Simplistic solutions to NZ’s taxation headache might be easier said than done

News source  Stuff  has reported almost 100 wealthy New Zealanders have signed an open letter to the government to say they want to pay more tax.

Said to be inspired by global initiative Millionaires for Humanity, 96 wealthy individuals have told the government they recognise the current tax system is unfair, allowing wealthy people to pay less tax, while other New Zealanders who struggle day-to-day pay more.

Those who signed include Sir Ian Taylor, Phillip Mills, of gym chain Les Mills, company director Rob Campbell, actress Robyn Malcolm and Dame Susan Devoy.

The letter says they recognise the benefits of tax; that it “funds everything from the teachers who give our children a great start, to the Department of Conservation rangers who look after our environment, through to healthcare professionals on whom we all rely”, and it asks the government to fix the tax system.

Framing an election-winning budget a priority for Hipkins-led team — but will inflation erode any benefit before it arrives?

Incoming Prime Minister Chris Hipkins has already indicated he intends making the tax system “fairer”.  That points  to the route a government facing an election could take to tilt the odds towards winning  in its favour, given Labour’s support in the  last  months  of the Ardern era had been drifting downwards.

Appearing on AM on Monday, Hipkins said he will focus on bread-and-butter issues, like the cost of living, in his new role. 

He also hinted that tax changes could be on the cards, saying “we should always look at how we can make the tax system fairer”.

From $76bn to $108bn – that adds up to a hefty lift in the tax take in just five years

Covid’s impact on New Zealand  may be  diminishing but it still has injected a feverish tone  to  the  debate  on the  state of  the  government’s  books this  week.

Labour  and  the  Greens  reject  Opposition parties’ calls  for  tax  cuts  as  “unaffordable”. They  contend  tax  cuts would  just add  to  inflationary pressures.

National  and  ACT  insist  tax  cuts  are  needed to  ease the  pressure  on  household  budgets  as costs soar.

Meanwhile  Reserve Bank  governor  Adrian Orr seeks  to  check  inflation  by  raising  interest rates again.

In all the  fog, what’s  clear  is  that  in five years the  Ardern  government  has lifted  the  tax  take  by  43%, from  $76bn to $108bn.

Under-taxing the wealthy is a challenge for our Revenue Minister – but evidence for a new policy will be destroyed

Having got things admirably correct with his opinion as Attorney-General on the wretched Rotorua local body bill being promoted by Tweaker Coffey,  it looked  like David Parker had stumbled as Revenue Minister

The impression of a stumble was given by a Stuff headline which read   Revenue Minister David Parker lashes very wealthy for being undertaxed, calls for new tax principles

But if someone is being undertaxed, very wealthy or not, shouldn’t someone at the Inland Revenue Department be hauled into the Minister’s office to explain what’s going on?

And if it turns out that the undertaxed individual is breaking the law, then the next step is clear. Prosecution is the path to be taken.

If the fault lies with the law, then the next step is clear, too, albeit on a different path.  In this case, the law must be changed.

Boris’s budget tests limits to destruction

Gosh, politics is a rum game.  Britain’s PM, Boris Johnson, took some big risks and triumphantly shattered Britain’s political status quo during the Brexit turmoil.  But last week’s budget statement set the country’s economic parameters in anything but a Thatcherite way.

The difficulty is less in the government’s post-Covid financial tidying up, and more in its approach to long-term problems.  And these look like they might become more urgent – and sooner.

Boris keeps on gambling

Boris Johnson has done a great service for politicians everywhere by testing the political waters for tax increases.  He and his Chancellor of the Exchequer, Rishi Sunak, are ratcheting up Britain’s taxes to pay for care homes.  And Covid of course.  Pretty much everything it seems.

The new tax is not really that new: a levy on labour incomes (i.e., salaries, wages and self-employment) of 2.5 percentage points, with an increase in dividend taxes of half that. Boris – with flagrant disregard for Econ 101 – claims that business will share this burden. Sorry Boris and Rishi – labour taxes fall on labour.

Meanwhile, the Financial Times gloomily opines that the move will raise the UK’s tax burden to the highest level since 1950 – about the time when Boris’s hero, Winston Churchill, was heading for a second term as PM.

Boris has a reputation for being better on the strategic than the tactical decisions.  So, will the tax increase work?

How the Greens’ wealth tax proposal could be a political lifeline for Winston Peters and his party

The  Green Party’s  major new election  policy  for  a  wealth  tax has, not  unexpectedly,  had a mixed  reception, not   least  from  politicians of  other parties.

The  policy  to  tax the  wealthy  to  fund a payment of at least  $325 a week   for anyone  not  in  full-time  work,  predictably brought  cheers  from  trade  unions  and  child  poverty  lobby groups.  But it provoked scorn  from  the  other side of the  fence,  where  the  idea undermines  the  core  principle  of  capitalism as  the  driver of  economic  growth.

Interestingly,  one  sample of   public opinion  on the issue   showed   85%  against—and   only 15% in favour.

But  that lopsided  result has its  upside for  the Greens   and brings a  glow to those  within  the Green Party  who worked  up  the policy.  It  could  guarantee    the  Green   Party  is  not   overwhelmed    by  the halo effect  at  present  enveloping   Prime Minister    Jacinda  Ardern,   which  could result  in  the  kind of election landslide  delivering an outright majority  in Parliament for Labour.

If it  lifted the Green  Party’s  current  ratings  of  around 6-7%  to  double-digit levels   it  would be a  major  victory.  

Oh, goody – Nash says some tax relief is in the offing but only a few of us will benefit from it

After a string of spending decisions over the past two days, the Government today announced some cheering news on the revenue-gathering side of its activities.  It is moving to ease financial stress for around 149,000 taxpayers by changing the rules around write-offs for tax debt.

As a consequence, fewer people will have tax bills to pay this year.

But not too many fewer.

According to Treasury figures,  we have 3,850,000 taxpayers who generate $36,850 million of revenue.  Around 4% of those taxpayers – by the looks of it – will benefit from the Government’s relaxing of the rules.

Revenue Minister Stuart Nash said Inland Revenue’s end-of-year automatic income tax calculation process for individuals is currently underway and is expected to run until early July.

This is the annual wash-up which results in people either having tax to pay or receiving a refund.

The capital gains tax is scrapped – but revenue raisers are looking for other ways to skin us

Cabinet,  we  are  told,  has  signed off  on  the  budget,  to be  presented   next  month. This  year  the focus  is to be   on  “well-being”.

It’s a phrase  that  captures  the  style  of  the  Prime  Minister   Jacinda  Ardern.  If  the  budget  delivers,  it  will  reinforce  public perceptions  of  Labour’s  leadership whose  ratings  have  shot up  in  the  wake of the Christchurch  mosque  massacre.

But  will the  budget  be  “transformative”?

NZ’s  economy  under Labour over the past  six months  has shown  increasing   signs of   slowing.

Recent indicators  of a weakening economy include rising job-seeker numbers, stalled job growth, a rising cost of living, lower economic growth forecasts by all major banks, weakening business confidence,  and the Reserve Bank  signalling a cut in interest rates  to stimulate economic activity.

Sir Michael is being paid well while he takes his tax report for a spin

So  how  is  the  debate   on  a   comprehensive  capital  gains tax  going?

Not   well,  some would  say,  particularly  if  you have to pay  more than a  $1000 a  day  for  a   PR   snow job.

Questioned  in  Parliament   why  the  government  is  paying  Sir  Michael  Cullen more than $1000 a day of taxpayer funds to engage in political debate for four months after the Tax Working Group has been disbanded, including two months after the government will have announced its own position,  Finance  Minister  Grant Robertson explained the contract had been extended “because it’s necessary to respond to all of the misrepresentation and lies about the report”.