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.

The Nation: Joyce v Robertson on Finance

The election campaign is getting serious – there will be a debate between the Minister of Finance Steven Joyce and Labour’s finance spokesperson Grant Robertson on The Nation this morning.

This could define National’s approach to combating the resurgence of Labour, and also give us an indication of how well Robertson grasps economic issues.

A key difference on tax.

Robertson says Labour wants to target those who need help the most and it is wrong to give tax cuts to high earners.

Joyce says that Labour’s policy will give ‘baby bonuses’ of $3,000 to high earners and won’t give anything to middle income earners.

I don’t think either argued their tax policies clearly enough, but this is likely to be a big election issue.

There’s a lot of debate about whether the Government is cutting expenditure on health and education, something Labour have pushed for a while, but Joyce claims otherwise. A lot of numbers quoted.

Tax and spending policies can’t be finalised yet.

Until that comes out the amount of money available can’t be finalised. Robertson won’t commit to not raising income tax rates.

Scoop has the transcript: http://www.scoop.co.nz/stories/PO1708/S00249/the-nation-economy-debate.htm

The Nation: James Shaw and the Greens

 

James Shaw will be interviewed by Patrick Gower on The Nation this morning about ‘what’s next for the Green Party’.

Shaw has had a torrid week trying to support Metiria Turei, and then when she stood down trying to tidy up the mess. This will be a very interesting interview.

Pre-interview update – the Green Party Executive has declined Kennedy Graham’s request to be reinstated on the party list –  Greens won’t let Graham back on list

That won’t help heal divisions.


The first part of the interview was a waste of time. Shaw wouldn’t say what the Greens plan to change in their campaign until it is announced later this weekend.

Also a wast of time were questions about Kennedy Graham, the interview was recorded yesterday and we now know Graham won’t be allowed back in.

Shaw stood his ground on a couple of things but generally this was a week interview, he looks a bit like Bill Rowling, who Muldoon called a mouse.

Shaw wouldn’t say whether Greens would sit on the sidelines if it meant a Labour+NZ First change of government.

A lot of work for Shaw and the Greens to repair and rebuild.

Shaw mentioned ‘conversation’ a few times – this interview was more like a gentle conversation than a strong indication of a new start for the Greens under a sole leader.

Quite notable – the panel discussion was solely about the Joyce-Robertson debate and about National and Labour policies.

No mention of Shaw or the Greens.

Ardern on the Māori seats

Jacinda Ardern and Kelvin Davis were questioned on The Nation about Labour’s position on the Māori seats.

Lisa Owen: OK, well, while we’re talking about the Maori seats, Winston Peters– This is another one of Winston’s bottom lines is to have a referendum on the Maori seats. Would you pay that price? Would you be prepared to pay that price to get into government?

Kelvin Davis: We’re not going to have a referendum on Maori seats. It’s off the table.

Lisa Owen: I see a head shake. A referendum is asking the people. You know, you would find out whether you have to get rid of them or not from the people. Definite no? Even at the price of government?

Kelvin Davis: No, Hone Harawira tried to sell the Tai Tokerau for $3.5 million last election to Kim Dotcom, and here’s Winston trying to give away all seven for nothing.

Lisa Owen: OK. So, Ms Ardern, definite no on a referendum, even if it’s the price of a deal with Winston Peters?

Jacinda Ardern: What we said on Tuesday is that we don’t want to spend the entire election campaign talking about other parties’ policies. So I’m happy to share with you Labour’s policy in that area.

Lisa Owen: Well, this is about how you would form a government. This is about how you would form a government. And voters want to know that, and that’s why I’m asking you. And you were shaking your head, so no referendum on the Maori seats?

Jacinda Ardern: The makeup of government will be determined by voters. So voters deserve to know what each political party’s position on those issues are. Labour’s position on that issue is that the Maori seats are for Maori to decide. Labour will allow only Maori to make the decision about those seats. That is our position.

Lisa Owen: All right. So, is Labour’s position, Labour’s policy, no referendum on Maori seats?

Jacinda Ardern: Only Maori should have the decision around whether or not those seats remain. We’ll stay firm on that.

Lisa Owen: That sounds like you could have a referendum where only Maori on the electoral roll could vote.

Jacinda Ardern: I believe that’s what Shane Jones might have– See, there’s not even clarity within New Zealand First on this position.

Lisa Owen: That’s why I’m wanting clarity around your policy. You’re saying Maori should decide, so Maori on the electoral roll, they could be polled whether they think that the seats should stay.

Jacinda Ardern: Well, that’s a question for Winston because he’s the one coming up with–

Lisa Owen: No, I’m asking you your policy. I’m asking your policy.

Jacinda Ardern: And I’m being very clear – only Maori will decide whether those Maori seats remain. We have no reason right now– I have not heard from–

Lisa Owen: That leaves the door open for a referendum of people on the Maori roll.

Jacinda Ardern: No, it does not. Maori have not raised the need for those seats to go, so why would we ask the question?

Kelvin Davis: Those seats were foisted upon Maori back in the 1860s just to really control our voting power, and we’ve become quite fond of them, to be honest, so we really don’t want them to go.

Jacinda Ardern: It’s not on the agenda.

I think there would be hell to pay in Labour and amongst Maori if Labour agreed to an all-voter referendum on the Māori seats. It has to be a non-negotiable for in any coalition wrangling with NZ First.

Māori get to choose every five years whether they want Maori seats or not.

ABOUT THE MĀORI ELECTORAL OPTION

The Option only happens once every five years or so, just after the New Zealand Census of Population and Dwellings.

What you decide during the Māori Electoral Option is an important choice, as it determines who will represent you in Parliament.

If you’re on the General Electoral Roll, you will vote for an MP in a General Electorate at the next General Election. If you’re on the Māori Electoral Roll, you will vote for an MP in a Māori Electorate at the next General Election. Every voter, regardless of which electoral roll they are on or where they live in the country, has the same list of political parties to choose from when using their Party Vote.

The results of the Māori Electoral Option together with the Census data are used to determine the number of Māori and General Electorates in Parliament and to revise the electorate boundaries.

How does the Māori Electoral Option affect the number of Māori electorates?

There are currently seven Māori electorates. If more Māori enrol on the Māori roll, it could mean more Māori electorate seats in parliament. The number of General Electorate seats could also change.

Visit Calculating Future Māori and General Electorates for more detail.

 

 

The Nation: Paula Bennett

National are trying to address the Jacinda effect by putting Paula Bennett on The Nation.

I only half listened to this, it seemed a bit half baked in comparison to Labour’s tag team.

The Nation understands some Police stations were unable to change lightbulbs, damaged cars weren’t being fixed until the new financial year. But Bennett says Police have told her that’s not true and the lightbulb claim is “ridiculous”.

Petty stuff in comparison to new leaders.

And stolen Bennett’s and Labour’s thunder, all week and on The Nation.

 

The Nation: Ardern and Davis

Jacinda Ardern, along with Kelvin Davis and Labour, continue to get the political spotlight. This morning they are on The Nation.

A poor start by Lisa Owen trying to get Ardern to commit to what she will do if Labour doesn’t get into Government. It is pointless peculating on what losing leaders will do, or what losing parties will do to their leaders.

With Kelvin Davis included there is a focus on Maori issues – Davis says the key ones are housing, education, health and P.

They won’t commit to specific policies yet.

They are working on policy priorities but ‘wait and see’. Ardern won’t commit on Little’s ‘promises’ on taxes.

She says there will be no lack of clarity, but they need the space to work things out.

Owen keeps banging on about tax rates. Ardern still won’t bite. She guarantees sticking within their fiscal responsibility commitment.

Lisa Owen tried a few tricks to get a headline out of Ardern but had some very odd lines, especially trying to get Ardern to say what % of vote would be a success.

Ardern was assertive and focussed, another very good performance, but hobbled by a lack of policies to confirm – ‘wait and see’.

She was right to only comment on what Labour could control, and not to comment on whether Turei should stay an MOP with the Greens.

Davis added strongly and assertively at times, especially on Maori issues, but did not overshadow Ardern.

There are signs of a formidable team being developed.

Lack of policy direction is an issue that has to be resolved quickly – some time must be allowed for the sudden change in leadership, but there is not much time available.

Overall another strong, smart and focussed showing from both Ardern and Davis. Add to that the breath of fresh air.

The Nation: first time voters

Young people have relatively poor record of voting, but first time voters can still play an important part in deciding elections.

The Nation looks at what some think.

The full item is here:  Wooing the youth vote

The Nation: interview with Boris Johnson

I’m not sure what the point of his visit was.  He isn’t in a position to commit to anything on NZ trade with the UK, nor with visa conditions.

So Owen doesn’t bother spending long on NZ related issues and goes on the the Middle East, arms supplies to Saudi Arabia and the civil war in Yemen.

That’s a novel approach – that should sort things out pretty quickly.

The Nation – Jacinda Ardern transcript

Jacinda Ardern is an important part of Labour’s election campaign, being promoted alongside Andrew Little as his deputy leader.

She has previously said she has no ambition to be Prime Minister.

Today in an interview on The Nation she effectively said that being Deputy Prime Minister doesn’t matter to her. She said it would be a fantastic outcome if she’s a minister but not deputy.

My relative position actually doesn’t matter to me. If we’re in government, that matters to me.

So if I’m not deputy prime minister, but I’m a minister, that is fantastic. That means that we’ve won, and we’ve got a progressive government.

When asked about the Social Development portfolio she said her ambition is to be Minister for Children.

Children. I’m happy to say that I would very much like to be the Minister for Children. I’m very happy to say that.

For Labour’s no 2 that is not a very big ambition.

Anne Tolley is ranked 10 in National’s Cabinet, and is Minister of both Social Development and Children, as well as Local Government.

The interview on The Nation, and the transcript:

Lisa Owen: Well, it’s nine weeks out from the election, and Labour’s released its alternative budget, saying it would scrap National’s tax cuts and put those billions into social services. But could Labour’s plans to cut immigration and the spending plans of its potential coalition partners through a spanner in the works? Well, Labour’s deputy leader, Jacinda Ardern, joins me now. Good morning.

Jacinda Ardern: Good morning.

Lisa Owen: You’ve got fiscal responsibilities rules, and this was party to help show that you are financially sound, financially as sound as National. But does that mean that your alternative budget has turned out, well, a bit same-same, inoffensive but not bold, not enough to make people change?

Jacinda Ardern: No. I would really dispute that. I think what we’ve presented to the public, to voters, is a really clear choice this election. We’ve rejected the idea from National that we can afford tax cuts right now when we have a situation where, for instance, the Salvation Army is telling us we’ve got the worst homelessness that they have ever seen, kids doing homework in cars, people not able to access health services. The choice that we’re presenting to voters is we need to invest in those social services, reject the idea of $20 a week and make sure that New Zealand is the prosperous nation that gives a good start to every child.

Lisa Owen: So why not go bolder? You have nothing to lose, looking at the polls, so why not make a bigger, bolder statement?

Jacinda Ardern: Cancelling tax cuts and saying now is not the time for tax cuts, we’re investing in poverty, we’re reducing inequality is bold, and exactly the kind of boldness and courage that I think New Zealanders want to see from an alternative government.

Lisa Owen: So you feel you went far enough?

Jacinda Ardern: I think what we have done is bold. Certainly, when we put out the families package and our choice to cancel those tax cuts and instead invest in families, particularly families on low incomes, yeah, we got a lot of criticism for that. I think people acknowledged that was a big, stark difference to choose to reduce inequality and poverty, rather than what National have done, which some people interpreted as being a bit of an election bribe. Yeah, that was bold.

Lisa Owen: Okay, well, let’s take a closer look at your fiscal plan. It is based on the current Treasury projections for growth, which are around 3%. But economists that we’ve spoken to said that immigration makes up a huge chunk of that growth, counts for 1%-2%. Your party wants to take a breather on immigration, so that means knocking off a considerable amount of income. How are the numbers going to balance out?

Jacinda Ardern: An interesting point there. I mean, you’ve actually just pointed out that National’s plans for growth was immigration and the rebuild off the back of crises that New Zealand has experienced. Our view is that our growth should come off the back of investing in regional economic development, becoming a smarter economy through things like research and development tax credits. You know, innovating instead of just simply saying carte blanche that we shouldn’t worry about the strain on our infrastructure that immigration in and in of itself was an answer. It’s not an answer.

Lisa Owen: But your numbers are built on the foundation of current immigration numbers and current growth projections. If you cut immigration, you might not have that money, and if you’re looking at a coalition with Winston Peters, who wants 10,000 immigrants a year, you could be looking at even less money, less growth in GDP.

Jacinda Ardern: I think if anyone looks at the immigration policy that we’ve set out, anyone who can demonstrate that they have a skill shortage in their area will not have a problem accessing migrant labour. That’s what we’ve been really clear on. So we won’t see, for instance—

Lisa Owen: I suppose it’s a bit different. What we’re talking about here is the GDP growth that is generated through population growth, and all through Treasury’s fiscal update in May, it talked about the fact that immigration is expected to underpin real GDP growth. Population is one of the key drivers in the economy, it says. Slowing immigration will risk slowing growth.

Jacinda Ardern: And what we’ve said is that, actually, we’ve got a plan around economic development that isn’t simply reliant on population growth that we can’t meet the needs of. So instead, and we’ve been really clear in the fiscal plan that we’ve presented, which I should add that BERL that endorsed as being absolutely correct, that we’ll be investing in making sure that we diversify our economy and continue to stimulate it, but instead of just relying on population growth, saying we will have things like research and development tax credits, things like our $200 million regional economic development. Things that will generate jobs in New Zealand, also diversify our economy and innovate within our economy. That’s the kind of growth that New Zealanders want to see, rather than just saying the only way to see growth in our economy is simply through unvetted immigration that doesn’t necessarily meet the needs of migrants as well. They’re coming into New Zealand without even having the housing and infrastructure to have a decent life.

Lisa Owen: You raised jobs, so let’s go there. Labour’s aiming to get unemployment down from 5% to 4%. In real terms, how many jobs is that and how are you going to do it?

Jacinda Ardern: Yeah, we are, and we’ve talked about some of the specific ideas that we’ve had. For instance—

Lisa Owen: Sorry, how many jobs will that be in real terms?

Jacinda Ardern: Well, we’ve said we want to drop it down to 4% as a target. I can’t give you the specific number that that generates.

Lisa Owen: So about 25,000.

Jacinda Ardern: We’ve set 4% as a target, but we are a party that believes in full employment. I want to make that point. But some of the ideas that we’ve already set out, like, for instance, in Gisborne, where we have a large amount of unprocessed timber going off shore. We want to invest in that area to create a timber-processing plant that creates prefabricated housing that then helps us deal with our other major crisis in New Zealand, which is the housing crisis. We’ve looked in Whanganui, for instance. They’ve got jobs that will be generated if they have work done on their port. We’ve said we’ll invest there. We’re looking for ways that we can invest in our regional economies to try and generate jobs — real jobs — that they know right now, if they had a little bit of a boost, would make a real difference.

Lisa Owen: And I don’t think anyone would argue with the fact that job creation is a good thing, but under National, unemployment is on track to drop to 4.3% by 2021 anyway. So I suppose we’re circling back round—

Jacinda Ardern: And what specific plans—?

Lisa Owen: …we’re circling back round to the fact that your critics would say you’re not being that ambitious. We’re getting there anyway — 4.3%. You’re offering us 0.3%. Is that enough to motivate people to change, which is what you want them to do.

Jacinda Ardern: And as I say, we’ve set some targets, but, actually, we are a party, as I say, is ambitious enough to say that, actually, what we want is full employment. We will never be satisfied as long we have anyone—

Lisa Owen: But that’s not the target you’ve set in the short term. The target you’ve set is this, which is so close to National’s, it could be National’s.

Jacinda Ardern: We’ve set a target that allows us to make some projections around the kind of spending in investment in other areas. But, as I say, as much as we’ve got a number in this fiscal plan, our target is that as long as there is anyone who is unable to work because they cannot find employment, that isn’t supported, that doesn’t have the dignity of that work, we will not be satisfied. Yeah, we put a number on it. We believe in full employment. That’s bold. And I would love to hear Steven Joyce say the same thing.

Lisa Owen: You say you’re going to spend about $17 billion more than National over four years — 8 billion in health, I think it is; 4 billion in education; Super Fund payments. All of that means carrying a higher debt load for longer, which is a costly exercise. How much does a billion bucks cost you in interest?

Jacinda Ardern: Yeah, and let’s put that in perspective. Yeah, we’ve said that relative to what the government’s doing, we will take on a bit more debt. So our debt track will actually take us about two years to get down to where the government’s saying. But let me be really clear on what we’re borrowing on, because I think that’s actually the point.

Lisa Owen: No, but before we get to that, there is a price that you pay for that. So what is that price?

Jacinda Ardern: Well, on the market, of course it costs less for a government to borrow than it does an individual, right. But let me be clear on what we’re borrowing for. We’re talking $3 billion for the Super Fund. The return on the Super Fund, we’re looking at around—

Lisa Owen: Your fiscal plan says it’s about $10 million in interest a day, I think it was. So that’s an opportunity cost, isn’t it?

Jacinda Ardern: Let me just answer the question. Which is why we’re trying to get the debt track down to 20%, and we’ll be there at about two years later than the government. The reason we’ve said that we’re willing to wear those extra two years is this — we cannot sit by while children live in cars. We are not willing to have a country where we can get the debt track down at the same rate as the government, but people suffer. So we will borrow for KiwiBuild, but that’s the kind of borrowing that we need. That’s the kind of borrowing that is justified. The other borrowing — the most substantial other bit of borrowing — is so that we can restart contributions to the—

Lisa Owen: To the Super Fund?

Jacinda Ardern: To the Super, where, actually, we get a return of about 10%, which is well over what we’ll be paying and what we’re borrowing to do it. That is justifiable debt. And also, I have to say, we will not be lectured by Steven Joyce when it comes to debt. We left in office, after Labour, a debt net — Crown debt — that was at around 10%, and now we’re up around, what, 25%? We’ve got goals to bring that down, yes, but we have a track record that proves we will.

Lisa Owen: Okay. Let’s move on to the diverted profits tax, which was announced this week. Andrew Little says he’s going to claw back money from foreign corporates who are not paying their fair share of tax. So, what’s that going to be set at? What rate?

Yeah, well, we’ve originally started out by saying we’ve written to multinationals. We’ve told them that this is our intention if they don’t come to the table.

Lisa Owen: But how much are you going to after them for?

Jacinda Ardern: Well, at the moment, IRD’s predicted that we’re forgoing over, I believe, from three to four years, about $600 million. So our view is they’ve set a really unambitious target of collecting, you know, about $100 million. Our view is that we can do better than that through a diverted tax.

Lisa Owen: Yes. Using what percentage?

Jacinda Ardern: But that’s set by IRD, dependent on what—

Lisa Owen: But you have already accounted, in your fiscal plan, for gains of $200 million a year. That’s taken into your costings from this tax. So you must’ve used some figure to work that out.

Jacinda Ardern: Based on what IRD have predicted is the forgone tax revenue that we’re losing, the government’s then gone, ‘Actually, we think that we can only then recoup a certain percentage of that.’ Our view is we can recoup more of that by actually investing in IRD to be able to do that, so we’ve budgeted for investing in IRD to—

Lisa Owen: You can’t give me a ballpark of what the tax level would be? So, in Australia, it’s like—

Jacinda Ardern: Because the diverted tax regime is set by IRD, based on how much they think the company has forgone in revenues, so that then comes down to an IRD discretion.

Lisa Owen: All right. So, you’ve got $10 billion that’s unaccounted for spending in your budget — so, unallocated spending — looking at your potential coalition partners — New Zealand First and the Greens — what policies of those parties do you like and that you think would be worthy of consideration for unallocated funds?

Jacinda Ardern: And the reason we’ve done that is because all governments do that. That’s the way that you build a fiscal plan. Because, also, you have to take into account inflation adjustments for your spending.

Lisa Owen: But there’s obviously money in there, because you’re going to have to have friends in a government, and friends like their policies to be implemented. What policies do you like from the Greens and New Zealand First that you think are worthy of consideration?

Jacinda Ardern: I love this hypothetical, because, of course, this is talking through Labour forming a government afterwards. And, of course, that’s the position that we’re out there campaigning on, to be in that position to be able to do that. But, ultimately, as every election has generated, that’s the conversation you have after the election. We’ve put out a set of priorities—

Lisa Owen: So you don’t like any of their policies?

Jacinda Ardern: Oh, there are similarities in some of the policies.

Lisa Owen: So which ones do you like?

Jacinda Ardern: There’s some similarities in the Families Package and what the Greens have put out in theirs, because we’ve both targeted poverty alleviation and looking after middle income.

Lisa Owen: Yeah, but the Greens propose to spend more on a family package, so would you support some of their initiatives in spending more in those areas that they’ve suggested?

Jacinda Ardern: Oh, well, if you look, for instance, at what we’ve done with Best Start, which is about investing in children in their early years, they’ve got something that they’ve called a Child Benefit, and so there’s some similarities there.

Lisa Owen: But they are spending more, so is that a policy that you would support being implemented?

Jacinda Ardern: That’s all for negotiation. But even though they’ve spent more—

Lisa Owen: But voters want to know what exactly they’re voting for.

Yeah, and if they vote for Labour, they get our Families Package. If they vote for the Greens or any other party, then it comes down to a negotiation afterwards. But my simple message, Lisa, to any voter—

Lisa Owen: Let’s move on, because you, personally, want to eradicate child poverty — that’s what you’ve said — and the Children’s Commissioner says benefits should be tagged to wages, like Super. So why not commit to that? Why not make a bold move and commit to something like that?

Jacinda Ardern: Because the Children’s Commissioner has also talked about doing things like investing in the early years of a child’s life. In fact, we looked at some of the research and analysis, and it told us that, actually, the period of a child’s life where they experience the most persistent poverty is —

Lisa Owen: I know you’re giving a universal baby bonus in these winter payments. I’m asking you about this. Why not do that?

Jacinda Ardern: If you just let me finish. He also pointed out that, actually, if we increase the payments for those early years, that’s going to make a really big difference to those low-income families and those ones in poverty. So we prioritise that—

Lisa Owen: So you don’t think you need to tag benefits to wages, is that what you’re saying?

Jacinda Ardern: We haven’t done it in this package, but we have acknowledged that those families who are on constrained incomes, who are on benefits, are doing it tough. And those are the areas where kids are suffering. What we’ve done goes to those beneficiary families as well.

Lisa Owen: Yes, but this is a step further, I suppose. And you’ve also said in the past that you think that the Commissioner needs to have more power, and you don’t get more power just through money. You get more power by implementing his suggestions or ideas.

Jacinda Ardern: Indeed.

Lisa Owen: So why not go with this one? Why not go with a big, bold—?

Jacinda Ardern: What will give him more power is, actually, greater independence, the ability to speak freely. And we want him to do that. We want any Children’s Commissioner in the future to have the ability to hold us to account.

Lisa Owen: Okay, so you’re not prepared to take that on, then?

Jacinda Ardern: But, to be fair, everything that we did in this package — the Winter Energy Payment, the Best Start payment, the increases to the Family Tax Credit, all go to families on benefits. In fact, by doing what we’ve done, we’ve got a big boost—

Lisa Owen: You’ve said that, and viewers will get that, but really the question is about whether it’s enough of an incentive, if it’s bold enough, if it’s dynamic enough to get people to change — which is what you want them to do.

Jacinda Ardern: And what I would say is that those families we have targeted, in the most need, end up being thousands of dollars better off. And that would even do more, in some cases, than what the Children’s Commissioner has suggested.

Lisa Owen:  Sorry to interrupt, but we want to get to a couple of other things. You’ve made it clear that you’re not keen to be Prime Minister; it’s not on your radar. How likely do you think it is that you’re going to be deputy prime minister?

Jacinda Ardern: Do you know, for me, if we’re in the position where we’re negotiating those positions, then that’s where I want us to be.

Lisa Owen: Come on, how likely? How likely is it?

Jacinda Ardern: My relative position actually doesn’t matter to me. If we’re in government, that matters to me.

Lisa Owen: Is the reason—?

Jacinda Ardern: So if I’m not deputy prime minister, but I’m a minister, that is fantastic. That means that we’ve won, and we’ve got a progressive government.

Lisa Owen: So you’re prepared to give up the opportunity of that role if one of the people you’re in coalition with—?

Jacinda Ardern: Yeah, because, as I’ve said, it’s never been about me. If we are in a position to be in government, that’s what I want. I don’t care about my relative status in that government.

Lisa Owen: Okay, so would you rather it be a Green or Winston Peters who held that position?

Jacinda Ardern: I’m loving this negotiation that we’re conducting here, Lisa.

Lisa Owen: Yeah, well, voters want to know what they’re getting. All right, let’s be fair, they want to know what they’re getting. So I’m asking you what your thoughts are.

Jacinda Ardern: And I agree with you. Voters deserve, in an MMP environment, to know, which is why we have the MOU. We’ve indicated that we’re going to work with the Greens. New Zealand First is a wildcard for voters. They could go with either Labour or National. If people want to change the government, the clearest way to do that is with Labour. Beyond that—

Lisa Owen: So, Greens is your preference, then?

Jacinda Ardern: Yes. We’ve got an MOU with the Greens.

Lisa Owen: And Greens is your preference for deputy prime minister as well?

Jacinda Ardern: I’m not saying that. That’s words in my mouth. What I’m saying is that, ultimately, there’s a range of things that will be on the table, but for me, it doesn’t matter to me.

Lisa Owen: You’ve mentioned a ministerial portfolio. So, social development — is that one that you’d like?

Jacinda Ardern: Children. I’m happy to say that I would very much like to be the minister for children. I’m very happy to say that.

Lisa Owen: Just before we go, if something should happen, as Winston Peters suggests, and your polling goes down and your leader is out, if it is a decision between stepping up for your party or not, will you do that?

Jacinda Ardern: Andrew Little is taking us to the election.

Lisa Owen: What about after the election?

Jacinda Ardern: Andrew Little is taking us to the election for victory. There’s no Plan B.

Lisa Owen: All right. Thanks for joining us this morning. Nice to talk to you.

The Nation – Judith Collins

Judith Collins was interviewed on The Nation this morning. Their news item generated from the interview:

Interview.

Transcript:

Lisa Owen: Revenue Minister Judith Collins joins me now. Good morning.

Judith Collins: Good morning, Lisa.

Lisa Owen: Minister, why is it that corporate charities like Sanitarium, some Brethren charities, some iwis don’t pay tax on their income or profits?

Judith Collins: Well, some businesses, you could say, charities running certain businesses, they have to comply with the Charities Act, which was set up in 2003, from memory. And their activities are audited as such by the Charities Services, which is part of the Department of Internal Affairs, which is not my area. But Revenue, certainly, does investigate any instances where they believe people should be paying tax because of either their activities or because they’re not actually really engaged in charitable purposes.

Lisa Owen: Yeah. Do you think that it gives them an unfair advantage? Isn’t it anti-competitive that they’re not paying tax?

Judith Collins: I think it is significantly difficult for a lot of businesses if they’re dealing with any competitor who they believe isn’t paying their fair share of tax. And the problem with these questions is that Revenue doesn’t tell me about any individual cases, and you can imagine why; you wouldn’t really want the Minister of Revenue being involved in deciding who gets to pay tax and who doesn’t and knowing what’s– obviously because there are privacy provisions as well, under the law. But I think one of the issues is if anyone does believe that someone should be paying some tax and they’re not paying it and they’re rorting the system as such, they need to go to the charities.

Lisa Owen: I’m not talking about specific companies when I ask that. I’m talking more generally. But you do have, sort of, Brethren charities who own dairy and kiwifruit enterprises – huge, huge conglomerates – and they’re competing in a market against other businesses.

Judith Collins: Well, it all depends on what the money’s going to. For instance, if profits are going into charitable purposes, which is often religion or education or helping the poor – those are all charitable purposes – then they will obviously be meeting charitable purposes. So it’s a different thing if it’s going into things that are not charitable purposes; then there’s a possible breach of the law, and that means that the Charities Services and the Department of Internal Affairs should be notified.

Lisa Owen: But do you believe that simply spreading your religion or your religious word is enough to warrant a tax break?

Judith Collins: It’s not a matter of me believing it; it is the fact that that is the law.

Lisa Owen: It is the law, yeah.

Judith Collins: It’s been the law since the first Queen Elizabeth.

Lisa Owen: But do you think it’s a good law? Should it be the law?

Judith Collins: Well, let’s put it this way. I mean, I’ve often thought that there’s quite a lot of business that goes through charities, but that is the law. It has been there forever. That would mean that every church that’s involved in things like, for instance, some of the shops that people get– you know, obviously, they sell clothes and sell these other things – that they would then suddenly become subject to tax. We’ve got other things that we can do in tax, and actually, going after charities that are actually complying with the law and using their profits for charitable purposes, which is helping the poor, education, those sorts of things, that’s not the biggest priority I have right at the moment.

Lisa Owen: But what if they’re not doing those things in any great numbers? Because there is no legal requirement for them to give a certain amount of what they make to charity. It’s left up to them, isn’t it?

Judith Collins: Well, no, there’s the Charities Services part of the Department of Internal Affairs. And Inland Revenue tell me – and I believe them – that they are almost religious, actually, in their wish to get in every cent of tax dollars that they believe they should be getting in, and they work very closely with Charitable Services in Department of Internal Affairs to do that. So just because someone is operating a charity doesn’t mean to say every part of their business activities is tax-free because some of that money may be going for non-charitable purposes.

Lisa Owen: Right. But for example, I mean, there’s all sorts of ones that fall under the category of charities. Church of Scientology – their return for 2015, they brought in income of almost $2.5 million; grants paid out within New Zealand – zero. Another one – Salvation Army, by comparison, paid out $30 million in evangelical programmes, $57 million in community and training job programmes, $35 million in social and health programmes. You know, those are stark comparisons. And here we’ve got an iwi, Ngai Tahu – $533 million income; grants paid out in New Zealand – $12 million in the same year. So are all these charities created equal in terms of what they’re doing and the breaks that they’re eligible for?

Judith Collins: Well, I think, quite clearly, that not all are doing exactly the same as each other. But the fact is that if there are concerns, then the right people to go to are Charitable Services, the Department of Internal Affairs, which is another minister’s portfolio.

Lisa Owen: So you’re fine with how the law stands at the moment?

Judith Collins: No, I say that is the law, and at the moment, I’ve got other things that I’m doing.

Lisa Owen: But do you think it needs to be reviewed?

Judith Collins: I think it’s something that is clearly in a lot of people’s radar at the moment, but right at the moment, my big issues are dealing with things like child support but also dealing with things like multinational companies. That’s where my focus is right at the moment.

Lisa Owen: OK. And I want to get on to international companies. Australia has changed its rules around charities in 2014, and only income directly related to charitable activities that are paid out, you know, you get a tax break on that. So why couldn’t we just do the same here?

Judith Collins: Well, we don’t just do the same like that in New Zealand. We actually put out discussion documents and things.

Lisa Owen: But we like to be in line with our trading partners, don’t we?

Judith Collins: Well, in some cases. We have a very open tax system, and ours is much more simple than many other countries’, including our trading partners. We have a lot of trading partners. But in terms of the charities thing, it is certainly something that Charitable Services and Revenue look at, and it’s certainly something that I’ve asked for some advice on as to what is actually happening, what are the rules, what’s happening on it. But that’s actually for another time because I’ve got other issues I deal with.

Lisa Owen: OK. So, the advice you asked for, what prompted that? What concerned you that you want to–?

Judith Collins: Oh, because people like yourself– obviously not you personally in this one, but people like yourself who raised the issues. So I think it is important to know the extent of any issues.

Lisa Owen: So you are looking into it?

Judith Collins: Well, no, I’ve asked for some advice on it, and that advice is that at the moment, they don’t believe that it’s such the issue that people might think it is, and that is because they’re working so closely with Charitable Services.

Lisa Owen: So after petrol and multinationals, you might get to it?

Judith Collins: Well, we have to wait and see. I’d have to be back in the role, wouldn’t I, after an election?

Lisa Owen: This week Labour said it’s going to crack down on multinationals not paying their fair share of tax.

Judith Collins: Oh, yeah. Bit late to the party, aren’t they?

Lisa Owen: But does anyone think that’s a bad idea?

Judith Collins: Well, I think we’ve already been doing that. I mean, earlier this year, Steven Joyce and myself released discussion documents on exactly that. And it’s called ‘BEPS’ or base erosion profit-shifting, and that’s some of the stuff that some multinationals have been undertaking in New Zealand and elsewhere.

Lisa Owen: So why aren’t your numbers as good as Labour’s? You’re talking about getting back between $50 million and $100 million a year over a period of time. Their projections are $200 million a year.

Judith Collins: Well, actually, it’s wrong, because the figure of $100 million was put in the budget for this budget year, and, of course, most of our measures that we’ve been consulting on and which I’ll be taking to– Steven and I will be taking to Cabinet in the next little while – we are looking for an announcement within the next month or so – those are obviously spread out over the next couple of years. So we will get to– we believe we will get to at least $300 million.

Lisa Owen: OK. So, diverted profits tax.

Judith Collins: Yes.

Lisa Owen: Why not have that? And I know you say we don’t like to follow all our trading partners.

Judith Collins: No, we don’t.

Lisa Owen: But you have said that we do like to be in line with some of our trading partners. And Australia has introduced a tax like this. The UK’s got one. We’re out of step, aren’t we?

Judith Collins: No, we’re actually in-step with the rest of the OECD. And in fact, recently I signed us up to a multilateral instrument, which is basically a massive treaty with 67 other countries – and I think now about 70; some more have added on to it now, over 70 – where we have actually signed up to a lot of the measures to actually deal with this very issues. Diverted profits tax is a very draconian measure. It basically says if we think you are doing anything to shift your tax liability, we’re just going to stick a 40% tax on what we think you should be paying. Now, that is a pretty harsh measure, which might sound great, but even Labour are saying they’re not expecting much of it. Australia are saying that they’re expecting–

Lisa Owen: So you’re ruling it out totally?

Judith Collins: No, Australia are saying that they’re expecting $100 million. In their size of their economy, you know, five, six times our size, we believe we can do better with what we’re doing – following the OECD and working with other countries. Because this is all around things like–

Lisa Owen: So we’re definitely not going to do it.

Judith Collins: No, no. What we’ve said is that we’re not ruling it out, but what we’re not doing is rushing into it. We believe we can get pretty much the same result or even better working with the OECD and working with all these other countries. Just imagine if Revenue decided that we were going to add this massive tax on to everything else that people have and then other countries…

Lisa Owen: You’re saying it will scare business away because other countries are not?

Judith Collins: …did the same to our companies. We are an exporting nation; we need to be very careful how we do these things. And what we don’t want to do is end up with a situation where we’re considered to be a difficult and dangerous place for businesses to operate in.

Lisa Owen: So are you not holding them to account simply because you fear retaliation?

Judith Collins: No. I’m holding them to account, but we think we can get a far better outcome working with the OECD, which, after all, when you’ve got 70-odd countries signed up to it all working together– And when you’re dealing with that, that’s a much stronger position, we believe, than simply adding on another tax, which we may never be able to collect.

Lisa Owen: OK. We talked earlier in the interview about being returned to government and what portfolio you might have.

Judith Collins: Well, who knows?

Lisa Owen: So let’s imagine for a minute that National gets a fourth term.

Judith Collins: That would be great.

Lisa Owen: What’s your dream portfolio?

Judith Collins: Whatever I’m given, actually.

Lisa Owen: Oh, come on. You’re more ambitious than that, aren’t you, Mrs Collins?

Judith Collins: I’ve actually always been very happy to be a minister in a National-led government. And every portfolio I’ve had, I’ve loved every one of them. And, you know, tax is something I just love, the Revenue area, I love the energy and resources, the ethnic communities – these are all really important. And as a former tax lawyer, I’m happy as anything in there.

Lisa Owen: So you don’t think you’ve got more to offer? There’s not more ambition? You’re number 15 in…

Judith Collins: I’ll tell you what, number 15 in government is a lot better than number 3 or 4 in opposition. I can tell you that, Lisa.

Lisa Owen: But is number 6, 7 and 8 in government better than number 15?

Judith Collins: Oh, look, you just do the role.

Lisa Owen: Are you more ambitious than that, minister? I mean, you were tagged as a future prime minister.

Judith Collins: By others. But my view is this – that just being in government and being able to actually do the best we can for New Zealanders is much better than saying where you’re ranked or whatever. I know some people get very excited about that. I’m not excited about that. I don’t get excited about that…

Lisa Owen: OK, so happy to stay where you are

Judith Collins: …because it doesn’t make any difference in terms of your ability to actually do what you have to do.

Lisa Owen: You heard it here – Judith Collins happy to stay where she is.

Judith Collins: I’m always a happy person.

Lisa Owen: All right.