Tax Working Group Report & Related Matters

[eri]

time to register here?

[Perry]

Bye Bye Miss Taxcindarella Pie

Even before they do anything aside from media ploys, the race is on.

Dhil Twitford has assumed the mantle of Arnold Nordmeyer.

Labour's Tax Revenue Increasing Regime Has Started

The proposed 9-12c a litre rise in fuel tax - a double whammy for Auckland to 20c a litre - will go down like a cup of the proverbial in parts of New Zealand where the Government's draft 10-year transport plan proposes a big shift in funding away from roads to public transport.

"Nordie's Black Budget"

The second Labour government took office in 1957, the 32nd Parliament. Within a year, the government was confronted with a balance of payments crisis caused by the collapse of the price of butter in Britain (at the time New Zealand's largest export market). Nordmeyer's colleagues were reluctant to cut government spending or break expensive election promises, so Nordmeyer was left with little option but to raise taxes.

The budget increased social security benefits but was very unpopular, not least with Labour's traditional working-class supporters. The term black budget is believed to have been coined by union leader Fintan Patrick Walsh, but was taken up by the National Party opposition, and became the commonly used term for the budget.

Seems Labour is determined to be another one-term anachronism.

[flyernzl]

Questioning the Tax Working Group’s property calculations

The Tax Working Group (TWG) appears to be showing an unbalanced approach to rental property investment, by using incorrect calculations and inconsistent assumptions to assess relative tax rates for different asset classes.

In their background paper "Future of Tax" the TWG say that "property remains under taxed compared to other investments. For instance, any profits from the sale of a long term property investment generally isn't taxed." This is misleading as the IRD has confirmed that similar profits from the sale of shares, farms, businesses and other assets that grow in value are also untaxed.

Of most importance is that the TWG uses a study into Marginal Effective Tax Rates (METR) on savings to claim that "Owner occupied and rental housing is undertaxed relative to other assets."

However a just released report by Morgan Wallace, a financial economics consultancy, has uncovered serious flaws with the TWG's study, leading them to conclude that apart from bank deposits, rental property is actually taxed at a higher rate than other asset classes.
A key flaw in the TWG study is that they assume capital growth for property but not for other capital growth assets. They treat PIE Funds, superannuation and companies like bank deposits, not only assuming they don't increase in value, but that they actually lose value due to the effects of inflation.

Morgan Wallace state that "the TWG paper cannot therefore be accepted at face value. If a capital return component were to be included for PIE, superannuation and company investments, then all three would have lower METR than presented in the TWG research paper."

The TWG also didn't include a key asset class, being direct share investments. Morgan Wallace said that "If this asset class were to be included, it would also have a lower METR than rental property under the TWG Paper framework."

The NZPIF is worried that, rather than looking into tax changes objectively, it would appear that the TWG has an agenda against rental property. This was the case with the last TWG in 2010 which claimed that rental property took $200m a year out of the tax take when this had only happened once, due to high mortgage interest rates, over a 27 year period.
It will surprise many to learn that according to the latest IRD data, rental property owners have paid tax on rental property income of between $1.3 and $1.5 billion dollars in each of the five years to 2016.

"Rental property owners provide people with homes to live in. They are an essential part of the productive economy who pay their fair share of tax" says NZPIF Executive Officer Andrew King. "Why are we continually looking to make it harder for them to provide rental property at a time when tenants are finding it harder and more expensive to secure accommodation?"


(A full copy of the Morgan Wallace report can be found at https://www.nzpif.org.nz/items/view/59162

For further information please contact:
Andrew King, Executive Officer, NZ Property Investors’ Federation
Email: [email protected]
Ph: (09) 815 8645, Mobile: 021 216 1299
OR
Bevan Wallace,
Executive Director, Morgan Wallace
021 2462577

[Perry]

Time To Call A Spade What It Is

In their background paper "Future of Tax" the TWG say that "property remains under taxed compared to other investments. For instance, any profits from the sale of a long term property investment generally isn't taxed." This is misleading as the IRD has confirmed that similar profits from the sale of shares, farms, businesses and other assets that grow in value are also untaxed.

Not, it's not misleading!

It's a lie.

Time to stop pussy-footing around and say so, too.

[Davo36]

Yes all the big corporates pay no tax here (look up Visa and Mastercard if you want) but hey, it's us landlords who are the problem.

[artemis]

The tax working group have a flash website that wants people to answer multiple choice questions about tax.

The questions look to be even handed but are not. For example, there is a question - should the tax system make housing more affordable? Of the 5 possible answers 3 say yes the tax system should, one says unsure and one says no, it is not the job of the tax system.

How is that even handed?

Beter to make a submission direct to -

[email protected]

[flyernzl]

Somewhere on one of the local news sites there was a question "Should we remove GST off healthy foods and make up the tax lost by imposing a capital gains tax?"

Talk about bribery and corruption!!

[Perry]

Right!

How about making up the loss by imposing FBT on MPs (and ex-MP's and ex-PM's) perks?

Payable by present MPs, from their own pockets.

[flyernzl]

That was actually the original plan for Fringe Benefit Tax..

You got paid $x in money and received non-cash perks valued at $y.
Add the two together, that was your total remuneration, and you paid income tax on that total.
That way makes sense.

Then, just to see how it went, someone idly ran the figures over a parliamentary Ministers total remuneration package and found - shock, horror! - that their FBT payment would in some cases actually be higher than their cash income.

So the onus of payment was hastily switched from the employee to the employer.
Whew, disaster averted.
The Government pays itself tax on its employees earnings.
Welcome to mickey-mouse-land.

[flyernzl]

Submissions to the Tax Working Group close on Monday 30th April - next Monday!

The Taxpayers Union have put out a copy of their proposed submission.
You can read it here

It is wide-ranging, and you may not necessarily agree with all they have to say.
Pay particular attention to their thoughts on Capital Gains Tax and Land Tax.
There appears to be no mention of ring-fencing in either document, although there are some thoughts of the effects of these taxes on residential landlords.

There is also a submission template here

Again, you may like to amend and/or alter that as they suggest to fit in with your own ideas.

I urge you to look through these two documents and then have your say.
This is your one chance for us to get our voice out to the TWG.

This should make it easier for you to do that.

---

EDIT
The email address to send it to is: [email protected]

[Perry]

Adding to Peter's comments, try to avoid jargon in your submission.
Plain English is better, even if it takes a few more words.

89. While a redistribution of tax burden from capital owners to income earners would have an
income improving effect for low wage earners in the first order, there is a danger in
disincentivising the capital accumulation which will be required to sustainably improve wages
over the long run.

Have they got that back-to-front?
Or am I confuddled?
I thought a CGT was supposed to work the other way.

[Marc]

Right!

How about making up the loss by imposing FBT on MPs (and ex-MP's and ex-PM's) perks?

Payable by present MPs, from their own pockets.

Sounds a good plan Perry.

[Perry]

Tax Working Group papers highlight concerns over 'inequality'
9 May 2018

One of the key questions facing the Tax Working Group was whether it should be aiming to reduce inequality, officials said. A broad-based capital gains tax would help if that was the goal, according to the Inland Revenue and Treasury officials who are currently serving as the group's secretariat and who prepared the advice. The Treasury has previously estimated that a broad-based capital gains tax, that excluded gains on owner-occupied housing, could raise about $2.7 billion a year once it fully kicked-in – increasing the total amount of tax Inland Revenue collected by between 3 and 4 per cent.

Former PWC global tax head Christopher Wales, who served as an adviser to former British Prime Minister Tony Blair, cautioned during a visit to Wellington in March that a capital gains tax would probably mean fewer houses being built and hence higher house prices. But the officials' advice suggested they believed a broader capital gains tax could have the opposite effect of reducing house prices while potentially increasing rents. The officials' advice indicated that a key question for the Tax Working Group is whether or not tax changes should be targeted to reducing inequality in New Zealand. There is considerable public concern about the levels of inequality," they added.

Is there? Or is it squeaking-wheel-populist-hype and a-socialist-agenda-driven-media that's conning the said gummint functionaries?

Interesting comment from the same closeted coterie of functionaries that a CGT would reduce house prices [gawd knows how!] and increase rents!

That idea should really thrill Taxcindarella et al.

[eri]

if they were serious

they would include the family home

but they're not stupid or very serious

as long as the sheep think they won't be shorn...

but they'll be trimmed

and the slowest will get trimmed the most

[flyernzl]

News item in the Herald this morning:

"Most people believe that more tax should be paid"

They forgot to add the last bit:

" . . . by other people".