Govt should look in mirror

Fuel prices are coming down which ought to be good news for the government.

But as they drop, the percentage we pay in tax gets higher which only reinforces the knowledge that the government’s impost is too high.

It has confirmed that it’s ordering a market study into the retail fuel market.

This will be an expensive exercise and the Taxpayers’ Unions says the government could save the money by looking into a mirror, not the market:

Taxpayers’ Union spokesman Louis Houlbrooke says, “The recent spike, and now drop, in petrol prices shows that the market’s influence on petrol price varies. What is constant, however, is the Government’s fuel tax, which makes up close to 50 per cent of current prices.”

“The Government’s conspicuous hand-wringing over the conduct on petrol companies looks like an attempt to distract from its ongoing tax revenue grab – set to escalate with further petrol tax hikes in 2019 and 2020.”

“The Prime Minister is playing loose with the truth when she says tax revenue goes straight into improving our roads. Her Government has pursued a strategy of raiding excise tax revenues to fund projects motorists don’t use – like trams and cycleways.”

This last point is particularly galling.

High fuel taxes spent on roads would be a form of user-pays which is  a a bit less difficult to swallow than higher fuel taxes for public transport and cycleways.

High fuel prices flow on to the cost of all goods and every service for individuals and businesses.

They also impact on not for profit organisations that provide social services and hit the poorest hardest.

If the government was serious about reducing poverty, it would acknowledge the high cost of fuel is one of the biggest contributing factors and the part tax plays in that.

Reducing, or at least not increasing, fuel taxes would be a simple way to reduce the cost of living and therefore help the people it purports to want to get out of poverty.

 

CGT & death tax by stealth

The Tax Working Group wants a Capital Gains Tax:

The Tax Working Group has reached a consensus on introducing a capital gains tax, but it is not supported by all members of the working group, chairman Sir Michael Cullen has revealed.

“We have got to the point where we have a central package around the extension of capital income tax which is supported by a clear majority of the 10-person working group,” he said. . . 

I am not opposed to a CGT per se, but to be fair and efficient it must be comprehensive and replace other taxes. This one is likely to fail on both of those counts.

If it’s not comprehensive it will be expensive to administer and full of loopholes making it ripe for avoidance.

If it doesn’t replace other taxes it will be placing an even greater burden on individuals and businesses and act as an even stronger hand brake on productivity.

Cullen said the working group had discussed an alternative option of an inheritance tax, despite an instruction from Finance Minister Grant Robertson that should be off the table.

“We are not supposed to be looking at inheritance taxes but a majority of my colleagues on the tax working group appear to have a found a partial way around that,” he said. . . 

National finance spokesperson Amy Adams says:

“The Government already takes about $50,000 a year in tax from the average New Zealand household and has worked quickly to increase that burden with more taxes on everything from fuel to residential property.

“A Capital Gains Tax will see New Zealanders pay more tax on their small businesses, baches and investments and are known to be very difficult and expensive to apply. . . 

“National believes extra taxes that hit New Zealanders in the back pocket are wrong. If the Government cut down on its wasteful and poorly target expenditure we wouldn’t need any more tax. National are committed to repealing any capital gains tax brought in by this Government.”

On top of a CGT, there’s also the threat of a death tax by stealth:

If the Tax Working Group recommends an inheritance tax in all-but-name, the Government should declare it dead-on-arrival, says the New Zealand Taxpayers’ Union in response to comments made by Sir Michael Cullen in Wellington today.

Taxpayers’ Union spokesman Louis Houlbrooke says, “The Government ruled an inheritance tax out of scope in the Tax Working Group’s Terms of Reference, but Sir Michael Cullen says a majority of the Group has found a way to include it. Warping a capital gains tax to implement a death tax by stealth would be a betrayal of those terms.”

“Taxpayers were told the role of the Working Group was to modernise the tax system. It’s actual task appears to be preparing the country for an ideological tax grab.”

One of the TGW’s aims was to make the tax system fairer.

A CTG which isn’t comprehensive and a death tax by stealth will do the opposite.

But perhaps the mention of the death tax is merely a diversion to take attention away from the CTG.

 

Why not less tax?

The Tax Working Group is trying to find out ways to make tax more fair.

Imposing not just a Capital Gains Tax but the costs of complying with it on individuals and business is anything but fair and, as Hamish Rutherford shows, the attempt by the group’s chair Sir Michael Cullen to shut down discussion in it makes it worse.

. . .After a critic raised concerns of the implications of proposals in the working group’s interim report, Cullen was dismissive.

Critics should wait for the tax working group’s final report in February, he said. The interim report may be the only thing the public has to work off, but Cullen said that the Tax Working Group’s own work had moved on and all the problems are being solved.

This Kafkaesque shutdown came after Wellington businessman Troy Bowker made alarming claims about the possible costs introducing a tax would have on small business, predicting the cost of compliance would be billions of dollars.

Bowker claimed the tax working group’s preferred method for introducing the tax – creating a “valuation day” after which all assets captured by a new tax would immediately be taxable – would create huge compliance costs, with all businesses needing to be professionally valued on a given day.

Valuing things like commercial property is as easy as valuing your home – just look up the rateable value. But valuing businesses, especially small businesses, can be much harder. Much is tied up in the knowledge and contacts of the key employees, which is tough to put a price on.

Although Bowker’s assessment of the possible costs was guesswork, the tax working group’s own interim report appears to back up his argument. . . 

While the exact cost might be debatable, that there will be a cost and it will be high is not and nor is who will pay it – everyone directly or indirectly.

Anything that adds to the cost of doing business and reduces profit, as a CGT will, decreases productivity. That in turn makes the businesses less able to expand and could lead it to contract, threatening jobs and the businesses’ viability. Should the businesses survive, the added cost will sooner or later be passed on, at least in part, to everyone who uses the goods or services that business provides.

Meanwhile, the question that ought to be asked, is what’s fair about more and higher taxes when the government is running a very healthy surplus?

The previous government took the quality of its spending very seriously aiming for better rather than more.

This government is sprinkling money here and there like fairy dust in the mistaken belief that quantity is better than quality.

There is a case for more spending in some areas where spending was too constrained but there is no case of profligacy with public money.

A government with money to waste is a government that’s taxing us too much.

More care about how and on what money is spent would reduce waste and allow us all to keep a bit more of the money we earn.

Instead of looking at ways to impose new and more tax, the TWG ought to be working out how to tax us less.

 

Bridges talks tax – less and lower

Simon Bridges is talking tax – less and lower while increasing funding for core services:

His commitment is to prioritise good outcomes over good intentions.

I believe Kiwis pay too much tax already. That’s why @nznationalparty will:
✓ get rid of the Akld Regional Fuel tax
✓ repeal any Capital Gains Tax
✓ Have no new taxes in our first term
✓ Not add any more excise tax to petrol in our first term

— Simon Bridges (@simonjbridges) November 25, 2018

While the government has a working party to look at how to tax us more, National provides a very clear commitment to let us keep more of the money we earn.

Petrol pain pressures policy on hoof

The pressure from the pain of petrol prices has forced a government backdown:

National Party Leader Simon Bridges has welcomed the Prime Minister’s forced backdown on her regional fuel taxes, and called on her to overturn her excise increases and remove the regional fuel tax imposed on Aucklanders.

“After pressure from the National Party over her Government’s decision to impose more and more new taxes on record petrol prices the Prime Minister has today finally backed down and ruled out rolling the regional fuel tax out beyond Auckland while she is Prime Minister.

“This is in spite of her Government introducing legislation which would have enabled the 11.5 cent per litre regional fuel tax to be rolled out around the country from 2021. It has already been imposed on Aucklanders.

“Fourteen other councils had already started discussions with the Government saying they wanted the tax and will be surprised to hear about the Prime Minister’s backdown today.

“Her Transport Minister was also be surprised at his Prime Minister’s unilateral decision. This was forced policy made up on the hoof by a Prime Minister under pressure over her disregard for the costs her Government is imposing on New Zealanders.

Policy on the hoof is becoming a habit. This time it’s doing the right thing but it’s not a good way to govern.

“New Zealanders will be relieved. These taxes on top of record petrol prices are hitting them hard and pricing them out of their cars yet this Government was blindly forging ahead with new taxes because it can’t get its spending under control.

“The Prime Minister needs to go further, do the right thing and throw her numerous new taxes out completely. She should remove the regional fuel tax from Auckland as well as her first four cent national excise tax increase, and pledge not to impose any more new taxes.”

 She can cast blame on fuel companies but nearly half the cost of a litre of petrol is tax.

It was bad enough when all the money collected was spent on roads, it’s much worse now some is being spent on cycleways and public transport most of us will never use.

Value for tax $s isn’t partisan

The Taxpayers’ Union is encouraging people to celebrate Labour Day by joining them:

 The Union’s Executive Director, Jordan Williams, says, “With the events of the last seven days seeing the Opposition distracted, and the Government using the opportunity to rule out tax relief for New Zealand workers, external pressure groups fighting to hold the Government to account are as important as ever.”

“We are using this important day to step-up our efforts fighting for Lower Taxes, Less Waste, and More Transparency.”

“Tax is by far the largest cost imposed on New Zealand workers and their families. Every dollar wasted by politicians and bureaucrats is one less for the hard working taxpayer who earned it.”

The Taxpayers’ Union relies on support by its members and subscribed supporters to fund its work. Becoming a supporter is free, with membership from as little as $5 at http://www.taxpayers.org.nz/join.

The NZTU is often described in the media as right wing it’s not, and working for lower taxes, less waste and more transparency is not politically partisan.

I don’t buy into the line that parties on the right of the political spectrum don’t care about the poor but parties on the left purport to champion them.

The poor have most to gain from lower taxes and less wasteful, more transparent governments.

Wealthy people don’t like higher taxes but they don’t have to worry about every dollar the way poor people do and every dollar taken in tax and wasted by government misspending is a dollar they need more.

The NZTU was launched when National was in power and held it to account. It is continuing to hold this government to account and that brings benefits to us all.

I joined the NZTU when it was launched and continue to support it as the only organisation that seeks to ensure better value for taxpayers’ money.

Taxing too far

The petrol tank was around a quarter full when I stopped for more fuel.

It cost more than $100.

As I paid I said to the woman serving me, “I’m pleased this doesn’t mean I can’t buy the groceries, it must be hard for a lot of people.”

She agreed, said her children were on the minimum wage and one sometimes had to toss up between fuel for the car to get to work and food for her family.

That is now the reality for too many people.

The government can cast blame on fuel companies but it has to take some responsibility.

The extra taxes it has already introduced and the additional tax in the pipeline makes the government’s share of the price we pay at the pump too big a proportion of the total cost.

Just like tobacco tax, the extra fuel tax (and GST on top of it) is taking tax too far.

It’s not just that people are now having to toss up between fuel and food, it’s compounded by the inflationary impact of fuel tax because all goods and every service have a fuel component. The extra taxes are making that fuel too expensive and inflating the cost of everything else.

That doesn’t just impact on households and businesses. It is over-stretching budgets for hospitals, schools and the myriad providers of social services, whether or not they are not-for-profit.

The politicians’ encouragement for people to use public transport more doesn’t help these organisations.

They can’t get their supplies delivered by foot, cycle or bus and their staff can’t use those modes of transport to carry out their work.

They’re not an option for many people on shift work nor for anyone who  lives or works too far from bus routes.

When you live in the country you can do your best to minimise the times you need to go somewhere, but some travel is necessary and that requires driving your own vehicle.

When the government has a $5 billion surplus – even if big-cost items in this year’s Budget aren’t included in it – it shouldn’t be introducing any extra taxes.

It should be having a very careful look at its spending, taking a very sharp knife to every excess, and not just forgetting any more fuel tax, it must remove the extra it’s already imposed.