Clampdown on multinational tax avoidance?

A Government announcement is expected today on attempts to clamp down on multinational companies avoiding paying tax in New Zealand.

This is a difficult world-wide issue so it will be interesting top see what is proposed. The Government has been looking into what it might be able to do about this for some time.

Stuff: Multinationals face nervous wait on tax

Long-awaited measures to clamp down on multinational tax rorts are expected to be unveiled by Revenue Minister Judith Collins on Friday morning.

Company tax makes up 15 per cent of New Zealand’s total tax take of $63 billion, but a Cabinet paper said there were concerns multinationals were not paying their fair share.

Profit-shifting has prompted G20 nations to back a crackdown by the Organisation for Economic Cooperation and Development, called Beps.

An Inland Revenue briefing to Collins released last month confirmed officials were working on proposals to tighten transfer pricing and “permanent establishment” rules and hybrid instruments and on limiting the interest payments that foreign firms could deduct from the profits of their New Zealand subsidiaries.

Judith Collins only took over the Revenue portfolio late last year. Previous Revenue Minister Michael Woodhouse put this out last September:

BEPS proposals released for consultation

A strategy used by some large multinationals to shift profits overseas and minimise their New Zealand tax is the focus of international tax proposals released for consultation today, says Revenue Minister Michael Woodhouse.

“A discussion document which proposes that New Zealand adopt the OECD recommendations on hybrid mismatch arrangements was today released for consultation,” says Mr Woodhouse.

“Our international tax rules are sound, but the Government considers that New Zealand’s rules on hybrids can be stronger.

“Hybrid mismatch arrangements are one of the base erosion and profit shifting strategies used by multinationals to exploit the difference between how two countries might treat a cross-border transaction, resulting in less tax.”

The OECD recommendations remove the advantage of using hybrids.

“It is important that our rules complement those of other countries, particularly Australia and the UK who have both announced their intentions to adopt the OECD recommendations in this area.”

IRD in November:

Addressing hybrid mismatch arrangements

Hybrid mistmatch arrangements are one of the main base erosion and profit shifting (BEPS) strategies used by some large international companies to pay little or no tax anywhere in the world.

The OECD developed recommendations for anti-hybrid measures in its 15 point Base Erosion and Profit Shifting (BEPS) Action Plan.

A Government discussion document, Addressing hybrid mismatch arrangements, seeks comments on how the OECD recommendations could be implemented in New Zealand:

Part I of the document describes the problem of hybrid mismatch arrangements, the case for responding to the problem, and a summary of the OECD recommendations.

Part II of the document explains the OECD recommendations in greater depth and discusses how they could be incorporated into New Zealand law.

Submissions closed on 11 November 2016 (extended from 17 October 2016).

Perhaps today’s announcement is a result of this.

Hybrid financial instruments and transfers

The First Discussion Draft defines a hybrid financial instrument as any financing arrangement that is subject to either different tax characterizations under the law of two or more jurisdictions such that a payment will have different tax treatments (e.g., a loan in one jurisdiction and equity in another), or different manner in which tax will be assessed on the instrument (e.g., deduction in one jurisdiction while the other jurisdiction gives an exemption). The different tax characterizations will result in a D/NI outcome.

From Neutralizing hybrid mismatch arrangements under BEPS Action 2

The Nippert tax investigations

Media is widely criticised for it’s shallowness, it’s obsession with trivia, and it’s lack of investigative reporting.

Last year Matt Nippert showed that there is still some old school investigation going on. He has detailed his series on articles on tax last year – 19 articles at NZ Herald on the topic were published through the year, in what he calls “a deliberate effort to dig into the opaque world of corporate tax avoidance and the growing Tax Gap.”

Not the most popular of topics, but far more important than much of the news we are now dished up.

The series started with package on the front page of the Herald on March 18. This included:

A pre-planned series of stories followed, including

Nippert then looked at government policy on the issue, including

Some further drilling down:

Nippert: “Throughout all this, the opinions of the public and policy-maker and even the business community appeared to shift.”

And finally “late in the year, the government finally reacted”:

In a year that the Herald was heavily criticised for it’s click-bait headlines and increasing reliance trivia we should acknowledge that they retain a commitment to some in depth investigative reporting, albeit with reducing resources.


NZH bio on Nippert:

A Fulbright scholar with a masters from the Columbia School of Journalism in New York, Matt has spent the past decade in newsbreaking roles at the New Zealand Listener, National Business Review, Herald on Sunday and the Sunday Star-Times before joining the Herald in 2014. His work has won numerous awards and he is the reigning Canon reporter of the year.

His stories include horrific abuse at a state-run boys home on Great Barrier Island, malfeasance at South Canterbury Finance, systematic tax avoidance by multinational companies, and the sudden resignation of justice minister Judith Collins.

Nippert has a regular sideline as a broadcast commentator and is one of only a few journalists who honestly enjoys numbers and spreadsheets.

Last year Nippert won Canon media awards for his efforts:

  • Reporter – Business Matt Nippert – The New Zealand Herald
  • Reporter of the Year Matt Nippert – The New Zealand Herald

Action on on taxing multinationals

The taxing of multinational companies has been a difficult issue to deal with. The Government is planning further action to try to address it.

It’s very complex, and not something that can be easily solved by waving a magic Government wand.

NZ Herald: Government planning action to target multinationals over tax

The Government is planning unilateral action to crack down on tax dodging by multinational companies, including changing the law, amid growing concern about fairness.

Revenue Minister Michael Woodhouse said proposals outlined in a cabinet discussion document tabled last month would see Inland Revenue properly armed to tackle the problem and could be accompanied by increased enforcement funding for the taxation authority.

“They are policy and legal bullets – and there may also be resource bullets. We’re constantly having that conversation,” Woodhouse said.

The proposals include granting broader information-gathering powers to Inland Revenue investigators, shifting the burden of proof to multinational companies in disputes over transfer pricing, and tightening loopholes that allow companies to claim they have no taxable presence in New Zealand.

The moves stop short of a full-scale diverted profits tax, as introduced by Australia and the United Kingdom, but Woodhouse refused to rule out such a measure if this new package failed to achieve results.

The paper lays out challenges faced by IRD dealing with multinationals over tax issues, especially “a minority that engage in aggressive tax practices” complicated by “difficulties Inland Revenue faces in obtaining the relevant information”.

The measures are intended to both tackle sharp tax practice – and have a positive, but as-yet unquantified effect on the government’s tax take – as well as answer public concerns about tax fairness.

Woodhouse said controversy over the tax arrangement of multinational companies was likely to continue, as he was concerned that moving imprudently could cause unintended consequences.

“If we start playing silly games with this stuff and over-reach in our attempts to claw back from multinational companies, Fonterra may be subject to the same thing,” he said.

Woodhouse said the package was unlikely to be the final word on the subject of corporate tax avoidance.

A formal paper on the policy changes is expected to be published for consultation in February, with cabinet making a formal decision on the proposals later in the year.

New Zealand shares a common problem with many countries in trying to get multinational companies to pay a ‘fair share’ of tax.

If they avoid paying tax for business done in New Zealand it puts a greater tax burden on local companies and especially wage earners, and gives unfair pricing advantages to those companies who pay less tax.

Also from the Herald: Explore how multinational companies pay no tax in NZ

NZ ‘heading in the right direction’

The latest Roy Morgan poll shows that a clear majority think that New Zealand is ‘heading in the right direction’.

“Generally speaking, do you feel that things in New Zealand are heading in the right direction or would you say things are seriously heading in the wrong direction?”

  • Right direction 55.5%
  • Wrong direction 29%


Meanwhile there has been some positive news over the last week or so.

RNZ: Tax take puts govt back in black

Excluding investment gains and losses, the operating surplus stood at $222 million for the three months to September 30, compared with the $503m loss that had been forecast in May’s budget.

That comes after the government recorded a $1.8 billion surplus in the June 2016 year – four times more than forecast.

The growing economy has again boosted tax revenue for the most recent quarter, which came in above expectations at $17.3bn.

Treasury said the improvement was being driven by a higher corporate tax haul and stronger GST returns from building work and tourists.

Expenses remained close to expectations, at $18.9m.

If investment gains and losses were included, the operating surplus was a larger than expected $2.3bn.

Net debt totalled $63.1bn, or 25 percent of the value of the economy.

Economists are picking the faster growing economy will translate into bigger surpluses in coming years.

RNZ: Unemployment drops to lowest level since 2008

Official figures show the unemployment rate declined to 4.9 percent in the three months to September, or 128,000 people, the lowest rate since December 2008.

That compares to a revised 5 percent jobless rate in the previous June quarter.

“The number of people employed in New Zealand was up 35,000, or 1.4 percent, in the September 2016 quarter,” Statistics New Zealand labour and income statistics manager Mark Gordon said.

“This strong growth in employment, coupled with few unemployed people, pushed the unemployment rate below 5 percent for the first time in nearly eight years.”

Employment outpaced the growth in the number of people entering the workforce, which rose 0.7 percent, or 24,000, to 3.379 million.

Unemployment fell by only 3000.

New Zealand has been ranked the top country in the world for doing business in the World Bank’s 2017 Doing Business Report.

The report, which examines regulations that enhance or constrain business activity, assesses 190 countries and ranks them according on the impacts of their regulatory environment on business.

The report is made up of ten different indicators that affect the life of a business. New Zealand ranks first in half of these including starting a business, dealing with construction permits, registering property, getting credit, and protecting minority investors.

The report also notes:

  • New Zealand’s strength in procurement through our online procurement process (GETS)
  • New Zealand is world leading in ease of starting a business with the smallest number of procedures required and the shortest time to start a new business.
  • New Zealand has made the process of paying taxes easier and cheaper.

Newshub: New Zealand best place to live in the world – study

A survey conducted by London-based think-tank the Legatum Institute considered 104 factors before coming to the conclusion that New Zealand should be crowned the top country on its Prosperity Index.

The Index calculates just how much prosperity a country delivers given its wealth – looking at its per capita GDP and the number of people employed, among a myriad of other variables.

The Index said New Zealand was unrivalled in its ability to turn its wealth into prosperity, describing Aotearoa as model country for delivering “wellbeing and wealth”.

We took top spot on account of our social capital – which measures personal relationship and social network support – and economic quality – which looks at macroeconomic indicators, financial foundations for growth and the economy’s openness.

We were also deemed to have the world’s second best business environment and governance, and were third best in personal freedom.

Our success has been put down to a few factors – with our place in the Commonwealth, our strong civil society and wide open markets all significant, the Legatum Institute says.

While there’s obvious room for improvement New Zealand is doing relatively well.

Tax paid by multinational companies

The issue of tax paid (or lack or tax paid) by multinational companies came up in Parliament’s Question Time yesterday.

7. FLETCHER TABUTEAU (NZ First) to the Minister of Finance: Does he think it is acceptable that 20 multinational companies paid just $1.8 million in income tax in 2014, despite recording nearly $10 billion in annual sales in New Zealand?

That sounds like dramatic underpayment of tax but it lacks a lot of detail. In many cases much of the cost of sales from multinational companies is incurred overseas and the sales are recorded overseas.

Hon BILL ENGLISH (Minister of Finance): As I think the member is aware, we do not tax turnover in New Zealand, so it is a bit hard to know. It is possible that the levels of tax are lower than they should be. We expect multinationals to pay their fair share of tax and be good corporate citizens. Most companies play by the rules, but the Government is continuing to tighten up the rules around transfer pricing and interest deductibility. New Zealand continues—most importantly, in my view—to work with other OECD countries to strengthen international tax settings, because, in some respects, what is most concerning about some multinationals is that they do not appear to pay much tax anywhere. We need to work with other countries to make sure that they pay their fair share as appropriate to each country’s rules.

That’s standard waffle from English, and his following responses didn’t add much. But Tabuteau came up with two examples.

Fletcher Tabuteau: Given that he just stated that he believes in a fair and equitable tax system, does he think it right that MasterCard New Zealand declared revenue in New Zealand of just $4.5 million, and paid tax of only $71,000 in its latest figures, despite sharing evenly in $40 billion of annual credit card billings?

That seems interesting but it is misleading, as his next question shows.

Fletcher Tabuteau: Given his answer, does he think it right that Visa New Zealand shared in the same pool of credit card billings of $40 billion, and it declared only $3.2 million of revenue and paid only $185,000 in tax in its latest figures?

So Mastercard and Visa together shared in “the same pool of credit card billings of $40 billion”. And that is not their sales, it is the sales of many companies who use credit card services so people can pay for goods and services.

It doesn’t separate domestic versus international sales.

Credit card charges are only a small part of overall sales, a few percent at most. If you pay Inland Revenue by credit card the fee paid to Westpac is 1.42%, if you pay the Police the fee is 1.9%.

It is obvious from this that some of the $40b are not sales but are payments with no revenue or tax involved.

One percent of $40b is $400 million, still a substantial amount. But there will be significant costs involved in providing the service and providing the finance – banks provide finance free of interest for up a month and a half.

So the detail Tabuteau is insufficient to have any ideas how outraged to be about how little revenue Mastercard and Visa report and how little tax they pay.

I don’t know how things are structured between the banks and the credit card companies. It looks like the banks incur most of the costs and will get most of the sales value from transactions.

Fletcher Tabuteau: How will the Minister help many New Zealand companies, which have said that they have missed out on investments here at home because overseas competitors are abusing the tax system here in New Zealand, giving them an unfair advantage over Kiwi firms?

That’s little more than a vague assertion of abuse. Without details Tabuteau has embellished his claims and made a very weak argument.

Tax cuts or debt reduction?

Today’s Herald editorial makes the case that Govt should use extra to cut debt, not taxes.

The Prime Minister, an endlessly agreeable politician, entertains talk of tax cuts whenever the Budget surplus turns out to be higher than expected. It is well past time that he stopped doing so and instead made the public better acquainted with its debt position.

John Key and his Government know very well that the reason they have managed to bring the economy through a recession and earthquakes in good shape owes just about everything to the very low debt left by the previous Government.

We have to hope the next economic “shock” does not happen before 2020, for it is not until then that National plans to have the debt back down to the level at which Labour left it.

Really? Government debt has risen from $10 billion in 2008 when National took office to $50 billion now. I don’t think there is any way our economy would allow for an average of $10b per year debt reduction for the next four years.

However reducing debt should now be a priority. But the Government still needs to spend, and they should seriously consider reversing the creeping personal tax increases we have had over the last eight years.

The calls for tax cuts today are not coming from opposition parties, nor from business lobbies who have seen how low public debt helped the economy weather the global financial crisis better than most others.

Business lobbies may well be happy that personal income tax increases while their rates remain static.

The Government should not base their tax decisions on who calls the loudest, they should do what is fair. And allowing personal tax rates to creep up is hardly fair on wage earners.

Repaying debt is important.

There is always pressure to spend more on things like health, social housing, education, crime – and some spending increases are unavoidable, like providing more prison beds.

But restoring personal tax parity should also be a serious consideration.

We can have both tax cuts and debt reduction from a fair and prudent Government.

ACT versus National on tax

This week’s ACT Free Press is highly critical of National “boasting that they’ve increased wealth redistribution”.

From a press release from Steven Joyce – Significant income redistribution after tax reforms:

New data from the Treasury shows that income redistribution across New Zealand’s income tax and support system continues to increase, with the top 10 per cent of households forecast to pay 37.2 per cent of income tax in 2016/17, compared with 35.5 per cent in 2007/08.

“This latest data confirms that New Zealand’s income tax and support system significantly redistribute incomes to households in need,” Acting Finance Minister Steven Joyce says.

The rich are paying a bigger proportion of the income tax:

“Higher income households are paying a larger share of income tax than they were in 2008, and lower income households are paying less – the 30 per cent of households with the lowest incomes are forecast to pay just 5.4 per cent of income tax, compared with 6.3 per cent in 2007/08.

“This is before the effect of redistribution from Working For Families and benefits. The Government has increased support for low income families to help New Zealanders through times of need. So at any particular time, a large number of households effectively don’t pay income tax,” Mr Joyce says.

“It’s appropriate to maintain a tax and income support system that helps low and middle income households when they most need it.”

And 42% of households will pay less income tax than they receive from than they receive from welfare benefits, Working for Families, New Zealand Superannuation and accommodation subsidies. This is up from 39% in 2007/2008.

This won’t include what GST they pay though, which can be where about half of the income of the poor people now goes.

ACT Free Press:

Housing is the Underlying Driver
Also last week the Ministry of Social Development released its update of household income inequality from 1982-2015.  It measures income inequality before housing costs and after housing costs. 

Dr Bryce Wilkinson of the New Zealand Initiative says there has been no significant change in income inequality over the last 10, 15, 20 or even 25 years depending on the measure used, before housing costs.  However the bottom 20 per cent of households (by income) spent 29 per cent of their income on housing in the 1980s compared with 54 per cent now.

Free Press concludes:

The National Party is taxing top earners hard, then shovelling the money at low income earners who pay more for housing.  Free Press suspects that it is mostly top earners who benefit from rising house prices, so completing the money-go-round.  This is nuts.

When the money-go-round is spinning fast it can be hard to slow down and difficult to hop off.

What would ACT do?

It is time to give taxpayers relief.  As ACT has said before, the best way to do this is to index tax brackets to inflation (this would have saved the average household $2,500 in tax since 2010 by ending bracket creep).  Ideally we should cut the top rates, clearly the ‘rich’ (read hard working PAYE earners) are paying their share. 

I agree that tax increases by stealth – allowing bracket creep without adjustment – should be dealt with differently.

At the same time, there needs to be serious land use and infrastructure funding reform to get the housing market functioning again.

There’s been a lot of talk but little tangible change on housing, apart from prices continuing to escalate.

However if National reduced income tax for higher earners and if they reduced tax redistribution to poorer people there would be political hell to pay.



EU Commission rules against Apple tax

Missy reports:

How to win friends and influence people the EU way.

Today the EU commission have ruled on the investigation into tax paid by Apple in Ireland. The ruling has found against Apple and ordered Ireland to bill them 11bn pounds (13bn Euro). I will admit now that I was unaware of this case, and don’t really know the background to it, but my understanding it is part of the EU supposedly cracking down on tax evasion, however, this ruling could cause a number of political problems for the EU, problems that they won’t be wanting right now.

Ireland and Apple are going to appeal the decision, and Ireland have stated they will not be collecting the money – apparently the jobs and investment in Ireland by Apple is worth more to them over the long run, which is fair enough if they see it that way, it is their country after all. The EU commission have made the ruling on anti competition laws, rather than tax law.

  1. The first is that this is seen very much as the EU getting close to infringing on a member country’s sovereignty. From what I understand from some tax experts, the EU could be on shaky ground demanding Ireland collect the tax, as the law they are using to condemn Apple and make the ruling is to do with competition as opposed to actual tax – though I believe it is around the fact that a member state cannot offer favourable conditions (including tax breaks) to one company and not another.
  2. This could damage the relationship between the EU and the US, and with the trade agreement between the two in the midst of negotiations there could be some problems for the EU to get the agreement they want from the US.
  3. The EU could have some credibility issues here. The EU Commission President, Jean-Claude Juncker, is a former Finance Minister and PM of Luxembourg, which is widely considered a tax haven – despite coincidentally not being named on the EU’s list of tax haven countries last year. The tax laws, culture, and deals that have made it a very favourable place for large Multinationals to do business, and avoid paying too much tax, were largely developed – or exploited – during Juncker’s time in office. To be going after a Multinational, and another EU member state, for doing what their own President had actively encouraged, shows more than a little hypocrisy.
  4. Apple have threatened the EU that if they enforce this payment then their business in the EU could be downsized quite significantly – if not completely. Now, whilst this is an attempt at either blackmail or bullying (or both) on the part of Apple, it does show that Apple could be in the stronger position here. Apple employ 6000 in Ireland alone, and 10,000’s more throughout the EU, if they were to pull out – or significantly downsize – then this could have a serious impact on an already fragile economy. The UK have, quite rightly in my opinion, jumped on this and told Apple they would be more than welcome to set up shop here.
  5. Apple are not the first Multinational that the EU have gone after, appeals are waiting to be heard on rulings against Starbucks and Fiat for not paying enough tax. There is an opinion that with the latest ruling against Apple some Multinationals may think twice about investing in the EU, and with the UK looking to Brexit, it could make the UK a more attractive option for many. Google and Amazon are rumoured to also be in the firing line – leading the Americans to accuse the US of discriminating against US companies.

Only time will tell how this pans out, but it is looking to be a case of two of the playground bullies squaring up against each other, if it ends up a case of the smarter one winning then I will be putting my money on Apple, the EU Commission are too arrogant with an overinflated sense of the EU’s importance, and delusions of grandeur. But if it is a case of the most stubborn winning, or it being a game of chicken, I think that the EU may edge it.


“A cold-eyed, practical, socialist revolution”

Owen Smith appears to be trying out-flank Jeremy Corbyn on the left flanks of the UK Labour Party.

“Not some misty eyed romantacism about a revolution to overthrow capitalism.

“But a cold-eyed, practical, socialist revolution, through a radical Labour Government that puts in place the laws and levers that can genuinely even things up.

Smith will have to take over the Labour leadership first, then wait a few years in Opposition before getting a chance to contest the next election.

The Guardian: Owen Smith pledges to end austerity in radical pitch to Labour’s left

Labour leadership contender Owen Smith has made a raft of concrete new pledges in a radical pitch to the left of the party, including scrapping the Department for Work and Pensions, which he said had become “a byword for cruelty and insecurity”.

“I am determined that a Labour government I hope to lead will smash austerity, will end austerity. We will make an unbreakable promise to the British people to guarantee a better future,” he said.

The policy pledges by Smith, whose campaign has been characterised by supporters of the Labour leader, Jeremy Corbyn, as “Blair-lite”, included leftwing economic policies that went significantly beyond the promises of the former leader Ed Miliband.

Smith’s 20 policies:

  1. A pledge to focus on equality of outcome, not equality of opportunity
  2. Scrapping the DWP and replacing it with a Ministry for Labour and a Department for Social Security
  3. Introducing modern wages councils for hotel, shop and care workers to strengthen terms and conditions
  4. Banning zero hour contracts
  5. Ending the public sector pay freeze
  6. Extending the right to information and consultation to cover all workplaces with more than 50 employees
  7. Ensuring workers’ representation on remuneration committees
  8. Repealing the Trade Union Act
  9. Increase spending on the NHS by 4 per cent in real-terms in every year of the next parliament
  10. Commit to bringing NHS funding up to the European average within the first term of a Labour Government
  11. Greater spending on schools and libraries
  12. Re-instate the 50p top rate of income tax
  13. Reverse the reductions in Corporation Tax due to take place over the next four years
  14. Reverse cuts to Inheritance Tax announced in the Summer Budget
  15. Reverse cuts to Capital Gains Tax announced in the Summer Budget
  16. Introduce a new wealth Tax on the top 1 per cent earners
  17. A British New Deal unveiling £200bn of investment over five years
  18. A commitment to invest tens of billions in the North of England, and to bring forward High Speed 3
  19. A pledge to build 300,000 homes in every year of the next parliament – 1.5 million over five years
  20. Ending the scandal of fuel poverty by investing in efficient energy

More on his tax proposals from The Guardian:

Announcements included plans to increase spending on the NHS by 4% in real terms every year of the parliament from 2020, with a commitment to increase health service spending in line with European averages, to reinstate the 50p top rate of income tax and to reverse the cuts to corporation tax and inheritance tax.

Another notable pledge was a promise to create a new wealth tax on the top 1% of earners, which Smith said would generate £3bn a year. The new tax would be a charge of 15% on unearned income and income from investment, he said, only applying to those paying the additional rate of tax for earnings of £150,000 a year or more.

A 50% ‘top tax rate’ plus a 15% wealth tax is getting quite high, totalling 65%.

Smith’s house building pledge – 1.5 million in five years – dwarfs New Zealand Labour’s policy of 0.1 million houses in ten years.

Smith may be believe these policy proposals are a cold-eyed, practical way to out-Corbyn the current Labour leader but if he succeeds he may struggle to out-May Theresa May.

Treasury: alcohol and tobacco more harm than cannabis

A Treasury document obtained after an OIA request be a Nelson lawyer gives estimated costs of policing cannabis and potential tax revenue, and says that “the harm caused by alcohol and tobacco was much worse than what’s caused by drugs like cannabis”.

NZ Herald: Cannabis tax could be $150m

An internal Treasury document on New Zealand’s drug policy shows the Government could be earning $150 million from taxing cannabis and saving taxpayers $400 million through reduced policing costs.

The brainstorming notes, from 2013, have been publicly released after an Official Information Act request from Nelson lawyer Sue Grey to Finance Minister Bill English.

Grey said the notes confirmed what was well-known in other sectors – that the harm caused by alcohol and tobacco was much worse than what’s caused by drugs like cannabis.

Relative harm of alcohol and tobacco compared to cannabis is fairly well known.

Drug Foundation executive director Ross Bell agreed, saying the reason there’s been no action is because politicians are too scared to talk about the “taboo” subject of drugs.

He said we should be willing to look at alternatives for New Zealand and admit, as the Treasury notes do, that the current system isn’t working.

Bell said the notes stated prohibition wasn’t working and cannabis was not a gateway drug.

He said while politicians did not like talking about drug policy, they were now misreading the public mood and people were ready to have this discussion.

I don’t think the National party and it’s leaders care about the public mood on cannabis. They simply don’t want to address the obvious issues and public sentiment.

English said the brainstorm notes were merely a discussion and were not official Treasury opinion.

That’s disappointing but predictable fobbing off by English. The document wasn’t anyone’s opinion, it was stating well known facts, and estimated costs and potential revenue.

It was advice that English and National don’t want to hear because they don’t want to do anything about the large cannabis problem.

Both medical cannabis products and recreational use are issues with growing profiles. Ignoring public opinion may be costly for National – as a third term Government they are facing rising dissatisfaction with a failure to take seriously issues of public significance.

It’s quite possible that next election cannabis could be the toke that breaks the Government’s back.