CGT complicated, complex and costly

September 3, 2014

Prime Minister John Key floored David Cunliffe last night when he couldn’t answer whether or not Labour’s capital gains tax would apply to homes owned by trusts.

After the debate he said it wouldn’t but that’s not what the policy says:

David Cunliffe’s inability to answer the most basic questions about Labour’s proposed capital gains tax underlines key problems identified by successive tax reviews, National Party Finance Spokesman Bill English says.

“David Cunliffe’s failure to explain how he would implement a new capital gains tax, which has now been Labour policy for more than three years, will leave many thousands of New Zealanders confused and uncertain,” Mr English says.

“Nowhere in Labour’s capital gains tax policy does it exclude family homes owned by trusts. In fact, Labour actually says: ‘We will ensure trusts are not used as a means of avoiding a CGT’. David Cunliffe cannot have it both ways.

“And now Labour is trying to say the test for whether a capital gains tax applies is not whether a trust owns the property, but who lives in it. That would require Inland Revenue to confirm the living arrangements of householders in deciding whether the tax would apply.

What if there are adult children paying rent?

What if there is a boarder?

What if the boarder is a relative, for example an elderly parent?

Would it make a difference if the relative lived in a granny flat?

Would it make a difference if someone living in the granny flat wasn’t a relative?

What if there’s more than one family in the house?

“This latest confusion follows Labour previously making contradictory claims about whether the KiwiSaver accounts of 2.3 million New Zealanders would be exempt from their new tax. They now claim they would be exempt, but this is not reflected in their policy or their costings.”

Mr English says Labour’s proposed capital gains tax was already full of holes, applying only to only a quarter of the housing market, but to every New Zealand business and farm.

“All of this underlines what tax experts and independent reviews have said over the past 20 years. Implementing an extra capital gains tax would be much more complicated and confusing in practice than it appears in theory.

“By contrast, National’s clear economic plan is successfully supporting higher wages and more jobs. It is steering New Zealand back to surplus this year and ensuring government spending is invested wisely to deliver better results.

“The five new taxes promised by Labour and the Greens would stall the New Zealand economy and cost thousands of jobs.”

People who trade in property or shares already pay taxes on the capital gains.

Introducing Labour’s CTG CGT would add cost  and complexity to the tax system which wouldn’t be justified by the money raised.

Labour wants to introduce a CTG CGT and  four more taxes for the worst reason – so it can spend more.

The best way to increase the tax take is through economic growth which enables businesses to make bigger profits, increase jobs and wages.

The worst way is to increase tax rates and add new taxes which add complications, complexity and costs and put a hand brake on economic growth.


Compare the chairs

September 2, 2014

Duncan Garner chaired last week’s debate between the finance spokespeople for five parties.

He began by saying each speaker had three minutes to give a pitch and he’d accept interjections if they were witty.

The speakers largely abided by his rules and on the few occasions any tried to speak over another Garner quelled him.

On Sunday  Corin Dann chaired a debate between Finance Minister Bill English and Labour’s spokesman David Parker.

He kept control throughout, only rarely did one of the MPs try to talk over the other and Dann kept good control when that happened.

In both debates the audience heard almost every word the speakers said.

Contrast that with the Leaders’ Debate between Prime Minister John Key  and Labour’s David Cunliffe on Thursday.

Mike Hosking rarely seemed to be in control and let Cunliffe away with constant interruptions.

The result was he looked like a boor and it was difficult to hear what either he of the PM was saying.

I wondered if Hosking was worried about the perception of bias, Kerre McIvor does too:

. . . Moderator Mike Hosking could have been more aggressive himself.

There had been criticism from Labour over the choice of Hosking to chair the debate. It felt he had pinned his colours to the mast by introducing Key at a business meeting and exhorting those there to vote for him.

Perhaps Hosking felt a little hamstrung – if he pulled up Cunliffe too often, the accusations of bias would appear to have some justification. . .

That a debate could have a strong influence on how people vote is concerning.

But whether or not it does, it should allow the speakers to speak and the audience to hear what they say and it’s the chair’s role to ensure they do.

Not PC has some advice on a proper debate.

Garner and Dann showed how to do it.

The chairs in the remaining debates should follow their example.


Stay on track or stall

September 1, 2014

Finance Minister Bill English (from 15:30ish)

. . . exporters have done a fantastic job. they’ve had a high dollar, they’ve had their export markets, US, UK, Europe in massive recession and still they’ve done well. . .

. . . the last thing they want is the whole shebang tipped upside down by politicians setting interest rates, higher income tax, capital gains tax,  carbon tax and . . .  the government taking over the energy and the housing markets. . . .

Labour and the Greens will add new taxes, put on capital gains tax, carbon tax and put up income tax to pay for a lot more wasteful spending.

Our focus is on building confidence, because a new job and higher pay come from businesses who are investing and the good news is they are really starting to get some momentum and the last thing we want is to stall that momentum. . .

. . . First we spend a lot less and we don’t raise new taxes. Secondly the quality of our spending is much better specified because we’re spending for results. . . ours is focussed on getting results kids learning, more elective surgery . . . they are just throwing money at the problems.

The choice for voters is staying on track with National or stalling under a government led by Labour.

It’s a choice between National which respects other people’s money and the need to spend it wisely and Labour and its mismatched mates who want to take more of other people’s money and spend it in the mistaken belief that the quantity of the spend is better than the quality.

It’s a choice between continuing to go forwards or stalling and going backwards.


They haven’t learned a thing

August 30, 2014

Labour and the Green Party are trying to pretend they would be good economic managers.

The cost of their policies puts the lie to that:

David Cunliffe and Labour have actually increased their new spending promises for the next four years to $18.4 billion, despite putting some of their proposals such as New Zealand Power on the never-never, National Party Finance Spokesman Bill English says.

“David Cunliffe and David Parker have again been caught out under-costing their expensive promises,” Mr English says. “This is irresponsible and deceptive and confirms that under David Cunliffe, Labour is reverting to its failed spend and tax recipe of the past.

“We saw what happened the last time around – under Labour in 2008, floating mortgage rates reached almost 11 per cent, inflation exceeded 5 per cent and the economy went into recession well before the global financial crisis.”

Labour’s latest costings attempt, which it released on Monday, confirm its untried New Zealand Power proposal, which would give politicians control of the electricity industry and push up power prices, would be postponed until 1 January 2018.

And in another example of it attempting to dress up its numbers, Labour has also pushed back free GP visits for over 65s and other groups to 1 January 2017.

“So while David Cunliffe is going around New Zealand making expensive promises, he is quietly pushing some of them back beyond two elections because he knows they are unaffordable,” Mr English says.

“But he has again failed to hide Labour’s real spending agenda because he has not added in promises made over the last two weeks.

“Even using Labour’s own numbers, the cost of its promises over the next four years is now $17.3 billion – up from its claimed $16.4 billion when it first attempted to cost its policies.

“But when the real costs of its proposed R&D tax credit, compulsory KiwiSaver and New Zealand Power are included, the tally jumps to $18.4 billion – up from around $18 billion the last time around.

“As Labour’s numbers come under scrutiny, they keep changing them,” Mr English says. “David Cunliffe has tried to say he would spend less, but when you add it all up he is actually spending more.”

Labour Party Election 2014 Spending Announcements – as at 27 August 2014
Four year costings as per Labour documents unless noted

$m
27-Jan-14 Best Start Policy 614
27-Jan-14 Extended Paid Parental Leave 245
27-Jan-14 Maternity Policies 50
27-Jan-14 Early Childhood Education Announcements 352
19-Mar-14 Forestry Policy 28
14-Apr-14 Bowel Screening Programme 56
23-Apr-14 Veterans Pension Extension 37
23-Jun-14 Canterbury Policies 116
25-Jun-14 R & D Tax Credit* 1,079
25-Jun-14 Accelerated Depreciation 210
25-Jun-14 Universal KiwiSaver** 845
25-Jun-14 NZ Power*** 566
25-Jun-14 KiwiBuild 1,527
25-Jun-14 KiwiBuild Finance Costs 176
2-Jul-14 School Donation Policy 175
3-Jul-14 Family & Sexual Violence Policies 60
5-Jul-14 Digital Devices in Schools 120
5-Jul-14 Reading Recovery 140
5-Jul-14 Food in Schools 70
11-Jul-14 ICT policies 17
22-Jul-14 Regional Investment Fund 200
24-Jul-14 Digital and Connectivity Policy 21
30-Jul-14 Living wage for Public Sector 94
31-Jul-14 Centres of Vocational Excellence 40
4-Aug-14 Youth Employment Package 182
6-Aug-14 Primary Healthcare 150
8-Aug-14 ACC 40
10-Aug-14 Free Doctors’ Visits 540
18-Aug-14 Tertiary Education (incl ACE) 130
20-Aug-14 Aged Care 222
22-Aug-14 Welfare Policy 78
24-Aug-14 Immediate Funding of City Rail Link**** 800
25-Aug-14 Other Education Initiatives 45
25-Aug-14 Other Smaller Initiatives 80
25-Aug-14 Maintain Real Value of Spending in Public Services 9,000
25-Aug-14 Policy Soon to be Announced 289
Total Announced Spending Pledges 18,394

*Adjusted to reflect Treasury’s forecast costs of the previous R & D Tax credit
**Adjusted to include the average Kiwisaver tax credit paid to new Kiwisaver members
***Adjusted to remove the claimed fiscal offset for wider benefits in one part of the economy that ignores wider costs elsewhere
****Labour says it would reprioritise existing transport spend but most of first 4 yrs committed/contracted

Note: some costs differ from the original Labour releases as a result of fiscal tables released 25 August.

This is only the cost of its spending.

It doesn’t take into account the cost of poor economic management, higher and extra taxes, higher interest rates, a greater burden of government and all the other hand brakes a Labour/Green?New Zealand First.Internet Mana government would impose on the country.

Higher spending and higher taxes didn’t work for New Zealand under the last Labour-led government and it won’t work if voters are conned into trusting another one.

Hopefully voters have learned what works for New Zealand and New Zealanders because Labour and its mismatched mates haven’t.

 

In their last five years in government, Labour’s spending increased by 50%, pushing mortgage rates to 11%, causing inflation to exceed 5%, and putting the economy into recession well before the global financial crisis. Now they want to make the same mistakes all over again.


Labour negative on labour

August 27, 2014

Labour’s campaign on positivity took several hits at the ASB finance spokespeople’s debate in Queenstown last night.

The worst was from its finance spokesman David Parker in response to a question on immigration when he said:

“I don’t think that in a world that needs less labour the answer is more labour.”

He then went on to talk about low value immigrants, was pulled up by the chair Duncan Garner and tried to turn it into immigrants doing low value jobs.

Then he repeated what he’d already said that in a world with a decreasing need for labour because of technology the answer wasn’t more labour.

That is an extraordinarily ignorant statement which shows no understanding of how an economy and the job market works.

It also demonstrates a depressingly negative attitude from a party which obviously doesn’t understand wealth creation.

Businesses go and others come, jobs go and others come and in a growing economy more come than go.

They might be different jobs and will need differing levels of skill and receive differing levels of pay, but they will be jobs.

Finance Minister Bill English made that point by saying that we will need 150,000 people to fill the jobs that will be created.

Parker presumably meant labour with a small l but look at his sentence with a big L:

I don’t think that in a world that needs less Labour the answer is more Labour.

Now that’s positive.


Peters scared of Craig

August 27, 2014

The Queenstown ASB debate between the finance spokespeople for five parties attracted a sell-out crowd last night.

debate

The photo shows, chair Duncan Garner, Finance Minister Bill English for National, Conservative leader Colin Craig, Labour’s David Parker, Act’s Jamie Whyte and Green Russel Norman.

Duncan Garner said that the Maori Party declined the invitation, Mana didn’t reply and New Zealand First leader Winston Peters refused to come if Craig was there.

The chair gave each speaker three minutes to give a pitch then gave them a few questions before taking questions from the floor.

Labour’s trying to campaign on being positive but its finance spokesman started by being negative about the economy and the outlook.

Jamie Whyte started by quoting Adam Smith:

Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.

He also asked who’s going to make better decisions – someone putting their own money at risk in search of profit of someone using other people’s money in search of votes?

Duncan Garner asked him to name one Green policy he agreed with and he said he couldn’t think of one.

The question Duncan Garner put to Russel Norman at the end of his three minutes was whether he could say something good about the Finance Minister and he said he’d been very responsible.

Colin Craig rattled through his policy which includes tax cuts at the lower end.

The chair asked him to say whether he’d go with National or Labour if he had the choice after the election. He said National because the party would have the most votes.

Clutha Southland MP Bill English got the biggest welcome from his home crowd.

He started by giving people the credit for their resilience, responsible and work and how important that was because the economy doesn’t just exist in an office in Wellington, it’s what people do.

That, in partnership with National-led government’s careful management of public finances, had put New Zealand back on the right track.

He said we now have a platform built on our resilience the positive encouragement from government and the most positive Prime Minister New Zealand has had that will allow us to have sustainable growth.

“You have set that direction and we can keep it,” he said.

There’s a video of the debate here.


Labour spending scares itself

August 27, 2014

Labour’s propensity for over taxing and over spending is scaring voters, it’s scaring the Green Party and it’s scaring itself:

David Cunliffe and Labour are still committed to irresponsibly spending all of the next four Budgets before the election, despite yesterday attempting – and failing – to recast their ropey fiscal forecasts, National Party Finance Spokesman Bill English says.

“New Zealanders can now see that under David Cunliffe economic history would repeat itself,” he says.

“Having been part of a Labour government that left New Zealand in recession with high interest rates, forecasts of never-ending deficits and ever-rising debt, David Cunliffe has again confirmed he has learnt nothing from the fiscal and economic mess Labour left for New Zealanders.

“Two election campaigns on, he has reverted to form with new spending promises still totalling nearly $18 billion over four years. Having been criticised for being fiscally irresponsible, he belatedly realised he had over-stretched and has attempted to back down. But it hasn’t worked.

“David Cunliffe has scared New Zealanders with his spending plans and he’s scared his partners the Greens. He’s now even scared himself. No wonder the Greens are calling for a full audit of Labour’s numbers.

“The trouble for Labour is that its claims of trimming extra spending just don’t stack up because proper costings of Labour’s tweaked promises still add up to around $18 billion over four years. And that’s before you add the Greens’ promises to spend an extra $10 billion over the same period – and who knows how many billions more by the Dotcom party.

“By contrast, National has committed only a small fraction of future Budgets. This will provide us with flexibility to deal with future shocks, speed up debt repayment or provide future tax reductions should there be room to do so.”

Labour’s spending is predicated on more tax income on the back of higher tax rates and new taxes, including a Capital Gains Tax.

It ignores the fact that increasing the tax rate and adding new taxes doesn’t bring in a corresponding increase in the tax take and can reduce it.

On top of that its less flexible employment law and other costs to and constraints on business will act as a handbrake on economic growth, wage rises and job prospects.

And that’s without taking into accounts the expensive price it will have to pay to cobble together a coalition with the Green, New Zealand First and Internet Mana parties.


Follow

Get every new post delivered to your Inbox.

Join 1,341 other followers

%d bloggers like this: