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.

Show us the money Winston

I agree with Winston peters that Labour should be more open about their intentions on tax.

I cut Jacinda Ardern a bit of slack, Andrew Little and possibly Grant Robertson arrived at the election campaign with no concrete tax plans and Ardern has had no time to get sufficient expert advice.

But I still think it looks like Labour is playing games with voters, and should be far more up front.

But the need to be open applies to other parties too. If Peters demands transparency, he should also be transparent.

Perhaps he or someone from NZ First could respond to claims by TOP:

Show us the money Mr Peters

1. $5bn  – Student Debt write-off.

No funding sources provided

2. $3bn pa – Diversion of GST collected in regions to funding regional development.

This is money that would otherwise fund central government’s activities so has to be found from somewhere – we wonder where as Peters provides no suggestions.

3. $2.3bn pa – Universal Student Allowance and zero fees.

And this is before hordes more people decide to go to University because it is free.

4. $1.9bn pa – reduction of company tax rate to 25%.

No funding detail provided

5. $1.3bn – ban inshore fishing and provide compensation to the commercial fishers.

No detail at all given on funding

6$1.1bn pa – fix interest rates at 2% per annum for 5 years for first home buyers.

No funding provided and this doesn’t consider the flood of extra buyers who would be drawn in by such low rates

7. $845m pa – raising the minimum wage to $20 ph.

No funding detail provided

8. $450m pa – replacing 1080 with alternate pest eradication methods.

No funding detail provided

9. $324m pa – 1800 more police.

No funding detail provided

10. $3.6bn pa – Removal of GST from fruit and vegetables.

To be funded apparently by a “tax evasion crackdown”, and clamping down on the black economy. No realism at all provided to this throwaway line – it’s grossly inadequate of the %3.6bn pa required.

The above list is by no means exhaustive but provides an idea of the absurdity of the Peters programme. All up it will cost somewhere of the order of $12.5bn per annum plus at least $18bn of one-off costs. To cover this would require a 50% increase in income tax rates & even then the $18bn of one-off costs needs to be raised.

http://www.top.org.nz/peters_porkies

Winston demands to know Labour’s intentions

Yet another bottom line apparently from Winston Peters. He is demanding to know what Labour’s intentions on tax are.

Of course this is highly hypocritical, as Peters refuses to say what NZ First might do after the election, claiming they need to wait and see what voters decide.

This is just posturing.

NZH: Winston Peters to Labour: Front up on your tax plans

Winston Peters has set out a firm new condition of going into government with Labour – it must tell him what its tax plans are.

New Zealand First could not support any Labour government without knowing its true intentions, he told the Herald.

Peters said he believed Labour already knew what it wanted from a proposed tax working group but was instead saying it had not decided.

“I’ve got more experience than nearly all of them put together, with respect, lining up for these [post-election] discussions.

And he’s worse than anyone at not being open about what he might do, and what policies he may demand as non-negotiable.

“And I’d expect to know, yes. As the people who trust Winston Peters would expect him to know.”

Some people do trust Peters, but I’m not sure why. But I think that most people are justifiably very suspicious.

Peters compared Ardern’s rise to that of French President Emmanuel Macron, but claimed an uncritical media had played a crucial part.

“You are not asking the questions. You can’t possibly mean to go into an election saying, ‘My tax policy will be decided by a committee, and I am very sincere about that’. One needs to know what we are talking about … that should be fatal to a party’s chances. And we need to know.”

Accusing an uncritical media of playing a part in someone else’s campaign success is hilarious. He has long been given a free pass on a lot of his bull, and he has also long been given disproportionate media attention, that he is adept at milking.

That Winston is attacking Labour and Ardern like this suggests he is worried about the impact they are having on NZ First support.

I’m surprised there has been no public poll done on the Northland electorate. Peters has had to split his time between defending his electorate – and I haven’t seen any sign of Labour helping him this time – and trying to campaign for the party vote nationally.

Ardern, the Greens (last month), Todd Barclay and Steven Joyce have all been sucking the wind out of Winston’s sails.

In the same way, Peters said he wanted more clarity from Labour about how its proposed water royalty would be set, and assurances from National that Maori would not be given rights over fresh water.

Labour and national should demand that Peters let voters know what his true intentions are, including advising which of his many implied and stated bottom lines will actual be bottom lines.

Or maybe it would be better just laughing at him then ignoring him.

Peters seems to think he deserves more recognition and more say in government – “I’ve got more experience than nearly all of them put together”. It must really grate that Ardern has stolen the election thunder and another political youngster David Seymour keeps winding him up.

This election is likely to be his last chance of political glory, but it may also turn out to be a sign of Winston’s whine and wane.

How much tax do we pay?

The average wage earning or small business person pays quite a lot of tax.

Damien Grant at Stuff: The National Government a Labour PM would be proud to lead

In my small business, for every dollar that comes in almost half of it goes out in tax: GST, PAYE, FBT, ACC and in the event there is anything left over, income tax comes clobbers a third.

So, I was pleased to see John Key elected. National has a set of principles. These include limited government and personal responsibility. They have had nine years to implement their principles. How have they done?

When Bill English became minister of finance government spending was $60 billion. It is now $80b. Sovereign debt was a mere $10b when National took office. It is now $60b. In nine years of relatively unfettered power, National has failed to roll back a single penny of the welfare state, failed to confront the disaster of the Resource Management Act, unwind restrictive building regulations or do anything consistent with their stated principles.

This is a centre-left government Norman Kirk would have been proud to lead.

So how much tax do we actually pay? PAYE has different rates of tax at different thresholds, plus there is ACC Earner Levy. And we get taxed on interest earned or gains in investments – including on our Kiwisaver. And on top of that we get taxed on all the goods and services we pay for.

PAYE has different rates of tax.

  • Income up to $14000, taxed at 10.5%
  • Income over $14000 and up to $48000, taxed at 17.5%
  • Income over $48000 and up to $70000, taxed at 30%
  • Remaining income over $70000, taxed at 33%

Plus the current ACC Earner levy is 1.39% on top of that, up to earnings of $126,286.

Payroll tax:

TaxIncome

Payroll tax plus GST on quarter of income:

TaxIncomeQuarterGST

Payroll tax plus GST on half income:

TaxIncomeGSTHalf

Payroll tax plus GST on all income:

TaxIncomeGSTAll

 

Seeing through Labour’s tax transparency

One of Labour’s biggest weaknesses in the last three weeks of the campaign is tax – what they may or may not tax, especially regarding Capital Gains Tax.

Just after she became Labour leader Ardern spoke on Q+A (6 August):

JESSICA MUTCH: Capital gains tax – yes or no?

JACINDA ARDERN: I will not be campaigning on that this election.

JESSICA MUTCH: So no for a capital gains tax.

JACINDA ARDERN: But let me be transparent, though, here. I won’t be campaigning on it in the next seven weeks. I don’t think anyone would expect us to generate a policy like that in seven weeks. But I’m very clear on is that we are giving a mandate to a tax working group, as we’ve always been clear that we will, to look at the way we tax assets and wealth in New Zealand. 

JESSICA MUTCH: So laying the groundwork for post-election?

JACINDA ARDERN: Yeah. That work will be done after the election. We do not tax assets and wealth the same way as other countries do. If we want to look at inequality, then it is necessary that we do that. But I will not be doing that in this seven weeks.

Ardern has pretty much stuck with this line, repeating ‘transparency’ often but always deferring to a future tax working group.

On one hand it is understandable that Ardern doesn’t want to be rushed into making significant policy decisions when she has been suddenly thrust into the heat of an election campaign. Theoretically decisions like this have to be run through the party policy development system.

But on the other hand this lack of certainty leaves Labour wide open to claims and confusion. Even her deputy was confused.

Yesterday from Stuff: Jacinda Ardern tells Kelvin Davis off over capital gains tax comments

In a confused interview with the AM Show, Kelvin Davis appeared to know little of the detail of Labour’s tax stance and seemed to resile from that comment in the next breath.

Labour has faced tough criticism over its decision to establish a tax working group after the election, but not reveal to voters beforehand whether they intended to implement a capital gains tax or any other taxes.

This election, the party is refusing to rule in or out the possibility of capital gains tax at all.

It was the weak spot for Ardern in Thursday night’s first TVNZ leaders’ debate

Ardern said she was “absolutely clear” on the fact Labour would hold a working group, but refused to answer how far Labour was intending to go with its conclusions and suggested tax changes were more likely to occur in the first term.

“I’ve absolutely maintained our right, and my right as leader, to make sure when that tax working group reports back that I am able to act in Government in the best interests of New Zealand to try and address the housing crisis.”

Apparently not clear to Davis though.

Davis was asked during an earlier interview if Labour would put the outcomes of its tax working group to the country at the following election – Davis replied: “I can’t answer that”.

Pressed again he said: “my understanding is we’ll campaign on it in the next election”. Asked to firm up that answer, on whether Labour would slip it during their first term or take it back to voters to decide, Davis reverted.

“Look, I’m not going to answer that question,” he said.

“Because right now I don’t know, we’ve got to have the working group make their decisions and we’ll come to the country with whatever they produce.”

Ardern said she had not seen the interview, but Davis was “now very clear on our position”.

Like the voters, as clear as mud.

And Ardern is likely to get hammered on this over the next three weeks unless she finds some different lines. Ones that demonstrate transparency rather than just claiming to be transparent.

As transparent as treacle.

Duncan Garner: Hey Jacinda Ardern, what’s your secret tax plan?

They’ll also tax. Tax, tax, tax. And repeat. On water, petrol and tourism. And maybe on capital gains.

If Ardern wants to be PM, she must tell voters more about this capital gains tax (CGT). Would it start in her first term? Would she seek a fresh mandate by putting it in front of voters in 2020?

Whatever she does she should keep her deputy, Kelvin Davis, away from talking about it. He’s a liability. Labour needs to get him up to speed quickly.

So, when, why, what? Would a CGT cover the sale of small businesses and farms?

Voters have every right to feel like there’s a secret agenda on tax.

Sam Sachdeva: Ardern again under gun over CGT

“I’ve been absolutely clear and have absolutely maintained my right as leader to make sure when that tax working group reports back that I am able to act in government in the best interests of New Zealand to try to address the housing crisis,” Ardern said.

Asked why she would not take the issue to another election for a mandate, Ardern cited National’s example when it came to power in 2008 and commissioned a tax review, ultimately leading to an increase in GST. “He [Bill English] saw fit to act on that as he saw fit in the best interests of New Zealand. The difference is that he wasn’t quite as open about intent before the election.”

Fair enough criticising National’s change of stance on increasing GST – but pointing out another party’s campaign deceit and subsequent u-turn is hardly a good way of giving voters confidence that Labour won’t do likewise, a similar somersault.

“I don’t want to be in a position where that working group comes back and there’s some ideas in there that could make a difference for that next generation to get into housing and to deal with some of the inequity in our tax system and to have to sit on that for another couple of years just doesn’t feel right to me.

“My view is though that certainly voters still get a way to feed back to us whether they think we are right or not. There will be another election probably 18 months within us acting on that review and if they don’t agree with what we’ve done, I’m sure they will tell us that.”

She denied it was a way of introducing a capital gains tax without having to say she was going to do so. “No, because I’ve been really clear with people. I expect to get scrutiny over that but I would rather be transparent around our direction of travel than say nothing at all.”

It was a government’s prerogative to act on the information a tax working group would give it. “But of course I’m setting out a few values, a few expectations going in; my expectation that it would never be on the family home and our major driver for this that it be around affordability issues, particularly in Auckland.”

Ardern is being clear in advance on the aspects of tax that suit her to be open about now, but refuses to be clear on others. This is cherry picking transparency.

Last week Alex Tarrant wrote about ‘Labour’s exclusion of family homes and income tax change aversion isn’t fit for a party wishing to fairly tax assets, wealth and income’

On Three’s The AM show on Thursday, Robertson was drawn into his views on whether New Zealand needs a better capital gains tax regime.

“I personally support a better balance in our tax system and I’m going to wait till we see the expert working group. But I don’t believe at the moment that someone who goes to work every single day, pays tax on every dollar that they earn, is being treated fairly compared to someone who flips an investment property and makes a profit on that.”

Robertson keeps repeating that. He must know that selling an investment property for profit is already taxable as income.

Take Robertson’s comment that the main cause of inequality growth in New Zealand over the past few years has been to do with asset inequality. Well, I’m sorry Grant, but New Zealand’s housing stock is worth $1.03 trillion. It’s the major component of our net worth. And about two-thirds of that housing stock is owner-occupied (which is the non-political way of saying ‘family home’).

If we want to ensure fairer tax treatment across assets, wealth and income, then you cannot just rule out capital gains or imputed rents made/unpaid on two-thirds of a trillion dollars’ worth of residential property holdings from the debate.

Perhaps Ardern needs to show some leadership and come out and be clear about Labour’s intentions on tax, some real transparency.

Otherwise she risks getting hammered on this in the remaining three weeks of the campaign, when voters start to look past her charisma and consider what a Labour led government would actually mean for them.

Claiming transparency when it is clear she is fobbing us off may be what ends up defeating Ardern and Labour.

Ardern has had a huge challenge stepping up in the heat of a campaign. I think many voters will be evaluating whether they think it is too soon for her to be Prime Minister or not.

Seeing through her claims of transparency could make the difference.

Tax is likely to be a key election issue

There have been major distractions in politics over the last two weeks, with the fall of Andrew Little followed by the euphoric rise of Jacinda Ardern, plus the self destruction of the Greens which included the end of two MPs and the effective end of Metiria Turei’s political career.

Amongst that earlier this week there were two polls that showed a shrink in support for the greens and NZ First, and the likely return of a head to head battle between National and Labour.

And in a debate on The Nation yesterday between Steven Joyce and Grant Robertson the battle lines were drawn.

Robertson: So, under Labour’s package, every family earning $62,000 or less will be better off than under National’s package. What I don’t want is for Steven and me to get a $1000 tax cut when we’ve got families living in cars and garages, when we’ve got a health system that’s not coping. What we’re saying is we’ll get the money to the families in need, but we’ll get the money that Steven wants to give to us as tax cuts – to wealthy people like us – we’ll get that money, and we’ll make sure it’s invested in public services that have been run down.

Joyce: Well, it’s not actually about me – or about Grant, actually. It’s about those people who are on the median wage who are currently facing a 30-cent-in-the-dollar tax rate, and we have to change that. And the only way we change that is shifting the thresholds. Now, Grant’s allergic to actually reducing taxes and allergic to adjusting thresholds. He’s about increasing taxes.

Labour have pushed the anti-tax cut for rich people since National’s tax cut package was announced in the budget in May.

But it doesn’t just reduce tax or ‘rich people’, it reduces tax for all workers who pay PAYE:

Increases the $14,000 income tax threshold to $22,000, and the $48,000 threshold to $52,000. This provides a tax reduction of $11 a week to people earning $22,000 or more rising to $20 per week for anyone earning $52,000 or more.

https://www.budget.govt.nz/budget/2017/family-incomes-package/index.htm

That’s $1,000 less tax per year for everyone earning over $52,000 (affecting ‘rich people’ of course but also the majority in wage earners).

Of all the polices announced this one directly affects me the most. Labour would scrap it, and that has to be a significant factor in deciding who to vote for.

More on possible tax changes;

Lisa Owen: Capital gains tax — are you ruling it out in the first term absolutely, if you’re in in the first term?

Robertson: We’ve got a tax working group. I can’t pre-empt what they’re going to come back and decide.

Lisa Owen: So you can’t rule it out? Could come in the first term?

Robertson: I can’t pre-empt what that group says, but here’s the important point — right now today we have something called the bright-line test that the National Party brought in. It says that if you sell a house that’s not your family home within two years, you’ll pay tax on it. Steven has a form of capital gains tax.

Lisa Owen: I’ll give you the chance to talk about your policy, Mr Robertson. So a capital gains tax is still on the table? You’re not taking it off?

Robertson: What we’re going to the election with is a commitment that if you sell a property that is not your family home within five years, you’ll be taxed for that.

Robertson clearly avoiding stating a position on a Capital Gains tax, something he has favoured in the past but Little took off the table. It appears to be under consideration again.

Joyce: I think there’s a problem there for the Labour Party, because they’re dodgy on tax. They’re refusing to say about the capital gains, they’ve mentioned a water tax last week, but they won’t tell us how much it is, and then, of course, they’ve got a regional fuel tax they won’t talk about where it goes beyond Auckland.

Expect National to hammer the uncertainty over what additional taxes a Labour government could implement.

Labour are trying to avoid details by deferring to a future tax working group (on CGT) and an ‘expert panel’ (on water taxes).

Lisa Owen: So top tax rate — can you rule out lining yourselves up with the Greens and having 40 cents over 150 grand? Are you going to go for that?

Robertson: No, I don’t think we will be going for that, but what we will do…

Lisa Owen: …but you are not ruling out raising that tax rate.

Robertson: I’m not ruling it in; I’m not ruling it out.

On a water tax:

Lisa Owen: What about your water levy? What’s that going to be?

Robertson: The water levy? Look, what we’ve said there is for every thousand litres of water that’s used in irrigation, perhaps one or two cents.

Lisa Owen: One or two cents. There you go, Mr Joyce. That’s not going to make a huge difference, is it?

Joyce: This is the problem is that he’s not telling.

Robertson: One or two cents, Steven. How big a difference?

Joyce: Well, hang on. Don’t ask me; ask the farmers, because I’ve seen some figures that even at those levels, you’re talking about 50,000 a year per farm. So I think it’s beholden on the Labour Party to actually come a bit more clean on their tax stuff, because they’re being very dodgy.

Robertson: We’ve been completely upfront.

Joyce: You haven’t, actually. So you’ve got a water tax that you won’t tell anybody—

On the Panel discussion on The Nation:

Patrick Gower: I actually think that Grant Robertson probably got in a few more jabs in…however in terms of actual overall damage I think some of the talk about tax there that Steven Joyce, in terms of long term damage beyond the debate, in terms of that capital gains tax is back on the table.

The capital games tax is back baby. Labour were going to go to the next election with that, but that could come in next term.

Lisa Owen: Jane, are they doing themselves a disservice by not putting numbers on stuff now.

Jane Clifton: Absolutely. They’re their own worst enemy. This week alone with the water tax issue, because finally we’ve got a figure for irrigators and wineries and so on of one to two cents, although David Parker said three.

…but yeah, just get your ducks in a row, announce them all, don’t leave room for speculation about $18 cabbages and $70 on a bottle of wine…

The Newshub video cut Gower off at the end, but he pointed out a significant power shift in Labour. When Andrew little took over the leadership in 2014 he put a number of Labour policies on ice, including the CGT.

But with Little dropping to the ranks and Ardern taking over the leadership Gower said that this meant also a significant rise in influence of Robertson – he and Ardern have been close allies for a long time. We are already seeing glimpses of what that may change in Labours tax policies.

Gower followed up on Twitter:

So expect tax to be a prominent issue in the election.

It may have a significant effect on the outcome of the election. Labour will need to be much better prepared for the inevitable attacks from National.

Ardern will need to be well prepared for the leaders’ debates with Bill English. She will likely have a ready response to a ‘show me the money’ type line (Key used that to devastating effect against Phil Goff in 2011), but she is likely to get challenged over and over if she remains vague of what taxes a Labour government may impose or increase.

And tax could also have a significant impact on the outcome of coalition negotiations. Both Labour and National will have to try and find enough partners to support their tax (and spending) plans.

Personally a water tax or a CGT or a fuel tax in Auckland won’t affect me.

But I will be seriously taking into account whether National’s income tax cuts might be reversed or not when I decide who I will vote for.

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.

Grant Robertson on the budget

 

Labour’s finance spokesperson Grant Robertson keeps his criticism up of Thursday’s budget. I guess he couldn’t praise it, but if he disses it too much he risks being seen as too negative.

He has promoted this Radio NZ interview:

And from the Labour website:

Nats’ budget a double-crewed ambulance parked at the bottom of the cliff

National’s election year Budget shows that there’s no coincidence Finance Minister Steven Joyce doubles as National’s campaign manager, says Labour’s Finance Spokesperson Grant Robertson.

“The 2017 Budget reveals a lack of vision, and is simply an election year budget with an eye for September 23, not the 21st Century.

“It’s irresponsible to dangle tax cuts that actually benefit the wealthiest more than low-income New Zealanders, instead of investing in the social foundations that are critical to our country’s future.

“The people who gain the most from the tax changes are people like Steven Joyce and me who earn far more than the average wage.

“The richest families get $35 a week from the Budget bribe, the poorest get $5 a week. Someone on the average wage gets $11 a week, and around 800,000 New Zealanders on taxable incomes below $14,000 get nothing.

“Steven Joyce has failed to deliver a plan to fix the housing crisis, build affordable homes for first home buyers, end homelessness, or fund our hospitals and schools properly.

“The big spending from the Government comes in the form of nearly $800 million for prisons. This is actually a sad indictment of National’s failure to invest in New Zealand.

“We would not have to build billion dollar prisons if the Government would adequately invest in early childhood education, get better support to help our vulnerable children, and provide mental health services to New Zealanders before their problems overwhelm them.

“The Government has said they want to double crew ambulances, but when it comes to social services, sadly those ambulances are still parked at the bottom of the cliff.

“Labour has different priorities to National. We will fund our health system properly to meet the needs of a growing population. We will build houses for first home buyers that they can afford, and invest in education instead of building prisons. This Budget offers nothing new. It’s time for a fresh approach,” says Grant Robertson.

The real costs of National’s election bribe

The cost of National’s poorly-targeted election year budget bribe is that there’s nothing to fix the housing crisis, health funding is cut, and funding for schools is cut, says Labour’s Finance spokesperson Grant Robertson.

It’s no coincidence that Robertson targets the three election issues that Labour has chosen to focus their campaign on.

“As the dust begins to settle on the Government’s massive PR exercise, it’s becoming clearer than ever that National has no plan for New Zealand’s future.

“The reality is that $5 of every $7 in National’s package is poorly-directed through the tax cuts. Labour can’t support an approach that perpetuates inequality.

“Around 800,000 New Zealanders on taxable incomes below $14,000 get nothing from this. The 500,000 low income workers currently getting the Independent Earners’ Tax Credit lose that $10 a week, and are left with just an extra dollar a week.

“National’s answer to the housing crisis is building only one new affordable house for every 100 new Aucklanders. They’ve funded just 1200 houses in this Budget.

“Health gets $439 million when it needed $650 million simply to keep up with a growing and ageing population, as well as inflation. This adds further to the existing $1.7 billion of underfunding over the past six years.

“School operational grants needed $140 million to keep up with roll pressures and inflation, but they got $60 million – a shortfall of $80 million.

“And once again, National is refusing to restart contributions to the NZ Superannuation Fund. National is selling out this country’s future for a cynical election-year bribe.

“But the real winners in the tax cuts are those like the Finance Minister and Prime Minister, who will gain 20 times what a single person working fulltime on the minimum wage gets.

“That’s simply not fair. Under nine years of National the gaps between rich and poor have only grown wider. Labour has the fresh ideas to ensure all New Zealanders get a fair share of prosperity,” says Grant Robertson.

The problem with this criticism is that Labour doesn’t have an alternative to suggest, they don’t have a new tax policy, apart from reviewing tax if they become government.

Tobacco dominates dairy revenue

A lot is being said about violent robberies of dairies. Tobacco is often the target of thieves, and suggestions have been made that dairies should stop stocking tobacco to protect themselves.

An Associate Minister of Health has said dairy owners should stop selling cigarettes, and the ‘higher security’ of liquor stores means they may be more appropriate outlets.

RNZ: Dairy owners blame cigarette price hikes for robberies

Dairy owners should stop selling cigarettes “if they feel too threatened” by robbers, says Associate Health Minister Nicky Wagner.

A packet of 20 cigarettes will cost about $32 by 2020, after four legislated 10 percent year-on-year price rises.

Dairy owners say the price hikes are making cigarettes more and more enticing for thieves.

Ms Wagner said cigarette sales might be more appropriate for liquor outlets.

“Maybe we should sell them with alcohol because the security systems in an alcohol convenience store is usually much higher than [in] a dairy,” she said.

There’ a major problem with these suggestions. A large chunk of dairy revenue is from tobacco products. Many dairies would be not be viable businesses without tobacco which can represent towards a half of their revenue.

And there are other complications too, as reported by the ODT: Liquor licence in doubt

A Dunedin supermarket  with a perfect record selling alcohol faces losing its liquor licence over the amount of tobacco products it sells.

A report  on the licence application by Brockville Four Square Supermarket said the police, public and Medical Officer of Health did not oppose the liquor licence, and there were no issues about the suitability of the applicants Greg and Zandra Davis.

The problem was a breakdown of the shop’s sales revenue showed the principal income  of the business  came  from the sale of tobacco.

Foodstuffs, which owns the Four Square chain, said tobacco was increasingly becoming shops’ main  revenue stream,  as prices rose each year because of government tax hikes.

Dunedin City Council liquor licensing inspector Tony Mole said in his report  39.50% of the shop’s  revenue was  from  tobacco products, while food products made up 28.64% of  income. According to  the Sale and Supply of Alcohol Regulations Act 2013,  the  shop’s high tobacco income meant it had to be considered its  “principal business”.

I’ve seen claims from elsewhere that suggest tobacco is the principal business of many dairies – this supermarket is in a similar situation to a dairy.

“Under this interpretation of the Act and the regulations, we would conclude that Brockville Four Square cannot be considered a grocery store for the purposes of licensing,” Mr Mole said.

The shop  did not appear to meet the requirements  for a different off-licence application, documents showed.

This is not the only supermarket with this problem.

Cockle Bay Four Square, in Auckland, also had its liquor licence renewal application declined last year on the basis it  sold too much tobacco to be considered a grocery shop.

This is a complex issue.

Security of supermarkets and dairies may need to be increased substantially if they want to safely sell tobacco.

The price of tobacco, pushed up by regularly increasing tax, has in large part created this problem, but it is also a law and order issue. It seems to be getting so bad that the police may need to put more resources into rapid responses to diary robberies – and liquor stores also have high robbery rates in some areas, so they aren’t necessarily the solution.

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