Submission to the Tax Working Group

Summary of a submission to the Tax Working Group:

That was from

Here are the key points of our submission to the Tax Working Group. You can read the full document here:

https://d3n8a8pro7vhmx.cloudfront.net/taxpayers/pages/13/attachments/original/1525056499/20180430_tax_working_group_submission.pdf

I think these are all good points worth considering and debating.

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47 Comments

  1. Callum

     /  May 1, 2018

    4 is a waste of time, it encourages spending for tax benefits rather than for the benefit of the business.
    5 is incorrect, profits are permanently locked in for charitable purposes only and cannot benefit any individual ever.
    6 a lower rate is used because majority of shareholders are in the lowest tax brackets. Effectively they would be overtaxed and then every beneficiary (which can be thousands, often with tiny holdings) would need to seek a tax refund every year. The administration alone would be a massive cost to government.

    Reply
    • Blazer

       /  May 1, 2018

      re-5….well overdue…charitable purposes are a handy…smoke screen.

      Reply
      • Trevors_Elbow

         /  May 1, 2018

        Completely agree Blazer. Do business – do it on an equal footing…

        Reply
    • Gerrit

       /  May 1, 2018

      Not to sure about your “5 is incorrect, profits are permanently locked in for charitable purposes only and cannot benefit any individual ever.” Callum.

      Once the profits have been returned to the charitable trust, the trust can distribute the money where it likes. Be it to an individual (such as full fees paid scholarships) or to the group (new buildings, etc.).

      I dont think the IRD investigates but I believe the Charitable Trust do have to report somewhere to another government department (cant recall which) to make sure the money is spent as per trust rules. Though many are very late in filling and accountability would seem at arms length at best.

      Reply
      • Callum

         /  May 1, 2018

        The entire point of being a registered charities is that funds can only be disbursed towards charitable purposes. All registered charities are required to prepare and file financial statements with http://www.charities.govt.nz which are publicly searchable.
        While an individual may receive a scholarship, a charity could not be set up to benefit only that individual. So a scholarship advances education which is charitable, the scholarship is required to be available to a sufficiently large section of the public for it to be considered charitable.
        A new building would only be charitable purpose if it was used to advance charitable purposes, so an educational facility or to provide social services to the community. You couldn’t for example donate the funds to a profit making entity for them to run a business from. You could donate to restore a Marae, however as many Marae are charitable entities any tax paying entity could do the same and received a tax rebate.

        Reply
  2. Gerrit

     /  May 1, 2018

    Am supervised they have not addressed the biggest tax bugbear for business and that is provisional tax. This was going to be abolished and small business go onto a PAYE type tax regime.

    Hopefully the tax working group will look into this.

    Reply
    • Gerrit

       /  May 1, 2018

      Should be “surprised” not supervised. Predictive text and lazy eyes to blame there.

      Reply
      • Callum

         /  May 1, 2018

        AIM is available this year which is the equivalent to PAYE, however with the significant changes around penalty interest for underpaying and other amendments made (as well as tax intermediaries like Tax Traders etc where you can cost effectively buy tax) it really isn’t the issue it is made out to be. The biggest issue is on business startup is people get hit with two lots of tax in the second year (prov tax and the prior year terminal tax) when they have spent all their earnings without putting any aside for tax.
        Prov tax is paid (for March Y/E) in August, January and May with any washup due either Feb or April of the following year so you should have actually earned the money prior to needing to pay.

        Reply
        • Trevors_Elbow

           /  May 1, 2018

          The biggest problem apart from penalty tax is people being stupid and spending all the first years Income and not putting their tax aside…..

          Reply
  3. alloytoo

     /  May 1, 2018

    “Revenue neutral” is the wrong way to describe it, it implies that it’s OK for government net revenue to remain the same even if a new tax is horribly inefficient and has huge implementation and compliance costs.

    New taxes should be recovery neutral. (This would discourage stupid taxes which are agenda driven.)

    Reply
  4. PartisanZ

     /  May 1, 2018

    Their only reference to wealth, land or asset tax is #7, predictably and misleadingly labelled “capital gains” and simultaneously identified with a single “complex Australian-style” collection system … Crafty! Or perhaps I should say ‘Krafty’? … momentarily chewed with a mouthful of confirmation bias and spat out again in one fell swoop!

    The similarly disingenuously named ‘Taxpayers Union’ (akin to Muriel Newman’s ‘Centre for Political Research’) which is actually a highly ‘orthodox’ Right-Wing economic lobby unit, are almost hide-bound to support the current foundations of our economy such as Finance, Insurance and, above all, Real Estate … Speculation in property … along with, no doubt, Immigration to keep wages low …

    Charity operated ‘businesses’ can also easily pay massive and even unrealistic salaries to their CEOs and upper-middle-management … possibly along with above average wages to staff … who will no doubt be their Church brethren, elders, leaders and/or congregation … and possible ‘tithers’ … It’s called ‘graft’ and it goes on throughout our econignominy* …

    https://www.top.org.nz/the_winners_and_loser_of_our_tax_system

    Here’s some ideas from a guy who sat on the last TWG in 2010 … the middle one of three!

    The fucken works already been done folks. We just need to have a revolution because that’s the only thing that will budge Kiwis from their obsession with speculating on the value of ‘their’ land … their ‘property in the soil’ …

    https://www.top.org.nz/top1

    I heard the other day that IRD are indeed instigating a PAYE scheme for small business to replace the horrific ‘provisional tax’ … How EVER did it survive this long?

    *econignominy = the disgraceful or sordid economy … new word # 153 (I think?)

    Reply
    • Callum

       /  May 1, 2018

      Any massive salaries to CEO’s and family or congregation employed are all taxable to the receiver, same as they would be for any tax paying entity. This whole charities area has a lot of misinformation floating around because people get secondhand info or media slanted stories about it.

      Reply
    • Trevors_Elbow

       /  May 1, 2018

      Ever worked on contract Partizan and needed to work under the Provisional Tax system. Not knowing what you will earn over the next 12 months but having the IRD say it will be 5% more than last tax year is the starting point and default assessment. Re-estimate from that baseline and get it wrong and earn more than the estimate, then you were liability to top up the first/second provisional payments immediately plus penalty interest for not knowing if you would work 12 months or 3 months. over Estimate and you give IRD free money till you reestimate or close out the tax year. It drove all sorts of stress in to peoples life when they were moving from contract to contract with no idea what their earnings for the coming year would be…

      But ya know – the State thinks we should all be wage slaves working for state own organisations and should be happy earning what they say we should

      the new AIM system will be a huge improvement for many, though it will require a lot more detail book work on a regular basis to ensure your accounts are completely up to date and accurate

      Reply
      • Callum

         /  May 1, 2018

        Sensible use of a tax intermediary address a lot of those issues and there have been significant changes and improvement in UOMI so basically if you are under $60k RIT and catch up any shortfall before P3 then you should be fine. Over that level Tax Traders or similar is your best bet as you can actually sell any overpaid tax.
        AIM adds a lot of complexity and will benefit few people because of the other changes made.

        Reply
      • PartisanZ

         /  May 1, 2018

        trevors_elbow – Create your own straw man and rail against it. My “How EVER did it survive this long?” refers to old-fashioned Provisional Tax and yes, I have been a victim of it …

        I’m an advocate of progressive tax within a very tight range – fair and equitable – and tax being as absolutely simple as possible to calculate and pay …

        The State, who is going to have to enforce it anyhow – human nature being what it is – “predictably irrational” – is well placed to provide machinations for smoothing the way.

        Why, we must ask, don’t they want to?

        Callum – You are correct about wages and salaries being “taxable to the receiver” – I stand corrected – but businesses pay tax on their profits IN ADDITION do they not?

        I doubt whether “for the benefit of this Secular club’s members” would suffice as a Charitable Aim with the Charities Commission, but “for the benefit of this Religious club’s members” apparently does, in the form of wording like “to advance [faith or religion] in a charitable manner”.

        Reply
        • Trevors_Elbow

           /  May 1, 2018

          “I’m an advocate of progressive tax within a very tight range – fair and equitable – and tax being as absolutely simple as possible to calculate and pay …”

          Great then a flat 15% tax on income, first 25K at 0% tax and a small wealthy tax… with GST at 10%…. would win your favour Parti…. then Government can then be sized to meet real needs and people can stand firmly on their own two feet.Free up the RMA so land bank becomes unprofitable and housing much cheaper obviously sits well with you as well! Who knew you were such a small state booster! Why does NZ need a Space Agency?

          Reply
          • PartisanZ

             /  May 1, 2018

            I should have added “and impossible to avoid” …

            But Yes and No Trevors_Elbow … Firstly, as I posted convincingly the other day, large government does not necessarily curtail personal freedom or prosperity … as the article clearly showed … the most prosperous and ‘free’ countries are those with larger government …

            Secondly, Government sizing will depend on what we mean by “real needs”, how we measure and provide for them … I, for instance, believe that NZ needs ‘provincial growth’ and that tax-based redistribution is a good way to foster it …

            Thirdly, “people standing firmly on their own two feet” is only half the story … People stand firmly on their own two feet as members of vibrant and healthy households, families/whanau, and hapu/communities … Half of the story is Margaret Thatcherism and the world is clearly over that …

            Certainly the RMA and a lot of other bureaucracy could be “freed up” somewhat, provided adequate safeguards remain. The argument about wax and resin extraction from the Kaimaumau Wetlands is an excellent example … IMHO neither the “just do it” nor the “do nothing” sides are completely right … What has been missed is the correct, legal, notified, resource consent process …

            So nope, no small State booster here!

            NZ needs a Space Agency because some businesses are starting to build and fire rockets into the atmosphere here in NZ … All industries require regulation, it’s as simple as that … because human beings and hence their economics are “predictably irrational”. Imagine an electrical industry without regulation? Building? Well, arguably we’ve experienced that! Farming with animal welfare?

            I don’t know what the tax rates would be, perhaps between 15 – 25% depending on income, with an amount tax free as you say, and yes, a wealth or asset tax, and company tax as low as possible but including the calculation of “real costs” like environmental costs of packaging, social costs of alcohol etc etc …

            The State should earn enough to employ the unemployed since, under austere-welfare-neoliberalism, employers and the employed are dependent upon them.

            Reply
            • PartisanZ

               /  May 1, 2018

              Should read “Farming without animal welfare?” …

        • Callum

           /  May 1, 2018

          Profit is after expenses so a wage to staff is a deductible expense for a business.
          Say a company sells $200 of goods with total costs of $100, they pay tax on $100 of $28 and can then either retain it in the business or eventually pay it out to shareholders. When the $72 cash is paid out the credit for tax paid is available for the shareholder the income is paid to as dividends. So the shareholders received $67 cash but are attributed $100 of income for tax purposes ($5 further is deduct as dividend withholding tax to bring it up to 33%). Companies are really only a conduit for the taxation of income from individuals. That individual could then donate $100 cash to a charity and get their $33 back from the IRD.
          Hard to explain clearly but a charity operating a business never has the profits reach an individual so taxing it in the company would effectively lock up the tax credits where they can’t be used.
          Arguments around what should and shouldn’t be a a charitable purpose are a different matter but there is hundreds of years of case law behind our current legislation.

          Reply
    • Kitty Catkin

       /  May 1, 2018

      Not a new word, Partz, it’s clumsy and pointless.

      Reply
  5. Gezza

     /  May 1, 2018

    I will be downticking all swearing today. If anyone doesn’t like it, too fucken bad.

    Reply
    • Trevors_Elbow

       /  May 1, 2018

      Fuck that!

      Reply
      • Gezza

         /  May 1, 2018

        Netted 8 whiners so far.

        Reply
        • MaureenW

           /  May 1, 2018

          Make sure you don’t fucken say “bitch”. (Some people take exception to that word)

          Reply
      • Gezza

         /  May 1, 2018

        The Trevor Show. Back later to check the net 😉

        Reply
        • Gezza

           /  May 1, 2018

          Jacinda is crawling up the royals for having another baby. Embarrassing. She gave him a baby blanket & Hairy McCleary book. Now Simon’s adding to the horror…

          Reply
          • Gezza

             /  May 1, 2018

            Marama now. Good heavens. Is there no end to it?

            Reply
            • Gezza

               /  May 1, 2018

              Now David Seymour. Motion of congratulations passed. Nobody suggested asking them to move Louis to be his last name & calling him Arthur, like sensible people would, so I’m not impressed.

            • Gezza

               /  May 1, 2018

              Apparently we won the Commonwealth Games?

              Nathan Guy asked by Speaker Trev to “keep his fingers down & settle please” following Damien reading out a personal statement correcting something or other misleading in a previous answer.

            • Gezza

               /  May 1, 2018

              Simon put the boot in for Question 1
              In Question 2 Grant said lights in Parliament will be one of the Budget’s priorities.

            • Gezza

               /  May 1, 2018

              Simon putting the boot in over oil & gas

            • Gezza

               /  May 1, 2018

              Trev telling Simon off for interjecting during Jacinda’s answers

            • Gezza

               /  May 1, 2018

              Jonathon Young sounds quite dense.

      • Kitty Catkin

         /  May 1, 2018

        Why don’t all you rude buggers bugger off ?

        Reply
  6. PartisanZ

     /  May 1, 2018

    “Sir Michael Cullen’s 2000s “third way” background – rule out some big matters, including a real land tax and fixing the mess of tax, rebates, allowances and phase-outs at the bottom end.

    They skirt around wealth, the core factor in embedded inequalities through the privilege it confers via untaxed inheritances. Likewise, the distortions that drive people to invest savings in houses and the attack on disposable income a high GST imposes on those at the bottom.”

    This from Colin James on today’s topic ‘Government looks transitional rather than transformational’ is right on the button … So true of the existing tax system, the TWG and, essentially, The Taxpayer Union’s submission … (that’s one Union I ain’t joining!) … Yet they claim to represent all taxpayers …

    Pure neoliberal ‘orthodoxy’ shall prevail I fear …

    As Gareth Morgan alone said to the last TWG in 2010 apparently, “You can’t consider the taxation system without considering the transfer system at the same time” …

    A lone dissenting voice in the austere-welfare-neoliberal wilderness.

    Reply
  7. PartisanZ

     /  May 1, 2018

    In the TWG’s background document there is this extraordinary statement prior to Figure 21 on page 40 –

    “Under a broad-based, low-rate system, ideally the bars in Figure 21 would line up perfectly and there would be no difference in marginal effective tax rates between the types of investments.

    Relative to other countries, New Zealand’s marginal effective tax rates on savings are quite uniform, but there may be room for improvement to make our current system more consistent.” (Note the words “quite uniform”)

    Fig 21, which I can’t reproduce here, then shows Marginal Tax Rates on various forms of Savings – Bank, PIE, Super Fund, Companies and Foreign Shares – of between 47.2% and 55.7%, whereas Owner Occupied Housing Equity comes in at 11.3% and Rental Property Equity 29.4% …

    So the proper response to “relative to other countries … ‘QUITE UNIFORM’ … room for improvement … to make our system more consistent” above is …

    “NO … SHIT … SHERLOCK!!!”

    https://taxworkinggroup.govt.nz/sites/default/files/2018-03/twg-subm-bgrd-paper-mar18.pdf

    Reply
    • PartisanZ

       /  May 1, 2018

      Also, no mention of a Financial Transactions Tax that I can find …

      Reply
      • PartisanZ

         /  May 1, 2018

        LAND TAX, Estate Duty, Gift Duty, Stamp Duty and Cheque Duty all fall into “Thinking outside the current system” as “Other Taxes” according to this marvellously informative TWG background document …

        Conclusion: We’re fucked!

        Reply
      • David

         /  May 1, 2018

        “Also, no mention of a Financial Transactions Tax that I can find ”

        Of course, that’s because it’s a really dumb idea.

        Reply
        • PartisanZ

           /  May 1, 2018

          Doesn’t seem like a dumb idea to me … Far from it.

          Reply
    • David

       /  May 1, 2018

      “Fig 21, which I can’t reproduce here, then shows Marginal Tax Rates on various forms of Savings – Bank, PIE, Super Fund, Companies and Foreign Shares – of between 47.2% and 55.7%, whereas Owner Occupied Housing Equity comes in at 11.3% and Rental Property Equity 29.4% …”

      Doesn’t that make it clear that taxes on things like bank savings, foreign shares and alike need to be cut in half?

      Reply
      • PartisanZ

         /  May 1, 2018

        Shit, you’re not gonna like nationalizing reserve banks and government issued money then, are you? A return to value-based rather than debt-based currency … Fundamental economic reform as promoted all these years by Democrats for Social Credit …

        And no, those taxes don’t need to be cut in half, because government revenue is the basic reason for taxation, and society is the basic reason for transfers …

        Transfer requirements drive the revenue collection.

        We need to close the Owner-occupied and Rental Property loopholes … along with tax evasion/avoidance loopholes …

        Reply
  8. Kitty Catkin

     /  May 1, 2018

    Someone has been after Joyce Meyer in the US for years to get her for tax crimes. She did seem to get a fright and remove some of the more blatant rorts. They have to give 10% away, but if you’re earning that amount, 10% would be no real sacrifice.

    As I remember it, her son was living rent-free in a very nice house paid for by the Meyer foundation (i,e. the mugs who hand over their money to the greedy Meyers) ….and being paid, as the clergy are, a housing allowance as well. .

    Reply
    • Callum

       /  May 1, 2018

      The US system has loopholes the size of a truck and very poor oversight.

      Reply
      • Kitty Catkin

         /  May 1, 2018

        I have heard about the 10% being enough to make them count as a charity, but the greed of some evangelists (who don’t deserve the name) means that they cheat the tax department when they could be rich beyond the dreams of avarice without it.

        Reply
      • PartisanZ

         /  May 1, 2018

        @Callum – “The US system has loopholes the size of a truck and very poor oversight.”

        And ours can’t be far behind …

        Reply

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