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Andrew King: Income tax cuts admirable, but let's look again at winners and losers
A rental property is just that and when you sell it it isn't anything more than when you started.
That describes the bare land.
The dwelling, on the other hand, needs some effort to maintain and enhance it.
Those with the right attitude do this and deserve the fruits of their productive labour.
Very good article, Andrew.
Well written and presented in a calm manner.
As such, Bernard and Mary will probably ignore it but hopefully it causes a few people to reconsider their position on changes to the property tax laws.
I'm pleased that you thought my article was "quite good". I'd be interested to know what improvements I could have made to improve it to good or better.
I'll take the devil's advocacy position.
The article was too calm, too reasonable
and lacked vehement, acerbic critique of
the mediocrats that mouth off all those
inaccuracies, untruths and plain lies that
Andrew sought to correct.
If you want to get noticed: shout. A polite 'ahem' gets no attention, mostly.
No matter how we decry 'sensationalism,'
we must agree that it gets attention and
gets results. Imitation is the sincerest form
of flattery, the old aphorism has it.
Time to take a leaf out of their book and
use their own techniques against them.
The newspapers call it the 'pyramid principle'
as I dimly recall.
A sensationalist heading, followed by an
equally assertive opening sentence/para-
graph. Or two. If you've carried the reader
that far, all the calm, factually articulated
stuff follows.
First, let's just contrast the headlines (over
which the writer often has little control)
Nonetheless:
Fed Up With Landlord Tantrums (Mary Holm - Pointedly Pithy)
Income Tax Cuts Admirable, But Let's
Look Again At Winners & Losers. (Andrew - Almost boring. So, what could the alternatives include?)
Fed Up With Politicians' Property Lies
Nope - that's not sensationalist, just normal!
Property Investors Tire of Ignorance
Lies & Half-Truths from Newspaper
Columnists & Hick Commentators
Getting better, but way too long! Maybe . . .
Property Investors Tire of Lies Ignorance & Half-Truths
Hhmm, better; but hey! What about:
IRD Deputy Lies To
Select Committee
That should get some attention! Now, what to
say in the first sentence or two . . .
At a 2007 Select Committee Hearing at Parliament,
IRD Deputy Commissioner Robin Oliver said that there
were no tax advantages for investments in rental
housing - none. If anything, the rules as to what is
a capital gain are tighter.
Since then, there's been a succession of politicians,
newspaper columnists and hick commentators saying
he was wrong. Where's the taxation expertise more
likely to lie? Is the IRD stance correct and the others
lying? Or vice versa? Let's look at some of the recent
spin and political rhetoric . . .
Calm, reasonable stuff follows . . .
I've suggested it before, Andrew, the PI 'industry'
needs some good, hired, professional help with
the media stuff.
.
First up today, an observant reader emailed me with a heads-up that the IRD is ripping us off to the tune of goodness-knows how much each year.
Apparently, we're only required to be the legal minimum of tax, no more.
So why then are the IRD misleading taxpayers and duping them into paying more tax than the legislation requires them to?
What am I talking about?
Well if you read this page you'll see that you're legally entitled to claim one third (33.3333. percent) of donations to approved charitable organisations.
However, on the IR526 Tax Credit Claim Form (PDF) they plainly state you should take your donation total and "multiply it by 33% (one-third)" to calculate the amount claimed.
Now I'm sorry but this is tantamount to skimming! 33%, despite the claims of the IRD, is NOT one third!
People have been arrested and found gulity of fraud when they've used rounding to skim the occasional cent here and there from bank accounts -- yet the IRD is doing exactly the same here with YOUR taxes.
How does that work?
Let's say you donated a total of $1,000 to charities.
A true "one third" of that amount is $333.33.
However, if you follow the IRD's fraudulent advice and multiply that $1,000 by 33% you get just $330.00.
They have just pocketed an extra $3.33 that YOU are entitled to claim back, according to the tax legislation.
Gosh, it's just $3.33 right, so who cares?
Well it's not the amount but the principle that's important here.
If the IRD is allowed to skim 0.33% from your legally entitled refund, why not make it 1% or maybe 10%?
Why should it be legal for the IRD to skim your tax refund while the very same action on the part of bank staff has resulted in many prosecutions and terms of imprisonment?
And what would happen if you performed a similar arbitrary rounding when calculating your GST return and said "hey, 12% is near enough to 12.5%, I'll just round-down and keep the difference"?
And even though we're only talking about $3.33 in the same I've given above, multiply that by the hundreds of thousands of Kiwis who regularly donate to charities and you'll see that it becomes a very useful sum of money that will fund many an MP's post-employment perks.
I'm sorry but I think that at the very least, the IRD owes the taxpayers of NZ an apology for this devious attempt to defraud them of their legally entitled refunds.
I realise that when I write about the IRD's activities I generally get very few comments to the forums and I can understand why. Nobody want's to put their head up and attract the attention of the most powerful entity in the land. Never the less, I'd like some opinions on this -- if you dare.
You might also want to point this column out to anyone who might be contemplating claiming a refund for donations they've made this year.
The three most harmful addictions are heroin, carbohydrates and a monthly salary - Fred Wilson.
The article was too calm, too reasonable
and lacked vehement, acerbic critique of
the mediocrats that mouth off all those
inaccuracies, untruths and plain lies that
Andrew sought to correct.
If you want to get noticed: shout. A polite 'ahem' gets no attention, mostly.
No matter how we decry 'sensationalism,'
we must agree that it gets attention and
gets results.
and I love your screaming headline about IRD lying.
I think you should sent the article to some journos and see whether any of them pick it up
Richard Bucklands Beach (New Zealand) 01:08PM Tuesday, 20 Apr 2010
I read an article the other day from a gentleman from the Property Investors Assn. Why only look to target capital gains taxes only on property investments? Especially when we dont target capital gains on shares, businesses or any other classes of investments.
The government and most commentators suggest that Kiwi's have an unbalanced propensity towards property investment. Ever asked yourself why this might be? The reality is that over the last 60 or so years, a culture has been developed by the NZ(Aussie) banks of only lending with property security.
Small to medium businesses or investors cant lend without property as security. Property rules! It is the most readily available leveraged investment to the public. Is it any surprise that the NZ public and the Aussie Banks like "as safe as houses" investment and securuity?
Trade Me founder and philanthropist Sam Morgan, who says the tax system is set up so the wealthy, such as himself, do not pay tax, is welcome to send a cheque to the Inland Revenue Department if he wishes, the Finance Minister says.
The Wellington entrepreneur, who founded Trade Me in 1999 and sold it in 2006 to Australian publisher Fairfax for more than $700 million, said he paid basically no tax.
"And that's not right, but what am I supposed to do?"
Mr Morgan, 32, was estimated to have made at least $227 million from the sale of his business but did not have to pay a capital gains tax.
As he had effectively no income, he paid minimal tax.
The people who paid the most tax were workers, he said.
Finance Minister Bill English said the Government would welcome a contribution from Mr Morgan if he was feeling uneasy about the tax laws.
"He could look to just write out a cheque to IRD. They won't send it back, they'll bank it," said Mr English yesterday.
While Mr Morgan probably did earn some income and pay some tax, the Government needed to make the system fairer so people were paying their fair share of tax, particularly if they had invested in property, he said.
- NZPA
The problem with Andrews article is that he compares advantages that renters have with the advantages of many different things, rather than a straight up comparison.
A better article would compare for instance:
Property investment vs Shares
Property investment vs Companies
Property investment vs Small Business
It's great that many investment vehicles have some tax advantages, but cherry picking them as a comparison with property investment is misleading.
There should also be a comparison as to what Property Investment provides the country vs whatever it is being compared with. People don't mind certain groups getting tax advantages if they feel there is a return / benefit for the country i.e. farmers.
But as with all articles from people with a vested interest basically every fact and comparison in the article is not put into context or is half a story / misleading.
It's a bit of an odd stance by Sam Morgan really. Being independently wealthy, he should be aware that philanthropy is the more usual route to changing the world rather than donating to the government spending machine. This way he can personally decide on the most appropriate recipients.
Discouraging entrepreneurs from creating and selling successful businesses impacts not only their own pocket but also all their employees. How many people are employed by Trademe, all paying tax due to the efforts of Sam and Co? OK so it's now owned by the Aussies, but that has freed up all that tax free capital to invest in new businesses generating more wealth and taxes.
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