Bank, govt aim at demand, what about supply?

May 18, 2015

The Reserve Bank and the government are both trying to take the heat out of the Auckland housing market.

The Bank announced proposed changes to the loan-to-value ratio (LVR) policy to take effect from 1 Octobere:

They will:

  • Require residential property investors in the Auckland Council area using bank loans to have a deposit of at least 30 percent.
  • Increase the existing speed limit for high LVR borrowing outside of Auckland from 10 to 15 percent, to reflect the more subdued housing market conditions outside of Auckland.
  • Retain the existing 10 percent speed limit for loans to owner-occupiers in Auckland at LVRs of greater than 80 percent.

The government is  taking extra steps to bolster the tax rules on property transaction.

FInance Minister Bill English and Revenue Minister Todd McLay say the Government is taking extra steps to bolster the tax rules on property transactions – including those by overseas buyers – and to help Inland Revenue enforce them.

The tax measures are also expected to take some of the heat out of Auckland’s housing market and sit alongside the Reserve Bank’s latest moves to address associated financial stability issues, Mr English says.

“Taken together, they will help Inland Revenue enforce existing tax rules, provide it with extra resources and ensure that property investors pay their fair share of tax – whether they’re from New Zealand or overseas.”

The Budget this week will confirm that, from 1 October this year, the following will be required when any property is bought or sold:

  • All non-residents and New Zealanders buying and selling any property other than their main home must provide a New Zealand IRD number as part of the usual land transfer process with Land Information New Zealand.
  • In addition, all non-resident buyers and sellers must provide their tax identification number from their home country, along with current identification requirements such as a passport.
  • And to ensure that our full anti-money laundering rules apply to non-residents before they buy a property, non-residents must have a New Zealand bank account before they can get a New Zealand IRD number.
  • In addition, a new “bright line” test will be introduced for non-residents and New Zealanders buying residential property, to supplement Inland Revenue’s current “intentions” test. Under this new test, gains from residential property sold within two years of purchase will be taxed, unless the property is the seller’s main home, inherited from a deceased estate or transferred as part of a relationship property settlement.

“Tax rules are complex and affect people in different ways, so we will consult on these measures before they take effect on 1 October,” Mr English says.

The “bright line” test will then apply to properties bought on or after 1 October.

To further ensure overseas property buyers meet both existing tax requirements and those of the new test, the Government will investigate introducing a withholding tax for non-residents selling residential property.

Officials will consult on these details with a view to this withholding tax being introduced around the middle of 2016.

Mr English reiterated owner-occupiers of residential property will not be affected by the new measures when they sell their main home, or if property is inherited from a deceased estate or transferred as part of a relationship property settlement.

“It’s important to reiterate that these changes will not apply to New Zealanders’ main home, although existing tax rules will still apply in  addition to these new measures,” Mr English says.

“It’s equally important that people buying residential property for gains meet their tax obligations, whether they are from New Zealand or overseas.

“The combination of collecting IRD numbers and introducing this new bright-line test will help ensure that non-residents pay their fair share of tax in New Zealand.” . . .

New Zealand National Party's photo.

These measures should go someway to dampening the demand side of the pressure on Auckland property prices.

More needs to be done to increase the supply of houses.

This could be done by building more houses and by people moving from Auckland to other areas.

Immigration Minister Michael Woodhouse is considering incetivising immigrants to settle in the regions:

The Government is set to give skilled migrants, investors and those planning to bring businesses to New Zealand extra points if they settle outside of Auckland.

Skilled migrants and those applying to live in New Zealand under entrepreneur visas already gain 10 points in the immigration points system if they say they intend to settle outside of Auckland. That could soon get a boost.

“Those entrepreneurs, those innovators who could make a contribution to regional development, it is possible for us to bump up the points settings to incentivise that,” says Mr Woodhouse. . .

 It’s not just immigrants who could make a contribution to regional development.

If some of those bemoaning property prices in their home city opened their eyes to opportunities outside Auckland they could move out of Auckland.

They would get a house for much less than they could hope to pay in the city, find how much easier life is when there are fewer people clogging the roads and in improving their lives would free up houses in Auckland for those who can’t or won’t move.


Bribe-O-Meter

August 13, 2014

The Taxpayers’ Union has launched an election campaign  Bribe-o-meter:

As political parties announce their policies in the weeks leading up to the General Election, we’ll be crunching the numbers and showing you just how much all the promises cost.

This week we’re launching with the total cost of the policies announced by the two main parties, up to Monday 11 August 2014.

And the results are:

National Party’s total cost of announced promises: $2,770.37 per New Zealand household (or $4.698 billion)

Labour Party’s total cost of announced promises: $4,081.85 per New Zealand household (or $6.922 billion) . . .

The Taxpayers’ Union has commissioned Dr Michael Dunn of Economic and Fiscal Consulting Ltd to independently calculate the data for the Bribe-o-meter. Michael is politically independent and has extensive experience in the field of economics, including as a Manager within IRD’s Forecasting and Analysis unit for 12 years. . .

The Bribe-o-meter compiles the political promises of each of the main political parties and places them within the major spending portfolios.

It assumes that the government elected on 20 September will last for a full three-year term and oversee Budgets 2015/2016 to 2017/2018.  Policies announced that do not come into effect during the next Parliament will not be included in the figures.

Our analysis includes spending pledges announced between 2011 and now. Given that the purpose of the Bribe-o-meter is to track spending pledges announced by politicians, it does not model the effect of tax cuts or tax increases and the effect they have on households.

Tax credits and rebates have been considered as constituting new spending.

Our cost tables do not include the provisions for future budget spending that have been made by each party.  For the next three budgets (2015, 2016 and 2017) National propose additional spending of $9.1 billion, and Labour $6.9 billion.  In addition, Labour plan to contribute $3.9 billion to the NZSF over the 3 year period.. . .

The quantity of money spent is only one factor, the quality of the spend – where and how effective it is –  is more important.

Spending is only one side of the ledger.

The other side – revenue the government gets in from taxpayers, user-pays and other charges – and the impact of policies on economic growth and the tax take are also important.

Though as a general rule of thumb, when it comes to government spending, less is often more and almost always better.


Info sharing saves $33.7 m

July 19, 2013

Information sharing between the IRD and Ministry of Social Development has identified and stopped 3139 illegitimate benefits in just six months, Associate Social Development Minister Chester Borrows says.

“While it is always disappointing to see some people are willing to break the law and take money they’re not entitled to, it happens, and we have a responsibility to the taxpayer to stop it,” says Mr Borrows.

“The benefits stopped thus far were costing the taxpayer more than $33.7 million per year, money which should be going to those who really need it.”

The enhanced information sharing started earlier this year, highlighting beneficiaries whose taxable income did not match what they had declared to MSD. MSD staff reviewed each case, and where the beneficiary was earning enough income that they were no longer eligible to receive a benefit, that benefit was stopped.

It’s not all about stopping benefits. Some people were not getting as much on a benefit as they could with other help.

A further 645 clients have been assessed as being better off with other financial assistance, such as Working for Families, and helped by Work and Income to move from benefit to that assistance.

Of the 3139 cancellations, the majority were receiving the unemployment benefit (1948) or sickness benefit (559).

MSD will now look to recover all overpaid money, including seeking attachment orders to wages which should see these debts repaid faster than most benefit fraud debt.

“MSD staff are still working through the information, including a large group of clients identified as being eligible for a benefit, but having incorrectly declared their income,” says Mr Borrows.

“Fraud investigators are also looking hard at the benefits which have been stopped, and where there is evidence they deliberately defrauded from the taxpayer they can expect to be prosecuted for their crimes.”

With all this saved, and some people helped to move off benefits which is better for them and the taxpayer, it’s just a pity information sharing wasn’t introduced years ago.

Jacinda Ardern was on TV last night complaining about the policy and saying tax fraud should be targeted instead.

It shouldn’t be one or the other, it should be both.

Fraud is fraud and should be targeted wherever it happens and whoever does it.

 

>Enhanced information sharing has identified and stopped 3139 illegitimate benefits in the last six months. Unfortunately some people are willing to take money from taxpayers that they are not entitled to, but this sends them a clear message that they are not going to get away with it.


Is tax owed on Glenn donation?

July 21, 2008

Graham McCready, the man who took Trevor Mallard to court after his non-parliamentary fiight with Tau Henare in parliament’s lobby, has asked the IRD to investigate whether tax should have been paid on the money Owen Glenn gave to pay Winston Peters’  legal fees.


IRD Doesn’t Trust Labour with EFA

June 19, 2008

Oh dear – even the IRD is wary  of Labour contravening the EFA.

Inland Revenue canned a KiwiSaver brochure because of fears it would be used for electioneering, despite at the time saying it was pulled for commercial reasons.

 National Party deputy leader Bill English tabled in Parliament today IRD emails that showed the brochures were pulled because they were deemed to be to political.

“I remain concerned that in the current environment it (the KiwiSaver brochure) leans too far towards the promotional,” one IRD adviser said in an email.

The emails show that officials were concerned about the possibility of politicians using IRD material for electioneering.

In response to questions from the media, IRD decided to say it was producing material as usual and to not reveal the reasons it had canned the brochure.

To add to Labour’s woes, the Electoral Commission is being asked whether press releases on the Beehive website contravene the EFA.

As No Minister  says: But what fun that such a dogs breakfast of an act is biting most the very people responsible for it!


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