Ardern’s record on child poverty

UNICEF has just ranked New Zealand near the bottom of OECD countries for ‘child wellbeing outcomes’.

Jacinda Ardern made a big deal out of child poverty when she became Prime Minister. She appointed herself Minister for Child Poverty Reduction.

She has responded to the UNICEF rankings saying their rankings are based on ‘old data’ from when National was in Government, and things are getting better.

How well has she done on child poverty?

I posted in November 2017 Eliminating’ (reducing) child poverty:

Prime Minister Jacinda Ardern has virtually staked her political career on reducing poverty.

Image

In her ‘Speech from the Throne’ in November 2017:

In the last nine years, New Zealand has changed a great deal. Ours is a great country still. But it could be even greater. In our society today, no one should have to live in a car or on the street. No one should have to beg for their next meal. No child should be experiencing poverty. That kind of inequality is degrading to us all.

This will be a government of transformation. It will lift up those who have been forgotten or neglected, it will take action on child poverty and homelessness…

Child poverty is a moral issue but it is also an economic one. Infometrics has estimated that poor investment in children in their early years costs the country between $6 billion and
$8 billion per annum.

This government will put child poverty at the heart of government policy development and decision-making. It will establish targets to reduce the impact of child poverty and it will put these into law.  A work programme will be put in place across all relevant areas of government to achieve these targets.  Heads of government departments will be required to work together to deliver real reductions in child poverty.

To deliver genuine change for children, transparent mechanisms are needed to hold the government to account on poverty reduction. 

Ardern mentioned ‘poverty’ 14 times.

A year later (December 2018): 2018 Child Poverty Monitor

When becoming Prime Minister Jacinda Ardern said that dealing with child poverty would be a priority for her and her Government.  However there are no easy or quick fixes – yet at least.

“The 2018 Child Poverty Monitor puts a spotlight on critical areas in a child’s life where poverty continues to have an adverse impact. The four areas of focus are health, food insecurity, education and housing.”

Click here for the Child Poverty Monitor: 2018 Technical Report

Something was being done about it: 119-1 support for Child Poverty Reduction Bill

All parties except ACT (David Seymour) voted in favour of the third reading (and final vote) of the Child Poverty Reduction Bill in Parliament yesterday.

NZ Herald: Child Poverty Reduction Bill passes third reading

The bill, which will set measures and targets for reducing child poverty, inform strategy to achieve that and require transparent reporting on poverty levels and introduce accountability for governments, was a cornerstone of Labour’s election campaign last year and on the list of achievements for the coalition Government’s first 100 days in office.

Speaking in Parliament today, Ardern said it was no longer just a Labour Party bill.

“This is now an initiative that has been led by a coalition Government with the support of New Zealand First and the Green Party.

“And it also is an initiative that has had the support of the National Party. I want to acknowledge that. This is this Parliament’s collective challenge, and the groups that have come together in Parliament today to support it in this House mean that it will have an enduring legacy”.

That seems like reasonable success getting National alongside the three Government parties.

But in 2019: Budget falls short of child poverty targets

This year’s budget was promoted as a Wellbeing Budget, but it has been criticised for not moving far enough towards addressing things that will improve the well being of the less well off, especially children.

Newsroom:  Budget moves not nearly enough to meet child poverty targets

This is the first Budget under the new Child Poverty Reduction Act rules. 

So how did Grant Robertson go first time out? How much progress towards cutting poverty was there actually in the Budget? The short answer is a bit, but almost certainly not enough to meet all three short-term targets by the deadline of June 2021.

Approximately 55 percent of children in poverty live in households reliant on benefit as their main source of income. Indexation of the benefit to wages is an important long-term change, but indexation to inadequate basic rates is not enough. It will simply not be feasible to address child poverty without either (or both) raising benefit rates or the Working for Families tax credits paid to parents on benefit. We did not see either of these in this first Wellbeing Budget.

I noted:

The last government was already nudging things towards more ‘social conscience’ spending. The current government has nudged things a bit more. Perhaps they will push things further towards wellbeing in the next budget, which is in election year.

This year the budget was dominated by measures trying to address the Covid-19 pandemic.

Ardern’s 2020 Budget Speech did mention poverty:

We have long faced a housing crisis, our environment has been suffering, inequality and child poverty have all been issues we’ve had to tackle.

In three years’ time I want to look back and say that COVID was not the point those issues got worse, but the chance we had to make them better.

And that brings me to the last challenge, child poverty.

We know this has the potential to get even worse than where we are now. And while we moved quickly, even before lock down providing increasing government support to those out of work through benefit increases and the winter energy payment, today we focus on kids, with a major expansion of the food in schools programme.

We already started this programme last year, now we expand healthy lunches in schools so that for around 200,000 more children across the country benefit. Based on what we know, this will also create an estimated 2,000 jobs in local communities. And equally important it will mean in the tough days ahead we can guarantee our most vulnerable kids will get a filling healthy lunch every school day.

But that was a minor mention and Ardern followed it with.

Mr Speaker, I want to finish where I started. On our businesses, on our job creators, on our innovators and on those who have carried such a huge burden over these last weeks and months.

Mr Speaker, I said yesterday that this budget would be about jobs, jobs, jobs. In total it seeks to save as many as 140,000 of them over the next two years, and to support the growth of 370,000 more over four years.

This Budget shows how we are positioning New Zealand for that right now. It shows that we know this is not the time for business as usual, it’s the time for a relentless focus on jobs, on training, on education, and the role they all can play to support our environment, and our people.

So Mr Speaker, let’s begin our recovery and let’s rebuild, together

Word counts from the speech:

  • Poverty 2
  • Business 19
  • Jobs 23

Obviously business viability and jobs are important for family incomes and for the care of children, and Covid necessarily changed the Government focus a lot, But of the many billions of dollars spent on on Covid support most has been for propping up businesses and jobs, and little has directly addressed poverty issues.

Coming towards an election Ardern and Labour needed to be mainly focussed on dealing with Covid, and that seemed to dominate their campaign strategy, but yesterday UNICEF brought attention back to children.

RNZ: NZ ranked near bottom of UNICEF child wellbeing ratings

New Zealand is near the bottom of a UNICEF league table ranking wealthy countries on the wellbeing of their children.

Of the 41 OECD and European Union countries surveyed, New Zealand ranked 35th in overall child wellbeing outcomes – and UNICEF says that is failing children.

The UN Children’s Fund rankings show this country’s youth suicide rates are the second highest in the developed world, with 14.9 deaths per 100,000 adolescents, and only 64 percent of 15-year-olds have basic reading and maths skills.

The rankings also show too many children and young people in New Zealand are overweight and obese.

On mental wellbeing alone, New Zealand sits at 38th on the list and on physical health it is ranked 33rd.

NZ has ‘normalised inequality’

UNICEF NZ executive director Vivien Maidaborn said New Zealand’s rankings were driven by inequality.

“I think we normalise inequality. Somehow it’s alright that some families can’t afford homes and are living in motels and emergency housing. Somehow its alright that many of our lower socio-economic families can’t access high quality early childhood education. And then we wonder why we finish up with a statistic like only 64.5 percent of 15 year olds have got proficiency in reading and maths.

“Right now in Covid-19 there is a real worry we’re increasing inequality,” she told Morning Report.

She said while there were wage subsidies and mortgage holidays, there were no rent holidays, and the doubling of the winter energy payment was due to run out on 1 October.

“I just think we’re in danger of investing in the New Zealanders who already have wealth and assets and forgetting that the poorest New Zealanders, people living on benefits, are not being well supported.”

More from Maidment (and Chris Hipkins’ response to the ratings) from Stuff: New Zealand continues to fail children, Unicef report shows

Ardern issued a media release Prime Minister responds to child wellbeing report

A UNICEF report reflecting poor rates of child wellbeing in New Zealand between 2013 and 2018 underscores the Government’s work to break the cycle of child poverty.

“The report itself acknowledges in many cases data was missing or was several years old, largely painting a picture of the previous Government’s underinvestment in our families,” Prime Minister and Child Poverty Reduction Minister Jacinda Ardern said.

“The report pre-dates our progress in rolling out the $5.5bn Families Package, setting child poverty targets, lifting 18,400 children from poverty, and improving seven out of nine child poverty measures.

“Our plan to make New Zealand the best place in the world to be a child is making a difference but there is more to do…

“That work is all under way, with 6000 young people contributing to our Child and Youth Wellbeing Strategy, the historic Child Poverty Reduction Act 2018, and the alignment of our goal to halve child poverty in a decade with the United Nations’ Sustainable Development goals.

“One of the things I’m very focused on through the Child and Youth Wellbeing Strategy is to systematically collect and publish data on a much broader range of child wellbeing indicators, which is why we invested $21 million in Budget 20 to measure persistent poverty.

“What’s important is that as a Government we keep making progress to ensure our children have a warm, dry home, access to healthcare, safe and healthy food, and the chance to have a childhood in which they’re free to learn and play,” Jacinda Ardern said.

(Edited)

But that was a defensive response.

A week ago Bryce Edwards compiled Political Roundup – Politicians making inequality worse

Inequality and poverty look to be the forgotten issues of the election campaign, with not much more than lip-service being paid to them on the campaign trail. Yet decisions are currently being made that appear to be fuelling a greater gap between rich and poor.

Newsroom’s Bernard Hickey has tweeted this week to sum up how the Government has chosen to manage the Covid-19 health and economic crisis: “This Covid-19 response has all been about bailing out property owners, helping banks, propping up zombie small businesses, big grants and loans to well-connected big businesses and middle class welfare via special Covid dole to higher-paid jobless. Not a team of 5 million at all.”

Hickey has elaborated on this in a column, saying the Government has made policy choices that have advantaged the rich and disadvantaged the poor, which will fuel higher levels of inequality: “without debate, the Labour-led Government has delivered the biggest shot of cash and monetary support to the wealthy in the history of New Zealand, while giving nothing to the renters, the jobless, students, migrants and the working poor who mostly voted it in” – see: NZ’s ‘K’ shaped Covid-19 recovery.

Hickey has also written today about housing inequality, arguing that the Government has chosen to prioritise the housing market in order to prevent a crash in values – see: Our housing market is too big to fail (paywalled). He believes the Government has chosen not to embark on “massive state house building”, nor implement a capital gains tax, because these might upset wealthy property owners.

Of course, the problems of inequality and poverty aren’t simply down to the Covid-19 crisis. At the last election, Labour, the Greens and NZ First campaigned strongly on inequality, pointing out that under nine years of National things had got worse for the poor and working people in a variety of ways.

Have these parties actually made a significant difference during their three years in power? There are signs that things haven’t improved much at all. The Government has largely chosen not to transform the economy or redistribute wealth in any meaningful way.

This was reflected in February when the official economic statistics were released, showing little change. Financial journalist Brian Fallow reported the details: “Data out this week on household incomes and housing costs make uncomfortable reading for both the Government and the Opposition. A centre-left Government should not be happy that in the year to June 2019 — its first full year in office — it has not moved the dial on income inequality at all. A standard measure of inequality, called the Gini coefficient, at 33.9 is as bad as it has been at any time in National’s last nine years in power and higher than it was before the global financial crisis” – see: Numbers show Government hasn’t moved the dial on income inequality at all (paywalled).

Fallow made the notable comment: “Neither the Government nor the Opposition is offering any plan to change that.”

A major problem with Covid that despite all the Government subsidies there is less work available and take home wages have decreased for many people, and this has impacted on the lower waged most. And that impacts on many children.

Ardern has a chance to address this with Labour’s campaign policies, but those will be political promises for the future. There’s a good chance Labour will have more unconstrained power next term, but under Ardern the Government has talked up transformation but under-delivered.

Leftwing blogger No Right Turn: Labour doesn’t care about the already poor.

While they talk about ‘kindness’ and ‘wellbeing’, when push comes to shove, they’re happy with existing inequalities, happy even to exacerbate them, happy with the underclass Roger Douglas and Ruth Richardson created, happy with the status quo and all its injustices.

Because doing anything about any of those problems would mean them having to pay more tax on their $180K+ salaries, or on their property portfolios or family trusts, and that seems to be something which is simply unthinkable to them now.

Ardern has achieved a bit on child poverty this term but Covid may have reversed some of that.

The UNICEF report is timely – it should have reminded Ardern of her commitments on child poverty, and she will no doubt be reminded again through the campaign.

Three years ago:

This will be a government of transformation. It will lift up those who have been forgotten or neglected, it will take action on child poverty and homelessness…

Ardern managed only modest gains and some of those have been reversed by Covid.

Early in her first term she talked the transformation talk. We are waiting for a bold walk.

Labour wimped out on a number of major polices, like Kiwibuild and CGT, and underperformed on others like child poverty and homelessness.

Next term she won’t be able to blame National as much. She may not have Winston Peters holding her back. She may have the Greens pushing her for action.

Ardern argues in defence of more complicated taxes

Some people (including me) hoped that a decent review of New Zealand’s tax (and welfare) system would lead to simplifications. Complexities add to costs, and they tend to lead to distortions and unfairness – rich people are generally more successful at finding ways around complex tax law.

Jacinda Ardern keeps pushing more ‘fairness’ as a primary reason for tax reform, and she did this again in Parliament yesterday, but she also appeared to concede that this justified a more complicated tax system.

David Seymour: Is it possible that a proposed capital gains tax could be revenue-neutral?

Rt Hon JACINDA ARDERN: That is certainly the request that we made of the Tax Working Group. It was to consider options around making the package revenue-neutral.

That sounds lie a very fuzzy lack of commitment to ‘revenue-neutral’ tax changes.

David Seymour: Why would a Government request advice that would make a tax system more complicated, to get the same amount of revenue?

Rt Hon JACINDA ARDERN: Two points: firstly, to make the tax system fairer—which seems like a pretty good reason to members on this side of the House—and secondly, almost every member of the OECD manages to deal with what is being asserted to be complicated; why can’t we?

Ardern didn’t dispute “a Government request advice that would make a tax system more complicated” – in fact she justified it  “to make the tax system fairer”.

The more complicated it is the greater the chance of unfair anomalies and loopholes.

Inequality has made New Zealand poorer – OECD

A lack of improvement in productivity has been cited as a problem for New Zealand – is that why we feature poorly here?

Rising inequality holds back economic growth — according to a recent report by the Organization for Economic Co-operation and Development (OECD).

The organization, which is primarily composed of high-income countries, analyzed economic growth from 1990 to 2010 and found that almost all 21 examined countries missed out on economic growth due to rising inequalities. (We take a closer look at the countries that were hardest hit in the second half of this post.)

“When income inequality rises, economic growth falls,” the authors of the report concluded.

They explained their findings by pointing out that wealth gaps hold back the skills development of children — particularly those with parents who have a poorer education background. In other words: A lack of access to high-quality and long-term education among poorer citizens in many OECD countries hurts the economy.

Generally I though access to education was good in New Zealand.

Are failures due to financial inequality, or to an inequality of encouragement of parents and ambition of children and young adults. Lack of hope?

RNZ (June 2017) – NZ’s weak productivity in OECD’s sights

New Zealanders enjoy high living standards, but the country’s low labour productivity continues to be a weakness, the latest OECD report says.

In its latest two-yearly review of the economy, the Paris-based organisation forecast robust growth of about 3 percent over the next couple of years, and noted the government’s healthy financial position.

Overall, New Zealanders enjoyed high living standards, with all components of the Better Life Index stronger than the OECD average except for household disposable income and wealth.

“New Zealand’s robust economic growth and high levels of well-being are enviable, even among the highest-performing OECD countries,” OECD chief economist Catherine Mann said.

However, labour productivity remained an Achilles heel for New Zealand – and well below leading OECD countries.

“Improving productivity growth is a major long-term challenge for improving inclusiveness and living standards,” the report said.

New Zealand’s persistently low productivity has long puzzled the OECD, despite expectations the far-reaching reforms of the late 1980s and early 1990s – which the OECD championed – would reverse that.

It blames the weak performance on the country’s distance from its main markets, relatively small population, weak capital investment and a lack of competition internally.

Stuff (September 2017) – Shamubeel Eaqub: New Zealand has a productivity problem

We are working harder to grow the economy, but we aren’t getting much better at it. Poor productivity has plagued New Zealand for the past 40 years.

We have a productivity problem. The problem is not new, there are no easy fixes, and doing more of the same will most certainly not fix it. We should not pretend that any of the political parties have a convincing plan to fix it.

Migrant populations in OECD countries

On average, migrants make up 13% of the population in OECD countries, up from 9.5% in 2000 – a significant increase.

Some interesting comparisons here.

Not surprising to see Australia and New Zealand near the top.

Surprising to see Switzerland so high.

NZ Herald: Ex pats are choosing New Zealand over Australia as emigration destination

Could beautiful pictures of New Zealand on social media be luring ex pats here instead of Australia?

The latest report from international relocation experts Movehub could be suggesting so.

The report shows for the first time since 1991 more Australians are moving to New Zealand than the other way round, and searches online for moving to New Zealand from the UK have surged upwards.

Australia has seen a five per cent decrease in people moving there.

The report has attributed the rise in New Zealand’s popularity to its economy, scenery, sense of community, and “the Trump and Brexit effect”.

“The EU Referendum was one of the most controversial political events of 201 and its outcome has had global repercussions,” head of Movehub, Ben Tyrrell said in the report.

“There was no shortage of political drama in the US this year either.”

Moves to New Zealand from the US grew by 71 per cent in November 2016.

But New Zealand has more to offer than simply an escape from Trump, the report said.

“New Zealand’s economy is another contributing factor for the surge in immigration; it continues to perform strongly whilst Australia’s mining boom dwindles, pushing up prices and encouraging yet more Australians to seek a cheaper cost of living across the Tasman.

“Though Australians may be moving to a well-known neighbour, Americans and Britons are relocating to a country half a world away, however it is clear that the distance pales into significance for the chance to live somewhere so beautiful with such a strong sense of community.”

New Zealand is ranked as the seventh most popular destination country, but the eighth highest country people are leaving.

Despite this, searches for moving to New Zealand from the UK were up 83 per cent in the 2016/2017 financial year compared to the previous one.

Migration patterns keep changing, but the Internet makes it easier for people who want to move countries to check distant countries out.

 

Q+A – multi-nationals paying tax

On Q+A at 9 am this morning:

Judith Collins is our lead interview on Sunday. Political Editor Corin Dann asks her how she plans to get multi-nationals to pay their fair share of New Zealand tax.

Also…

…how’s the economy treating you? We’ve got a panel of economic experts to examine this week’s OECD report and give their take on how you and our economy are really doing.

Life expectancy versus health expenditure

lifeexpectancyvhealthexpenditure

185 schools in ERO’s worst performing category

The state of many New Zealand schools is substandard and failing many students according to a report from the New Zealand Initiative.

Jo Moir at Stuff reports Student achievement is improving in New Zealand but internationally Kiwis are slipping – report

School quality reports from the Education Review Office (ERO) reveal as of June last year 185 schools were in ERO’s worst performing category.

Of those schools, one-third were “persistent” poor performers and some had repeatedly failed students for at least a decade – spanning the entire schooling career of their students, says the New Zealand Initiative report.

That kind of underperformance wouldn’t be tolerated in other sectors but is “accepted in education”.

Lack of education is a major factor in many negative social outcomes, including health, crime, unemployment, parenting.

Very high illiteracy of prisoners shows that those who fail in schools are more likely to fail in society.

ERO has recently changed its approach from “asking about general performance to asking how primary schools are making sure that every single student is achieving at the level they need to”.

Poor performance has led to the Ministry of Education taking over all or some functions of 67 school boards – 51 per cent of the students affected are from schools made up of the poorest families.

Every three years New Zealand students sit the OECD’s PISA exams testing thousands of 15-year-olds on maths, science, reading skills and knowledge.

New Zealand’s position dropped from 7th place in reading, 7th in science and 13th in maths in 2009 to 13th, 18th and 23rd respectively in 2012.

On the other hand just this month Education Minister Hekia Parata congratulated students and schools on the “best-ever results in NCEA” – roll-based pass rates in level 1, 2 and 3 have all improved.

Teaching is a very demanding occupation.

Ministry of Education deputy secretary Lisa Rodgers said schools are supported to “resolve issues themselves” unless help is needed and the ministry steps in.

Data shows teacher turnover is increasing, and it is greater in lower decile schools, but again it isn’t recorded why teachers leave the profession and where they go.

The Education Council is the professional body for teachers and its professional services manager Pauline Barnes says it “cares about when teachers leave and why”.

“We will read the report in detail and then look at how we can respond.”

The ministry couldn’t provide a response on where or why teachers go because they “do not collect the data on the reasons why people move”.

“Because we want the best teachers teaching our students we are concerned about supply and also quality,” Rodgers said.

If they don’t know why teachers leave it makes it difficult to know how to try and prevent more teachers leaving.

Schools report: could do better. Must do better. The future success and well being of hundreds of thousands of children are at stake.

 

Little questions multinational tax paying

Following James Shaw questioning the Government on the amount of tax paid by multinationals on Tuesday – see Shaw on ‘multinational’ tax avoidance – Andrew Little followed up with more questions on this yesterday.

Both Shaw and Little have tried ‘slack Government, bad multinational’ lines of attack but neither offer any better solutions than we currently have.

Bill English spoke as acting Prime Minister (John key is overseas).

1. ANDREW LITTLE (Leader of the Opposition) to the Prime Minister: Does he stand by his statement with regard to multinational corporations that “I suspect they are legally paying their correct amount of tax; the question is are they ethically paying the right amount of tax. It feels hard to believe that they are”?

Hon BILL ENGLISH (Deputy Prime Minister) on behalf of the Prime Minister: Yes, it is unfair that some multinational companies appear to be able to structure themselves so that they avoid paying tax anywhere in the world or so that they pay minimal amounts of tax. The only lasting solution to this problem is collective global action. The good news is that the OECD is leading work on base erosion and profit shifting, and New Zealand is an active participant in that work.

Andrew Little: Do all multinational companies in New Zealand comply with the OECD guidelines on multinational enterprises, which state that “enterprises should comply with both the letter and the spirit of the tax laws and regulations of the countries in which they operate.”?

Hon BILL ENGLISH: They are certainly required to comply with New Zealand law. We need to bear in mind that New Zealand has the ability to tax the profits of these companies in New Zealand—that is, revenue minus expenses. If profit is generated elsewhere, we do not have the ability to tax it in other jurisdictions.

Andrew Little: How many multinationals has his Government taken to the OECD dispute resolution process?

Hon BILL ENGLISH: I do not have that information, and I am not sure exactly what process the member is referring to. The New Zealand model for taxing these companies is about as robust as that of any developed country—that is, we have tighter rules on transfer pricing and thin capitalisation regimes. If they make profits here, they are taxed.

Andrew Little: Does he believe that the Australian-owned banks in New Zealand, which are the most profitable banks in the developed world, are paying the tax they owe, or are Kiwis having to carry the burden for them as well?

Hon BILL ENGLISH: I believe that they are paying the tax they owe. In fact, 4 or 5 years ago Crown Law won major tax cases, where we collected hundreds of millions more out of the banks—

Hon Trevor Mallard: That Michael Cullen funded.

Hon BILL ENGLISH: —that is right; he did, too—and since then the rules have been further tightened in ways that the banks do not like, but it means that they do pay pretty close to the statutory rate of tax.

David Seymour: Is the Prime Minister aware that our company tax rate of 28 percent gives New Zealand one of the highest effective tax rates on capital in the OECD and that a more effective way of gaining more revenue might be to have a more competitive company tax rate?

Hon BILL ENGLISH: Yes, by international standards, we have a robust company taxation system. New Zealand has always believed in a broad-based, low-rate system, but that means having a company tax rate close to the higher levels of our personal tax rates. That is a bit unusual.

Andrew Little: Is it acceptable that his Government is penny-pinching to the extent that the health Minister now says of Pharmac that it has not got the money at the moment to buy life-saving medicines like Keytruda while, at the same time, multinationals are ripping us off for anything from $500 million to $7.3 billion a year, which is what the Tax Justice Network says New Zealanders are being ripped off by?

Hon BILL ENGLISH: I simply disagree with and rebut the assertion the member is implying, that the Government is soft on the taxation of companies. It is simply not the case. We have one of the most robust taxation systems for company profits in the developed world. The type of issues the Tax Justice Network is pointing to can be dealt with only by global cooperation to ensure that multinationals pay their tax somewhere. But, for instance, if Fonterra sells a billion dollars’ worth of product in China, we do not want the Chinese Government levying 30 percent tax on them, and nor should it be able to.

Andrew Little: Will the Government join with the Labour Party and support a parliamentary inquiry into multinational tax avoidance and stronger laws and more money for enforcement; if not, why not?

Hon BILL ENGLISH: The Parliament has a regular opportunity every time it looks at a taxation amendment bill—there are two or three a year, generally—and if you look back through the record of what the New Zealand Parliament had done, you will see that the Finance and Expenditure Committee has supported, as far as I know, every single measure that the Government has taken to ensure that multinational companies pay tax on their profits in New Zealand.

Unlike Greens Labour doesn’t appear to have done anything parallel to this in social media nor is there any follow up media release. Neither Greens or Labour seem to have got any wider exposure.

Instead NZ Herald reported yesterday: KPMG: Moves to curb international tax dodges

Global international tax takes from multinational companies will almost certainly increase in the next 5-10 years as governments around the world look to level the taxation playing field.

Commenting on the New Zealand Herald’s series examining ‘the tax gap’ – multinationals channelling earnings to lower tax regimes, disadvantaging some of the countries they trade in – Bruce Bernacchi, a partner in KPMG’s tax division, says change is on the way.

The Organisation for Economic Cooperation and Development (OECD) recommendations on international taxation, developed along with the G20 nations – one of the biggest OECD projects in decades – should be that levelling influence when it comes to international taxation, he says.

The OECD’s Base Erosion and Profit Shifting (BEPS) action plan is an attempt by the world’s various economies to address the widespread concern corporations may not be paying their fair share of taxes in the nations in which they operate.

Multinational companies are able, because of differing tax regimes globally, to work legal tax manoeuvres by shifting income from locations where they operate to other jurisdictions with lower tax rates. That costs the countries in which they operate, who are denied a tax take.

Support from around the world suggests large-scale acceptance of the OECD rules – effectively making international tax rules consistent around the globe – but here is still a way to go before they come into effect.

“Yes, these proposals have been in process for two years but it is an extremely complicated field and they are gathering pace; countries like the UK and Australia have already made moves ahead of the OECD recommendations and most member countries will be starting to change their domestic laws to bring them into line with the recommendations,” Bernacchi says.

In New Zealand, Inland Revenue will release discussion documents on two OECD recommendations this year – but Bernacchi suggests those hoping major international corporates pay more tax should be careful what they wish for.

However, if multinationals were caught in a more exacting international tax net, their response might also not be popular.

“If Apple, for example, starts paying a lot more tax and starts charging $50 more for every i-Phone, I don’t expect that will be greeted with universal acceptance either.”

Of course higher taxes means higher prices.

It looks like change is coming, but effective international agreements take time to reach and implement.

Presumably Shaw and Little know this, but they choose to try to score political points over the Government and multinational companies anyway, without much effect.

If this was a coordinated attempt at an attack by Greens and Labour it has been a bit lame, especially considering their lack of suggestions except:

Andrew Little: Will the Government join with the Labour Party and support a parliamentary inquiry into multinational tax avoidance and stronger laws and more money for enforcement.

Asking for an inquiry implies that Labour doesn’t have any alternatives.

Norman and Little versus Key on income inequality

In the last clash of the leaders of the year in Question Time both Russel Norman and Andrew Little quizzed John Key on the OECD report on income inequality.

Norman was first.

[Sitting date: 10 December 2014. Volume:702;Page:1. Text is subject to correction.]

1. Dr RUSSEL NORMAN (Co-Leader—Green) to the Prime Minister : Does he agree with the OECD that “when income inequality rises, economic growth falls”?

Rt Hon JOHN KEY (Prime Minister): No, it is not that simple, because there are a number of factors that contribute to economic growth.

Dr Russel Norman : Is the Prime Minister saying that the OECD Secretary-General, Angel Gurria, got it wrong when he said yesterday that “addressing high and growing inequality is critical to promote strong and sustained growth”?

Rt Hon JOHN KEY : No, I think that that helps. That is one of the reasons why the Government is proud of its record, as defined by the OECD in a table that it put out last night. It showed that between 2007 and 2011, income inequality has actually narrowed under this Government. The great tragedy is that it also put out a report last night that showed that between 1985 and 2005, when a Labour Government was in office for a reasonable period of time, income inequality got worse. Shame on Labour—

Mr SPEAKER : Order!

Dr Russel Norman : Why does the Prime Minister continue to defend a failed right-wing ideology—trickle-down economics, which the OECD has now rejected—when this economic ideology has fuelled the biggest rise in inequality amongst OECD countries and has knocked 10 percentage points off New

Rt Hon JOHN KEY : That is not right. All I can say is that under a National-led Government, income inequality has actually narrowed, as defined by the OECD, between 2007 and 2011. Interestingly enough, if the member is quoting the OECD as the oracle of all good information when it comes to growth and issues of inequality, maybe he would like to follow this comment from the OECD. It said in 2010 in its report: “A growth-orientated tax reform would improve the design of tax regimes by broadening the base and lowering the tax rates of New Zealand.”

Dr Russel Norman : With regard to tax rates, does the Prime Minister believe that when he cut taxes for the top 10 percent of income earners in the middle of the global financial crisis, in 2010, it reduced inequality?

Rt Hon JOHN KEY : As Treasury noted at the time and as has proven to be correct, actually, the changes to the tax system that were made by the National-led Government in 2010 were distributionally neutral. Actually, as time has gone on, it has been proven that higher-income taxpayers have paid more as a result of those tax changes. That is because the Government changed the rules around depreciation of rental properties, the bulk of which are owned by better-off New Zealanders, and it is because even though there was an increase in GST, a large amount of nominal GST is, of course, paid by higher-income taxpayers. They were very good tax changes, and that is why New Zealanders voted for them in an overwhelming way and why they rejected the Green Party policies, and delivered what was—

Mr SPEAKER : Order!

Dr Russel Norman : Will he now revisit his policy of keeping benefits low as “an incentive to work” in light of the OECD finding that the resulting inequality is bad for people and bad for the economy?

Rt Hon JOHN KEY : Inequality is narrowing under a National-led Government. I am proud of that record, as confirmed by the OECD last night in its report. Secondly, the Government is not keeping benefits low. In fact, this is a Government that has legislated to ensure that there are increases in benefits in line with the CPI. The most important thing we can do for beneficiaries—where possible for the bulk of them; clearly not all of them—is to find them work. That is why a strong economy that delivers job opportunities and lifts people out of the welfare trap into work is one of the most beneficial things we can do for low-income families in New Zealand.

Dr Russel Norman : Does he accept the finding of the OECD that the increase in inequality in New Zealand, one of the largest increases in the developed world, resulted in a 10 percent reduction in the size of the New Zealand economy?

Rt Hon JOHN KEY : Well, I do not accept all elements of the report, but I do say this. It was a report that took place on statistical data between 1985 and 2005. In the period between 1999 and 2005, if my memory serves me correctly, the then Labour Government did that with support in various forms from the Green Party. So I say to Russel Norman that, yes, he should apologise to New Zealanders—

Mr SPEAKER : Order!

David Seymour : Would the Prime Minister agree that what the report really found was that growth is driven by the quality of investment in human capital across all income levels; if so, could he share any initiatives that this Government is taking to improve the quality of investment in human capital across lower-income New Zealanders?

Rt Hon JOHN KEY : Yes, I would, and I would say that the OECD actually made a very interesting point when it said that redistribution policies that are poorly targeted and do not focus on the most effective tools can lead to a waste of resources and general inefficiencies. One of the ways I know to do that when it comes to human capital—

Hon Member : What about charter schools?

Rt Hon JOHN KEY : —is to make sure they get access to a world-class education. That was the point I was actually going to come to. I myself, with the member, visited Vanguard Military School and saw the great young New Zealanders who are coming out into employment. I must say how proud I was to be part of a Government that is championing those partnership schools that are making a difference to those young New Zealanders.

Dr Russel Norman : Why can the Prime Minister not see this OECD report as an opportunity to move away from failed trickle-down economics towards a form of economic policy that is both good for people and good for the economy, and has a win-win solution for poor children and for the broader economy?

Rt Hon JOHN KEY : If the member wants to talk about failed policies, he should read the Green Party manifesto, as it was so utterly rejected by New Zealanders. I remember that member parading before the cameras a couple of days before the election, telling New Zealanders that the Green Party would be polling a massive number—basically, throwing the Labour Party overboard because the Greens did not want to be part of it, and in the end, they polled 10-odd percent. It was a terrible result. Bad policies are the Green Party’s policies. This Government is delivering for New Zealanders.

The clash of ideologies did little more than give Key a chance to defend and promote his Government.

Little was next.

2. ANDREW LITTLE (Leader of the Opposition) to the Prime Minister : Does he agree with yesterday’s OECD report that “focusing exclusively on growth and assuming that its benefits will automatically trickle down to the different segments of the population may undermine growth in the long run”; if not, why not?

Rt Hon JOHN KEY (Prime Minister): With regard to New Zealand, under this Government that is a hypothetical question. That is because the Government is providing billions and billions of dollars of targeted income and welfare support to the most vulnerable New Zealanders every year. So it is simply incorrect to characterise our economic approach as trickle-down. I would also point out to the member that the data covered the period from 1985 to 2005. I became Prime Minister in 2008. I know he wants to blame me for everything, and he will for the next 3 years, but it is a little bit difficult to blame me for something when I was not even Prime Minister.

Andrew Little : In view of the figures in the report relying on data to 2011, and in light of his previous answer, what specifically does he think was wrong with the OECD’s analysis when it found that economic growth is undermined by inequality?

Rt Hon JOHN KEY : There are many, many things in the report, but what the report last night showed is that there was a growing income inequality in a period that started with a Labour Government and ended with a Labour Government. That is called a failure of Labour’s policies. Since we have had a National-led Government income inequality is narrowing, and that is because this Government is providing enormous support to those most in need. One great example of that is that under this Government the support that is given to households earning under $60,000 a year—that is, just under half of all households are expected to pay no net income tax at all. The members opposite do not like it, but I will tell you what we do not like—the failure, between that 1985 to 2005 period, of a Labour-led Government.

Andrew Little : Does he accept Statistics New Zealand’s finding that incomes for the top fifth in the year to June 2014—after the date for the OECD report—grew by 14.7 percent, while incomes for the bottom fifth grew by just 2.9 percent, thereby increasing inequality in New Zealand?

Rt Hon JOHN KEY : The last bit is the assumption of the member and it is simply incorrect.

Hon Members : Ha, ha!

Rt Hon JOHN KEY : No, I am sorry, but it is simply incorrect. The first point may be correct, but if my memory serves me correctly, and the member is talking about the data series I have seen in the past, that is because it includes returns on investments and other things, and as the member will—

Hon Member : When was it you got your memory back again?

Rt Hon JOHN KEY : That is right—that is right. The member will know that between 2008 and some period, I think, in 2011 or 2012, there was a decrease each year because those returns were negative.

Andrew Little : Does he accept the finding of the New Zealand Institute of Economic Research that loan-to-value ratio restrictions have led to home purchases by speculators leaping as high as 45 percent, while the number of first-home buyers has fallen, all of which is making inequality in New Zealand worse?

Rt Hon JOHN KEY : No, I do not accept that as being correct. I will remind the member that it was his party that actually supported loan-to-value ratios in the early days, but that is another issue. Here is the point: loan-to-value ratios were part of the tool box deployed by the Reserve Bank governor. Without that, interest rates would have gone up by at least half a basis point for all New Zealanders, and that would have had a very significant impact on lower-income New Zealanders. Actually, what we know is that economic growth is being delivered at high levels by this Government, and that follows the economic disaster that we inherited from the previous Labour Government.

Andrew Little : Does taking away the rights of low-paid workers to better pay, secure work, and even tea breaks make them economically stronger or weaker compared with their employers?

Rt Hon JOHN KEY : We are not doing that. What we are doing is providing flexibility in the labour markets. Interestingly enough, last week Mr Little was trying to tell New Zealanders that somehow small businesses are now working New Zealanders, and that they would have his support. They would have his support so much that they would not be allowed a 90-day probationary period, they would not be allowed flexibility in their labour markets, and they would have to pay a much higher starting-out wage or a much higher minimum wage. I know why the member is supporting his policies; it is because his caucus did not vote for him, but the unions did.

Mr SPEAKER : Order! That answer will not help the order of the House.

Andrew Little : Given the OECD’s finding that increased inequality has made the economy 15.5 percent worse off since 1990, how does he plan to reduce inequality in order to grow the economy faster?

Rt Hon JOHN KEY : Income inequality is narrowing under a National-led Government, as supported by the OECD. The members cannot have it both ways. They cannot say one OECD report is right and another one is wrong. The only point I would make is simply that the member needs to go away and get his facts right. Under the report where income inequality was widening was under a Labour-led Government. I know it is a disgrace, but that is why they were hammered at the polls—it is because they were a disgrace. [Interruption]

Andrew Little : Save your applause for a decent performance. Why is he so unambitious that he does not want to boost future economic growth for all New Zealanders? Is it because he is still trapped in a 1980s time warp?

Rt Hon JOHN KEY : I am very ambitious for New Zealand and for the growth rate of New Zealand. We are delivering on that growth rate for New Zealand, which is why it was nearly 4 percent this year. I am so ambitious that if I put my leadership up for a vote, I would expect more than four people to vote for me. [Interruption]

Little was gained by either attacks.

That was the last of the leaders’ clashes for the year,