$3 billion small and medium business relief package announced

The Government has just announced a “tax loss carry-back scheme” package for small and medium sized businesses amounting to over three billion dollars.

Government backs business through COVID-19

The Government has announced a suite of new measures to provide relief for small and medium-sized businesses during the COVID-19 pandemic.

Finance Minister Grant Robertson says while the Government has already acted swiftly in response to the crisis, with about $20 billion in support already announced, it recognises that more is needed.

The new measures include:

  • $3.1 billion tax loss carry-back scheme (estimated cost over the next two years)
  • $60 million estimated annual savings to business each year from changes to the tax loss continuity rules
  • $25 million in the next 12 months for further business consultancy support
  • Greater flexibility for affected businesses affected to meet their tax obligations
  • Measures to support commercial tenants and landlords

“We have taken decisive action throughout this pandemic to cushion the blow for our businesses and workers – today’s announcement continues that focus. We need our businesses to stay solvent to help with the economic recovery as we emerge from this health crisis.

“Our focus on cashflow and confidence continues through these measures. We have approved a tax loss carry-back scheme that will allow a large number of businesses to access their previous tax payments as cash refunds. Essentially this means a forecast loss in the current financial year can be offset against the tax paid on a profit from last year.”

We are also changing the tax loss continuity rules to make it easier for firms to raise new capital without losing the benefit of their existing tax losses” Grant Robertson said

Minister for Small Business Hon Stuart Nash says some businesses are struggling to meet their non-wage fixed costs, like interest, rent and insurance, but are not currently in a position to take on additional debt.

“In the absence of further support from the Government, these otherwise viable SMEs may be forced to close down permanently.

“We don’t want that to happen, so as well as the tax measures which should provide some cashflow relief, we are going to provide tailored support services to help businesses weather the storm, at no charge to the business.

“Using established services including the Regional Business Partner Network and the helplines run by the Employers and Manufacturers Association and Canterbury Chamber of Commerce, we can get specialist, tailored advice where it is needed, fast. This could range from human resources advice to business continuity planning to financial management – because every one of these small businesses will have a different need,” Stuart Nash said.

New measures are also being announced to support stability in commercial property transactions, extending the timeframes required before landlords can cancel leases and mortgagees can exercise their rights to sale or repossession.

Justice Minister Andrew Little says many businesses may be finding it difficult or impossible to pay rent if they are no longer able to access their property, and if landlords are not receiving rent, they may not be able to meet their mortgage obligations.

“As a result, the Government will extend the current 10 working day timeframe that commercial landlords may cancel the lease to 30 working days. This will be for both the period the tenant is in arrears before the notice is given, and for the period to remedy the breach.

“The Government will also extend the timeframes for lenders from 20 to 40 working days for mortgaged land, and from 10 to 20 working days for mortgaged goods. This will apply to commercial mortgages and home loans. However, the already announced mortgage deferrals are likely to be the first port of call for residential borrowers.

“These measures will ensure an orderly process to deal with commercial lease disputes caused by COVID-19,” Andrew Little said.

Legislation enacting the changes announced today will be introduced on April 27 and will apply effectively retrospectively once the bill is passed.

Work is also underway on further support for businesses and households as the impacts of COVID 19 become clearer.

Why people’s wages are shit

From a comment at Kiwiblog:

This is why you don’t want to even think about voting for “TOP” (The ‘Opportunities Party’)

I’m quoting Geoff Simmons, TOP spokesman, from an article he wrote in The Spinoff ‘Hey Renters Don’t Fall for the CGT Fantasy’ –

He says: You may not care about ‘business’ but have you ever wondered why your wages are so shit? The big problem is that our tax system favours investment in housing over investment in business’

No, that’s not why people’s wages are shit, Geoff.

The reason the wages are generally shit is this: businesses can’t afford to pay employees any more than they do, because the Government takes so much from the employer, then wastes a third of it before giving it back to said employee in the form of entitlements.

Wasn’t the Tax Working Group supposed to look at reforming the tax system?

It has suggested some limited changes, and it looks like the thing with most focus on in, CGT, will be pared back further if Labour risk it at all (or NZ First lets them).

And this comment from below deserves more prominence:

The reason NZ wages are poor is our lack of productivity per capita and geographical constraints.

To increase productivity, businesses must invest in new equipment, for growth and for efficiencies. Business needs access to capital for this, our early stage funding opportunities for small to medium sized businesses are extremely limited, due to the lack of capital depth in our markets. The tax system has contributed to creating this by incentivising investment into housing over more product asset classes such as equities and businesses.

The other key reason is geography. Our remoteness in the world and lack of scale. It is very expensive to bring product into NZ, it is very expensive to move product around NZ efficiently. This creates huge extra costs for business and consumers. This again contributes to a very high relative cost of living in NZ. Unfortunately there is not much NZ can do about this one, but it has it’s benefits too of course.

Bridges makes first term promise on taxes

But he doesn’t say when he expects that first term to be.

There may be some scepticism about ‘no new taxes in first term’.

Didn’t John Key say something like that and then raise GST? National claimed the GST hike was revenue neutral, offset by reduced income tax rates, but that didn’t affect everyone evenly. Higher consumption taxes like GST can impact disproportionately on poorer people, because much of their income is spent on buying stuff to survive.

National also raised fuel levies.

Didn’t Grant Robertson say something similar and then introduce regional fuel taxes and increase fuel levies?

Didn’t a politician say something that was bent into a different shape when they got into power?

The pledge to ‘repeal any Capital Gains Tax’ is odd – unless bridges concedes he won’t get into power in 2020, and a Labour led Government will introduce more Capital Gains Tax, and then Bridges will repeal it if he takes over in 2023. or 2026. By then this pledge will be forgotten.

And his CGT pledge needs clarification on what it actually means. Capital gains are already taxed in many circumstances. National introduced a 2 year bright line test to make it easier to enforce. Labour increased the brightline test. Would Bridges repeal all that? Would he scrap tax on property deals that now incur a gains tax?

No mention of adjusting personal income tax thresholds. If left unchanged effective tax rates keep creeping up.

Everyone wants to pay less tax.

Most people want the Government to do more and to spend more.

Some people want to pay less tax but want other people to pay more tax.

Politicians make simplified pledges that don’t have a good record of being solid promises.

Stuff have more on this: Bridges: We would repeal capital gains tax

In his speech to Aucklanders at Parenting Place on Monday afternoon, Bridges promised not to introduce any new taxes during National’s first term if elected in 2020.

Bridges told media a capital gains tax was very likely and any proposed exceptions for it were “even more preposterous”.

“New Zealanders are taxed more than enough,” Bridges said.

“No new taxes. Jacinda Ardern also made that promise but she didn’t keep it and it looks like they’re warming up to a capital gains tax. We will repeal that tax, we don’t need any more, it’s bad for our country.

Bridges said the TWG’s interim report created uncertainty and people were factoring it into their decisions already.

“People are deciding to invest less, to do less. We want to be clear with New Zealanders, we will repeal a capital gains tax.”

In his speech Bridges said costs were increasing more than wages.

“It’s becoming more expensive to get by, the Government is taking more of what you earn, and incomes aren’t rising fast enough. The Government has more and you have less. That’s wrong.”

“The Government is imposing a raft of new taxes and regulations on landlords including ring fencing of losses, extending the bright line test, changing the Residential Tenancies Act, introducing more costly standards and threatening a capital gains tax.”

Bridges also criticised the rise in petrol, rents and the Government’s “good intentions that have resulted in bad outcomes”.

“Petrol prices also recently reached record highs. It not only costs you more to rent your house – it costs you more to drive to and from it.”

“The Government have banned letting fees. But landlords are now being charged more rent to cover these new costs. Some are even selling up because it’s become too expensive, too difficult and too complicated. Fewer rentals, higher rents. Good intentions, bad outcomes.”

He also said National would increasing funding for core public services such as health, education and transport.

A typical politician pledging less taxes and more spending.

I couldn’t find any sign of this on National’s ‘news’ page.

Q+A: David Parker on taxing bottled water

David Parker as Trade and Growth Minister was interviewed on Q+A last night.

Parker was asked about this from the Labour-NZ First coalition agreement:

  • No resource rentals for water in this term of Parliament
  • Introduce a royalty on exports of bottled water.

Winston Peters via Stuff (June 2018):

A coalition commitment to introduce a royalty on bottled water exports appears to have stalled, with the Government still trying to find a workaround that won’t breach its free trade deals.

Environment Minister David Parker told Newsroom the Government had not “got a lot closer to an outcome” on an export royalty since MFAT’s concerns were raised, and was instead focusing on how to tackle carbon emissions.

“The Government makes agreements as you go into coalitions as to what it is that you prioritise, and we prioritised emissions pricing over water pricing in the coalition agreement and both the Greens and New Zealand First agreed to that.”

Unless there is significance in the order that priorities are listed in the agreement this is not clear.

However, Acting Prime Minister Winston Peters says he is confident a solution to implement a royalty on bottled water will be found before the end of the year.

“I think New Zealanders think it’s unfair that people who bottle water and send it offshore without any return to the public, they don’t think that’s fair – I agree with them, I think that’s also true of other water bottling as well. We’re working through that.”

“Let me tell you, we’ve had so many other things on that it’s not been the priority we’d have all liked, but it certainly is now.”

Asked whether the Government still planned to introduce an export royalty on bottled water this term, Peters said: “I think I can confidently say, this year.”


I’ve got a Cabinet paper coming through soon, in fact I’ve seen a draft of it looking at the different options. We’ve agreed in the coalition agreement that we won’t have a price on water generally during this term in Parliament.

There’s two reasons why you might in the longer term there’s the Tax Working Group suggests. One is fairness between the public and private, if private people for their own profit arre using a public resource then maybe they should…

And the second goes to the efficiency of the use of the resource. If there is a price for scarce resources then they’re inclined to be used more efficiently and so there’s less waste which is environmentally good.

He avoided saying when a decision was expected.

On issues with trade agreements and water – “Can you actually implement a tax on that?”:

Ah you are restricted by your trade agreements. There are still things you can still do, um, ah, they are very, some of them are quite complex, ah it doesn’t kick up a lot of money…

Levies or taxes in various forms are possible, but there is a sense of umbrage on the part of New Zealanders who think that it’s wrong that we export water to the rest of the world without anything coming back to the public for that privilege.

Can you do something without breaching these agreements, and this year?

Ah yes you can do some things, ah, you clearly can do some things, ah, you could also change the rules related to foreign direct investment to make it clear criteria when people are investing from overseas which is something we might consider in the second part of our…

What does he prefer?

Ah I’m not going to express a preference on this.

Can you do it this term or is it in the too hard basket?

Um, yes we can.

So it will be done this term?

I didn’t say that.

You want to do it this term?

Well I, you know, I think the principle where private people are exporting a public resource for their own profit, that something should come back to the public, is a fair play.

So Parker avoided giving any indication of when something may happen on taxing water being exported.

Then he was asked about the complication of claims of Maori ownership. “Is that going to be resolved this term?”

(Big breath) Well, no one’s been able to resolve that until now. Ah, I think there’s considerable goodwill on the part of all sides of these water debates. Ah the public made it clear they want water quality improved. You can’t do that without resolving some of the water allocation issues relating to nutrient discharge rights.

That does throw up Maori rights and interests because Maori disproportionately hold the underdeveloped land that wants the right to…

But you can avoid a foreshore and seabed mess which Michael Cullen was talking about earlier?

I think so.

And Parker was let off the hook there after avoiding committing to any time frame for taxing bottled water, and without giving any indication how Maori claims on water rights might be dealt with.



“Stop using the tax system to address social or equity issues”

“It’s time to stop using the tax system to address social engineering or equity issues. It never works. The tax system’s only purpose is to raise the revenue the government needs as simply and efficiently as possible.”

Ardern: “the effect of any (tax) changes will not occur until after the next election”

Suggestions that the Government may raise fuel excise taxes to pay for things like rail, public transport, and cycleways and walkways, has raised questions about commitments made by Labour during last year’s election campaign on certainty over possible tax changes.

NZH (14 September 2017): Labour tidies up tax policy, will delay new changes until 2020

Labour has decided to delay any implementation of changes from its tax working group until after the 2020 election in a bid to stop any further political damage from its tax policy.

Finance spokesman Grant Robertson’s announcement…

…is a reversal of the previous position of leader Jacinda Ardern.

“We will involve the public at every stage of the Working Group, as well as Cabinet and Parliament’s consideration of any changes that arise from it.

“We know it is important to get this right, so we will balance the need for certainty and urgency by ensuring that any potential changes will not come into effect until the 2021 tax year.

“This gives multiple opportunities for public input, and a general election before any new tax would come into effect.

“To avoid any doubt, no one will be affected by any tax changes arising from the outcomes of the Working Group until 2021.

“There will be no new taxes or levies introduced in our first term of government beyond those we have already announced.”

Ardern said…

… it was her “captain’s call” to back down from introducing new taxes in a first term of a Labour Government because it was clear the public were concerned.

“I have been driving our campaign and I have taken political risks but I’ve done that because I feel so strongly around the urgency there is around tackling the housing crisis. But I needed to also balance that against certainty for voters.”


“This is about making sure that we are providing certainty to voters, but also there is still real urgency around tackling the housing crisis. So yes I will continue to undertake this work in government, but we have balanced that against the need for people to be certain when they vote around exactly what they will be doing.”

“We will still act on what comes from the Working Group, and that may be legislation or it may not. We’ll still act on the findings of the Working Group, we’ll go through a big process with both the public and in Parliament…

…but the effect of any changes will not occur until after the next election.”

Katie Bradford: “If you essentially delay taxes now, will you be able to afford your promises?”


“I want to make really clear, our fiscal plan was never built around any potential revenue down the track from a tax working group, because we had not settled on what we would do in the future. So there is no requirement for any revenue off the back of that tax working group.

“Everything that we have announced in public is already able to be fully funded from the re-prioritisation that we have set out, and it’s all in our fiscal plan.

“I believe I can do the work, get it ready to go, and still provide voters a chance to vote on it before it’s implemented.”

This was in part referring to tax related to housing (Capital Gains tax), and to recommendations coming out of the Tax Working Group.

But Ardern went on to refer to Labour’s whole Fiscal Plan, and to “”everything that we have announced in public”, so i think that voters would consider it disingenuous if Ardern now claims that tax changes like fuel tax done outside the Tax Working Group don’t apply.

Ardern already sounded disingenuous yesterday saying the an increase in fuel ‘excise’ was not a tax increase – see Ardern: fuel increase not a tax, it’s an excise.

Previous Governments have increased taxes after promising not to – the National led Government increased GST after saying they wouldn’t. But that was a measure taken in reaction to a serious Global Financial Crisis they were landed with, and was more or less balanced by decreases in income tax rates.

I’m sure there are more examples going back further, but regardless of what past politicians have twisted and changed, that doesn’t give Ardern or the current Government a free pass for going back on their word.

Similar to ‘it’s not a tax, it’s an excise’, perhaps Ardern thinks it wasn’t a promise, it was an exercise in campaign rhetoric.

Or perhaps she will make another ‘captain’s call’ and defer any changes to tax, including fuel tax, until after the 2020 election.

However she could have an out in the fine print:

“Alcohol, Petrol and Tobacco Levies – will be adjusted as per normal government practice and as set out in Budget documents.” – http://www.labour.org.nz/tax

Will people be happy with that and paying more for their petrol to finance Auckland transport?

And – Labour’s Fiscal Plan, which Ardern clearly referred to, makes no mention of increasing fuel tax, and does not specify or mention at all the fuel levy in their costings.

Ardern: fuel increase not a tax, it’s an excise

When asked about it being a proposed 10% increase in fuel prices, Ardern is on RNZ trying to avoid saying it is a tax, she says it’s an excise.

This sort of playing with semantics is high risk for Ardern.

Especially when they made claims like this during the election campaign: Labour – no new taxes in first term

Labour won’t implement any tax changes until after the 2020 election, finance spokesman Grant Robertson has announced.

“To avoid any doubt, no one will be affected by any tax changes arising from the outcomes of the Working Group until 2021,” Mr Robertson said at Parliament on Thursday morning

“There will be no new taxes or levies introduced in our first term of Government beyond those we have already announced.”

Robertson made it clear there would be no new taxes or levies – but didn’t mention excise increases, so he’s off the hook there. Maybe.

Oxford dictionary: excise

[mass noun, usually as modifier] A tax levied on certain goods and commodities produced or sold within a country and on licences granted for certain activities.

Labour are still ok on this, it won’t be a new excise (tax), it would just be an increase in an existing one.


Bad behaviour taxes

Head of the Tax Working Group, Michael Cullen, has signalled to possibility of taxes to ‘change bad behaviours’.

Stuff: New taxes could change bad behaviours, suggests Sir Michael Cullen

A wealth tax, a tax on financial transactions, a broader capital gains tax, a land tax and new environmental taxes will all be options considered by the Tax Working Group, its chairman Sir Michael Cullen says.

Cullen said those new taxes would be among the options canvassed in a “background paper” that will be published on Wednesday week.

Speaking to the International Fiscal Association conference in Queenstown on Friday, Cullen gave several strong clues on his own thinking on the direction of the tax system.

Cullen appeared warm to the idea of taxes on environmental and social ills, such as greenhouse gas emissions, pollution and the causes of obesity.

“In this summer of 2017-18 there can surely be little argument that the effects of global warming are already with us.

“We face many other environmental challenges such as water pollution, possible over-allocation of water, plastic pollution of the oceans, and congestion, in Auckland especially,” he said.

“All this means that the possible use of the system to change people’s behaviour in ways which increase the wellbeing of all of us is very much on the agenda at the present time.”

Perhaps MPs could be taxed to change their bad behaviour, especially in Parliament.

Cullen played down the suggestion New Zealand needed to cut its company tax rate to compete with lower rates being promised or introduced in countries including Australia, the United States and Britain.

“Some would … argue that trends in tax rates and types of tax offshore may also necessitate similar changes in New Zealand. Most commonly cited is the downward trend in company tax rates which means that our rate is now slightly above the OECD average.”

But he said New Zealand’s 28 per cent company tax was not as high as it might seem, given other charges that applied in other countries, and that the evidence of a link between company tax and economic performance was “very weak”.

Cullen has made these suggestions before submissions to the working group have been made.

Tobacco tax to rise again

Is rising tobacco tax fair?

Helping to quit is not the only cost of tobacco use though – health costs are high, as are related issues of poverty.

The details from Stuff:

From January 1, 2018 the tobacco tax is 83 cents per cigarette, with GST levied on top of that. A smoker who smokes 20 cigarettes per day is paying $133 in tobacco tax each week, including GST.

How much tax is being collected?

The Government collects $1.7b per year in tobacco tax itself, and $1.9b when the GST on the tobacco tax is included. According to Treasury, this amount is forecast to grow to $2.2b by 2021.

Only $62m, or 3 per cent of this money, is spent encouraging or actively helping smokers to quit.

But increasing tax has encouraged many people to quit.

Tobacco tax has played a part in reducing the proportion of adults (aged 15+) who smoke from 20.1 per cent to 15.7 per cent over the last 10 years.

However 600,000 people still smoke.

A pack a day smoker earning $45,000 a year would pay 15 per cent of their income, or close to $7000 per year in income tax and a further 15 per cent (nearly $7000) of their income in tobacco tax each year.

Given that poor people are more likely to smoke that must have a huge impact on their quality of life – and the quality of life of their families.

The tax is being paid by those for whom the policy is failing. Māori, Pasifika and those on low incomes are over-represented in this group.

Of course reducing smoking is a very important health goal, but addicted smokers are surviving on significantly less money per week after paying the tobacco tax. A pack-a-day smoker has $133 per week less to spend on heating, good food and clothes for children.

There are other adverse effects of rising tobacco prices – dairy robberies are increasing and often involve violence. Other crime to finance tobacco purchases is another.

The author of the Stuff opinion piece is Kathy Spencer, a (non-smoking) former Deputy Director-General in the Ministry of Health (responsible for Sector Policy) and a former Manager of Personal and Indirect Tax in the Treasury. She suggests:

Smokers need more active help to quit and there are now many ways to do this: more active support from health professionals, programmes like Quitline, nicotine replacement, e-cigarettes and so on.

The new government has the opportunity to introduce a fairer approach:

  • Double the amount spent on actively supporting smokers to quit, especially Māori, Pasifika and low-income groups.
  • Freeze the excise rate at the current level.

Success will mean that the Government will lose the $2b in revenue that it has been getting from addicted smokers.

It’s time to start thinking about collecting this revenue in other ways, from people who are in a better position to contribute.

I don’t think that increasing taxes of non-smokers to finance attempts to get smokers to quit would be very popular.

Labour lose their nerve on tax

There’s been a lot already written and commented on today’s tax back down from Labour so I won’t go over it all, but it looks like they lost their nerve on their tax working group strategy.

Labour say they won’t implement any new taxes they haven’t already been announced until after the 2020 election, but if in government they may put legislation in place before the election, set to kick off in 2021.

Grant Robertson fronted the announcement. here’s his PR:

Labour committed to fair and progressive tax system

Labour is committed to a tax system where everyone pays their fair share and where we start to address the imbalances that have fuelled the housing crisis, says Labour’s Finance spokesperson Grant Robertson and Labour’s Revenue spokesperson Michael Wood.

“Today Labour has released its full tax plan, bringing together a number of previous announcements and more detail on the Tax Working Group. Given the amount of misinformation being spread, it is important that we have all the information in one place.

“Labour will not make any changes to personal income tax, corporate tax rates or GST.

“What we will do is reverse National’s proposed tax cuts and use the billions of dollars to make 70 per cent of families with children better off and invest more in health, education, housing and other public services.

“Our policy also cracks down on those who are exploiting weaknesses in the tax system by speculating in the housing market. Labour will end the practice of negative gearing, and extend the current bright line test that taxes the capital gain on the sale of a property other than the family home to five years.

“We are establishing the Tax Working Group to explore other options to make our tax system fairer, particularly in terms of the balance between taxing income from salaries and wages and property speculation.

“To be absolutely clear, under Labour the family home and the land around it will never be taxed. There will also be no inheritance tax.

“Labour will not shy away from the hard issues such as fixing the housing crisis and we are determined to do what is right, but we also know we must take New Zealanders with us as we do that.

“We have heard the call for New Zealanders’ voices to be heard. We will involve the public at every stage of the Working Group, as well as Cabinet and Parliament’s consideration of any changes that arise from it.

“We know it is important to get this right, so we will balance the need for certainty and urgency by ensuring that any potential changes will not come into effect until the 2021 tax year. This gives multiple opportunities for public input, and a general election before any new tax would come into effect.

“To avoid any doubt, no one will be affected by any tax changes arising from the outcomes of the Working Group until 2021. There will be no new taxes or levies introduced in our first term of government beyond those we have already announced.

“Other highlights of Labour’s plan include ensuring multinationals meet their tax obligations, a Research and Development Tax Credit and the fast tracked abolition of secondary tax as part of the Business Transformation Programme at IRD,” says Grant Robertson and Michael Wood.

Read our tax plan here.