What’s fair?

14/02/2019

The government and many of the groups supporting it put a lot of emphasis on fairness, but what’s fair?

National policy is to adjust tax brackets to take account of inflation which Professor Norman Gemmell, chair in public finance at Victoria University, says is only fair:

 Tax economists have long advocated that keeping income tax thresholds constant in real terms (by adjusting them upwards as prices rise) should be the norm. But this indexation is much less important for tax on wages than it is for tax on capital gains – a crucial point in the current climate. . . 

Capital income, such as capital gains from house sales or interest payments on bank accounts, are much more vulnerable to this “indexation problem”.

Consider a simple capital gain example. If house prices rise by 5 per cent but “general” inflation is 2 per cent, the real capital gain for homeowners is 3 per cent, not 5 per cent. Now suppose that a 33 per cent tax rate payer buys a bach for $100,000 and sells it one year later for $105,000. The CGT liability on the sale is $660, due to the general inflation of 2 per cent, plus $990 for the additional house price increase (the “real” gain).

So the extra tax levied on the inflation component is a whopping two-thirds as big as the “real” tax liability (or 40 per cent of the total). In other words, with a CGT, failing to allow for general inflation means a huge additional tax bill.

What does this all mean for the TWG advice and a Government concerned with “fairness”? First, adopting National’s indexing of income tax thresholds would be a good idea, and not just for transparency reasons. It is the fair thing to do for taxpayers right across the income scale, who otherwise pay more tax simply because prices have risen.

Also, if the Government decides to go ahead with a CGT, designing out the “inflation problem” is much more important, due to the size of the tax distortion it creates. It is also important for fairness.

Otherwise, what superficially looks like the same tax rate being applied to all income actually means that the effective tax rate on capital gains (and interest income) is much higher than the same rate on income earned as wages. 

Surely that’s not fair?

Even if a CGT is inflation indexed, would it be fair?

Only if you’re a socialist who think that people who work hard, pay the costs and take the risks,  forgo personal spending, to save and invest, and pay taxes on earnings from that work, savings and investment should then be taxed again.

A CTG is a classic envy tax, aiming to bring middle and upper income people down down rather than helping the poor up.

Is it fair that the government is looking at raising more tax rather than letting people keep more of their own money?

Leighton Smith shows a better way:

 . . . the Swiss government must get approval from its voters by virtue of referendum to give themselves a pay rise or change tax rates. In 1975, the voters declined a government request for a tax increase. A prominent Swiss citizen, responding to a question of what happens next, replied “the government will have to live on what it has, like the rest of us.” But it doesn’t stop there. The Swiss have a separation of powers between taxing and spending, in the belief that temptation to overspend is omnipresent. Unfortunately, we in New Zealand could be returning to the ideology of the politics of envy. The introduction of any tax policy that enriches the accounting industry is bad policy. . . 

A government that keeps telling us its a good economic manager should not need more tax, in fact the reverse is true.

Healthy surpluses are a clear sign it’s already taking too much for us. There is no need for new taxes, and certainly not one that would benefit tax accountants and lawyers most.

Better taxes are simpler taxes. A CTG would be complicated and in spite of the aim of fairness which is behind the motivation for its introduction, would not be fair.

 

 


Tax cuts could cut strikes

17/01/2019

The Taxpayers’ Union has a simple way to reduce strikes:

Implementing tax relief would relieve the pressure of low take-home pay and resolve much of the current industrial action, says the New Zealand Taxpayers’ Union.

Taxpayers’ Union Executive Director Jordan Williams says “It’s understandable that junior doctors and the Wellington bus drivers feel under pressure – no Government has delivered a tax cut since the 2010 Budget. If the Government delivered tax cuts, take-home pay would increase and workers would feel welcome reprieve.”

“Tax cuts would help all workers. The Taxpayers’ Union is calling on our union allies to help back collective action for tax cuts. Acting together, the union movement could put pressure on the Government to boost pay for everyone and end the pressure of industrial action on our heath and transport sectors.”

The Government surplus is running ahead of forecasts which means it’s taking more tax than it needs.

Tax cuts would boost take home pay for workers and increase pensions which are based on after-tax income.

The government should be letting us all keep more of our own money.

It should throw out whatever suggestions the Tax Working Group has for introducing any new taxes – especially a Capital Gains Tax.

It should end wasteful spending.

And if it can’t bring itself to cut taxes, at the very least t should increase tax thresholds so modest pay rises don’t push people into higher tax brackets.

 

 


Rural round-up

06/12/2018

Dairy product prices climb as whole milk powder gains – Margaret Dietz:

(BusinessDesk) – Dairy product prices rose at the Global Dairy Trade auction, stemming a decline that began in May.

The GDT price index gained 2.2 percent from the previous auction two weeks ago. The average price was a US$2,819 a tonne, compared with US$2,727 a tonne two weeks ago. Some 36,450 tonnes of product was sold, down from 42,966 tonnes two weeks ago.

Whole milk powder climbed 2.5 percent to US$2,667 a tonne. . . 

Dairy bosses are best employers:

In the first-ever Primary Industries Good Employer Awards dairy farmers Ben and Nicky Allomes won the top accolade, the Minister of Agriculture’s Award for Best Primary Sector Employers.

Woodville dairy farmers Ben and Nicky Allomes have been named the Best Primary Sector Employers. 

The couple, who own Hopelands Dairies, also won the Innovative Employment Practices award. . . 

Fonterra reaches provisional deal with Beingmate:

Fonterra Cooperative Group has reached a provisional deal with Chinese partner Beingmate Baby & Child Food to unwind their Darnum joint venture in Australia.

The joint venture – 51 percent owned by Beingmate and 49 percent Fonterra – produced infant formula products at the Darnum plant in Australia for Beingmate’s Chinese customers, and was a key component of Fonterra’s plan to expand its reach into China’s second and third-tier cities. . . 

Voting for the 2nd Fonterra Directors’ Election is underway:

Voting is now open for the 2018 Fonterra Board of Directors’ Second Election.

Only two candidates from the first election, Leonie Guiney and Peter McBride, obtained more than 50% support from voting shareholders. The Rules of the first election state that if not enough candidates obtain more than 50% support, there must be a second election. . . 

Dairy loan done on a handshake, details to follow:

It beggars belief that the Government has dispensed a $9.9 million low-interest loan to a dairy company without having finalised the terms, National’s Economic and Regional Development spokesperson Paul Goldsmith says.

“The Minister in charge of the Provincial Growth Fund couldn’t tell the House what terms he had in mind when he undercut commercial lenders to provide debt funding for a new processing plant.

“I wouldn’t blame any business like Westland Milk for accepting a cheap loan from a secure lender. . . 

Apple producer’s underlying profit looks to be at top end:

Apple producer Scales has had a bumper year with a record export crop lifting profits to the top end of guidance.

The company’s underlying profit was likely to be at the top end, or slightly exceed, the current guidance range of $58 million to $65m, in the year ending December.

Managing director Andy Borland said it was an excellent performance for the group, with all business units performing well over the year. . . 

New Landcorp chair appointed:

Dr Warren Parker has been appointed as Director and Chair of Landcorp, the Minister of Finance Grant Robertson and Associate Minister of State-Owned Enterprises Shane Jones announced today.

Dr Parker is a former Chief Executive of Scion (the NZ Forest Research Institute) and Landcare Research, and was previously Chief Operating Officer of AgResearch. He currently holds a number of board roles including on Predator Free 2050 Ltd, Farmlands Cooperative Society, Genomics Aotearoa and is the Chair of the Forestry Ministerial Advisory Group. Until recently he was Chair of the New Zealand Conservation Authority. . . 

Landcorp out of touch with real farmers:

Landcorp’s submission to Sir Michael Cullen’s Tax Working Group (TWG) is a kick in the guts to rural communities, National’s Nathan Guy and David Carter say.

“Landcorp’s sneaky submission to the TWG proposing a water tax, nitrogen fertiliser tax and not opposing a capital gains tax proves how out of touch the state-owned company is with farmers on the ground,” Mr Guy says.

“With 6700 other submissions, why was Landcorp pressured to put in a submission that was more than a month late? The reality seems to be that the TWG are hell-bent on introducing environmental taxes and a capital gains tax, so they leaned on Landcorp to submit supporting more taxes and levies. . . 

New president and vice president elected to HortNZ board:

The Horticulture New Zealand board elected Barry O’Neil as its new President and Chairman at a meeting today. Mr O’Neil replaces Julian Raine, who has been President and Chairman for six years and who has made a significant contribution to horticulture for New Zealand. Mr Raine has stood down to pursue other business interests.

Bernadine Guilleux was elected Vice-President, with both positions effective from 1 January 2019. . . 

Busy orchardist advises small businesses start payday filing:

A Hawke’s Bay orchardist is advising fellow small businesses to be ahead of the game on payday filing.

This is the mandatory requirement from April next year for employers to file their payroll information to Inland Revenue every time they pay their staff.

Te Mata Figs owner Helen Walker has been paying her five staff fortnightly and sending across their details using the online entry method in myIR. . . 


Why not less tax?

27/11/2018

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.

 


Rural round-up

24/09/2018

There is support out there for Hawke’s Bay farmers – Georgia May:

Farmers constantly deal with situations that are out of their control, heavy weather, dairy payouts and stock illness. A vulnerability that doesn’t weigh on the minds of many others.

It’s been nearly three weeks since heavy rain struck the Hawke’s Bay region where some farmers lost up to 25 per cent of their newborn lambs.

While attitudes of farmers generally remain stoic through difficult times, others have spoken out, saying that they feel forgotten about. . .

Plant shows Alliance is serious

Processing has begun at Alliance’s new $15.9 million venison plant at Lorneville in Southland.

The first deer went through the plant last Monday. 

Once operating at peak capacity the plant will employ about 60 people.

It has improved handling facilities and an enhanced configuration. 

The slaughterboard, boning room and offal area are larger than those at Alliance’s venison processing facilities at Smithfield and the company’s former Makarewa plant. . .

Comprehensive interim tax report a useful step:

The Tax Working Group’s (TWG) Interim Report provides a useful resource for how New Zealand’s tax system could be improved says Federated Farmers vice president Andrew Hoggard.

“It’s a good piece of work. The report clearly articulates and explores the issues we raised in our submission – it’s a highlight when you can see you have been heard.”

A big issue explored in the report is whether to extend New Zealand’s taxation of capital income, says Andrew. “Federated Farmers remains opposed to a significant broadening of the capital gains tax particularly if it taxes unrealised capital gains.”

“The report outlines the value of providing ‘roll-over relief’ for farms sold to the next generation and for farmers wanting to ‘trade-up’ to a bigger more expensive farm.  These were two critical issues we raised in our submission to the TWG back in April so we are pleased that it has listened to us on those points. . .

Tax Working Group findings support private land conservation:

QEII National Trust is pleased to see the Tax Working Group’s recommendations acknowledged the scope for the tax system to support, sustain and enhance land protected by QEII covenants.

QEII National Trust CEO, Mike Jebson says “our covenantors know the value of investing in protected private land and we are pleased to see the Tax Working Group include suggestions that costs incurred in looking after land protected by QEII covenant should be treated as deductible expenses for tax purposes in their interim conclusions.” . .

UK farmers have edge on Kiwis – Jack Keeys:

Over the past 12 months I’ve visited numerous farms and agricultural companies throughout Britain. 

That insight provided an opportunity to observe New Zealand agriculture from an outside perspective and get a clear comparison with those on the other side of the world. 

Driving through Scotland, Ireland, Wales and now England I see the farms here exhibit a large variation in size, topography, climatic conditions and pasture management. 

However, some broad commonalities become very apparent.

The farms have insufficient infrastructure, they are under-stocked and have very inefficient pasture management.

Most farms require subsidies s to be profitable.  . .

Hunters under attack again:

Hunters all over new Zealand feel like they under an intense attack from the Conservation Minister Eugenie Sage who has let her personal hatred of wild animals cloud her judgement.

“This mass killing of up to 25,000 Himalayan Tahr is unprecedented in this country and about one million kilos of meat will be left to rot on the mountains of New Zealand. The stench and pollution of headwater streams will be on the Minister’s head. This is our food basket on which many families rely on.” says Alan Simmons President of The NZ Outdoors Party. . .


Rural round-up

26/04/2018

Land use tipped to change on Waimea Plains, near Nelson, if dam gets nod – Cherie Sivignon:

Waimea Irrigators Ltd chairman Murray King is putting his money where his mouth is to support the proposed Waimea dam.

The dairy farmer and long-term proponent of the dam project said he had committed to buy more water shares, at $5500 a pop, than he needed for his 57ha block of land on the Waimea Plains.

“We’re fully subscribed, a little bit over actually.”

His “60-something” shares would cost him more than $300,000. . .

Retaining soil carbon the answer to managing agricultural GHG emissions – Gerald Piddock:

A Matamata dairy farm has become ground zero for a team of Waikato scientists searching for ways to lower agriculture’s greenhouse gas emissions.

Soil carbon and nitrous oxide losses are being measured on the 200 hectare farm owned by Terry and Margaret Troughton and managed by their son Ben and wife Sarah.

Their findings so far in a project funded by the New Zealand Agricultural Greenhouse Gas Research Centre were outlined at a field day on the farm.

Better pasture management, genetics, feed and nutrition had been done well, but new strategies were needed to take the project the next step forward, Landcare Research’s Jack Pronger​ said. . . 

Farmers give thumbs down to new taxes:

Any move to introduce a capital gains, land or environment tax will meet stiff opposition from farmers, a Federated Farmers survey shows.

The Federation asked its members for their views last month, to help inform the farmer group’s submission to the Tax Working Group. The nearly 1,400 responses indicated strong opposition to some of the new taxes that have been suggested.

Just on 81 percent opposed a capital gains tax excluding the family home, with 11 percent in support. However, 47 percent would support a CGT on property sold within a five year ‘bright line’ test. There is currently a two-year threshold, and the measure is seen by some as a way of discouraging speculators. . . 

NZ farm sales fall 11% in March quarter as mycoplasma bovis keeps farmers nervous –  Paul McBeth:

(BusinessDesk) – New Zealand farm sales fell 11 percent in the March quarter from a year earlier, as the mycoplasma bovis cattle disease outbreak weighed on purchasing intentions and spanned a period where smaller plots of rural land were captured by the regime to screen foreign buyers.

Some 388 farms were sold at a median price of $27,428 per hectare in the three months ended March 31, down from 438 farms at a median price of $27,509/ha in 2017, Real Estate Institute of New Zealand figures show. Fewer dairy and grazing farms accounted for the drop, with gains in finishing farm sales coinciding with strong prices for beef and lamb meat. . . 

Calm ewes produce more than nervous ewes:

A calm temperament in ewes improves ovulation rate and successful pregnancies, according to a study published by The University of Western Australia.

The study, which was conducted in collaboration with researchers from Uruguay, the Department of Primary Industries and Regional Development WA and UWA, has implications for the impact of stress in human reproduction.

The team investigated the reproductive outcomes of 200 Merino ewes known to have either a calm or a nervous temperament. They found the ovulation rate and rate of successful pregnancies to be higher in the calm ewes. . .

Shearing at the end of the world –  Tomas Munita and Russell Goldman:

Life at the end of the world can be lonely.

For weeks at a time, Roberto Bitsch and gauchos like him might not see another human being. They see horses, both wild and tame. They see the dogs they work with. But mostly, they see sheep — thousands of them.

Locals mark time by the length of the sheep’s woolly coats here on Isla Grande, the largest of the Tierra del Fuego islands at the tip of South America, closer to Antarctica than to Chile’s capital, Santiago. . . 

 


Rural round-up

19/12/2017

The water is on, now for the hard bit – Hamish MacLean:

The $57million North Otago Irrigation Company expansion is complete — much to the relief of shareholders, with weather forecasters predicting a warm, dry summer. But irrigation is not so easy for farmers as simply turning on the water and watching the grass grow, Hamish MacLean finds out.

It could be a couple of years before North Otago’s newest irrigators get to grips with their new resource, but with a big dry spell predicted this summer, farmers are pleased to have a guaranteed water supply.

While the water on the North Otago Irrigation Company’s expansion began flowing in September, it was the end of November when all 85 off-takes of the expansion were commissioned, reaching the end of the line at All Day Bay. . . 

Rabobank New Zealand announces new CEO:

Rabobank New Zealand has announced it proposes to appoint Todd Charteris to the position of chief executive officer, subject to regulatory approval.

Rabobank New Zealand chairman Sir Henry van der Heyden said Mr Charteris “will bring significant experience with Rabobank on both sides of the Tasman to the role of CEO, as well as a deep knowledge of agribusiness and extensive relationships across the global Rabobank network”. . . 

Jonni keeps quality core at Stirling cheese – Sally Rae:

You could call Jonni de Malmanche a jack-of-all-trades, or more accurately, a Jane of them.

The South Otago woman is one of the long-serving staff members at Fonterra’s Stirling cheese factory, having worked there for the past 23 years.

“I still enjoy coming to work every day. I love the people, I love basically what Stirling stands for which is we make great cheese,” she said.

The factory, which opened in 1983, was built by the Otago Cheese Company, formed after the merger of three small South Otago dairy companies. In 2010, Fonterra spent $7.75 million upgrading the factory. . . 

 

Westland Milk Products soon to announce new products – Alexa Cook:

New Zealand’s second largest milk company is planning to step away from selling dairy products alone and expand into alternative protein and blended products.

Westland Milk Products has bounced back from a $14.5m loss in 2015/16 to break even this year.

Chief executive Toni Brendish says the co-operative worked hard over the past year to become more efficient.

The company’s purpose was now “nourishment made beautifully for generations” which she said gave it freedom to go beyond traditional dairy products. . . 

Dry summer weather prompts farmers to offload stock, AgriHQ – Tina Morrison:

(BusinessDesk) – Dry summer weather is denting grass growth, prompting farmers to reduce their livestock numbers, with the increased volumes of animals hitting the market starting to weigh on prices, according to AgriHQ’s Monthly Sheep & Beef report for December.

“The common factor pulling values down throughout NZ is the weather,” AgriHQ analyst Reece Brick said in his report. “It was a rapid transition from a particularly wet early spring into one of the driest late spring/early summers in recent years, catching many farmers off guard.”

For the sheep industry, below-average growth rates through November kept a lid on the number of lambs being sent to slaughter, keeping prices higher than anticipated. However numbers were now coming forward in significant volume and the long awaited fall in prices has finally begun, Brick said, noting that meat companies had dropped lamb slaughter prices by 15-20 cents per kilogram over the past fortnight, bringing the price to $7.10/kg. . .

Capital gains tax may be on the horizon with the new government:

With the new government reversing National’s tax cuts in April 2018, the government has now announced the items that are on the tax agenda, and have also signalled other potential changes. Tony Marshall, tax advisory partner for Crowe Horwath, predicts how the government’s new tax agenda may affect farmers.

As promised, the government is forming a Tax Working Group and has stated one of the focuses of the group will be looking into capital gains associated with property speculation. Capital gains tax has always been a contentious topic and sends nervous tension through the farming community. . . 

Monthly Dairy production report November 2017:

Key Statistics:

• NZ milk production for November 2017 was up 4.2% (+3.4% on a milksolids basis)
• NZ milk production for the season-to-date was up 1.8% (+1.8% on a milksolids basis)
• NZ milk production for the 12-months through November 2017 was up 1.3% (+1.9% on a milksolids basis)

Full report here.


Let’s not tax this

16/09/2017

Labour backed down on introducing a capital gains tax without putting it to the electorate in 2020, but they’re still planning plenty of other taxes.


Vision based on science and experience

11/09/2017

David Clark writes:

I also have a Vision…
…of where NZ is going to be taken.

When I was a young fella growing up, all I wanted to do was go farming, just like my Dad, my grandfather before him and my great grandfather who had jumped ship in Thames as an orphan in the early 1870’s. I knew that there was something very special about being able to farm the land and grow food.

Then along came the 1980s and the brutal recession brought on by the changes made the Lange Labour Government. As a teenager I still vividly remember watching Television News coverage of a farmer by the name of Dan Dufty being escorted off his North Waikato farm like so many other families were at the time. I remember the tears running down his face and the anguish in his voice.

I remember worrying about whether that would happen to us, things where pretty tight on our family’s small South Auckland Town Supply dairy farm during this time.

When I left school I was very fortunate to be employed by a family at Orere on their large Sheep and Cattle farm. They demonstrated to me that there was a future in farming if you worked hard and this set me on my course.

I wanted to get ahead and found that by starting a small contracting business, initially as a fencer, with a lot of determination, late nights and early starts I would be on a path to make my own way. There was no O.Es, no leering up. In 1994 my parents and I each sold up our assets in Clevedon and set off for the South Island to take up arable and stock farming in Mid Canterbury.

We started contracting out of necessity to help us fund the development of irrigation on the then dryland farm and in 2010 sold that Contracting run to then fund the installation of Centre Pivot Irrigators that were much more water efficient and resulted in less leaching than the earlier machines.

My wife Jayne and I farm here with our three young sons and my parents still live here on farm. This is our Turangawaewae.

But I sit here, thirty years on from that farmer being dragged off his farm and I wonder, no, I fear we are heading back to those very grim days. In my view we are standing in 1984.

Since I wrote my last article, I have seen overwhelmingly positive feedback who buy into the idea that poor water quality has many causes, urban, rural and industrial. Those many causes have many solutions best worked through on a catchment by catchment, community by community basis.

But sadly I have also seen the hatred and vitriol, and I’ve paid a lot of attention to the policies being proposed or hinted at by Labour and the Greens. I have come to the view that these policies, not in isolation, as a compounding effect will likely result in the biggest drop in agricultural economic confidence since the ‘80s.

A Water Tax levied on irrigation, primarily on the East Coast of the South Island to fund a payment of Koha to Iwi and then pay for waterway restoration across the Nation is inequitable and will be ineffective. There is no correlation between areas of poor water quality and areas of intensive irrigation; in fact quite the reverse applies. The tax will exempt all other farming systems and all urban and industrial takes from municipal supply even though it is very clear that poor water quality is also caused by other activities.

The Greens Nitrogen Tax intends to levy Dairy Farmers initially and other farming types soon after for Nitrate discharge even though other land forms leak Nitrogen, as does the DoC estate, Plantation Forestry and of course the discharges of treated and untreated human effluent and storm water, all of which will be untaxed. The cost of compliance with an Audit Quality Overseer assessment required on every farm, every year would be enormous. The suggestion that funding be used in part to coach farmers on Organics is nonsense.

Overseer was never designed to be used to levy tax and it is not reliable – up to 30% margin of error.

I fully understand that the agricultural sector must work to address water quality issues and I believe that we are already making very good progress with riparian fencing and plantings, upgrading of older irrigators to precision application of water, more targeted fertiliser usage and a major rebuild of farm effluent systems in the last 15 years. We have reduced our calculated Nitrogen loss here by 25% in the last six years. Progress is being made, largely voluntarily, however nationally and certainly in Canterbury, Regional Plans have been introduced to put significant onus on land owners to demonstrate a measurable reduction in agricultural externalities.

Farming under the Canterbury Land and Water Regional Plan will, is, delivering results for the environment, but it is expensive to make the changes required in our faming systems, taxing more money out of our business will slow the progress that we can make on farm due to cashflow restriction.

An inclusion of all agricultural emissions into an ETS will see us as farmers compete in the International Marketplace with another layer of cost as we compete against produce that is largely directly or indirectly subsidised and will see farmers struggling to compete with the same overseas product in our domestic market. An ETS on Agriculture in NZ will simply move food growing to a less efficient producer elsewhere in the world.

I hear people regularly saying we all must pay our dues to fight climate change, but I note that International Air Travel is excluded from the Kyoto Protocol because of the damage it would do to global tourism. Research and Development is the way to reduce livestock emissions, not Tax.

A Land Tax with an annualised charge levied over the value of an asset is just simply a new tax, not based on productivity or profit, just a tax and in my view a tax of envy. Farms have high asset values and low profitability, the affordability of an annualised charge will further undermine farming, especially in the sheep and beef sectors.

A Capital Gains Tax and its’ necessary partners, Death and Gift Duties will threaten the very core of New Zealand Agriculture, but not only Agriculture, but intergenerational ownership of all types of businesses across New Zealand and will result in more land and productive assets being lost to long-term corporate and offshore ownership.

Many families struggle to meet the cash flow and capital raising requirements of family succession at the time of the intergenerational transaction, which is done at or near to market values. The new generation of farmer invests their own capital and relies on either internal family or external borrowings to then buy out non-farming siblings; help expand the business to accommodate multiple siblings and provide money to buy a house for parents or otherwise fund their care and welfare.

If Government put their hand out for a Capital Gains Tax on the lifetime growth in the value of the asset, then that cash removed by way of a tax would be the very cash that was so badly needed to complete the intergeneration handover. I certainly understand the extreme difficulties caused by Death Duties in years gone by in New Zealand. They were abolished for very good reason.

Capital Gains Tax and Death Duties will make continued family ownership of the farms and businesses, on which New Zealand is built, extremely difficult.

In Argentina death and gift duties stall farms sales. People hold onto land and lease it rather than selling.

In Australia, CTG stalls farm succession and sales.

In my view the most significant policy of this election is Labour’s Employment Relations Policy which hands total control of workplace pay, conditions and terms across all sectors and all skills and puts the Unions in a centre role of negotiation and “Remove the ability for employers to deduct pay from workers taking low level protest action during an industrial dispute” . I would argue that most New Zealanders have a relationship with their employer built on mutual trust and respect and I don’t believe that most Kiwis wish to return to the ‘70s and ‘80s were the Ferries went on strike at the start of the school holidays, the works went out just as the lambs came on in January or Unions went out in sympathy for a workplace scrap going on at the other end of the country.

In my opinion, this election has got nothing whatsoever to do with the House Prices or Swimming in rivers, this election and the campaign of Labour is a desperate attempt by the Trade Unions to seize control of the New Zealand workplace.

At present we are living with an asset bubble, certainly in house prices in the upper North Island and arguably in farmland, this is no different to most Western economies that have binged on cheap and plentiful credit generated by the madness of Quantitative Easing. Arguably it is not the Government’s fault that we have “traded up” our family home, put a boat or overseas holiday or new car “on the house”, or generally lived beyond our means and racked up massive private sector debt secured against the family home.

We are enjoying interest rates well below the recent long run average and a credible statistical correction could easily see cost of borrowing lift from 5% to 8-9%, I’m not convinced that many home owners would not find their financial situation severely compromised by a near doubling of interest rates, nor do I think many farming businesses could stand such a shock.

I fully support the need for our society to have a robust and compassionate Social Welfare system to provide an outstretched helping hand to our fellow man as they go through a vulnerable time, but this must be a based on the principle of a hand up, not a hand out, and for us to be able to provide that compassion, we need to have a robust and stable economy in the first instance.

It is a culmination of all of these policies, not just one in isolation that I believe has the very real potential to create a collapse in economic confidence not seen in New Zealand since the 1980s.

The brutal and stark reality is that even with our business, which is very sound and holds only a very modest level of debt, there is simply not the money to pay these taxes and increased costs. The cumulative total of these taxes will far outweigh the taxable profit of our farm and will leave us cash flow negative and therefore un-bankable.

I don’t know where the Labour Party think the cash will come from, I can assure you it is not under the pillow in a cake tin.

I can very accurately tell you where the money for these taxes and charges will come from. These costs will come straight out of the till of the businesses in our local town that supply us with goods and services. I fear for the future of those business and the families employed by them, I really do. The ‘80s was very tough for service industries as well.

Land and CTG taxes will hit businesses big and small including health professionals like doctors and physiotherapists, shops, hair dressers, and trades people.

Will the people who think these new taxes are a good idea also think paying more for the goods and services these businesses provide is a good idea?

We have already suspended all none urgent expenditure pending the election outcome.

I and many other New Zealand farmers today are proud to have grown the grain for your cereal or toast; multiplied the seeds that were planted by other farmers to grow your vegetables and spuds; raised your tender meat; clipped wool for your warm clothes; produced the milk for your coffee and supported a multitude of local businesses along the way.

The words that resonate with me are those of retired US Secretary of Agriculture Tom Vilsack…

“Every one of us that’s not a farmer, is not a farmer because we have farmers. We delegate the responsibility of feeding our families to a relatively small percentage of this country… so the rest of us can be lawyers or doctors… or all the other occupations because we never have to think – Do I actually have to grow the food for my family? No, I go to the grocery store and buy it.”

I am proud to be a farmer, doing what’s right, we are not in the ‘80s, please don’t let us go back…

If you support what I have said, please stand together with me and I would really appreciate you sharing this post.

This vision is built on experience, science and facts not political theory.

A lurch to the left under a Labour-led government would undo much of the good that National’s careful economic management has achieved.


Gift tax by stealth

15/09/2014

Labour yeah-nahed over whether or not capital gains tax would be due on the family home if it was sold by the beneficiaries of a will,  but would which make CGT a death tax by stealth.

It will also be a gift tax by stealth.

Baker & Associates latest AgLetter examines the tax and finds:

Gifting an asset will be considered a CGT event, except in the case of inheritance upon death. The person gifting will be liable for CGT based on the market value of the asset, and this will include farm property.
National removed gift duty because the amount raised didn’t justify the costs.
The major beneficiaries were accountants and lawyers and that would be the case should labour CGT be inflicted on us too.

Labour’s CGT no good – NZIER

10/09/2014

A report by the New Zealand Institute of Economic Research (NZIER) reinforces Federated Farmers concerns over Labour’s proposed capital gains tax:

“The NZIER say the Labour Party’s proposed Capital Gains Tax would not be a good addition to New Zealand’s tax mix as it is proposed, we agree,” says Dr William Rolleston, Federated Farmers President.

“The nature of politics will see the Labour Party try to dismiss the NZIER report.  Yet they must listen to the message because the messenger is credible.

“We commissioned the NZIER to examine Labour’s CGT proposal since it represents a major change to New Zealand’s tax system and has been devoid of critical analysis. 

“Perhaps the most concerning aspect of the report comes down to the Labour Party’s revenue assumptions.  In 2011, the Labour Party estimated a 15 percent capital gains tax would raise $17.5 million in its first year, rising to $3.7 billion by 2026.

“The NZIER tell us these estimates are high, since the revenue potential of its proposed CGT is more likely to be half that sum.  In fact it may be smaller.  If this key policy is out by such a margin it asks fundamental questions about the Party’s shadow budget. 

“What’s more, the Labour Party’s estimates of CGT revenue were revised up this year.  The NZIER noting Labour’s “…2014 estimates are less believable than the 2011 estimates.”

“Labour also expects to raise at least $1.3 billion from the farming sector but a more realistic estimate is half that sum in 15 years’ time.  NZIER further estimates that the loss in current farm values will be between $2.4 billion and $7.6 billion.  But this will be a one off hit for farmers.

“Lower land values mean lower tax revenue too.

“Aside from simply delaying sale, the NZIER notes there would be significant opportunities to avoid taxable ‘realisation’ events by keeping assets in the family. The CGT tax proposed would not treat transfers to family members as events where capital gains are assessed.

“A CGT genuinely risks capital lock-in with the housing market.  To avoid taxable gains people will choose not to sell achieving the opposite of what is desired for productive investment.

“Since the housing market has been part of a CGT’s rationale, the NZIER found Labour’s CGT will not aid affordability and is not as progressive as many would like to think.  Indeed, a CGT may lead to higher rents. 

“What is more, speculative property investment is already subject to income tax on capital gains.

“The lesson we can draw from countries with a CGT is that they are not immune from rising house prices, indeed, two weeks ago, the Sydney Morning Herald reported that Sydney and Melbourne had their strongest winter price surge since 2007.

“Federated Farmers, NZIER and others like Victoria University’s Tax Working Group agree that a CGT, of the kind proposed by the Labour Party, would not be an efficient and effective option,” Dr Rolleston concluded.

The party has criticised the criticism to which  Feds replied:

The New Zealand Labour Party has issued a media release calling into question the efficacy of the report authored by the New Zealand Institute of Economic Research (NZIER).

Federated Farmers notes the NZIER details Victoria University’s Tax Working Group consideration that a CGT, of the kind proposed by the Labour Party, would not be an efficient and effective option going forward.

This media statement confirms that the NZIER stands by its report and Federated Farmers deliberately selected an independent organisation to prepare the CGT report.

The NZIER report was issued to generate discussion on what could become a major change to New Zealand’s taxation base. In doing so, it casts doubt about Labour’s revenue projections and assumptions about the capital gains tax.

The Federation believes it is incumbent on the Labour Party to release detailed calculations supporting the basis for its policy allowing independent scrutiny ahead of the General Election.

Particularly, the analytical basis underpinning the Labour Party’s estimates of CGT revenue, which were revised upwards earlier this year.

The comments we have read do not represent the report NZIER wrote . . . 

Other objections raised by the Labour Party are reflective of debates around the world, in which the Labour Party holds a different philosophical view.

The NZIER fully stands behind its key findings and messages.

 

A simple and comprehensive CGT which was combined with lower personal and company taxes might work.

Labour’s is complicated, has several exclusions and is in addition to existing taxes.

It won’t do anything to cool the housing market, will distort investment and reduce the reward from risk taking and hard work.


CGT death duty in drag

04/09/2014

Larry Williams interviewed David Cunliffe on Labour’s capital gains tax yesterday and established that it will be complicated and arbitrary.

One example of that is managed funds.

KiwiSaver managed funds will be exempt but anyone owning exactly the same shares in a managed fund will be taxed.

The Taxpayers’ Union highlights another aspect that Labour has not – a CGT will be a death duty in drag:

Responding to confirmation that under Labour’s capital gains tax policy children would have to pay the tax if they sold a family home after both parents have passed, Ben Craven, Spokesman for the Taxpayers’ Union, says:

“Labour’s capital gains tax is looking more and more like a death duty in drag. The vast majority of estates are liquidated, even where the family home is in a trust to the children.”

“The last time death duty existed in New Zealand was 1992. It appears that Labour are looking to reintroduce it but under another name with far more complexity. When children lose their parents they should be encouraged to put the inheritance to good use. Instead, Labour’s policy would whack them with a tax bill.”

“If Mr Cunliffe’s comments to media are correct, his policy will create a cruel tax incentive to quickly sell the family home while parents are still on their death beds. Mr Cunliffe’s statements to the media must be mistaken, or Labour really haven’t thought this one through.”

The tax won’t be levied if the house is sold in 30 days but few estates are settled and houses sold that quickly.

CGT wouldn’t be imposed if a family member lives in the house but that doesn’t happen very often.

When it does, unless it’s an only child, it’s usual for only one beneficiary to buy the shares of other family members and those gains would be taxed.

 


CGT complicated, complex and costly

03/09/2014

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.


CTG very bad idea

10/07/2014

Act leader Jamie Whyte is not impressed by Labour’s proposal to introduce a Capital Gains Tax:

On TV1’s Q&A programme, David Cunliffe boasted that his proposed new capital gains tax would collect an extra $5 billion a year. That is the biggest tax hike in the history of New Zealand. Which is saying something.

This isn’t replacing other taxes, it’s in addition to them.

It is a dreadful boast. Taxes are always paid by people, whatever the taxes are levied on. Income taxes, corporate taxes, property taxes, GST: they are all the same in this respect. They are all paid by people.

Nor are the people who bear the cost necessarily the people who write the cheques to the government. For example, if a capital gains tax means that landlords get a lower return on the capital appreciation of their properties, it will increase the rents they charge their tenants. Or landlords may sell their properties to owner-occupants. The supply of rental properties will then fall and, again, tenants will end up paying more.

Actions have consequences. If the cost of property rises or the return on investment falls, landlords will put up rents or sell and invest elsewhere.

This won’t just affect domestic rentals, it will affect commercial properties too which will add to the costs of businesses.

Where the cost of a capital gains tax will fall is a complex matter and extraordinarily difficult to predict. All Cunliffe knows is that the $5 billion will somehow be extracted from the people of New Zealand so that it can be spent in ways that he figures will buy him the most votes.

At least, that is what Cunliffe thinks he knows. In fact, he has almost certainly over-estimated the amount he will be able to squeeze out of tenants, consumers and entrepreneurs because taxes can be avoided.

Our observation of CGT in Argentina is that it prompts people to hold on to property, especially farms, rather than selling them.

This has led to a lot of absentee ownership, boosted the price of land and made it harder for people to get into farming.

When it comes to income tax, people can divert their activities from highly taxed activities, such as working in productive jobs, to low taxed activities, such as playing golf. When it comes to a capital gains tax, they can divert their investments from rental properties to bigger homes for themselves (which will not incur capital gains tax at sale). They can invest overseas rather than in New Zealand. They can delay selling assets to avoid realising a gain and paying the tax. And they can spend money on accountants and tax lawyers to devise all sorts of other ingenious schemes

Such avoidance activities will reduce the loot Cunliffe can get his hands on. That’s good. But they will also reduce the growth of the New Zealand economy. Resources will not flow to their most valuable uses. They will instead flow to the uses that are farthest from Cunliffe’s grasp.

A capital gains tax is a very bad idea.

I’m not opposed to a CGT per se.

There could be merit in it if it was comprehensive and replaced other taxes so it was cost-neutral.

Labour’s is neither of those and is, as Whyte says a very bad idea.


Taxing prosperity

26/06/2014

A comprehensive Capital Gains Tax compensated for by a lowering in other taxes might have something to recommend it.

But Labour’s CGT isn’t comprehensive and won’t be matched by compensatory drops in other taxes.

Labour leader David Cunliffe tried to sell the policy via questions to Prime Minister John Key in question time yesterday – and failed:

1. Hon DAVID CUNLIFFE (Leader of the Opposition) to the Prime Minister: Does he accept inequality, including asset inequality, is increasing in New Zealand?

Rt Hon JOHN KEY (Prime Minister): No. The best evidence shows that income inequality is not increasing in New Zealand, and I am advised that there is no reliable time series on changes in wealth inequality. As the Minister of Finance noted yesterday, the OECD has reported that New Zealand was one of only six developed economies in which both income inequality and disposable income inequality were flat or slightly better between 2007 and 2011. This is quite an achievement through one of the worst recessions in decades.

Hon David Cunliffe: How does the Prime Minister feel about the Oxfam report that shows that the top 10 percent of wealthy New Zealanders own more than the other 90 percent put together?

Rt Hon JOHN KEY: I suspect that is probably similar to lots of parts of the world, but what I can say is that under a Labour Government, with its announcements today, every single New Zealander in KiwiSaver will be worse off when they have a capital gains tax on their KiwiSaver account.

Hon David Cunliffe: How can he be so relaxed about the growing gap between the rich and poor, when the median income in, say, St Heliers has increased by $6,700 a year since 2006 to $42,700, while the median income in Māngere has fallen by $200 to just $19,700?

Rt Hon JOHN KEY: I did not actually say what the member said that I said. What I would say is that at a time when the economy is in surplus, when it is earning more than it is spending, putting a tax on every farm, on every business, and on every KiwiSaver will simply make the situation worse for so many New Zealanders. No wonder they will not vote for that.

Hon David Cunliffe: In light of that answer, does the Prime Minister agree that a 35 percent increase in luxury car sales over the past 2 years while at the same time the number of children living in poverty has grown to 285,000 shows that inequality is rising, or does he not?

Rt Hon JOHN KEY: No, that is not a reliable measure of income inequality. What would be worth noting, though, is that households that earn $60,000 or less—that is, 50 percent of all New Zealand households—pay $2.5 billion in tax and they receive over $7 billion in benefits. Through the worst of the economic times this Government has supported those most vulnerable New Zealanders.

Hon David Cunliffe: How does the Prime Minister feel about the fact that homeownership rates are at their lowest levels in 50 years, and does he think it acceptable that half of the pupils in schools in our lower income areas are changing schools once a year or more? So we have declining homeownership, dislocated children, and growing inequality—how does he feel about that?

Rt Hon JOHN KEY: One thing I do know is that if you put a capital gains tax on rental properties, as the member is suggesting—because, in fact, virtually all property is excluded under the Labour plan—what that will do is put rents up. So those who are renting a property and watching parliamentary question time today better know that under a Labour Government they will pay more. In other words, they will have less to spend. No wonder they will never support that policy. . . .

Hon David Cunliffe: Does the Prime Minister think it is fair that the incomes of the top 1 percent of income earners in New Zealand have risen 10 times faster than the bottom 10 percent, and does he think that a capital gains tax might just help equalise some of that growing gap between the rich and the poor?

Rt Hon JOHN KEY: In answer to the last part of the question, no. What is really important that New Zealanders understand is that a capital gains tax in the way that Labour has described today will be on every small business in New Zealand, every business in New Zealand, every KiwiSaver account in New Zealand, and every part of the productive sector of New Zealand. If we want people in poverty, then we should cancel their jobs, and that is what Labour would be doing—putting a tax on prosperity for New Zealand. . . .

Good tax might be an oxymoron but better taxes are aimed at things we want to discourage.

Labour’s CGT by contrast will hit things we need to encourage – savings, investment and businesses big, medium and small that earn the money and provide the jobs we need for prosperity.


More tax, higher costs, fewer jobs

02/06/2014

The Green Party plans to impose a carbon tax on us:

. . . Co-leader Russel Norman wants to scrap the current carbon pricing system – the Emissions Trading Scheme.

In its place would be a tax of $25 per tonne of carbon on industry polluters. . .

Critics of the tax claim the tax is a burden on households, who pay higher electricity and fuel costs.

However, the Greens say their levy would be offset by a ”climate tax cut” on the first $2000 of income. 

”We can reduce our emissions without hurting household budgets,” he said. ”Households will be on average $319 better off every year under the Green party policy.” . .

Imposing a tax with one hand and giving a tax with another won’t make anyone better off because the tax will lead to other cost increases on fuel, power and food which will passed on, in part or full, to consumers.

Agriculture – which is currently exempt from the ETS – would pay a reduced rate of $12.50 per tonne. This works out as an 12.5 per cent hit on farmers’ income. This includes 2 per cent on the working expenses of the average farm. A Berl Economics report, released with the policy, said dairying will be ”adversely affected.”

Dairying won’t just be adversely affected by the carbon tax, it will be hit by other Green policies too.

But it adds: ”However, at the currently projected pay-out for milk solids, even dairy farms in the lowest decile would remain well above break even in the face of an emissions levy.”

What happens when the payout drops to its long-term average which is well below the $7 forecast for the coming season?

What about the environmental impact of less efficient farmers in other countries increasing production because our produce is more expensive which makes it easier to compete with us?

And what about the poor people who will face higher prices for dairy products, power and fuel?

Other gas-emitting industries – such as electricity and road fuels – are less likely to be affected because they would be able to ”pass-on any production cost increases to households.” . . .

That will be the households whose earners will be getting a tax cut, the benefit of which will be less than the cost increases from the extra tax.

BusinessNZ Chief Executive Phil O’Reilly said the levy may threaten jobs. 

“Our approach should be unlocking business solutions rather taxing business more,” he said. 

As a “small open trading economy” New Zealand should participate in international emissions trading schemes.

Federated Farmers president Bruce Wills said the tax will make dairy farmers “less competitive” in international markets. . .

Less competitive means lower returns which means less export income which means less economic growth which means we’ll be less able to fund the first world education, health and other services we need.

However green they want to paint it, this is a red policy which will add costs, put downwards pressure on wages and threaten jobs.

Bernard Hickey told last week’s  Alliance Group Pure South conference that the election will be close.

He then went on to list the policies that farmers could expect to adversely affect them under a Labour/Green coalition with whichever other left-wing parties they’d need to govern.

They included: capital gains tax, compulsory KiwiSaver and water restrictions and charges.

Those are three very good reasons to vote National and the Green carbon tax is another.

And Steven Joyce points out some inconvenient truths:

 

 

 


Political meddling won’t help meat industry

29/04/2014

Labour’s primary sector policy is likely to include meddling with the meat industry:

A capital gains tax on farmland, stringent environmental practices and a revamp of the meat sector are up for consideration as the Labour Party makes a play for the rural vote.

Their policy position is still in development but the party’s primary industries spokesman, Damien O’Connor, was in Hamilton yesterday to gauge reaction on proposals in two days of meetings with sector groups and party faithful in Waikato and Coromandel.

He said farmers would be opposed to a capital gains tax at first but it was necessary to halt “rampant” price increases and to keep land productive.

“People buying farmland should do so on the basis of its productive-return capacity, not on some expectation of a capital gain that effectively makes it more difficult for the next farmer to make a living,” he said. . .

Productive return should govern prices but how will imposing a CGT which increases the price influence that?

It hasn’t worked anywhere else.

In Argentina, for example, it reduces farm sales and increases absentee ownership.

The meat industry was in deep trouble, he said, and needed to be transformed to offer more security to farm workers, businesses and freezing workers. “At the moment there is so much uncertainty, a shrinking base of the number of sheep.. .

The meat industry does have problems but they’re not insurmountable and they won’t be solved by political meddling.

It’s not Labour’s industry, it’s is a collection of private businesses and co-operatives and it’s up to them to sort it out.

Primary Industry Minister Nathan Guy has the right approach:

. . . The best way to put a sector into a downward spiral is to consistently talk doom and gloom. It is not true that the meat industry is on the way out. This industry is capable of truly leading the world in its innovative and profitable approach to selling high quality meat.

I will continue to back this sector and I will continue to acknowledge the great success stories. We need to hear even more pride and passion from everyone involved. . .

My role as Minister is to listen to, to act on behalf of, and to support, this sector.

So I now publicly reiterate statements that I have made in a variety of forums. If a significant portion of the sector, and this means across the whole sector come together with a solution of how they want to better the industry, my door is open. I will listen and I will do what I can to support the sector.

Any substantial change needs to come with a very clear and very broad level of support. I am not prepared to interfere in the structure of a sector without the support of that sector. The Government doesn’t own the industry – you do.

I doubt that anyone in this room wants the heavy hand of government dreaming up bureaucratic solutions that haven’t come from the ground up. . .

The heavy hand of government is what Labour is threatening.

That and the CGT are two very good reasons why they’ll be struggling for the rural vote again.


Property speculators pay CGT

13/04/2014

Labour leader David Cunliffe says it’s ‘lunacy’ that property speculators get tax free capital gain.

But they don’t.

Buying and selling properties as a business, which is what speculators do, attracts a capital gains tax.

Hon BILL ENGLISH (Minister of Finance) : The Government already taxes capital gains on property speculation where property investment is for the purpose of trading. The member may not be aware of that. In addition to this, the Government’s 2010 tax changes on property disallowed deductions for building depreciation, and this raises around $700 million per year from property investors, a much larger number than any estimate we have seen for the foreseeable future for a further extension of the capital gains tax. Further extension of the current tax on capital gains is likely to have high compliance costs, and that is a conclusion that three tax inquiries and several Governments have come to over the last 20 years. If it excludes the family home, it will not raise much difference, it will not raise much revenue, and it becomes effectively a tax on successful businesses. In overseas jurisdictions, it has not improved housing affordability.

Hon David Parker: Why does he think the profits on the sale of investment property are of such critical importance to the economy that they should not be taxed but, instead, be cross-subsidised by every other taxpaying business and worker in New Zealand?

Hon BILL ENGLISH: I would point out two things, as I pointed out in the primary answer. First, where any property is bought for the purposes of selling, the gains on that are taxed at current income tax rates. It is called an income tax, but, actually, it is a capital gains tax on trading investment property. The member may have seen recent publicity about the scope of the Inland Revenue Department’s activities in ensuring that everyone who does trade in property pays full income tax rates, not the half-baked rate that he proposes in his proposition of 15c in the dollar. They are, actually, taxed at 33c currently. Secondly, the changes made in the 2010 tax package do collect $700 million per year from property investors, which is a much larger number than any revenue that he has posited as a result of his partial extension of the current capital gains tax.

Labour’s policy is built on the lie that we don’t have a CGT.

We do, at 33 cents in the dollar, more than twice the rate Labour is proposing – unless of course they’re going to tax it twice which is quite possible with them.

Jami-Lee Ross: In considering various tax options for New Zealand, what international evidence has the Minister seen on the effects of capital gains taxes on housing affordability?

Hon BILL ENGLISH: I have seen reports from Australia on the effects of a partial capital gains tax, limits on foreign investment, a so-called mansion tax, and compulsory savings. If these policies are meant to improve housing affordability, then they have not, because housing affordability is worse in Australia than in New Zealand. Just today there is a report being published showing that first-home buyers now make up the smallest proportion of the housing market ever in Australia. So the housing market in Australia now consists of fewer first-home buyers than ever, so we would be a bit careful about following that policy prescription.

Hon David Parker: What proportion of investment property sales pay tax as traders; is it closer to zero percent than 100 percent?

Hon BILL ENGLISH: I do not have that information to hand, but I can assure the member that the Inland Revenue Department is vigorously pursuing every investor who trades in property.

Jami-Lee Ross: What reports has the Minister received on the case for a new capital gains tax in New Zealand?

Hon BILL ENGLISH: I have received the report of a speech to the Wellington Property Investors Association in July 2005. It noted that the Government-appointed tax review in 2001 considered a new capital gains tax and concluded that the disadvantages of such a tax—its complexity and costs—outweighed the theoretical benefits, so it did not recommend such a tax. The speech also noted that the Government of the day agreed with that conclusion that the status quo was entirely adequate. The speech was delivered on behalf of the Minister of Finance Michael Cullen by his associate David Cunliffe. . . .

What’s changed since Cunliffe delivered that speech?

None of the facts, just the politics.


Dunne’s bottom lines

30/10/2013

Untied Future leader Peter Dunne spent three terms supporting Labour, is in his second term supporting National and is showing he could go left or right after next year’s election.

However, he’s got some bottom lines:

. . .  Mr Dunne said he would need Labour to abandon its plans for a capital gains tax, higher taxes for higher income earners, abolition of the Families Commission and opposition to the establishment of the Game Animal Council.

I wouldn’t give him much chance with the first two conditions.

Both Labour and the Green party want more taxes and higher taxes, even though those they’re promoting will do more harm than good.

The Families Commission has yet to justify its existence and the money it costs but it’s not particularly significant in the grand scheme of things. Nor is the Game Animal Council.

Dunne might get the two little things he wants but he would be much safer sticking with National which would give him the bigger ones – no capital gains tax and no envy taxes for higher earners.


CGT comprehensive or useless

26/07/2013

I’m not averse to the idea of a capital gains tax if it was comprehensive and matched by a decrease in other taxes.

The LabourGreen proposal for a CGT won’t be balanced by a reduction in other taxes and will exclude the family home which means it will have little or no affect on house prices.

A capital gains tax on property makes little sense unless it also applies to the family home, says Finance Minister Bill English.

Speaking at today’s Mood of the Boardroom event in Auckland, English told the country’s top business leaders the government was maintaining its “clear position” on the capital gains tax debate.

“We’re not supporting the extension of the current capital gains tax,” he said.

“The overseas experts who tell us we need it all say that it should be comprehensive on all capital gains. And if you don’t do the whole thing then it probably doesn’t make much difference.”

The LabourGreen proposal is typical of them – an overall increase in tax for little if any benefit.


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