Taxation

After slamming the government Robbo, with his next breath, says Labour will increase taxes

As I said previously Grant Robertson knows as much about finance as Jacinda Ardern does about child rearing.

After slamming the government over tax cuts in his next breath he announces Labour will fight the election proposing tax increases.

Labour is planning to announce tax increases before the next election to help fund its spending plans but will leave the detailed work until it is in government.

Their spending promises are shaping up to be massive. Billions upon billions, and the only way they can fund that is by stiffing us with tax increases.

In a pre-Budget speech to a business breakfast on Monday, Labour finance spokesman Grant Robertson said a Tax Working Group would be set up after the election to develop ways to correct the imbalances between the productive and speculative parts of the economy.

“While we want a comprehensive review there will be some interim steps that we will announce before the election … to ensure that we have the revenue to address pressing issues, particularly in health, education and housing,” he said.

“I think it’s only fair to New Zealand we go to the next election with some sense of the direction of our tax policy. We want the Tax Working Group to do the detailed work but I think it’s only fair for New Zealanders that they see the path we are on.

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Grant Robertson knows what’s in the government’s budget (clue: nope)

Grant Robertson knows as much about finance as Jacinda Ardern knows about raising children.

Both have spouted off in the past couple of days but Robbo has declared that Labour will fight the next election with the promise of a tax working group.

The Government’s tax cut promises have turned into a farce, Labour’s finance spokesman Grant Robertson says.

Mr Robertson is accusing the Government of making a mockery of the Budget process by dangling the promise of tax cuts, but failing to include them in the Budget.

“We are not as a country in a position to be offering tax cuts when there are families living in cars and garages,” Mr Robertson said in a pre-Budget speech in Wellington today.

“I have a specific challenge to John Key and Bill English when it comes to tax cuts – if you really believe they are the right thing to do for New Zealand, cost them properly and put them into Budget 2017, rather than dangling them about in an election campaign as a promise from Neverland.”  Read more »

I don’t want hints John, I want cuts

After Bill English cancelled promised tax cuts the PM is now making hints of tax cuts in election year.

Prime Minister John Key has signalled National will campaign in 2017 on a $3 billion package of tax cuts.

Last week Finance Minister Bill English ruled out offering tax cuts in this year’s Budget and said it was not currently in the plan for the 2017 Budget either, although that could alter.

Speaking to Mike Hosking on Newstalk ZB this morning, Mr Key said tax cuts had been ruled out in the short term because it was a choice of spending $1 billion on tax cuts “to deliver very small amounts” or spending that money on healthcare and other areas.

However, he signalled National was working on a more substantial package of cuts for 2017. “We are not ruling that out for 2017 or campaigning on it for a fourth term in 2017, but having a bigger one, to be blunt, than $1 billion.” Asked how much was needed to deliver meaningful tax cuts, he said: “$3 billion, I reckon.”

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So, is NZ a tax haven?

The left-wing, the opposition and the Media party are all claiming that NZ has become a tax haven as a result of the revelations in the so-called Panama Papers.

So is NZ a tax haven?

Well, the short answer is no.

The slightly longer answer is not even close.

Fortunately the OECD has written a Policy Paper on tax havens, a document the Media party clearly haven’t read, much less understood.

2.1 Definitions of Tax Havens

Given the importance of the issue and the international commitments in this area, it might be expected that identifying tax havens would be straightforward, but this is not the case. There is no agreed definition of what the term “tax haven” actually means. Probably the best known definition of a tax haven is that used by the OECD (1998).

Four key indicators of tax havens are identified:

  1. No or only nominal taxes (and offering, or being perceived as offering, a place for non-residents to escape tax in their country of residence);
  2. Lack of transparency (such as the absence of beneficial ownership information and bank secrecy);
  3. Unwillingness to exchange information with the tax administrations of OECD member countries; and
  4. Absence of a requirement that activity be substantial (transactions may be “booked” in the country with no or little real economic activity).

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Green MP: Key not responsible for trust problem

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So far the Panama leaks have been positively underwhelming.

A sure sign of this is a Green MP, Julie Anne Genter, admitting that John Key isn’t directly responsible for the [tax haven] laws and what people and companies are doing “technically legal”.  Read more »

A Little elephant in the room – Part 3

Where were we? That’s right, it had just been established that the Council of Trade Unions via then-head Helen Kelly had issued a “please explain” to Unite Union and Matt McCarten. But it is McCarten’s response to Dominion-Post journalist Rebecca Stevenson that is the most enlightening:

Unite head Matt McCarten confirmed yesterday that the union owed money to the IRD but said he had made choices to pay for union campaigns rather than clear the debt. “I don’t shy away from these decisions, I make the calls.”

So Matt McCarten, is now Chief of Staff for the Leader of the Labour Party, fellow former union boss Andrew Little. But some time around the time of the 2008 General Election, McCarten made a conscious decision not to pass on PAYE deducted from Unite Union staff to the IRD as he is legally required to do.    Read more »

A Little elephant in the room – Part 2

So it’s been established that Andrew Little, leader of the Labour Party doesn’t like people who evade paying tax. So why does he employ one as his Chief of Staff?

That’s a pretty fair question, don’t you think? It’s probably one that David Cunliffe should have considered before he hired Matt McCarten in 2014 and set up the infamous War Room. And it’s certainly something Andrew Little should have considered before he went full retard on John Key over the last two weeks, and before he made a factually incorrect attack on John Shewan.

Matt McCarten and Unite Union’s tax issues first became a public issue in 2010. Rebecca Steven reported this in Stuff on 2 December 2010:

One of New Zealand’s largest unions, Unite, owes IRD over $130,000 including over $36,000 in tax meant to be paid on behalf of its employees.

The union’s accounts, which can be publicly viewed through a Government website, shows Unite’s liabilities exceeded its assets by over $170,000 for the year ended March 2009.

A further $57,630 is owed to the Government tax collector for GST.

Unite head Matt McCarten admitted to BusinessDay this afternoon that the union owed money to IRD and said the union was “keen” to pay.

He said it was “not that much in the great scheme of things”.

PAYE stands for pay-as-you-earn. This money is collected from employees by employers and then paid to the IRD.

Right-wing blogger David Farrar said on his Kiwiblog this was a very bad look for a trade union as it meant Unite had been collecting the tax but not paying it.   

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Hang on a minute? Now we have to follow some moral code? What about the law? Doesn’t that matter anymore?

Labour have pounced on some rather silly statements by the Prime Minister.

Labour’s finance spokesperson Grant Robertson is calling for John Key to “take a firm stand and demand a law change” following the prime minister admitting small taxes on multinational companies is unfair.

“Multinationals should pay their fair share of tax – not just about what’s legally right but also what’s ethically right,” said Mr Key on The Nation yesterday.

“To fix that situation I think you need all of the countries working together.”

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Has the government shot itself in the foot with its “Bright-line” test?

I have come across something that more suitably qualified people might like to comment on. I think the government has created a “vote-losing” law inadvertently.

It is this new “Bright-line” law regarding housing sales.

I was talking to a chartered accountant and lawyer about it the other day.  It appears the government may have inadvertently created a problem whereby ANYONE making even a slight change to a trust is going to end up triggering a tax situation even though no real sale happens or money is involved.

The relevant law is Section GB 53 of the Income Tax Act 2007, below. The problem word is effect in 1(c) [underlined].

Section GB 53 says:

GB 53 Arrangements involving residential land: trusts

When this section applies

(1) This section applies when—

(a) the trustees of a trust own residential land directly or indirectly (trust residential land); and

(b) trust residential land makes up 50% or more, by market value, of the assets of the trust; and

(c) the trust’s trust deed changes, a decision-maker under the trust deed changes, or an arrangement under the trust changes, with a purpose or effect of defeating the intent and application of section CB 6A (Disposal within 2 years: bright-line test for residential land).   Read more »

Trotter on Labour’s education policy

Chris Trotter doesn’t seem too enamoured with Labour’s education policy.

THERE’S A HOLE in Labour’s emerging policy framework – through which too little light is getting in. The party’s latest big announcement: three years of free post-school education; is a case in point. As a headline, it’s fantastic. But, Labour supporters’ euphoria is unlikely to survive the policy’s fine print. Nearly a decade will pass before the plan is fully implemented – but only if  Labour wins the 2017, 2020 and 2023 elections on the trot. It’s not quite a case of  giving something with one hand, only to snatch it back with the other – but it’s close.

And why is Labour unwilling to offer three years of free tertiary level education in its first budget? Because it’s not yet ready to adopt a social-democratic fiscal policy to pay for its social-democratic education policy. That’s the hole – and it’s a bloody dangerous one!

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