at 16 and there’s none of this nonsense that all must go to university – that’s reserved for the small fraction that are indeed academic. Or the Swedish system of education vouchers. Parents decide on the school they want children to go to and the local council stumps up the fees – whether it’s a public or private school.

From Denmark we’ll take a couple of policies. Privatise the ambulance and fire services certainly. They’ve been working well there for nigh on 90 years. We’d want their taxation system as well: the national income tax is 3.76% and the top national rate is 15%. True, total income taxes are high but the rest is levied by the commune, a political unit as small as 10,000 people. At that scale, taxation is subject to the Bjorn’s Beer Effect. If you know that it’s Bjorn who levies your taxes, Bjorn who spends your taxes and also know where Bjorn has his Friday night beer, then he’s going to spend your money wisely. Otherwise he can’t go out for a beer on Friday, can he?

From all of them we’ll take the abolition of the national minimum wage, for none of the EU Nordics has one.

Sweden has also abolished inheritance tax, gift tax and the wealth tax. Those sound like three excellent ideas to copy.