Cost of higher fuel tax

An extra four cent tax was imposed on motorists yesterday.

The direct cost is obvious – it will be more expensive to buy fuel.

The indirect costs won’t take long to take effect – higher prices for everything that has a transport component.

That will hit individuals, community organisations and businesses.

And for what?

. . .Half-way into the “year of delivery,” and all we’re seeing is key projects delayed, down-sized or discarded. The public are seeing noticeable asset deterioration at a rate we haven’t seen previously. It’s across New Zealand, Forum members advise, not just Auckland. . . 

Where’s the money gone? What exactly has it been spent on? Auckland transport users certainly aren’t seeing the benefits.

The rest of New Zealand isn’t seeing any benefits either.

We’re paying higher prices for fuel and getting less spent on roads.

Time to target tourists?

Cataclysmic headlines tell us we’re facing a climate crisis.

Councils are declaring climate emergencies.

People are marching demanding action to reverse climate change.

But how many are actually doing anything that will make a real and sustainable difference?

In spite of what it’s trying to tell us our government isn’t.

Its carbon zero bill is largely political and bureaucratic posturing that ignores the science.

If it was really serious about doing something that made a real difference it would stop trying to reduce farm production here which will only increase emissions as other less efficient producers increased their production to fill the gap.

Instead it would target tourists, taxing travel for any but essential reasons.

Farming produces food which people need for survival.

The benefits from tourism are purely personal.

Tourist taxes high enough to compensate for the emissions from travel aren’t being imposed and haven’t been suggested as a serious solution.

Does this mean that the government hasn’t got the courage of its climate change convictions, has got another plan it has yet to tell us, or doesn’t really believe there’s a crisis?

Tax Freedom Day at last

We’re nearly half way through the year and have only just got to Tax Freedom Day:

A media release from the Taxpayers’ Union says:

From today until the end of the year you are finally working for yourself, and not the taxman, says the New Zealand Taxpayers’ Union.
 
‘Tax Freedom Day’ marks the day on which New Zealanders have collectively worked enough to pay off the cost of government for the year.
 
Taxpayers’ Union spokesman Louis Houlbrooke says, “For the average New Zealander, getting to work on Monday represents the first day they’re working for themselves.”
 
“This year’s total government expenses have been forecast to suck up 41.5 percent of the economy. That means, if a taxpayer wanted pay off their share of government expenses as soon as possible this year, they would have to work sacrifice all their wages from January the 1^st, until today, June 1^st.”
 
“Today is worth celebrating, but it’s a shame we had to wait so long to pay off the politicians’ expense card. Unfortunately, government spending increasing faster than economic growth means the continuation of the trend of a later Tax Freedom Day.”
 
“Some other groups chose to observe Tax Freedom Day earlier this year. But our chosen date – based on OECD figures – takes into account local government and spending paid for with debt, meaning it reflects the full burden of government on taxpayers.”

And on the eve of Tax Freedom Day, the government pushed through an increase to fuel taxes under urgency:

The Taxpayers’ Union is slamming the passage of legislation hiking the price of petrol at the pump to see that more than 50 percent of the price paid will soon be tax. Union spokesperson, Jordan Williams says:

“Clearly ‘wellbeing’ is just marketing fluff.  Petrol taxes are highly regressive – they hit the poor, those in regional New Zealand, and those who live on outer suburbs the hardest. It’s one of the cruelest forms of tax.”

“Rushing these new petrol taxes through Parliament under urgency is disgraceful. They are a total breach of the Prime Minister’s ‘no new tax’ election promise.  And Labour know it.”

“Pain at the pump underscores the fact that big-ticket Budget announcements come at a real cost, regardless of the fuzzy wellbeing language the politicians use to promote them.”

Petrol was more than $2.45 a litre when we passed through Omarama earlier this week. Tax is already too big a contributor to that.

Taking more money from everyone and adding to the cost of everything will not contribute to wellbeing.

Rural round-up

Gas tax won’t cut farming emissions – Neal Wallace:

A capital gains tax is off the agenda but farming leaders are warning the imposition a suite of new taxes and regulations is pending.

In addition to farmers paying a greenhouse gas emissions tax of $50 million a year the Government is expected to impose tougher regulations on freshwater quality, aerial cropping, winter grazing and feedlots.

“When you look at everything else coming down the pipeline, if I was asked to pick one we were prepared to lose it would be this one, the one we have won,” Federated Farmers vice-president Andrew Hoggard said of the capital gains tax.

Prime Minister Jacinda Ardern also ruled out water and fertiliser taxes as suggested by the Tax Working Group. . .

Top dairy title revealed tonight – Yvonne O’Hara:

Dairy farmer Emma Hammond, of East Limehills, felt honoured when she was nominated for this year’s prestigious Fonterra Dairy Woman of the Year award.

The only South Island-based finalist, she and the other three women will hear if they are winners during a dinner this evening at the Allflex Dairy Women’s Network’s conference in Christchurch.

”For us to be recognised for what we do and get that acknowledgement is humbling,” Mrs Hammond said. . .

Farm management whizz ‘well on track‘ – Sally Rae:

At 19, James Matheson set a goal of having $1 million equity by the time he was 30.

Now 26, the Gore farm manager is ”well on track” to achieve that, sitting at between $700,000 and $800,000.

It has been a meteoric rise for a young man who had never previously considered a career in the dairy industry.

Now he and farm owner Chris Lawlor were endeavouring to help other young people follow a similar path through an innovative initiative. . . 

Highlife on top of the world – Andrew Stewart:

Setting up a tourism venture on a farm not only provides a second income but also acts as a public relations exercise to help bridge the rural-urban divide. And when it includes luxury glamping and breathtaking views the visitors cannot fail to be impressed. Andrew Stewart took a look.

In terms of spectacular views, Angus and Sarah Gilbertson’s farm is up there with the best. 

Rising to 600 metres above sea level at the highest point, the panorama on a clear day encompasses all the mountain peaks of the central plateau, Mount Taranaki to the west and the clear blue waters of the Tasman Sea far to the south. 

Between these stunning landmarks are great swathes of some of the most productive farming country in New Zealand that connect the landscape in various shades of green. It’s the sort of view you can’t help but stop and enjoy and this is part of the reason the Gilbertsons created their glamping business five years ago. . . 

The 10 biggest stories in farming over the past 25 years – Jamie Mackay:

My final chat on Newstalk ZB with the laconic Larry Williams was a great excuse to take a trip down memory lane.

Larry was stepping down after 27 years at the drive helm on ZB, while I was blowing out the candles on an accidental radio career spanning a quarter century in rural broadcasting.

For our penultimate ZB cross the week earlier I’d turned the tables on Larry and, without warning, asked him some unscripted questions. Much like his metronomic golf swing, he’s sometimes hard to get off script, but on this occasion he took up the challenge with good humour. . . 

Hunt on for ‘M.bovis’ study project manager – Sally Rae:

The search for an assistant research fellow to project manage a study on the impacts of Mycoplasma bovis on farmers and their communities has attracted a high level of interest.

In January, it was announced the University of Otago would undertake a study on the emotional, social and psychological impacts of the bacterial cattle disease on southern farmers and farming communities.

The two-year study, due to start this month, will look at the impact of the eradication programme on farmers specifically and the wider community more generally. . . 

Medicinal cannabis firm Pure Cann New Zealand gets $6 million investment– Rebecca Howard:

Pure Cann New Zealand, which counts former Air New Zealand boss Rob Fyfe as its executive chair, has secured $6 million from Australia’s Cann Group for a 20 per cent stake in the local medicinal cannabis company.

The investment will be made over stages with the initial 10 per cent to be completed on or before August 30 and a further 10 per cent when New Zealand regulations come into force and Pure Cann’s board approves the construction of its commercial cultivation facility.

The New Zealand government anticipates introducing new regulations, licensing requirements and quality standards governing medicinal cannabis usage by the end of this calendar year. . . 

 

No CGT but . . .

The government is not going to adopt a capital gains tax .

The backdown has cost $2 million and 18 months of uncertainty but Simon Bridges point out there will be more taxes:

“While the Government has backed down on a Capital Gains Tax, there are still a range of taxes on the table. They include a vacant land tax, an agricultural tax and a waste tax.

“Prime Minister Jacinda Ardern says she personally still wants a Capital Gains Tax and that our tax system is unfair. New Zealanders simply can’t trust Labour when it comes to tax. 

“The New Zealand economy has suffered while the Government has had a public discussion about a policy they couldn’t agree on. Put simply, this is political and economic mismanagement. . . 

The government asked a question, the answer to which its three constituent parties couldn’t agree on.

Remember James Shaw saying:

“The last question we should be asking ourselves is, ‘can we be re-elected if we do this?’ The only question we should be asking ourselves is, ‘do we deserve to be re-elected if we don’t?'”

Labour and the Green Party had to swallow a big dead rat, served to them by Winston Peters:

. . .It wasn’t even an hour after the Prime Minister had put the final nail in the coffin that is the capital gains tax (CGT) when RNZ asked Mr Peters whether Labour will be expecting his party’s support on another issue in return for losing this flagship policy. Mr Peters fired back: “May I remind you, the Labour Party is in government because of my party.”

No reading between the lines necessary. . .

New Zealand First is polling under the 5% threshold, it couldn’t afford to alienate the dwindling number of its supporters.

The capital gains tax, if not dead, is buried while Ardern is Prime Minister, but the threat of other niche taxes is still live.

 

$5b extra cost with CGT

BusinessNZ has worked out the proposed capital gains tax would impose an extra $5 billion on the economy :

BusinessNZ has released an analysis of additional costs to the economy that would accompany the direct costs of New Zealand’s proposed capital gains tax.

It shows compliance costs of $1.6 billion, administrative costs of $210 million and deadweight costs of $1.5 – $4.2 billion, over five years.-

BusinessNZ Chief Executive Kirk Hope said the Tax Working Group’s report did not include compliance, administrative or deadweight costs, and these needed to be made explicit to enable public debate about costs before the Government made its decision on a capital gains tax.

Goodness me, how surprising.  The people proposing a tax based on an ideological view of fairness didn’t include the costs.

Compliance costs include Valuation Day requirements for all business assets to gain a valuation to enable the imposition of the capital gains tax.

Administrative costs are IRD’s costs of collecting the tax.

Deadweight costs are the costs of reduced economic output resulting from changes in supply and demand caused by the imposition of a tax. . . 

Those who want the tax keep repeating the same theoretical argument about fairness.

Those opposing it keep finding real, practical reasons why it isn’t fair, will add costs and sabotage the economy.

There’s more on this at BusinessNZ

CGT based on dodgy stats

Assertions about the impact of the proposed capital gains tax are based on dodgy numbers.

Troy Bowker writes:

The Tax Working Group (TWG) used an unreliable survey by the Department of Statistics as the basis for its argument that the majority of the proposed capital gains tax (CGT) will be paid by the top 20 per cent of households measured by wealth.

Repeatedly, since the final report was published, Sir Michael Cullen has quoted the “statistic” to the media that 82 per cent of the assets that will be subject to CGT are owned by the top 20 per cent of New Zealand households measured by net worth.

He goes on to state (as factual) the second 20 per cent of wealthy households will be responsible for another 11 per cent , then only 4 per cent for “middle” New Zealand.

In reality, this information is based on what most reasonable people would describe as little more than guess work.

It has been used for political purposes to argue that the majority of the public have nothing to worry about, and it will be mostly the “rich” that will pay CGT.

If it is correct (which it isn’t), it’s a very good argument for Labour and the Greens who desperately want to see a comprehensive CGT implemented.

The problem for those wanting CGT is that the data is completely unreliable and should never have been used. We need to know why public officials used it in the first place when they knew, or ought to have known, it was dodgy statistics. . . 

The stats came from the annual Household Economic Survey (HES) carried out by Statistics NZ.

It was done by conducting interviews of 8000 households, out of approximately 1.7 million households, in New Zealand. That’s only 0.47 per cent of households — s a ridiculously low sample size.

The other reason it is unreliable is most of the information provided is unverifiable. The Department of Statistics asks all sorts of questions about the assets and liabilities of each household and records the answers given. People can guess, underestimate or overestimate or not even volunteer information.

As you can imagine, it’s an extremely invasive and intrusive process that attempts to delve into the most personal financial information of New Zealand homes.

By the Department of Statistics own admission, it contains data that is so unreliable they cautioned against its use. . . 

In spite of the caution Treasury used them in its report to the TWG.

It beggars belief that Treasury decided to use this information in its report to the TWG.

Senior Treasury officials who wrote this report to the TWG obviously knew the information couldn’t be safely relied upon.

Hidden in the fine print of the Treasury report, it states “care should be taken when interpreting wealth estimates because the confidence intervals around any point estimates vary widely”.

In layman’s terms, this is like Treasury saying to the TWG: “You probably shouldn’t be using this information as we really don’t know if it’s accurate and some of it’s completely unreliable.”

This raises some very serious questions about the probity of the process that need answering by Finance Minister Grant Robertson, and the TWG chair Michael Cullen (who is still on the Government pay roll). Hopefully he’s still being paid to answer the question of why the TWG used this data.

Did the TWG specifically request Treasury to dig up statistics to support the political argument that only the top households would pay CGT? Did the TWG know the data they were using was largely unreliable? Treasury obviously had concerns about using it and told the TWG in its report. So why did the TWG use that data? Does the Finance Minister now accept this data is unreliable and shouldn’t have been used for political purposes to justify Labour’s proposed CGT?

These are very serious questions that need to be answered and answered publicly.

The reality is, we don’t have enough reliable information to draw any conclusions at all about which households will pay the most from the proposed CGT.

We do know, however, that there are hundreds of thousands of farmers, business owners, lifestyle block owners, bach owners and sharemarket investors who will pay a lot more tax if Labour are successful in implementing CGT.

There are an awful lot of hardworking ordinary Kiwis who don’t consider themselves wealthy who will pay CGT if Labour are successful in convincing Winston Peters to support it.

For Labour to use these dodgy statistics to mislead the public would be to underestimate the intelligence of the voting public of New Zealand.

The CGT debate has a long way to go. But Labour need to come clean and be honest about the many hundreds of thousands of middle income Kiwis who will pay CGT. They also need to answer some serious questions about how, and why, the HES was used to support the main argument on fairness by the TWG.

This proposal is the most significant tax reform in many years in New Zealand and we deserve better than public officials using dubious and unreliable data to support a preconceived political agenda.

Significant tax reform should not be based on dodgy stats for both ethical and practical reasons.

Ethical because it’s wrong to base assertions on wrong numbers, and practical because if the stats are dodgy there can be no certainty about the outcomes.

It’s not just who would pay how much that matters, but how much tax a CGT would raise.

If the stats on which the assertions of who would pay what are dodgy the conclusions on how much that would raise are also completely unreliable.

The TGW was told any proposals must be revenue neutral – that is, the amount raised by any new tax would be offset by cuts to old ones.

There can be absolutely no certainty about how much it would raise and therefore how much other taxes could be lowered if the whole proposal is based on numbers based on guesswork.

Almost all those favouring a CGT do so based on an ideological and political idea about fairness. 

There is nothing fair about assertions based on dodgy numbers and a tax full of loopholes that would disincentivise investment and sabotage the economy.