Tax Working Group favours land tax over capital gains tax (Update 5)

Posted in News October 2, 2009 - 02:26pm, Bernard Hickey

The government's Tax Working Group has released its latest update on its progress towards reform recommendations to the government, agreeing that it favoured a land tax over a capital gains tax because it would harder to avoid, less complicated and more efficient. (Update 1 includes session summary/Update 2 includes highlights from papers presented at conference on CGT/Update 3 includes highlights from papers on Land Tax/Update 4 includes IRD estimates of at least US$214 million of current property tax not collected/Update 5 includes Mark Weldon saying the NZ$200 billion worth of rental properties in New Zealand generated NZ$500 million of losses last year) The Tax Working, which includes economist Arthur Grimes, PWC partner John Shewan, NZX CEO Mark Weldon, economist Gareth Morgan and Rob McLeod, met on September 16 at Victoria University to discuss taxation reform ideas relating to property and property investment. The papers from this meeting, including the summary, were released on Friday afternoon. "Broadly, implementing a more comprehensive system of capital gains taxation would extend an existing tax base (the income tax base) to include capital income in taxable income; whereas a land tax involves the creation of a new base of tax," the Tax Working Group said in the summary.

"They would both increase tax rates in an area (particularly land) that is currently untaxed, and the bases overlap to some extent. Therefore although they may have some similar effects they are not necessarily substitutes for each other," they said. "A comprehensive land tax is likely to be easier to implement, comply with and administer than a CGT. The integrity of the tax system could be improved by the adoption of either; although a land tax is likely to have a higher degree of integrity, particularly if the CGT is restricted to certain types of assets." "In relation to vertical equity (tax burden rises as ability to pay increases), a land tax is broadly proportional, whereas a CGT would be highly progressive; however the land tax is a one-off tax on existing wealth in the form of property, which compromises its horizontal equity relative to capital gains taxes. " Summary highlights Capital Gains Tax

US academic Len Burman presented a paper on what a CGT would look likeand its pros and cons.
Burman said the current system where capital gains are untaxed "distorts saving and investment decisions, encourages tax shelters, adds unnecessary uncertainty, and reduces the tax base, requiring higher rates of personal income tax."
Burman said the current system was inequitable and difficult to comply with. It also meant "the wealthy tend to hold higher-value assets. Not having an effective CGT undermines the progressivity of the tax system and means the wealthy pay less tax on their total income than the less well-off"
Burman said a realisation based capital gains tax may encourage 'lock in' where people avoid selling to defer the tax pain, but the evidence in America was that this effect was limited.
Burman suggested two options for a capital gains tax. Firstly, he suggested a hybrid approach where shares and unit trusts are taxed on accruals basis while other assets were taxed on a 'Risk Free Return Method (RFRM). Secondly, he suggested a realisation based CGT on all property.
Burman concluded: "Despite some practical difficulties, a capital gains tax would improve system efficiency, raise revenue, be progressive, and it could pay for other tax cuts."
Treasury then presented a paper saying a realisation based CGT that excluded owner-occupied housing would raise NZ$1.5 billion over time and nearly offset the costs of moving to a flat 30% rate for income, corporate and trust rates.
Treasury downplayed CGT's disadvantages, saying: "The impacts of lock-in, loss ring"“fencing, and design and transitional issues, should not be overestimated."
Inland Revenue and Treasury presented a 62 page paper on the pros and cons of a capital gains tax, concluding the cons made a CGT very difficult.
Inland Revenue concluded an accruals based CGT was not viable because it would encourage listed firms to delist. It said the only viable option was an accruals based system.
Even then, Inland Revenue argued such a CGT would be unattractive and reduce economic efficiency. It said: "While there are some benefits in theory from a more comprehensive treatment of capital income, in practice, lock-in, ring fencing, and the treatment of losses are likely to mean that a CGT reduces rather than increases economic efficiency."
A CGT which exempted owner occupied housing would distort land use decisions, IRD said.
If owner-occupied property is excluded it may trigger a shifting into this remaining tax-free area, IRD said.
IRD concluded: "On balance, Inland Revenue argued that the advantages of a real-world CGT would not outweigh its disadvantages."
The Tax Working Group discussed the avoidance opportunities with a CGT. "These could include sheltering of income in companies, and loss manipulation.
"Lock-in effects could be a problem - and some group members noted that this impact could be more severe given New Zealand's high levels of investment in real estate," the group said.
A CGT would be highly progressive (ie hit the rich more than the poor), the group said. "However, given this, there may be mobility concerns with the introduction of a CGT, with higher income people having a potential incentive to leave New Zealand."
Andrew Coleman from Motu produced a paper detailing the long term impact of a CGT, including the following conclusion: "The model suggests that capital gains taxes will raise rents, increase homeownership rates, rebalance the housing stock towards smaller houses, and increase the net foreign asset position."
Coleman also concluded a capital gains tax that excluded owner occupied housing would raise little revenue, while a CGT without exemptions would raise enough to cut GST.
Treasury and IRD said a CGT that exempted owner occupied housing and included shares would raise around NZ$4.5 billion per annum, while a full CGT would raise about NZ$9.1 billion, although this would take 15 years to reach that level, assuming only gains after introduction are taxed.

Land Tax

Economist Arthur Grimes then presented a paper on a Land Tax by himself and Andrew Coleman from Motu saying that a land tax would be more efficient than a property tax which included the value of both the land and buildings.
Grimes said the introduction of a land tax would trigger a one-off fall in land values, which would hurt landowners, but improve affordability for first home buyers. "A land tax would be likely to cause home ownership rates to rise slightly, and gross debt to GDP and net foreign assets to GDP ratios to fall due to lower foreign borrowing. "
Grimes said the taxable land base in New Zealand, which excludes government and conservation land, was worth NZ$460 billion. A 0.1% land tax rate would raise NZ$460 million, although this would fall to NZ$160 million if agriculture, forestry and owner-occupied land was excluded.
Retired people would be hurt most by a land tax as they held proportionally more land and would not benefit as much from other tax changes in any reform package.
A land tax would be easy and cheap to impose because it was already set up for local government rates, Grimes said. It would be almost impossible to evade, he said.
"Thus a central government land/property tax could be added as an adjunct to the current system with virtually no additional administrative cost. Furthermore, the ability to avoid (or evade) the tax is virtually non-existent since the land/property is valued by an independent agency and the land/property is available as collateral in cases of non-payment of tax."
A land tax would capture foreign owners of New Zealand land, Grimes said. "One currently untaxed sector that it would fall on is foreign-domiciled owners of New Zealand property, who otherwise pay no income tax and who pay no GST if they do not purchase goods and services in New Zealand. A shift to a land tax would therefore widen the tax base not just in terms of the base of assets on which tax is raised but also in terms of the number of people (i.e. non-New Zealand residents) who become taxpayers."
A 1% land tax would immediately reduce land prices by 17%, while a land tax phased in over 20 years would reduce land prices by 11.5%, he said.
A property tax with an exemption for home owners would cause the rental market to collapse, he said.
Grimes said a property tax and the resulting fall in property prices would over time reduce New Zealand's foreign debts. "Put simply, high domestic property prices raise the portion of the country's production that is paid annually to foreigners, and a policy that reduces these prices is likely to lead to an increase in net foreign assets and in the fraction of income available for consumption."
Residential land makes up 65% of all land values, while agricultural and commercial forestry make up 24% of the land value. A land tax would hit agricultural based households harder than residential households because each rural household owns proportionally more land.
The average land value for residential properties is NZ$215,000, meaning a 1% land tax would cost each household NZ$2,150 per year.
A 1% land tax would raise NZ$4.6 billion, which is equivalent to 20% of income tax.
A land tax would effectively transfer wealth over time from the old to the young. "The retired cohort would be more likely than younger cohorts to incur a wealth loss (in absolute terms) given the higher initial value of their housing assets. They would also likely face an increased overall tax burden if a land/property tax was matched by an income tax reduction, simply because their incomes tend to be low in relative terms. Younger cohorts would face reduced current and future income taxes that, on balance, would generally more than make up for their higher lifetime land tax payments."
Grimes suggested some variations on a land tax that would reduce the impact on farmers and lower income people, including a reduced rate on farmland or a per hectare rebate.
He also pointed out a rebalancing of the New Zealand economy could boost productivity and per capita living standard.

Current tax avoidance

IRD says it can raise an extra NZ$400 million extra for every extra NZ$100 million it spends policing the rules.
"Particular areas for the application of additional funding would be an increase in focus on the hidden economy, losses, tax debt and property industry compliance."
IRD has identified 2,000 people who have bought and sold 6 or more properties over a period of 4 years. Of this group, 312 people appear to have bought and sold 20 or more properties (and should therefore have paid taxes on trading profits) and owe up to NZ$214 million in tax.
There is another 5,112 people who have bought and sold 3 to 5 properties during the same period.
IRD then asked for more funding as its current funding runs out in June 2010.
NZX CEO and Tax Working Group member Mark Weldon told Andrew Patterson's Sunday Business on Radio Live the NZ$200 billion worth of rental properties in New Zealand generated NZ$500 million of losses last year.

The group's summary of its third session is below: Tax Group Session 3 Summary

241 Comments

by spanner | 02 Oct 09, 2:42pm

instead of finding new taxes,

instead of finding new taxes, why dont you guys provide tax incentives for new business start ups, instead of reactionary responses, try thinking proactively. Encourage both sectors not every one wants property many want to have a crack at starting a business, but where are the incentives, make the first year tax exempt....or some thing like that, a way that people can use a business to save some tax.....for a period and if the business takes off im sure they will be happy to pay tax on future earnings, could really get this country going.

Mark Hannah

by Harriet | 02 Oct 09, 2:45pm

Could be a real cottage

Could be a real cottage industry in selling a startup after 364 days, spanner? Show me an incentive, and I'll show you a hole.
Land Tax Rate ? 12.5% flat? May as well lump it in with GST, but non refundable.

by spanner | 02 Oct 09, 2:48pm

yes i thought that also,

yes i thought that also, but could make it for the real deal only, not sure how....... but set it up correctly no loop holes.

by Luke | 02 Oct 09, 2:50pm

"Officials stated that a land

"Officials stated that a land tax would not address future price bubbles at all as the tax would result in a one off reduction in the existing value of land at the time the tax is introduced"

Therefore, doesnt address the problem whatsoever! = Tax working group FAIL. What a joke.

by Liam | 02 Oct 09, 2:58pm

"Therefore, doesnt address the problem

"Therefore, doesnt address the problem whatsoever! = Tax working group FAIL. What a joke."

It does in so far as making investing in property less attractive relative to investing in productive enterprises, which i think is the main objective here

by Harriet | 02 Oct 09, 2:59pm

Surely the suggestion ought to

Surely the suggestion ought to be that it's a flat transactional tax, like the Aussies have stamp duty? If a a property is bought and sold X times , it's taxed at each turn? ( Also re mine 2.45pm; I know GST is aleady paid by the end user of land; it's the rate I was suggesting)

by spanner | 02 Oct 09, 2:59pm

Just seems to me everytime

Just seems to me everytime something doesnt work quite right the country's response is how do we stop that........ through regulation.... whereas the really smart forward thinkers would say how do we guide this problem to a better solution.

The problem is an over emphasis on property investment and the associated debt levels...... and not enough new business investment

Solution make it more beneficial to invest in business instead of property ? or beneficial for both sectors Logic

by Wally | 02 Oct 09, 3:13pm

Sod this, back to the

Sod this, back to the idea I floated months ago....place an adjustable fee on the registration of mortgages....one under the control of the RBNZ, not the bloody politicians. The higher the loan, the higher the fee. That way Bollard could put the screws on the residential stupidity. Demand would be cut for large mortgages. Oooops, I forgot, the banks won't allow it to happen. Oh well, back to the BS and spin. Oh yeah, and I forgot that the real reason for the tax spin is to raise more money for the pollies to trot around in.

by jimmy | 02 Oct 09, 3:15pm

I think its a sensible

I think its a sensible idea. I can see the benefits over CGT especially in regard to

1) use it or lose it thinking - ie hinders land banking
2) easier to enforce
3) brings foreigners directly into the tax system (helps CA deficit and disencourages foreign speculation)
4) it will be proportionately harder on those who are retired as they will not be getting he benefit of lowered personal tax rates to offset the cost of the land. This will encourage them to live somewhere more in line with incomes/lifestyle and not sit in a property purely out of a desire to reap CGs.
5) It is regularly paid. So the cost is shared over the life of ownership (rather than in 30 years when the asset is sold). This also reduces complexity.

I propose 5% per year. This can be offset to some degree by decreasing personal tax by big margins. If people cant afford this then land values will reduce until they can. This can only be positive.

Well done Tax reporty commissiony thingy.

by Luke | 02 Oct 09, 3:19pm

@ Wally. Just host Karaoke

@ Wally. Just host Karaoke competitions on cruise ships. International waters. No tax. Problem solved.

@ Jimmy. Bugger that. No chance of living free from the crown - rural land owners which attempt fully off-grid lifestyles would have rates and annual land tax to pay? Therefore, must get cash producing job - force for inclusion. Not a fan. Not a fan at all.

At transaction, different story. But doesn't help the problem.

by Andrew | 02 Oct 09, 3:46pm

Some thoughts 1. We already

Some thoughts

1. We already have a land tax. Its called rates and it is unjustifiably high. Where is Rodney Hide...all talk and no trousers ???

2. Before we impose yet another tax how about getting Govt spending under control. We need to break the tax and spend mindset.

3. If this chops property investors off at the knees and they bail out who will have to stump up with housing for those who still cant afford to buy ? Bill ? John ? Any takers ??

Jimmy what if I am old, worked hard all of my life, paid a lot of tax and dont care about CG..I just want somewhere nice to live in my late years. Why should I be taxed out of my home ??

by Luke | 02 Oct 09, 4:03pm

@ Andrew. Agree. "I'm the

@ Andrew. Agree.

"I'm the first bonafied Democrat, TAX and SPEND, TAX and SPEND, ahrdeharha" *insert crazy eyes.

by Roger Witherspoon | 02 Oct 09, 4:18pm

This is an old chestnut.

This is an old chestnut. No one likes a land tax (me included) but if you read people like Michael Hudson he is a strong advocate and he is one economist I have a deep regard for.

Basically a land tax, purely on land value not buildings, encourages the most productive use of land in a society.

Even Milton Friedman is reputed to have called it "the least bad tax" because it does not distort but encourages the best use of resources. This is a big issue for us, we would not need to be overly concerned about "foreign ownership" and other bogeys and it would certainly work against property bubbles.

Personally I think it is too hot a potato politically to ever take off but equally, if I were designing our tax system from scratch I'd have to start with it. Think about it - it encourages efficient use of resources.

Income tax discourages people from earning more (and high rates say "piss off we don't want you here"). GST discourages spending. Petrol tax discourages driving. The list goes on. Capital gains tax discourages change of ownership.

The game of Monopoly was invented by an advocate of land tax to show how without it the wealth in a society becomes concentrated in the hands of a few over long periods of time.

A land tax is the only rational tax.

by Jezza | 02 Oct 09, 4:30pm

Gotta love the $200bn elephant

Gotta love the $200bn elephant in the room that contributes negative tax (rental property). Flat land tax might have an interesting affect on some lease-hold agreements and how those costs are passed on or not.

by Bobby | 02 Oct 09, 4:37pm

Income Tax, GST, Fuel Tax,

Income Tax, GST, Fuel Tax, Rates, RUC Tax, ACC Tax, Environment Tax, Power charge rip off prices etc etc and now a bloody land tax! What do the mad b******ds think we are going to live off. Fresh air? Instead how about showing some leadership and stop all the handouts to bloody no hopers sucking off the working person. What is it now? 2.4 on benefits to 1 taxpayer. Stuff this place, I will just stop working!!!

by Wally | 02 Oct 09, 4:40pm

We already have land taxes...they

We already have land taxes...they call them rates....but they are still a bloody tax. Now, who gets to set the land tax.., and by what process. You can put your money on the ruling party making dam sure their rump cops the least tax. A system which would be at the whim of each govt. So we end up with pollies promising their way into the pig trough of cash and perks, on the back of cuts to land tax for their rump of support. Can't see the govt handing control over to the RBNZ, indeed they will see it as a great election tool.......this is a pig that won't fly. Jeeez Bobby, that's brilliant....a fresh air tax....

by watcher | 02 Oct 09, 4:42pm

No way !!! I hope

No way !!! I hope no-one tries a land tax. For one it would be political suicide- voters are not going to accept any property tax that hits the family home- there would be riots I am sure. We need something to penalise property speculators not hit people sitting in the family home. If you choose to live in a shack on a lifestyle block you would be worse off than someone sittiing in a multi-million dollar mansion in Remuera. Sounds like something dreamed up by the business roundtable.

by Roger Witherspoon | 02 Oct 09, 4:44pm

Quite agree Bobby, too many

Quite agree Bobby, too many taxes, too much money in the wrong hands for the wrong reasons.

by Roger Thompson | 02 Oct 09, 4:48pm

Could try a poll tax

Could try a poll tax , a'la Maggie Thatcher . Surprised that Cullen , the King of Tax , didn't get around to resurrecting that little gem .

by Wally | 02 Oct 09, 4:52pm

Yeah well, what's so wrong

Yeah well, what's so wrong with Wally's idea....have the RBNZ admin an adjustable mortgage reg fee...with the intention of making larger mortgages more expensive....at first it stinks, right? ....but when you waft away the smell you get a fall in demand for money and so a fall in property prices. That benefits the families, yes? So what's not to like about it?

by Chinese Cash Buyer | 02 Oct 09, 4:58pm

Anyone cares to explain how

Anyone cares to explain how a Land tax is going to work?

Do I just pay it once and that would be it?

Or do I pay it every year?

Or do I pay it when I sell?

Can I treat it as an expense and claim income tax refund?

If the tax rate is only 0.1% p.a., then a typical residential land would be taxed at $200 / year, which is not really a big deal.....when you compare to the city council rate increase...

The story will be different if the tax rate was 1%...

Land won't be worth buying if the rate was more than 5%...

by Roger Witherspoon | 02 Oct 09, 4:59pm

Bugger, I'm wrong again. A

Bugger, I'm wrong again. A land tax discourages use of ... land. So there would be a lot of marginal farmland reverting to useless bush. We've got quite enough of that.

Yes, i think it will have to be a fresh air tax, which I guess is quite similar to a poll tax really. Although it would be a tax on consumption like GST. What about a hot air tax? I suppose that's the same as a fart tax and it looks like we are getting that one way or another. I'd better just shut up I think.

by Wally | 02 Oct 09, 5:04pm

Yep, Bill's real goal has

Yep, Bill's real goal has been to confuse us all with BS and spin wrapped in a tax inquiry that keeps us all occupied arguing the toss, while Bill has Treasury plonkers craft some new ways to screw money from people, so he doesn't have to kowtow too much on his begging trip.

by Roger Witherspoon | 02 Oct 09, 5:06pm

What about a tax on

What about a tax on government spending and borrowing? Any takers?

by jimmy | 02 Oct 09, 5:07pm

Andrew, "what if I am

Andrew,

"what if I am old, worked hard all of my life, paid a lot of tax and dont care about CG..I just want somewhere nice to live in my late years. Why should I be taxed out of my home ??"

what if I am 30ish, have kids, have worked damn hard and have to live in an apartment because all the old coots are hogging all the good land??? If the nice place to live is an extremley inefficient use of a valuable resource by 1 (max 2) people then you should pay through the nose for it. NO right is absolute, and that includes property. What about the fact that we are importing tonnes of immigrants so that the precious boomers can have their health services paid for? The pressure these will put on land DEMANDS an efficent use of the land. Boomers want to have their cake and eat it too.

I'm not saying the tax is perfect, but NO TAX IS PERFECT. We just get used to the status quo. It is LUDICROUS that you should pay tax for income you produce via working and NOTHING on an appreciating parcel of land whose value increases without required effort. The land tax idea is simply spreading the burden around a bit more fairly. And thats what the commision is looking at - how do we more fairly distribute the tax burden? Less income on work and MORE on passive gains is FAR more equitable.

by Pete | 02 Oct 09, 5:08pm

So the classified ads will

So the classified ads will read. "To rent. 3 brdm bungalow. $450pw + land tax." That's going to be a real vote winner.

by jimmy | 02 Oct 09, 5:11pm

Wally, I think your idea

Wally,

I think your idea is a "nice in theory" example. For a start, how do you prevent people borrowing large sums from overseas?? Maybe "residential" loans could be dressed up as "business" loans (eg make most of your home is an office etc etc). It would be a nightmare to enforce.

by Silas | 02 Oct 09, 5:12pm

First choice: no new taxes

First choice: no new taxes at all. Cut govt spending by $400million per week.
Second choice: Land tax, no exemptions and include the family home/lifetstyle block/farm. In other words treat it like GST. But low like 0.5 or 0.75%.
Third choice: Exempt first $150,000 on land tax and the rest at 1% per year, payable quarterly in advance.
Fourth choice: Bollard to have legislated ability to surcharge fixed and floating mortages.

by Wally | 02 Oct 09, 5:17pm

Jimmy, our system allows the

Jimmy, our system allows the banks to use the courts and law to protect their dreamed up credit they lend out, against the borrowers buggering off. Any foreign bank lending for any reason would not be able to get that legal protection. Any 'fake' loan ....residential purpose but dressed up as a business loan....would invite a criminal charge and the mort being deemed as crap and unenforceable....no bank would risk this..... The enforcement comes in the courts. By placing the risk of honesty on the bank...you can count on full enforcement. They would risk both criminal charges and a loss of the money loaned out.

by jimmy | 02 Oct 09, 5:25pm

the beauty of the land

the beauty of the land tax more than anything else is its simplicity and it enforceability. If you have land to your name (company or personal) then you pay the bleeding tax. No issue as to whether you bought for a particular purpose, no issue as to whether you are an investor or homeowner, no complex calculations regarding inflation adjusted realised gains etc, no transitional issues to bring existing properties into the scheme, no incentive to put the property into a different entity or persons to lessen tax, no incentive to wait till you have retired to reduce your marginal tax rate. In other words, THE BEST TAXES ARE THE ONES WHERE EVERYONE IS TREATED THE SAME REGARDLESS OF HOW GOOD YOUR ACCOUNTANT OR LAWYER IS.

As to whether its another opportunity for the govt to waste money (like rates) forget it. THe commission is looking at NET ZERO GAIN tax intake. So MORE land tax to pay = LESS income tax to pay. It just means we have freed up some cash AWAY from land ie that additional tax can be used somewhere else.

And here is another reason to support it. Most of us agree that the property bubble need to burst. We need to be be UNITED in our opposition to the bubble - whilst you may not think the land tax is the best way, if its high enough WITHOUT question it will put a dent in the bubble and increase productivity on land. This is a think tank of some of our finest NON VESTED INTEREST minds. If we cant get behind a policy that the govt is at least going to have to consider seriously (given it commissioned the think tank) then the revolution away from property can not occur.

by jimmy | 02 Oct 09, 5:31pm

Wally, how good have the

Wally,

how good have the courts been at enforcing capital gains on the majority of property investors over the last 10 years who lets face it were more interested in gains than income????? There has not even been the desire to enforce the law properly - partly because it is such a gray area. The land tax is pure and simple. ANY enitty that owns the land (business, residential, foreign, low income earner, disabled pensioner) are subject to the same tax.

by Wally | 02 Oct 09, 5:35pm

Jimmy, the problems turn up

Jimmy, the problems turn up when you realise somebody has to decide how to implement the tax. Do you trust the pollies to do it? Will they allow an independent body to do it? Do you trust valuers to do it? How the hell would it be done. As for your point "Most of us agree that the property bubble need to burst"...you can bet the banks don't agree and the national party rump that's heavily invested in property and the real estate mob and the councils and a heap of others. In fact, deep down I doubt whether the govt wants property to be affordable, ever again!

by jimmy | 02 Oct 09, 5:39pm

Pete, "So the classified ads

Pete,

"So the classified ads will read. "To rent. 3 brdm bungalow. $450pw + land tax." That's going to be a real vote winner.
"

Incorrect. The headlines will read - "Property prices drop as speculators exit the market". Then the classifieds might read

"To rent. 3 brdm bungalow. $400pw + land tax." and the tenant enjoys the same cost of renting BUT has less income tax to pay. Ditto for first home buyers.

And we might also see some other headlines:

"NZers invest in shares as property continues to stagnate"
"Bank profits drop on decreasing loan size"
"Current Account deficit drops on reduced interest payments overseas"

by Spidy sense | 02 Oct 09, 5:39pm

How about we legalize the

How about we legalize the use of ones testicals as security on business loans only. Thus reducing the % of default, in turn increasing banks willingness to loan commercially and reducing the interest rate on said loans.

by jimmy | 02 Oct 09, 5:43pm

Wally, By "most of us"

Wally,

By "most of us" i mean the people who follow these blogs. We are the ones who need to aghitate for change, if we go in with a fractured policy then the result is inevitable. I have no doubt that the banks will be against this, but they will be against any policy that returns cash back to consumers.

"Do you trust the pollies to do it? Will they allow an independent body to do it? Do you trust valuers to do it? "

I cant see why you consider it to be such an administrative nightmare. Obviously you would need some central valuation system. Guess what??? we already have one of those, as well as lots of private ones. They are not perfect, but they are generally within cooey. It would be FAR LESS an admin nightmare than other options.

by Wally | 02 Oct 09, 5:46pm

At some point it will

At some point it will be clear that our legal system has been set up to protect the lender. We don't have the 'walk away' escape clause as in some US states. The bank can hunt you down for their pound of flesh. Ok, so the cost of protection increases according to the RBNZ decision, with the sole aim of throttling demand for larger sums on RESIDENTIAL only. It is a simple measure. The banks will scream blue bloody murder at such powers being given to the RBNZ. Finally Bollard would have a tool worth swinging.
Jimmy, I think it would be a nightmare and wide open to polly abuse. Who pays what?

by Luke | 02 Oct 09, 5:48pm

TAX and SPEND! Time to

TAX and SPEND! Time to look into more 'grey' market activities for personal operations me thinks...

@ Wally. More power to the central bank... where have we heard that before? Outcome?

by Alastair | 02 Oct 09, 5:58pm

Relax... John Key knows this

Relax... John Key knows this will be political suicide, it's not going to happen.
However I do agree that our economy is unbalanced in favor of property.
In our current (socialist) system everything is backwards. Hard workers are over taxed, good businesses are over taxed, the wealthy are over taxed and even capital is over taxed. However the problem starts with our medium of exchange being debt. Why do we as a nation pay interest on debt/credit that we have the power to issue debt free?
The international banking cartel have a monopoly on our own medium of exchange. Every one of us is paying the price. Slavery still exists!

by Wally | 02 Oct 09, 6:00pm

No Luke, the RBNZ has

No Luke, the RBNZ has eff all powers and that's been the decision of the govts we have had. Bollard is trying to push an elephant round with a matchstick. Give the poor sod an elephant sized electric prod. Give him the authority to throttle residential bubbles with a fee control over mortgages. It would work. Trouble is the banks would tell English and Key that they don't like it and not to do it!!!!! The bubble is a bankers dream. They will be there in the Beehive watching and warning.

by Gail M | 02 Oct 09, 6:01pm

Let's see now - if

Let's see now - if I were an 'old coot' who had a nice piece of land to live on, wasn't interested in capital gains and wanted to reduce my land tax....

1. QE2 covenant - that should drop the value a bit
2. Get someone to swear that there used to be a sheep dip in the paddock - organophosphate contamination -there we go - just halved my land tax!!

I'm sure that given a bit of time I could think of a few more....

by mouse | 02 Oct 09, 6:17pm

Lets party, time for a

Lets party, time for a "Tea party"?.

by jimmy | 02 Oct 09, 6:27pm

Gail M, Keep thinking. Whatever

Gail M,

Keep thinking. Whatever way you "wish" for a land value reduction will still have to proved to the valuer.

by Bobby | 02 Oct 09, 6:33pm

Hey Jimmy, Want to buy

Hey Jimmy, Want to buy 18 acres of top quality standing grass for silage. My contractor does not want it this year as he has 280 bales left from last season because farmers would not or could not afford to buy it. No money! My crop is ready for harvest and no one wants it. Will let it rot in paddock this year. Costs involved: Fertilizer, Council rates, Environment rates, Weed control and some stupid bloody townies want Land tax as well. Go to Hell!!!

by Brian W | 02 Oct 09, 6:34pm

Goodness me. I've watched this

Goodness me. I've watched this debate for some time now, and everyone gets all het up about the detail. The detail doesn't matter. There will always be losers in any system, and rorts etc. We employ bureaucrats to sort that out. If we don't tax those that avoid tax the rest of us all pay more. Simple really.

The problem is simply that if a system is inequitable then it has to be fixed. There has to be a CGT on the same or very similar basis to that outlined by Len Burman. Difficult to implement we hear from IRD. Who cares? Get over it. Get it done. Anything else is inequitable and if the system itself is inequitable then it has to be fixed up. Only those benefitting from the inequity want it to continue. The old Lords of the manor in UK, the communist party leaders in Russia etc. Who is it today? They hide themselves well but sponsor comment that leads the populace to think the family home is threatened to turn those that are suffering under the inequity away from the solution.

It isn't about the property bubble. Those that benefit want that discussed as the main end in sight. It's easy to discredit and it isn't actually the point. Not having CGT is inequitable, and I'm someone who has benefitted from not having one and still am in a position where I could gain more by keeping the staus quo. In the long run though my kids won't and nor will the grandkids - they'll go to Aus. because those that don't have much assets here have to pay too much income tax to keep those with the assets in comfort not paying their share.

by Bobby | 02 Oct 09, 7:08pm

Brian W: "Those that dont

Brian W: "Those that dont have much assets here have too pay too much income tax to keep those with assets on comfort not paying their share" Give me a break! I have paid tax for 48 years and I dont mind saying so, a bloody heap of it. Muldoon, 66%, you wouldnt remember that would you? Put money aside over the years to pay any medical bills. My wife and I paid $19,000 + GST of our tax paid money for her breast cancer treatment. Plus many other medical bills. I have never claimed ACC for the injuries over the years as I didnt want to have to deal with wanky state pen pushers. It was just work hard and get on with it. Nobody keeps us in comfort Brian, we keep our selves in comfort and we still both work. Would you like some of what we have worked for as well?

by Matt in Auck | 02 Oct 09, 7:10pm

This land tax is a

This land tax is a bloody good idea. I've got a lot of time for both Grimes and Morgan.
The libertarians will yell "yet another tax". But their solution is to free up land supply outside the urban limits. Nice idea in theory, the problem is land owners just beyond the urban fringes wouldn't suddenly develop all their land for housing and therefore solve the house price porblem. Of course many of them would land bank.
Introduce a land tax AND free up land supply and then WE ARE TALKING

by Philly | 02 Oct 09, 7:42pm

I don't know why you

I don't know why you are all wasting your breath. It will not happen.

If this is a tax that can't be avoided, then farmers will be hit by it. That is an absolute no-no.

Do you see the Feds jumping up & down screaming blue murder about it? No? That is because JK has given them an assurance that there will be no CGT / land tax etc that affects them.

Remember the Fart Tax. That was going to be a pittance, & there was blood on the streets, farmers on the streets of Wellington looking for a polly to hang from the nearest lamp post.

Whatever tax reform is introduced cannot be allowed to affect farmers. It would be political suicide for anyone, let alone the Nats

Forget it

by Jacko | 02 Oct 09, 7:55pm

Whether CGT, land tax, whatever,

Whether CGT, land tax, whatever, what we've got to do is look at ways of implementing either in a way that doesn't impact on those powerful democracy bending lobby groups supporting those who make their untaxed money by passive gain on assets and capital. That's tricky. Let's leave it to government to work out, I'm sure they'll know what to do - riddle the legislation with loop-holes, or simply bugger all - which is what they are all good at.

by Roger Thompson | 02 Oct 09, 8:00pm

Or , Jacko , find

Or , Jacko , find something that fits in with Wild Bill English's family trust ! Are these boof-heads concerned with the country and it's citizenry , or with lining their own personal pockets ?

by Shorty | 02 Oct 09, 8:05pm

How does land tax work?

How does land tax work? Is it annual or one off? Is it based on purchase price or a valuation? Who determines the value? What about pensioners with fixed incomes in freehold homes? All of a sudden they have additional tax to pay.

Whats wrong with stamp duty?

by Ross | 02 Oct 09, 8:06pm

I'll have to live on

I'll have to live on a luxury yacht then. NO LAND TAX! Ha!

by Matt in Auck | 02 Oct 09, 8:07pm

Philly - how bout the

Philly - how bout the land tax only applying in urban areas? After all, without a massive change to land use planning approaches rural areas can't be redeveloped into housing anyway.

A land tax on land in urban areas would help discourage the rather common practice of land banking. For example, there is a large amount of land still undeveloped in Flat Bush, if there really was so much demand for housing surely it would be being developed as we speak? But I know through my contacts that there are plenty of owners just sitting on their land biding their time

Libertarians who argue land supply should be freed up to solve the housing affordability crisis often conveniently forget to mention this :)

I would suggest that if the land tax only applied in urban areas it would be a much easier political pill to swallow

BTW I only support the idea of a land tax if it is revenue neutral (ie a reduction in income tax occurs as well)

by jimmy | 02 Oct 09, 8:22pm

Matt in Auck, Restricting the

Matt in Auck,

Restricting the land tax to residential areas is not a bad idea, or at least grade the tax according to the zoning type. What people need to remember is that the cost of the tax will be offset to a greater or lesser extent by income tax falls so its not all bad news - in fact most will probably be better off. Whats its doing is encouraging profitable use of the land - the result will be two fold

1) Some will be encouraged to use the land more effectively (eg land bankers build houses so they can rent)
2) Others will decide the additional cost is not worth it and sell, prices drop.

So its all good!!!

by Sally | 02 Oct 09, 8:31pm

I have been reading Rusty

I have been reading Rusty Firth's very thought provoking booklet "Are You a Charlatan?" written in 2001. The author, a retired farm advisor, looks at the danger the floating New Zealand dollar holds for the farming community and the rest of the country which, like it or not, still relies on the primary producers for its real wealth.

"Unless the primary producers are prospering there is little money to spare for health, education etc.

"If the NZ dollar increases 1% against The USD the NZ price decreases 1%. The "Processor" passes 66% of the loss onto the producer who has already lost 33%; therefore producers loss is now 3%.

Rusty Firth says that a one- percent increase in the dollar creates a three- percent decrease in land production, maintenance and investment. So production drops. The consequence of this is that funds for law and order, defence, health and education are on the decline, by three times the rise in the dollar.

"But on the other hand (all things being equal) the price of overseas holidays, petrol, diamonds, Swiss chocolate and french cheese comes down by a percentage equal to the rise in the dollar.

"We as a nation have to choose: do we want care for our elderly, or Swiss chocolate when determining what level the dollar should be, and whether WE want to determine the value of the dollar, or do we leave our dollar value to be determined by Wall Street bankers?

"There is a point at which the dollar should rise. This is when the people who hold the land are getting an income sufficient to fully maintain and sustain the land, and have a return, equal to other investment returns, to invest further in land-based products so the nation can improve the standard of living of all its inhabitants.

"New Zealand is different from the rest of the highly "“ developed countries in the world who rely only to a very small degree on trading and are virtually self-sufficient. NZ is probably the most dependent on trading derived of some 80% on land-based production.

"It is illogical for New Zealand to cast its tentacles around the world looking at the economic policies of the most successful countries and adopting their economic policies as our economic policies. There is no logical reason to suggest their policies will work in New Zealand.

"Our problem is that, as a nation, we cannot come to grips with the need for us to live within the income we earn after providing funds for our economic development. All New Zealand's problems are a product of successive government's inability to live within the income we generate. The responsibility for the situation we are in falls TOTALLY ON THE SHOULDERS OF THE POLITICIANS, EDITORS AND ECONOMISTS who have graced New Zealand for the last 35 years." (now 43 years)

"I'm telling you mate"¦.we're the only blokes in the country who buy retail, sell wholesale an' pay the freight both ways." (JOCK).

Now you know why farmers have had to borrow so much in recent years.

I am at a loss as to why so many folk relish the thought of farmers being saddled with a CGT and or a land tax. Farmers do pay income tax, they pay their share of GST as there is no escape from that tax. The government is doing very nicely out GST as living expenses have escalated. The rort in collecting rates off farmers CV or LV for services they do not use is a disgrace. What about those who have invested in shares, trade currencies etc?

GST is the farirest tax and it maybe that this is the simplest solution to funding the politicians who have no intention of making the necessary changes to our consumer society. But the lowest tax rates should be cut to match. Aim should be the bottom third earners end up being about the same (lesser income tax offsetting the increase in GST paid). Tax consumption, not income.

Introducing a Land Tax or CGC means more dosh for the lawyers, accountants, consultants etc whereas raising GST keeps their sticky paws out of the trough.

by Expat | 02 Oct 09, 8:33pm

I guess I'm in the

I guess I'm in the minority 'cause I don't mind a government that does tax and spend, call me old fashioned but i'm a fan of all sick people being treated, all kids getting an education, police and military protecting me, our elderly having an income etc etc.
Accept it there's going to be taxes, so the idea surely has to be making them distort the market place as little as possible. Any reasonable person would conclude that moving some taxation from heavily taxed work to lightly taxed assets is a good result.

Best of all is the automatic stabilising effect if the land tax is a percentage of market value, Bollard should be praying for this - property up 20%, so is the land tax and vice versa.

by The Bank Manager | 02 Oct 09, 8:54pm

Key and his cronies want

Key and his cronies want a second term so you can forget about any form of Land Tax, CGT, Stamp Duty for the next 5 years. It has zip chance of happening. The pollies are all heavily invested in property themselves and have a vested interest in avoiding all such taxes.

by Matt in Auck | 02 Oct 09, 9:15pm

Bank Manager - I disagree.

Bank Manager - I disagree. I think land tax (but not CGT) is a possibility, as is a slight raise in GST. I think if these 2 actions are offset by reductions in income tax then major political damage can be averted.

by buyerinchch | 02 Oct 09, 9:21pm

Renters pay council tax in

Renters pay council tax in uk so why wouldn't it be the same here?
Land is security on business loans- if its de-valuing that leaves businesses and banks in a huge mess???

by Sally | 02 Oct 09, 9:25pm

Expat - Building the state,

Expat -

Building the state, by over zealous taxation impinges on the liberty of conscience and breeds social, cultural and economic degeneration. Taxing the life blood out of the people is not the answer.

Key and English were all for reducing taxes before they came into power. We are told the recession is over - I think they should keep their promises and reduce taxes.

"Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies." (Marx)

by The Bank Manager | 02 Oct 09, 9:26pm

All this investigation of taxation

All this investigation of taxation methods by Govt is just a smokescreen.

by Philly | 02 Oct 09, 9:34pm

Mattinauck: Land tax only in

Mattinauck: Land tax only in urban areas. Hmmm.. So let off all the lawyers with their lifestyle blocks? Hardly seems equitable. Like you, I would rather just make it a blanket charge. But, then you come straight back to the "political suicide" problem.

Expat (which Expat are you, by the way? - but then, it hardly matters I suppose). Yes I agree, we do need to have taxes for all those things. I'm not at all impressed by the libertarians on these threads with their "all tax is theft" approach.

NZ's basic problem is not that our tax system is unfair - it is better than most that way. But that the country is getting progressively poorer & unable to fund those public goods. & of course the skewed taxation system is hindering rather than helping that

by Iain Parker | 02 Oct 09, 9:49pm

The taxes they are taliking

The taxes they are taliking of fiddling with, in order to make it appear they are attempting to do something, have all been in place in other nations and have prevented none of them suffering boom, bust, bankruptcy cycles, that is because it is a money supply issue, more specifically an excess liquidity of created credit money supply issue.
A recent report put the worlds gdp at 50 odd trillion, the worlds assets at 150 trillion and financial derivative products at 500 odd trillion.
Brian Gaynor recently reported that the amount of NZ dollars traded on the money markets in oneday is equal to our entire years trade.
These spin doctors are talking about these taxes gaining us $1.5 - 6 odd billion a year. Put this in context with the fact that year end DEC 2008 $39 billion left this nation in interest paid on debt.
For the sake of reason cant you seemingly intelligent people see what is steering you in the face.

by jimmy | 02 Oct 09, 10:54pm

Iain, We all know money

Iain,

We all know money supply is a major contributor to the problem. But NZ is in no position to influence this on a global scale so the issue will persisit. So we have to chip away at the sides with measures like this.

by Iain Parker | 02 Oct 09, 11:49pm

We have every sovereign right

We have every sovereign right to act internally in the national interest.

by nomad | 03 Oct 09, 12:29am

Iain, You point to the

Iain,
You point to the root cause of many of current economic problems however pursuing the solutions you offer threatens extremely powerful interests hence no politician would entertain such ideas. The economic slavery continues.

by ak | 03 Oct 09, 1:51am

Give up Iain. jimmy's right

Give up Iain. jimmy's right - and the most cogent voice on this thread. Barring total global meltdown (admittedly not completely out of the question), even your own summation indicates our inherent and abiding impotence. We're a minnow in a tank of sharks - get stroppy, and we're either lunch or left to starve.

We're also mentally ill. We went grand mal over a $200/yr fart tax bill, screamed in the name of Jesus for the right to bludgeon our beloved babies, metaphorically burnt our greatest living New Zealander at the stake, and put a populist, puerile money trader at the helm of God's own cradle of progression.

Which is why the rational land tax is a fizzer. And why our continued downward economic spiral is assured.

Which should be welcomed by every rational being.

The age of Mammon is over: embrace the age of Salubrity or die.

by Iain Parker | 03 Oct 09, 2:13am

jimmy - sounds like you

jimmy - sounds like you have swallowed the mantra of the Chicago school of economics trained NZ Treasury, who in turn have trained or blunted to their cause most governments in this nation since 1845, especially after our first debt repayment crisis in 1961, the mantra parretted by the likes of Roger Douglas and Ruth Richardson, the mantra of "generally accepted world wide accountancy practice".
I put it to you that overt slavery has been "generally accepted" worldwide best practice for more of history than it has not. I dont think it is beyond the pale what so ever to use slavery in reference to the predatory lending practices of those who currently monopolise the credit creation mechanism.
I have now read the biographies or books of JB Condliffe, Walter Nash, Rob Muldoon, Roger Douglas, Ruth Richardson, Jim Bolger, Helen Clark, that gave me a detailed understanding of our parliaments interaction with the international banking network and it aint pretty, we have been run by hook or by crook from behind the diplomatic curtain for much of our short history. Here just a sample, but it tells a much deeper tale:

Rob Muldoon - The New Zealand Economy, A Personal view, 1985
Page 33-34;
I well remember Keith Holyoake coming into Caucus in February or March of 1961 and the shock that it gave a brand new backbencher when he told us that the honeymoon was over and that we were faced with a serious situation, in respect of both Government accounts and our overseas transactions"¦"¦"¦"¦..
In May 1961 we raised a sterling loan of 20 million pounds, a substantial sum for those days. In February we had gone on the domestic market for 10 million pounds and taken 13.7 million. We were on the market again in June for 15 million pounds. In March the Reserve Bank moved to reduce the level of bank overdrafts. We brought in hire purchase regulations and restrained public expenditure to the greatest possible extent. We put a restriction on the allowances for overseas travel and we tightened up import licensing. If the figures sound small today then the March deficit, which continued to increase for sometime, was a record at that particular time.
We announced that we would be joining the International Monetary Fund and the World Bank and a principal reason was that it would give us access to drawing rights. Although this had not been in our election policy, we carried out our policy by appointing various advisory bodies in the economic field, the principal one being the Monetary and Economic Council, a three member council with supporting staff which had the task of advising the Government on matters of economic policy, but most importantly, the right to publish its advice, in various forms, with various amendments to its composition and order of reference, the Monetary and Economic Council and its successors have continued up until the present time.

page 109;
Following the second oil shock in 1979 the volume of petro-dollars increased but the position of the non oil developing countries began to look less attractive, particularly as some of the new industries that were being developed found that when they came on stream their products, and steel was an example, were facing, protectionist barriers in their natural markets in the wealthy industrialised countries, in some cases the very countries that had provided the loans to build the plants.

Roger Douglas - Toward Prosperity, 1987
page 29;
The informal group discussions on the economy and its direction became even more important to me after Doug's(Doug Andrews, Treasury Officer, seconded to 0pposition Leaders Office*) arrival. He shared a small room opposite Lange's office and I took the opportunity go up there and talk and discuss ideas more than any other Labour member of parliament. My ideas on how to shape the economic policy I believed Labour and New Zealand needed were crystallizing.
Together with Doug Andrew and Geoff Swier, an economist in the opposition research unit, I put together a 'think tank' of people with whom we already had formal contacts. The group included several businessmen and several academic economists from Victoria University. Jim Holt, who had read drafts of the alternative budget and on whom I constantly tested my ideas, had come south from the history department of Auckland University as chief historian at the National Archives. He also attended one or two meetings.

page 137;
The arguments in favour of financial deregulation had been going on for sometime. In 1966 a report published by the Monetary and Economics Council recommended financial reforms to improve competition and efficiency. By the time Labour was elected in July 1984 most of the work to enable a float to be put into practice had been done years before by officials in the Reserve Bank and Treasury. We did not need to spend time, as we did on aspects of tax reform, working out the detail. Government and the bureaucrats knew what had to be done.
page 140
The financial sector is distinct from the real sector of the economy. The former
handles the buying and selling of financial assets, the real sector produces, uses, buys and sells tangible items or services.

Ruth Richardson - Making A Difference 1995

Pg 50
In those days there was very little in the way of support staff available to the opposition I had no formal qualifications in economics; although philosophically a committed free-marketeer I was on a steep learning curve on the detail of economic policy. Soon after taking the finance job I wrote to Roger Douglas requesting a fulltime economic adviser. Douglas generously agreed and I managed to persuade my friend Charlotte Williams to take on the role. Charlotte proved to be an ideal choice. She was a breath of fresh air around the opposition wing and helped inject a long over-due dose of economic rigour into the oppositions policy machine.
Pg 55 - 56
To help me acheive this new softer persona I was sent to charm school under the guidance of former United States image-maker Jack Byrum - the man who had reputedly turned Richard Nixon from losing Presidential candidate into President......... Late in 1989 I had an intensive two day session with Jack Byrum. He analysed me relentlessly, stripping me down and gradually building me up again, making some extremely acute points along the way. Towards the end, thoroughly brainwashed, I was ready to do almost anything he asked. Unfortunately at that point Jack got his hands on the speech I was due to deliver the next day. The speech was to the Mont Pelerin Society - a pretigious worldwide association of market liberals which was having its first ever conference in New Zealand. It was one of the most intellectually high-powered audiences I would ever address - precisely the wrong audience to try out Jacks touchy-feely approach. However, by this stage I was past resistance. My speech was completely rewritten. Out went all the boring economics and in went some heart and soul.
The next day I stood up before an audience that included a Nobel prize winner and other luminaries, treated them to my coquettish new smile, and delivered a speech of numbing emptiness. Still under the influence, so to speak, I thought I had gone down rather well. I little knew that over morning tea a dozen converations were going on to the effect of: 'what has got into Ruth'? My philosophical allies had intended the conference to be a symbolic handing over of the torch from Roger Douglas to me. Over subsequent days, as I gradually became myself again, various people quietly broke the news to me that my speech had in fact been less than a roaring success. The moral of this story is not that I should have made no attempt to soften any image - only that I should have picked the right audience.
At the same time Anna came on board, I also managed to persuade Jim to have a Treasury economist seconded to his office - something had had always been entitled to do. The economist who came, Iain Reenie, would do an outstanding job in helping to educate Jim, and steadying him at crucial times. Jim even became considerably attached to Iain, who, when we eventually took office, for a short time went into the Primeministers department. Those of a paranoid disposition, who believes treasury has its tentacles everywhere and secretly runs the country, would of had their theories further reinforced had they observed Iain Rennies influence on Jim.

Helen - Portrait Of A Prime Minister - by Brian Edwards - Published 2001
page 176
"The fundamental divisions within the Party would have been very obvious to anyone on the inside in "˜81 and "˜84, because we couldn't produce an economic policy. And in the end Geoffrey Palmer, who used to in fact run the policy council, went away and wrote a policy that could have meant anything, in order to satisfy both sides. But everyone knew that we were going into an election where the Minister of Finance was eventually going to run the rampant."

page 210
"Basically Jim said, this is a disaster, and worked his way towards leaving. Margaret Wilson and I said, this is a disaster, but you have to hang in for a time when you might be able to make a difference. I look back on it now, 15 or 16 years later, and still think we did the right thing"

See jimmy, behind the diplomatic curtain we have not had a "true" change of government in this nation for a very longtime now.

by Roger Witherspoon | 03 Oct 09, 8:27am

GST on interest then?

by mort | 03 Oct 09, 9:38am

Has a CGT and landtax

Has a CGT and landtax stopped the Australians having a property boom?
Why do we need to broaden the tax take anyways?Do you give an alcoholic booze, or a a junkie smack? Of course not, and govet is exactlhy the same with taxes. They waste the money they take currently, so giving them more will be just feeding their habit of tax and spend on crap. The way to make the country more wealthy is to actually allow people to keep what they make out of investments. Eventually the wealth factor would result in the proprietors of that wealth spending more on their lifestyles improvements. Undoubtably that will include luxuries like baches, boats, expensive cars, expensive accessorising for their partners etc.... all of which are supplied/serviced by someone (ie somebody is employed). The tax take from upskilling and freeing up economy, and thus the populace will offset any perceived shortage in taxation, as has been shown many times over by the change in taxation policies as implemented by govts from 1984-90.
To tinker at the edges by making investment less attractive is ignoring the reality in the economy. We need to stop perpetually paying people to produce nothing but misery, and get them into gainful lives. Placing a moratorium on welfare entitlements, with a clear boundary as to time limits and a planned phased implementation programme there in is something a govt with guts would do.
But alas we have weak govts who ignore the obvious, and reward the unproductive, and so the productive sectors get leeched

by The Bank Manager | 03 Oct 09, 9:42am

Mort - No!

by Steptoe (Steps) | 03 Oct 09, 9:57am

To solve a problem 1st

To solve a problem 1st do not loose sight of the problem
This whole thing basically boils down to speculators/investors avoiding to plain tax evasion and the IRD cant for whatever reason collect tax, or it is very expensive to collect because of a unprecedented boom and so many got on the 'bandwagon', formed tax havens and trusts....and this is the biggest issue ...An across the board tax, hits those who are not property speculators and investors, and makes the ave family and farmers in for the long haul pay for the evaders.
The main gripe is where people/trusts have invested in a 'business' and rather thanwork on accepted good business practise of invest for a direct return of profit, have invested and the tax break has been the profit....and this unlike other forms of profit is not taxable..

Some how I think with all due respect, most have lost the plot....

Family homes are not business....If the logic is to tax these, then why not expolate the logic...so lets tax all personal items...from the daughters bra to the apprentice sons work tools over and above the GST they paid to purchase.

The IRD has done the gracious thing asking for voluntary declaration....and now are running out of the budget To recover the bulk remaining of the millions of tax evasion and avoidance.
So instead of spending millions of my hard earned paid tax to recover the rest, now make those who dont come forward pay for the IRD budget to recover, including court costs.
The biggest reason investors have gone down the avoidance route is they knew the IRD didnt have the manpower to enforce in a boom and gambled..

by Steven | 03 Oct 09, 10:38am

@The bank manager: If both

@The bank manager: If both parties supported a land tax then it would be neutral for votes....voters may not like it and I'd bet Whinnee Peters's NZF would campaign against it to get back in...but there wouldnt be far to go...

What concerns me about land tax is it sounds regressive as opposed to progressive....so I'd like to see/understand the detail...Pollies always make sure the detail gets them what they want...and not what the voter expected.....to get.

Lets face it ppl invest in houses because its pretty simple...they dont invest in businesses because its complex, often shady and therefore preceived (and often is) as risky....so I cant blame them....its rational....what a land tax does is negative to my mind, what the Govn could do is regulate properly and enforce properly so that investing is transparent and not open to abuse a positive....then ppl will start to invest...so a carrot and not a stick is wanted to my mind...but of course they wont do that either...usless sods to my mind.

"Family homes are not business" agree...shelter is one of the esentials to life....therefore taxing it achieves nothing except more Govt income...and as its a fixed item with value, its pretty easy to collect...

Also a land tax on two houses of the same value where one is a young(er) family with a big mortgage v someone with a small or no mortgage cripples that young family more? ie older ppl tend to earn more so would get a bigger % of tax back if the tax was aimked to be neutral overall?

regards

by Roger Witherspoon | 03 Oct 09, 10:47am

I think this whole discussion

I think this whole discussion could be unfounded and a distraction. That would perhaps explain the lack of agreement.

While the fiscal policy of previous governments probably made things worse it was surely the loose monetary policy that caused the speculative problem.

Why not change the Reserve Bank guidelines from their present setting of 1-3% inflation (I hope I got that right, facts are not my strong point) to + or - 2%.

This would result in higher interest rates paid to savers, more saving, better investment balance.

Or has the Reserve Bank got the solution in hand anyway by requiring the banks to raise more money onshore? It has certainly got the long term interests rates up, particularly in real, inflation adjusted terms.

by ruru | 03 Oct 09, 10:54am

What happened to National's no

What happened to National's no more taxes? Is the Treasury in control of policy? Middle New Zealand will revolt at this one. Why cripple NZ's only vibrant industry.?

by Kate | 03 Oct 09, 10:56am

I wonder why Arthur Grimes

I wonder why Arthur Grimes thinks a 1% land tax would immediately reduce land prices by 17%? That's a big call based on (I assume) some sort of sophisticated modelling.

He also asserts that such a tax would collect the equivalent of 20% of current income tax take. That's a fair whack - which allows for the consideration of more progressive tax meaures, such as lowering of GST, zero % income tax on the first $20-30,000 in earnings etc.

If we could bank on such modelling assumptions to be certain - I'd be all for it.

We generally have a low wage economy and a low rate of personal savings - combined with a high rate of income tax and a totally skewed ratio of income to property prices.

It's no wonder youth haven't got the incentive to try and get ahead in this country - the taxes they pay are disproportionate in relation to the taxes paid by the property-owning class. And sadly this fact has seen many who have stayed here take on debt to a level they are unlikely to ever repay.

by Mark Hubbard | 03 Oct 09, 11:10am

Emerging from holiday momentarily... I

Emerging from holiday momentarily...

I think IRD is the only Government department to have actually lost some staff over this recession: 250. Which knowing the way Goverment writes employment contracts probably cost us more through redundancies than keeping these people on for the next 10 years anyway.

Now, a new tax: how many new bureaucrats to administer this at IRD - probably about 400 (as with WFF). This will include most of the 250 that took redundancies.

Meanwhile, the private sector engineering firm I was dealing via phone with on Thursday, servicing the agricultural sector, is looking to lay somewhere between a third and a half of it's work force off.

The Big State: it's destroying us all. Mr Grimes, with your taxes on taxes on taxes, you are the problem, and no part of a solution.

Where are the reports mentioning the only fix for our economy, and the freedom of its citizens, is slashing the size of the State?

(Bobby: my understanding it is almost one for one: one working person paying tax in the private sector to pay the 'entitlements' (yeah right) and State worker wages of the welfare state (because all State workers are just well paid beneficiaries - worse in fact: they are highly paid to hold back the private sector. I'd love to see some accurate numbers on this anybody).

... submerging back into my holiday now.

by Brian W | 03 Oct 09, 11:22am

Here we are back into

Here we are back into mind numbing personal positioning and details that don't matter - again. The only person commenting about the principle of inequity was Bobby, and he likes it to continue on the basis that as he has suffered the people following should also suffer it.

Can we keep the deabte at a high level of principles involved or does it have to degenerate into sniping and endless detail that misses the root cause of the problem.

Easter Island illustrates the problem we have and probably gets near the root cause. The island was densley forested, attracted rain because of that and had abundant fish and wildlife that sustained a good population. Then some silly notion that having statues of immense proportions was more important than life itself gripped the leaders minds and off they went and mined the stone and slid it down to the beaches on the trees. The subsequent ground run off from erosion wrecked the fisheries, and no forest cover left the wildlife nowhere to live. The treeless island failed to attract rain and society collapsed with the residents turning to cannibalism and eventual total demise of the whole population.

Certainly you would think that smome people noticed things were going wrong well before the last 100 trees got felled. Some maintained they needed things to continue the way they were. Presumably the forresters and miners. Others blamed the leaders I guess but said nothing could be done. So the narrow self interest of a few asset holders and lovers of the immediate status quo ensured the eventual failure of their society.

They planned their own demise, by failing to extrapolate the eventual outcome of their activities, and when it eventually dawned on them failing to act, or conversely continuing to act as they always done. Now we are also doing that. We need to turn our attention to how we can grow a more productive economy. Not an economy that simply produces more. Actually all those in Treasury and the Reserve Bank and anyone that has read anything about how complex systems inter-relate knows what's needed but mysterious forces combine, probably mostly by accident, to ensure we elect leaders with a nice smile instead of the humility to listen, the intellect to understand and the courage to act in the overal best interest of the whole of the society in the longer term.

Perhaps it's just the human condition and our society is going to fail. Evidence certainly suggests that we will get bogged down discussing endless pointless detail if our economic performance over the last 60 years, and the level of debate in this blog is anything to go by.

We behave in inequitable ways at our peril. Actually at the peril of our kids and grandchildren lives. I suspect the odd influential pollie reads this stuff. They know who they are and can recognise themselves on Easter Island. But something stops them acting. Why exactly is that? Is it just the human condition?

by Sam Smith | 03 Oct 09, 11:48am

As I see it -

As I see it - the approach is to penalise everyone, because apparently is is to difficult to catch the people that are currently ripping off the system.

Form the Stuff:
"They estimated an extra $214m could be raised from 2000 people who bought and sold six or more properties in the past four years.

The department is also eyeing another 5112 people who bought or sold three to five properties over the same period."

Excuse me for being crude, but can't the department just "grow some balls" and have them pay up or prosecute them. Talk is cheap, where's the action?

by annie m | 03 Oct 09, 12:30pm

well said brian m. read

well said brian m. read "The Lorax" by Dr. Seuss. could have been written with Easter Is. in mind

by Christov | 03 Oct 09, 12:52pm

Brian W said............We behave in

Brian W said............We behave in inequitable ways at our peril. Actually at the peril of our kids and grandchildren lives. I suspect the odd influential pollie reads this stuff. They know who they are and can recognise themselves on Easter Island. But something stops them acting. Why exactly is that? Is it just the human condition?

Christov says..................Yes......... and thats what fascinates me.

by Kieran | 03 Oct 09, 1:21pm

Of all the ideas put

Of all the ideas put forward by the tax working group by far the best is to ring fence losses on rental property against personal income. This is the root of the tax evasion rort (rot). As already mentioned we have a land tax (rates) so debating the merits of it is a pointless exercise. We also have a CGT but with a loophole that enables most to avoid it, the issue is not a CGT but wether we get rid of the intent loophole. It doesen't take a working group to see where the problems are they could be fixed almost overnight with a few simple law changes at IRD, if they don't fix these 2 issues then the tax working group will be a complete and utter failure

by Brian W | 03 Oct 09, 1:44pm

No Sam Smith. It isn't

No Sam Smith. It isn't about penalising everyone. It's just about getting the system changed to make it equitable. Sure some people are presently ripping off the present system on property transactions and they need to be dealt to. That's what we pay IRD to do and I agrre with you about that. However the story is that the system is inequitable. and it needs to be corrected. How on earth can making the system equitable be translated into 'penalise everyone'.

Clever though. Are you actually purposely trying to shift the debate towards making everyone feel sorry for those that avoid tax by making money from Capital Gains and still stay inside the system, or can you genuinely not understand that for everyone who makes untaxed income from their activities those who do pay tax just end up paying more?

Is it really too hard to understand then that if you don't have opportunity to make capital gains - for whatever reason - then the tax system as it is means that your PAYE subsidises those that do have opportunity to make capital gain. Inequitable though that is at a personal level this also reinforces the growth of a mentality that making tax free gain is good while gain from productive activity is bad.

If you carry that on for long enough you will wreck the society. Collapse won't go as far as cannibalism, well hopefully not anyway, but it will have other consequences and we see them in our continued decline in OECD rankings on GDP per capita etc.

If things like commentary on how many beds we have in the emergency department of Christchurch hospital (Geoff Shaw in The Press this week) were spun differently these sorts of consequences of our actions would be more apparent. We should have some of the worst relationships of beds to population in the OECD, because we are now nearing the bottom of it. How do we compare for example with Portugal and Ukraine. Probably not bad and that is all as a result of the economic policy settings we have had over the last 60 years.

These sorts of outcomes will continue if we don't change things. We should expect it and start comparing ourselves with the others at the bottom of the pile where we are.

We compare ourselves with other poor quality soccer nations, not with Brazil or Spain, that would be silly. Why do we do it with economic matters like the money we have available for healthcare or education? We have collectively decided that we want policy that discourages investment in productive activity by setting up the rewards system to make it too tough. The final outcome of this is some form of collapse.

Which category of Easter Island population are you in. The miner, the forester, the leader or the one that things we simply can't change it anyway?

We all need to decide. Actually perhaps we need to ask the pollies first if they even understand the principles of it I guess and then get them to tell us which category they are in. I'm in the 'can't change it group' I'm afraid. I did try for a little while but I think the pollies are basically a bit too thick to understand it. I don't think they are purposely trying to wreck the place. They just don't get the principles of cause and effect.

by Brian W | 03 Oct 09, 2:21pm

Kieran. We don't have a

Kieran. We don't have a CGT. It isn't just about tax on land and property transactions where someone manages to avoid complying with the existing tax laws.

It's about all the things Len Burman described. It's about taxing all activity equally so that other taxes like income tax can fall, and economic activity isn't encouraged to take place in areas that don't add to our overall economic prosperity.

Or conversely, perhaps with luck, over perhaps a generation, it might even encourage activity in areas that do see growth in productive activity. Actually that's really complicated and it's about social change and heaps of other stuff so lets just keep the debate around making taxes equitable.

Once we accept that the present system is presently weighted towards encouraging particular types of activity then it's easier to see that it needs to be just turned so that it is even handed. Deciding that it needs to be weighted in another direction to actually cause investment in productive activity is really hard so let's just go for equity.

by Steptoe (Steps) | 03 Oct 09, 2:49pm

Easter Island ....anyone read "The

Easter Island ....anyone read "The Peter Princople" Think it was Peter townsend back in the 70s?? explains everything from Easter Island and the extinction of the sabre tooth ....to promotion above a persons compentance...

"Christov says"¦"¦"¦"¦"¦"¦Yes"¦"¦"¦ and thats what fascinates me." you will enjoy Townsend and while at it and alitle more light hearted with a very good baisis "Up the Organisation" cant rem who wrote that...the guy who turned Avis around??
Stuff like...
"Managers should have a desk and no chair, other they get to comfortable and dont know what is going on around them"

by Peter | 03 Oct 09, 2:53pm

What is it with these

What is it with these people? Why the great enthusiasm for more taxes? I guess so that only others will get to pay. Doesn't the government take enough now? They are thieving bastards, why should they be given carte blanche? Doesn't the state consume enough now.

I would suggest a tax on all wealth, and belongings. Why not go the whole hog? Why not screw the whole economy, because thats what these new ideas will lead to? A tax on savings, say 15% P.A. just for starters. Easy to administer, easy to raise the bar in the future when insufficient funding is inevitably collected. We could annually assess other private wealth holdings, once set uip and running, would be easy to maintain. There could be an annual inspection/recording of stamp albums, art, paintings, furniture, carpets, clothing, motor vehicles etc. Keep the playing field level.Why just pick on land owners? Why not a tax on airline tickets? that'd raise a whole lot plus have a positive restraint on foreign exchange depletion. This would wash well with the great kiwi egalitarian leveling machine and it would be good for the soul.

by Sore-loser | 03 Oct 09, 2:58pm

There is already a 19%

There is already a 19% tax on Savings...and often more.

by We are Stuffed | 03 Oct 09, 3:29pm

Yes and there is already

Yes and there is already a tax on rental income profits too.

The government should:

Slash government spending including benefits.

Align top tax rate, trust rate and company rate.

Chase tax abusers.

Leave me alone.

by Grandy | 03 Oct 09, 3:44pm

This blog has many intelligent

This blog has many intelligent people and could be great policy makers too. Perhaps, someone could get a party going and stand for election the next round. That may be able to make a difference and debate it in parliament. Otherwise, valuable discussions here may get to no where.

by Grandy | 03 Oct 09, 3:58pm

For some who might support

For some who might support CGT and Land Tax, then you could possibly quote countries that had implemented and succeeded. While some who might be against it could possibly quote countries that had implemented yet did not succeed much. Who is right or who is wrong, is there an end to it? do we just want to follow what others do in one aspect and might not follow in another aspect of a certain measure? or do we prefer to try out something that others might have tried but not suitable for them? There are too many things to consider in adopting and implementing certain policy. How do we compare and who do we compare to? is it the OECD countries or is it countries that we trade most, or countries that are similar to us in size, culture, system or what? there is no end to it, right? Why can't we try out something of our own, I am sure NZ has our own talents, right?

by Alex Tarrant | 03 Oct 09, 4:00pm

Here is the link to

Here is the link to the article on stuff Sam Smith quoted from

http://www.stuff.co.nz/business/personal-finance/2927102/Property-invest...

Great debate everyone

Cheers

Alex

by james | 03 Oct 09, 5:51pm

There are a couple of

There are a couple of themes emerging in the blog that needs addressing:

1) This is NOT an additional tax. It is a REDISTRIBUTION of tax.
2) In theory a CGTax makes more sense, but this a) removes foreign residents from the tax take and b)encourages formation of low tax entities (or transfers to a low tax spouse) c) does not remove fule from the bubble as the tax is only paid on sale.

Its really the use it or lose it nature of the tax that is so important. YES there will be sad cases, but hard cases make bad law and there are already existing hard cases under existing tax laws. People will have a reduced personal income tax rate, THEN they can either apply that additional income in their pocket to paying the land tax OR decide there are better ways to spend that money given their use of the land is not particulalry efficient. Not perfect, but perhaps better than the other options.

I would love to see ring fencing of -ve gearing tax credits as well but I suspect people could get around that as well (eg if you ring fence residential property, maybe they will call the rental dividend something else etc etc etc). But its certainly worth a try.

by Kate | 03 Oct 09, 6:09pm

Peter @2.53pm - there is

Peter @2.53pm - there is already a tax on interest earned on savings - and depending on what tax bracket you fit into - you can pay a heck of alot more that 15% on it - and that's EXACTLY one of the reasons why everyone who has savings has been investing them in property!!!!

by jh | 03 Oct 09, 6:12pm

Agree with Jimmy. here's one

Agree with Jimmy.

here's one farmers one farmer argues for a capital gains on rural land:

http://www.ruralnews.co.nz/Default.asp?task=article&subtask=show&item=14...

and this article is by Frank DeJong (leader of the Ontario green party) who is a champion of a land tax:

http://www.canada.com/ottawacitizen/news/opinion/story.html?id=97ccfb95-...

by Shorty | 03 Oct 09, 6:25pm

So what happens if you

So what happens if you sell your land for less then you paid for it? Do you get a refund? Stamp duty paid on purchase is far simpler to administer. Purchaser pays, banks won't lend on it, 1st home buyers can be exempted as can low value properties.

by Grandy | 03 Oct 09, 6:34pm

Kate, You have indicated a

Kate,

You have indicated a very real scenario that those who have savings are investing in property. Earnings and savings are taxed, then what about property? This problem will not likely be resolved unless majority are determined to have the problem resolved. Otherwise, month after month, and year after year ..... we would still be talking about the imbalance situation and the property obsession is here to stay.

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by james | 03 Oct 09, 7:25pm

shorty, because stamp duty is

shorty,

because stamp duty is an upfront one off it would be difficult to extract much income from it.

by Sally | 03 Oct 09, 7:53pm

Kate you have missed the

Kate you have missed the point of what Peter has said.

"Doesn't the government take enough now? They are thieving bastards, why should they be given carte blanche? Doesn't the state consume enough now."

He is absolutely correct.

The rest of his post shows what could happen, if we give more leeway to socialist governments.

It is quite simple, government must cut its out of control spending.

by Andrew | 03 Oct 09, 9:05pm

Jimmy Like the rest of

Jimmy

Like the rest of us you will be an old coot one day.

Are you seriously telling me that if you get taxed out of your home at that stage of life you will simply cop it on the chin and be satisfied you have made a sacrifice for the good of society ?

by jimmy | 03 Oct 09, 9:33pm

Andrew, For starters, I would

Andrew,

For starters, I would expect my taxes on my savings to also reduce given its about redistribution. with those savings I would have a choice, hold on to the land and apply it to the land tax OR realise that the land is costing me more than I can justify given that i have a 4 bedroom, 700 square metres in a leafy suburb and i can pay a lot less land tax living in a semi detached house.

Whether I like this or not is irrellevant - thats why we have govts. Hopefully they are there to make decisions for the long term benefit of society. I dont like getting taxed at 39%, I have to cop it whether I like it or not. Why should a landholder get off scott free?????? we all work hard. There is nothing NEW or more SINISTER about this tax - its just that we are not used to it. We have become accostomed to income being taxed so we accept it as justified. I see no reason why land should be sacrosanct. As outlined before, I think in principle a CGT is more fair, but there are too many loopholes and admin issues to consider and it does not deal with the here and now of inefficient land use. Remember, the boomers who would be detrimentally affected are also the same voting block promoting higher house prices and future taxpayers for their health via obscenely high immigration levels. We NEED A WAY FOR THE EXISTING WEALTHY TO WEAR SOME OF THE COST OF POLICIES THAT ARE DESIGNED TO BENEFIT THEM.

Just out of interest. I live in Melbourne, renting in a plush suburb (2% yield) in a city with a supposed MASSIVE housing demand. In Aus there are 8 million spare rooms. I have 4 immediate neighbours. ONE has kids living at home. Of the others, 2 are boomers in 4 bed houses on a 600 and 800 square meter section. The other is a single 80 year old on a 600 sq section 3 bedrooms who cant afford to repair his fence despite livnig in a 1.5 million dollar house. NONE of these neighbours are wealthy, they simply were LUCKY to buy at a cheaper time. Yet ALL are HOGGING valuable land to the detriment of the younger generation. ALL are active members of their residentiall associations practising NIMBYISM. ALL will benefit from the massive influx of immigrants needed to pay tax to keep them healthy and to keep their house prices high. NONE of them have to pay tax on the MASSIVE gains they have received on their assets over the last 10 years. GET THE PICTURE??????? DO YOU UNDERSTAND WHY I DONT FEEL A LOT OF SYMPATHY FOR THESE GUYS IF A LAND TAX WAS IMPOSED???????

by Grandy | 03 Oct 09, 10:42pm

jimmy, what will happen if

jimmy,

what will happen if immigrants aren't coming, instead people started to leave when economy and job market elsewhere (ie. Australia) started to improve? then the more both CGT + Land Tax are needed??? Maybe, these 2 taxes could be taken as a total tax package (ie. a smaller portion of CGT + land tax), is that beneficial in the macro perspective?
Perhaps, we got to prepare for the fact that immigrants may not always flow here all the time.

by jimmy | 03 Oct 09, 10:48pm

Grandy, Not quite sure what

Grandy,

Not quite sure what you are saying. This is primarily about redistribution of tax burden and removal of property incentives. If immigrants dont like it tough. But given that it would be accompanied by cuts in personal tax rates, those immgrants less cashed up are more ilkely to be attracted. And i prefer those sorts of immigrants as they dont price kiwis out of their own home.

by RBOT | 03 Oct 09, 11:06pm

LAQC??

by RBOT | 03 Oct 09, 11:19pm

L A Q C -

L A Q C - remember that old chest nut?/??

How much is that responsible for???/

Easy to turn that off

by The Bank Manager | 03 Oct 09, 11:35pm

Jimmy - why do you

Jimmy - why do you live in Oz rather than NZ? Why do you not own your own home there?

by Andrew | 04 Oct 09, 9:15am

Jimmy I guess we will

Jimmy I guess we will never agree on this one. Nobody should be taxed out of their family home. By all means tax investments but the family home should be sacred.

I also dont agree with the whole "intergenerational theft" issue. Gen x and y need to stop looking with envy at the oldies and get on with life....work hard and it will come I say. (I am gen x by the way)

I will never be in agreement with a CGT, land tax or any other until the Govt deals with the issues at hand ie

1. Rein in local & central govt spending
2. Enforce the current laws. There is plenty of money to be made from the property sector if the current laws were enforced by the IRD.

New taxes spur avoidance behaviour..ie part of the reason we have had so many "high earners" investing in property was the imposition of the 39% tax rate by Clark & co in 1999. I would be pleasantly surprised to see tax cuts in other areas if a new form of taxation were introduced but am not holding my breath.

by Kate | 04 Oct 09, 9:29am

Sally - I was just

Sally - I was just correcting a misunderstanding of Peter's - he seemed to imply that savings at present were not taxed. And this is a key aspect of the present problem of inflated house values. If you have excess capital and choose to invest it with a bank, or other savings institution - you get taxed on the interest earned. If you buy a bunch of properties outright instead - not only do you not get taxed on any capital gains they might produce when you go to sell them - you also have the potential to run any income they earn you at a "loss" and hence pay LESS personal income tax on your primary employment - given virtually all of the costs of ownership (i.e. rates, maintenance, interest paid on any borrowings) are all tax deductable.

Indeed as a wealthy person who owns a good portfolio of properties with a high level of equity in them, provided one structures their financial management wisely - can manage to pay very little tax at all. The more one earns in their primary employment the better off they are - you just buy another "loss" making property in order to pay less tax on your primary employment. It works a treat for high earning consultants in particular.

The present system is geared to favour the wealthy and the very well paid. They do not complain about NZs tax regime. It is primarily the poor and middle class who do - and I totally agree - the poor and middle class get absolutely screwed by the NZ tax regime.

A land tax shifts that imbalance. The wealthy cannot structure their financial affairs in any way to avoid it. According to Grimes in the study above - if we were capturing this wealth/land tax at 1% per annum - the amount collected in tax revenue would equate to 20% of the ENTIRE income tax take. That would provide significant scope for the Government to LOWER both income tax and GST.

So, for the vast majoirty of NZers, we don't necessarily need smaller government in order to pay less tax - we need a more balanced tax regime - we need to ensure those most able to pay, pay their fair share. Presently, the worst hit are the worst paid in our society - there is little incentive to work on NZs average wage as far too high a percentage of that wage is paid in taxes. Smaller government is not the answer - a better, more efficient tax regime is.

by Peter | 04 Oct 09, 10:03am

Kate, the interest on savings

Kate, the interest on savings is taxed now, same as farm income is taxed, so why suggest hitting someone who invests in productive farmland and adds to NZ standard of living? Why not just hit everyone? You want a land tax, why not a wealth tax? It was found some years ago that any tax level above 20% does serious harm to an economy. I think ourgovt extracts something more like 48-50%. The worse thing is the states intrusiveness and interference, not to mention the overbearing costs of compliance. A complete waste of energy.
What New Zealand needs is an environment that encourages and allows the accumulation of capital. by all people. This is the only way to raise the standard of living.
It has been expressed this way: Human progress = human energy X capital.
Growing and inventing new and more taxes is not the answer. Shrink the government.

by jimmy | 04 Oct 09, 10:08am

Kate, Completely agree. And there

Kate,

Completely agree. And there is also little incentive to save. How fair is it for someone saving for a house to pay 39% on the interest, whereas teh capital appreciation remains untouched. No wonder many forego traditional 20% deposit because
a) it takes too long\b) by the time you get there teh prices wuold have moved again and it si no longer a 20% deposit.

By taxing land, and reducing tax on income (or even eliminate it from savings) we are starting to move towards a fairer society.

by Matt in Auck | 04 Oct 09, 10:33am

Veedub and Jimmy (and other

Veedub and Jimmy (and other happy renters)

You might enjoy this article from Martin Hawes in today's Herald:

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1060...

He says:

"This happens not just to people planning to retire but to younger people too. I have seen many people with expensive houses and large mortgages. Paying the mortgage requires both partners to work long and hard.

Sometimes I think that the couple is rushing around and working to have a house they seldom have time to enjoy.

I ask: do they own the house or does the house own them? What things are they going without so that they can have this expensive house?"

by Roger Thompson | 04 Oct 09, 10:51am

Mark Weldon ( Radio Live

Mark Weldon ( Radio Live , this a.m. ) claims that on $ 200 billion capital , the rental housing pool of NZ , the IRD paid out $ 500 m. to owners ! Had depreciation not been allowed ( 2 % of capital value ? ) , those owners would've had to pay IRD $ 1400 m . Enough to bring all tax-thresholds down to a maximum of 30 % . Why allow depreciation on an asset that usually appreciates in value ?

by Kate | 04 Oct 09, 11:00am

Thanks, jimmy exactly my point!

Peter, a land tax is just that: a wealth tax - and a wealth tax that cannot be avoided by the wealthy.

I would like to see the family residence to be exempted (or at least the interest paid on mortages for the family home to be deductable from the income tax paid by those earning under $100K) and I would also like to see tax on savings exempted - if indeed such a land tax were introduced.

Then at least all of those investing their capital in property would have the incetive to sell (and thus property values would decrease) and put their money into a bank - such that the banks could put the capital accumulated tax savings of wealthy NZers to better use by lending to people who wished to grow productive businesses that employed NZers.

I am from a generation that was able to accumulate substantial capital. I've owned my own businesses in the past which employed people. I sold all of them for substantial profits. I just haven't got the energy or the inclination anymore to own my own business, as I can virtually live off my accumulated capital - and do what I love to do - write and teach with the hope that that gives something back to society.

But, I could just as easily invest my money outside of the banking system - however that doesn't help younger NZers into productive businesses. The fact that the banks here are skewing their investment towards residential property annoys me.

As my accumulated wealth is in cash deposits and we just own one house (as that is all we need to live in!) - I won't suffer much from a land tax - so perhaps in that way I am biased. But my bias is towards the wealthy who avoid taxes through elaborate financial mechanisms and who similarly gear their investments in a manner that minimises their tax exposure. This manner of organising ones financial affiars is driven purely by greed and a self-centred attitude. They are people who have more money than they know what to do with - but they want to make damn sure their good fortune is not shared. That is sad in my opinion.

by Unimpressed | 04 Oct 09, 11:07am

The question is not economic

The question is not economic but rather a case of political savvy.

Thus it is not whether there should be a Land Tax or form of C.G.T but rather what, if any, the rate would be, and what exemptions would be associated with them. Setting the rate too high or the exemptions too restrictively would mean political oblivion for the introducing party, and rightly so.

Turkeys really should vote for Christmas you know.

by Grandy | 04 Oct 09, 11:43am

Kate, Your analysis is quite

Kate,

Your analysis is quite fair. Bring in land tax, but what about LAQC? Is this even bigger a problem that favours property investments? If so, then why is the authority not looking into addressing this matter? interesting?

by David | 04 Oct 09, 11:44am

Good discussion here. My take

Good discussion here.
My take on it:
No land tax, too many repercussions for farming.
No tax deduction for interest on housing loans, why should the the investor be treated more favourably than the owner occupier?
No tax on bank interest for Kiwi residents up to say $50,000 PA

OR/ lets be really honest AND fair and deduct inflation from both interest income received and interest claimed. Inflation is the biggest distorting factor in this stumbling disaster we call our economy yet has been conveniently ignored for decades.
Or/ remove the real source of the problem and give us sound money, we've seen our supposed store of value decline by near 95% in a mere 40 years, how much longer till the remaining 5% is worthless?

BTW here is an excellent interactive comparison for various housing markets around the world from the economist. Amazing!

http://www.economist.com/displaystory.cfm?story_id=14438245

by veedub | 04 Oct 09, 11:57am

Matt - I saw that

Matt - I saw that article this morning and had a wee chuckle to myself. It's so true!

by Sally | 04 Oct 09, 11:59am

Some folk are baying for

Some folk are baying for the blood of producers . How bizarre this is. Successive government' socialistic policies have put our country on the collision course that inevitably will result in an almighty crash.

The "Jo Bloggs' " have no understanding of what the value of the productive sector is too our country. Successive governments have failed to impose adequate value-for-money disciplines on new and existing government spending that has resulted in increased taxation. Punishing producers for their profits is not the answer.

Andrew is correct
"1. Rein in local & central govt spending
2. Enforce the current laws. There is plenty of money to be made from the property sector if the current laws were enforced by the IRD."

And Mark Hubbard
"The Big State: it's destroying us all. Mr Grimes, with your taxes on taxes on taxes, you are the problem, and no part of a solution.

"Where are the reports mentioning the only fix for our economy, and the freedom of its citizens, is slashing the size of the State?"

by Kate | 04 Oct 09, 12:02pm

My thoughts on your points

My thoughts on your points David.

Farms where the major owner/shareholder is resident on the famr could also be exempted - but the Queens Street/Wall Street/absentee overseas investor land owners should be subject to the tax. This would have the effect possibly of driving these absentee landowners into selling locally.

The damaging effects of multiple changes to the Overseas Investment Act to atract foreign capital need to be reversed. Owner/operator farmers have been proven to be more incentivised to use our productive land more sustainably.

Absolutely agree with your second statement - there should be no tax deduction on interest paid on mortages for the investor.

Don't disagree with your point regards inflation.

And definitely support your point on NZ having a sovereign, sound money supply.

And yes, the linked chart shows just HOW out of balance our countries investment in housing is as compared to other advanced economies, such as the US and UK.

by Unimpressed | 04 Oct 09, 12:06pm

I read with interest those

I read with interest those who seem to think that if a Land Tax or form of CGT is introduced then other forms of tax will decrease to compensate. A view that history teaches is naive and simplistic.

Perhaps the younger generation should consider that they could afford houses if they changed their spending attitudes. Spending on "stuff" today and then whining that they cannot afford property is a cop out, a typical blame somebody else position. Forget your Ipod, latest cell phone, fancy boy racer car, and credit card addiction and then see what the money position is like.

by Kate | 04 Oct 09, 12:06pm

Sally - land/property investors who

Sally - land/property investors who are not resident owners in their investments are not producers.

If you think otherwise, please explain.

by Kate | 04 Oct 09, 12:24pm

Unimpressed - you obviously don't

Unimpressed - you obviously don't know alot of sensible, hard working young families. Do tell - what is the source of your prejudices? What you've read and seen in the media?

If so, I have a good solution for you - get out in the real world. Volunteer at your local Salvation Army Thrift Shop, your local food bank, your local budgeting service - and come back and tell me how many of the folks you meet in there have internet connectivity into the home, a flash car, the latest cellphone/Ipod etc.

by Sally | 04 Oct 09, 12:33pm

Kate, Farmers are the producers.

Kate, Farmers are the producers. " A land tax would hit agricultural based households harder than residential households because each rural household owns proportionally more land."

Unimpressed - good comments. When have we ever been able to trust those in power?

As HL Mencken said "All politicians are liars and blowhards and if you think otherwise, you're part of the problem."

by Grandy | 04 Oct 09, 12:47pm

So much so for Land

So much so for Land Tax, what about L.A.Q.C. ? any fruitful discussion on L.A.Q.C. ?

by Matt in Auck | 04 Oct 09, 12:59pm

Unimpressed - F@#k off I

Unimpressed - F@#k off
I get so sick and tired of that cliched mantra that the only reason young people can't afford homes is because they are always buying expensive toys
Its a load of bullsheeeet
The reason MOST young people struggle to get into property is because house prices are way out of whack with the reality of incomes END OF STORY

by Roger Thompson | 04 Oct 09, 1:04pm

Grandy : Scroll up to

Grandy : Scroll up to Kieran's comment , 1.21 p.m. Oct 3 : A good summation on the subject of LAQC's . Scrapping / or ring-fencing losses probably won't prevent house price inflation much , nor raise alot for the IRD ( bless them , they need all the contributions they can get ) . But it will send a message that negative-gearing of rental property is not the tax free buffet that it once was .

by Matt in Auck | 04 Oct 09, 1:04pm

David - That graph is

David - That graph is brilliant. If you select NZ it shows how crazy our housing got relative to other countries

by jimmy | 04 Oct 09, 1:09pm

Kate, "I would like to

Kate,

"I would like to see the family residence to be exempted ". I disagree with you on this one. There is no reason to treat the family home as sancrosanct because:

1) It is not unduly harsh because for the most part, with the land tax there will be savings on oher taxes to offset the cost AND we would expect prices to drop which will assist new entrants. Existing owners would be able to adjust as I would suggest we phase it in gradually over 5-10 years.
2) lets face it, a house is treated as a store of wealth by most NZers, so there should be taxes on this like any other. CGT makes more sense in principle, but there are practical difficulties in implementing it.
3) It will continue to encourage distorted tax motivated decisions in favour
of owner occupied housing. eg better to own one million dollar property that you live in than one 500g home and one 500g investment. An better to be a pensioner living in your 1 million dollar untaxed home than sell and live off the taxed interest.

by Matt in Auck | 04 Oct 09, 1:17pm

Another thing that really hits

Another thing that really hits home on that graph is the resilience of the Aus housing market relative to others. Of course we all know that the aus market has been resilient, but the graph really underlines that relative to other countries

by Harriet | 04 Oct 09, 1:22pm

A Matt in Auck: "2010

A Matt in Auck:

"2010 is shaping up as the year that the bulls and bears of the world's last unpopped asset market bubble"”Australia's property market"”will collide head on."

http://www.debtdeflation.com/blogs/category/debtwatch/

by Sally | 04 Oct 09, 1:25pm

â€œA land tax would be

"A land tax would be easy and cheap to impose because it was already set up for local government rates, Grimes said. It would be almost impossible to evade, he said."

Well Mr Grimes there is a huge problem in local government rates where farmers are being taken to the cleaners paying for facilities they don't use, because they are rated on the LV or CV of their whole enterprise.

Look at what has happened recently in Invercargill because the dopey City Council went out and paid an excessive amount for land that does not produce an adequate return. This ludicrous purchase raised the value of the land in that area, with farmers rates escalating. An increase of 160% going from $5000 to $13,000.

A fairer system would be to ring fence the area the farming homestead is situated on and rate on the land value of that area. NOT the whole farm. After all it is people that are able to use the facilities not the land.

by Matt in Auck | 04 Oct 09, 1:30pm

Harriet - interesting article, but

Harriet - interesting article, but I just don't think Aus property prices will collapse. Their economy seems fairly resilient, we all know that their banks are relatively strong and the country seems to be eternally attractive to wealthy immigrants (not to mention the fact that fewer young Aussies seem to permanently leave the country compared to here - means net migration is really high)
having said that I don't see boom times happening anytime soon there either
Jimmy - as you are based in Aus what are your predictions for the house market there?

by Unimpressed | 04 Oct 09, 1:32pm

Dear Matt in Auck Thank

Dear Matt in Auck

Thank your for your well thought out comment!

It may be an old mantra but none the less true for that. Whine whine whine whine whine

by Matt in Auck | 04 Oct 09, 1:39pm

Unimpressed - well it got

Unimpressed - well it got the response it deserved!
As Kate said why don't you get out into the real world and see the real situation rather than regurgitating wildly untrue myths
Sure, there are some young people who spend tonnes of money on gadgets etc. but thats always been the case
Most people I know under the age of 35 are actually pretty conservative with their money

by Roger Thompson | 04 Oct 09, 1:40pm

Matt / Unimpressed : Oddly

Matt / Unimpressed : Oddly enough , both of you are right . Each successive generation does have higher expectations , more toys and gadgets , if you will . And they do want a good property , they wish to start part way up the ladder , rather than begin in Aranui or Sth. Akld . And our houses are stretched , price wise , as a ratio of average incomes . Well done , each of you , for being correct !

by Unimpressed | 04 Oct 09, 2:00pm

Matt in Auck So you

Matt in Auck

So you agree some people do spend tonnes of money etc and some people under 35 that you know are pretty conservative with their money, which means some must equally be not so conservative.

If you have the money you can do with it as you please but sometimes choices need to be made.

And Kate, given that every day there is some form of charity appeal going on, which one do you suggest is more worthy of my $'s?

by Matt in Auck | 04 Oct 09, 2:02pm

Roger - very diplomatic! In

Roger - very diplomatic!
In terms of you comment:

"And they do want a good property , they wish to start part way up the ladder , rather than begin in Aranui or Sth. Akld"

I've thought about that concept a bit recently. Many older kiwis say:

"In our day we started at the bottom, then worked our way up"

However it is problematic to make comparisons with the past.

I would argue that although low income suburbs in the 1950s and 60s were not necessarily filled with saints, they were not like the low income suburbs of today which are frequently crime ridden. Therefore I would argue that the young people of today have good reason not to want to start off in a low income suburb. Its simply not fair to compare the low income suburbs of the 60s with the low income suburbs of today!

For example, I have a friend who bought into a low income suburb in Auckland. Within 2 years he had been burgled around 5 times, and generally felt unsafe. In the end he decided that wasn't fair on himself or his family and now he's renting in a pretty good safe suburb for less than he was paying on his mortgage to live in an unsafe dump.

by David | 04 Oct 09, 2:18pm

Thank you Kate, agree on

Thank you Kate, agree on your ideas for land tax on absentee land owners.
The result of past overseas investment in this country has been a real negative, generally a rent seeking or speculative take over of existing assets and businesses with the predictable result; a decline in our relative living standard and a huge increase in our net indebtedness. Seems we've landed ourselves a Government intent on following the same neo con, IMF loving agenda that's leading us to permanent debt slave status.

Good point Roger, the depreciation allowance would be a good place to start correcting this scam, just another example of a massively tilted playing field that has gone ignored for decades.
Any Government planning on balancing the budget with a CGT on residential property sales would be in for a rude shock.
Just look at our house prices related to average income, a fair indication of affordability.

ttp://www.economist.com/displaystory.cfm?story_id=14438245 (select "prices against average income")
Can't see any gains to tax there for a looooooong time.
when it comes to pissing your future away we are the champions of the world, our effort makes the US housing bubble look positively pathetic, . Bit of a challenge from the Belgians though. Does anyone have an explanation for this?

Cheers,
David.

by Roger Thompson | 04 Oct 09, 2:24pm

Good point , Matt .

Good point , Matt . The criminal elements do tend to thieve from those nearest to them . Are they not smart enough to pop over to Epsom or Fendalton to fleece some fat cats ?

But back to houses . Renting seems a better option , than buying into an already heightened market . Investment returns tend to revert to a " mean " , or average , over time . It may take a decade or so , but an adjustment of house prices to income levels will happen . As they say , " trees don't grow to the sky ! "

by Kate | 04 Oct 09, 2:39pm

Unimpressed - if you want

Unimpressed - if you want my suggestion - donate to the Sallies - but better yet, get out there and work with them - I think as a person you would benefit more from opening your mind and your heart, rather than your wallet.

Sally - I have no problem with owner-operated farms - they are usually well run and their owners are generally respectful of the land and animals from which they produce an income.

The corporate investor in agriculture is a different beast - and I'm quite happy for the owner-operator to be exempted or treated in some way differently to the corporate investor. I'd like to see the corporate investors given incentive to sell up to owner-operators - a land tax might just provide that incentive.

by Unimpressed | 04 Oct 09, 3:00pm

Kate Cash can help many,

Kate

Cash can help many, labour but a few.

by Kate | 04 Oct 09, 3:29pm

You miss my point unimpressed

You miss my point unimpressed - the labour would help you.

by jimmy | 04 Oct 09, 4:13pm

Matt in Auck, what will

Matt in Auck,

what will happen to the Aus housing market?? No idea, all I know is it was falling until

1) Rudd increased the first home buyers grant
2) rates were dropped to "emergency" lows
3) Rudd decided Aus is now going to have 35 million people in 30 years time as opposed to 28 million.
4) Rudd eased foreigners investment rules - according to the smarmy agent in our local rag, he has sold 40% of properties last month to absentee Chinese (but anything from an agent should be taken with a grain of salt).

So in short K Rudd, who I consider to be a complete ass, has dealt a major body blow to prospective buyers. Whether he can maintain this or not is to be seen. Any country that has obscene immigration rates can also expect some housing impetus, but like anything its all relative to where you start from. If existing prices are inflated (4% yields suggest they are) then you would expect some pull back. That is my simple argument - if yields are crap it implies enormous speculation. But speculation can go on for a long time, especially if supported by govt.

In short I will reserve judgment until
1) rate rises back to normal levels - the FHOG extension resulted in first home mortgages rocketing by 10% so could be a lot of stress there when people realise 5% is not normal
2) employment peaks
3) grant is fully removed (end of this year)

Then we will see if Rudd's sadistic pro property policies are enough to make life harder for home buyers going forward.

by Shorty | 04 Oct 09, 4:24pm

Matt - We lived in

Matt - We lived in Papatoetoe for 5 years and we were never robbed. We had flat mates and they parked their cars on the street and never had a problem either. Also had good train links to the city - including the express from middlemore. My brother flatted in Remuera and was robbed twice in one year. He moved to Onehunga and had no problems. Rich people have stuff worth stealing.

by Matt in Auck | 04 Oct 09, 4:37pm

Jimmy Interesting isn't it that

Jimmy
Interesting isn't it that Rudd is a Labour leader yet promotes policies that hurt the Aussie battlers
I suspect his government meant well with the FHOG but just didn't think that it might actaully be counterproductive

by Christov | 04 Oct 09, 4:46pm

Kate Says: If so, I

Kate Says:

Matt in Auck Says:

Kate........ with respect (and I mean it) that is a blanket statement, I have pesonally volunteered for the sallies in one of the poorest suburbs on too many occassions to recall and while I agree with you in part that many hard working families are completely disadvantaged by the unreachable goals (property) as a direct result of greed and speculation on the part of many cross sections of the community. (not just boomers or old folk).
You see one observation I have made over a long period of time is that the majority of the .......Poor..... will spend every cent they ever lay hand to........... and that's exactly what the machine wants them to do. It is by design rather than fault.

Matt in Auckland.............While I agree with you completely about the situation, I must also observe that my own two children have earned a great deal of money in thier respective careers and have spent it.......frivolously ..? hmmm I might have occassion to think so, but they have done many things with thier life that I had not .... because I was paying the mortgage... no whine , just the way it was is all.
They the children will take my property and my money and I will wonder if they ..KNOW..... the value of it.? but then it will thier choice not mine and so it goes.........Paradoxical to say the least. Good luck to you and may you prosper in good humor and not through gritted teeth.

by jimmy | 04 Oct 09, 4:46pm

Matt, No I dont think

Matt,

No I dont think they meant well. At a housing affordability summit in 2007, the then opposition (now govt) housing minister stated that the FHOGs do nothing more than increase house prices. Wayne Swann has stated many times that it is a good thing houses have not fallen because of the impact this would have on confidence. Make no mistake, the labour govt want the housing market to stay at least at existing levels. Intersting also to see that the RBA has stated recently that there is a "risk" of a bubble forming. That ASTOUNDING understatement sums up the entrenched bubble inducing policy that runs this country. I mean look at the economist graph, aus is now TWICE the median of the US. Surely all the so called demand factors dont justify that diferential?????? RISK of a bubble, please!!!!!!!

by jimmy | 04 Oct 09, 4:52pm

Christov, "Good luck to you

Christov,

"Good luck to you and may you prosper in good humor and not through gritted teeth." I accept you mean this in a positive light. But by bringing down the cost of housng to long term levels we will have more chance to prosper and more reason to be good humoured. At what point should one say, oh stuff it - I'm happy to be screwed but things could be worse?????? Workers got rights because they moaned and agitated for it, ditto slaves, blacks, women etc. The whole "oh stop your whingeing things could be worse" argument could apply to ANY movement.

by Matt in Auck | 04 Oct 09, 5:13pm

Jimmy- yeah that "Risk of

Jimmy- yeah that "Risk of a bubble forming" quote was briliant!!! There's been a bubble in Aus housing for what, at least 5-6 years?
also agree e: your comments to Christov. The problem is there isn't an organised movement against this house price nonsense, just some disparate bloggers and commentators like ourselves. I would argue that the young generation of non-home owners are just as down trodden as women were pre the 1970s
but why isn' there a movement? Are people too apathetic these days? Or are people resigned to the fact? Is it because non-home owners, unlike blacks and women before them, don't sense direct injustice and discrimination perhaps? there aren't signs at bus stops that say "No renters permitted"
its a more insiduous impact

by jimmy | 04 Oct 09, 5:40pm

i think half the problem

i think half the problem is people generally think, oh bugger houses are expensive but i'll buy one anyway and then they change sides. women and blacks never had the chance to change sides. plus, although we are being screwed, it is not to the level required to bring about a great social revolution, generally you need more pain for that. but perhaps most importantly, i think most people are just plain ignorant.

but on the subject of getting political, a facebook group page might be a good start - instant access to exponential networks. maybe a "support the land tax" page - list all the benefits etc.

by Steptoe (Steps) | 04 Oct 09, 5:46pm

Kate agree with you.. my

Kate agree with you.. my sediments exactly... from where you are coming from , why, right down to putting back into society.

by Christov | 04 Oct 09, 5:46pm

Matt .......Jimmy....By all means do

Matt .......Jimmy....By all means do ...do something and you wll have the support of more than just myself and a few bloggers........... but develop a strategy to target the source.
Greed and control rely upon apathy, they count on it, and so the soundest strategy ( in my opinion) is to target apathy and...... that........ is only achieved on common ground.

by buyerinchch | 04 Oct 09, 5:51pm

Re land tax- so how

Re land tax- so how would an apartment fare? A m2 tax? All those empty apartments might become worth something again?
Matt in auck, why didn't you buy last year? Where you being greedy and waiting for the market to completely collapse? Get tired of your comments bashing anyone trying to get ahead while you pay $540 (?) a week to rent a flash house, do the hard yards like everyone else!

by Gibber | 04 Oct 09, 6:10pm

Matt in Auck, you may

Matt in Auck,
you may be interested in Terry McCrann's article at

http://wl.theaustralian.news.com.au/business/story/0,28124,25762362-1474...

Some of the more interesting quotes are

We have never seen so much stimulus thrown at the economy in such a concentrated form. Not even in the baddest days of the Whitlam government debacle in the mid-1970s.

Extraordinary doesn't even begin to capture the size and swiftness of the shift.

Last year, the budget was $19billion in surplus in the June half. This year, it will be $22bn in deficit in this half.

...

Two things are indisputable though.

Firstly, the fiscal stimulus has been extraordinary, unprecedented in our history and the biggest or among the biggest in the developed world.

The OECD estimated our stimulus as adding up to 5.4 per cent of GDP over the three years 2008-10. Only Japan (at 4.7 per cent of GDP), South Korea (6.1per cent) and the US (5.6 per cent) came close.

But crucially in our case, 54 per cent of it would be delivered in 2009, according to the OECD, compared with just 37 per cent in the US.

Secondly, none of the major countries has had the monetary stimulus we've had. Either because they couldn't cut much in the first place -- like Japan. Or the cuts didn't flow to borrowers -- like in the US.

Two points flow from this. It would have been surprising -- disturbing? -- if stimulus adding up to more than 10 per cent of GDP, concentrated in a six-month period, did not keep the economy afloat, and thereby how fragile the underlying situation must have otherwise been.

Secondly, what happens next? The stimulus can't be repeated. The government can't deliver a $40bn additional deficit in the December half-year, the RBA can't cut official rates by another 425 points. It's only got 300points left.

Short answer: we are now entirely hostage to what happens in the US and China.

by Matt in Auck | 04 Oct 09, 6:19pm

buyerinchch - lets see where

buyerinchch - lets see where house prices are in 3 years and how your portfolio is looking then
good luck - you'll need it :)

by Iain Parker | 04 Oct 09, 6:32pm

anyone for the "real" reason,

anyone for the "real" reason, so we might be able to discuss some "real" solutions rather than continue to babble about moving the deck chairs round the Titantic
http://www.interest.co.nz/ratesblog/index.php/2009/10/03/opinion-are-we-...

by william | 04 Oct 09, 7:03pm

It appears to me that

It appears to me that by favouring land tax over CGT, the Tax Working Group has found a way to increase tax revenue without bursting the housing bubble. NZ$2,150 per year land tax is not going to deter home buyers/speculators.

by Dave S | 04 Oct 09, 7:10pm

Jimmy et al... Why do

Jimmy et al...
Why do you keep harping on about bringing down the price of houses like it's not a product of easy credit? Do you really think house prices have gone up just because a house gets bought and sold a few times? Prices are higher because there has been too much easy money floating around and the dollar has devalued. Basic economics. If that isn't addressed, no tax will make any difference, it will just get added to the price... wake up!

by Kate | 04 Oct 09, 7:52pm

William - even if it

William - even if it doesn't deter speculative investors and tax avoiders, and hence doesn't drive property prices down (although I note Arthur Grimes suggests a 1% land tax would reduce land values by 17% immediately, but I don't know what his modelling assumptions are) - IT DOES give the government room to decrease other taxes across the board for the non-property-owning classes!!!!!

The non-property-owning classes are paying a disproportionate amount of tax in proportion to their income in comparison to the wealthy who manipulate the system to their advantage. Land tax cannot be manipulated or avoided.

by Kate | 04 Oct 09, 7:57pm

Yes, Iain I too would

Yes, Iain I too would like to see a move toward a sovereign monetary system in NZ - but if the Social Credit movement are committed to social equity/social justice principles - then they would be advised to take advantage of the Tax Wroking Group's recommendations and lobby for their implementation.

Some social equity is better than none. It's a start.

by buyerinchch | 04 Oct 09, 8:25pm

Good one matt, have a

Good one matt, have a 20 year plan not 3, and currently sit at 40% equity. Think you need to look a little bit further ahead.

by jimmy | 04 Oct 09, 8:33pm

William, Kate is right. It

William,

Kate is right. It is not purely about reducing speculation on property. it is about finding an effective way to ensure the tax burden is spread more evenly. Would you feel happy about paying 39% on your hard work AND deposit savings while someone else is creaming capital gains and paying no tax ESPECIALLY when that tax advantage is contributing to asset inflation and you needing to pay a higher price. It just aint fair. It needs to change.

Iain, Kate speaks sense. We should not lose sight of the credit rort going on, but if we can chip away at the things that exacerbate the problem then that is no bad thing.

by jimmy | 04 Oct 09, 8:37pm

Dave S, Completely disagree. Check

Dave S,

Completely disagree. Check the report - 1% would equate to a 17% drop. I think it would need to be phased in gradulayy to be politically palatable. OH - and we better make sure the land tax is not tax deductible.

by Casual observer | 04 Oct 09, 8:46pm

Kate - 'Corporate investors sell

Kate - 'Corporate investors sell up to owner operators' - the reason these large enterprises are in the ownership of corporate investors is because no family owner operator farmers would touch these farms with a barge pole - unless you are the Crafars. They are nothing like an 'family owner operated' farm to run.

by Kate | 04 Oct 09, 9:17pm

I know someone managing a

I know someone managing a Crafar property - who would be happy to buy that individual farm as a family owner-operator - but not at the wildly inflated price CraFarms paid for it. It has been recently valued by the individual concerned at less than 50% of what was paid for it a few years ago. It is not so much Allan Crafar himself - but his banks that won't let this happen. They are looking for a foreign investor to buy the lot as a means to minimise their losses (and they are going to make a loss - as the rest-of-the-world knows well just how over-valued NZ agriculltural land is).

by Kate | 04 Oct 09, 9:27pm

jimmy - why should we

jimmy - why should we (NZ) put up with what might be politically palatable. I couldn't give a toss who is in government as there is little difference between the two main parties at present. Let the incumbants know what is politically palatable is what is good for the average NZer.

And somehow I think the average NZer just wants to house himself and his family - but many have been attracted to multiple property ownership as a means to avoid our high rates of taxation. Unfortunatley many of these average NZers took on too much debt as a result of that tax minimisation pursuit.

buyerinchch. I don't know if this applies to you but an awful lot of people calculate their "equity" based on unrealised capital gains - as opposed to having 40% of the actual purchase price they paid for the property. Unrealised capital gains are just that - unrealised. If this person sells their house and realises the gains, and then reinvests in a lower priced house with a 40% deposit - fair enough - they have 40% equity on today's market value for the the property they live in.

by Iain Parker | 04 Oct 09, 9:40pm

Kate - From my studies

Kate - From my studies of the repeated raids carried upon this nation by the privately owned international central banking network and their transnational corporate subsidiaries, we dont have time to "chip away", they and their co-operatives within our government and its advisory agencies nearly have all their ducks lined up in a row. The consolidation of our remaining public assets, both regional and central, under monetarist influenced central control is all but complete. Barring a massive public wake up and campaign of public protest the corptocracy will use the international financial crisis as a reason to privatise everything that moves in this nation, and I believe they will attempt to have it done and dusted, Roger and Ruth style, before the next election, and under multinational investment agreements ignorant or banker friendly governments have entered the damage will be almost impossible to reverse.

I would like to take the opportunity to state I am no longer a member of Democrats for Social Credit, mainly because they too want to "chip away" and I did not agree with a number of policies that I believed would add more complexity in a world looking for and needing more simplicity, as complexity is where fraud and corruption hide. Plus, I think they made some terminal mistakes when they decided to change there name to Democrats and entering the Alliance Party after the 1984 Bob Jones redicule campaign that was based on absolute bullshit, him claiming that Social Credit were the "funny money People" claiming banks create money out of freshair when everyone knows they only relend their deposits. Sadly for Social Credit the falsity of that statement has become wider known today and had they stuck to their guns their large following may have waned for a bit, but I bet it would have grown with the increased credibility today, sadly I think they will struggle to ever rebuild their days of glory. Those that dont believe me on the Bob Jones thing, as always from the horses mouths:
http://publiccreditorbust.blog.com/2008/11/01/bob-jones-fool-claims-bank...

Kate, I now just define myself as an advocate for Public Credit Reform and are weighing up the options.

by Iain Parker | 04 Oct 09, 9:48pm

Kate - I just spotted

Kate - I just spotted they have finally put my submission to the unofficial banking inquiry up with the others:
http://issues.co.nz/bankinquiry/Submissions

and going on the quality of submissions I fear that any great public protest at what is again occuring in this nation is a very long way off.

by Sally | 04 Oct 09, 10:47pm

In the last government politicians

In the last government politicians comprised of people who had rarely held a private sector job, had rarely personally invested in job creating activities, who knew nothing of risk-taking, who were largely ignorant of the daily challenges that businesses small and large have to face. In fact, many saw private for-profit business as evil and profits as ill-gotten gains.

The present government members, we thought were different that they had the various experiences and understanding of how to bring our country out of cradle to the grave dependency on a government that cannot possibly finance all the obligations it seeks to assume.

Sadly they are no better than labour. Under the guise of a "˜crisis' they broke their promise of reducing our taxes and lost credibility. They are now intent on finding other ways to increase taxes by plundering the wealth of its people wherever it can be found. The Minister of finance is going overseas, cap in hand, looking for $40 billion over the next ten years. We are being governed by bureaucrats who actually believe the country can grow its debt and its expenditures faster than it grows its economy and still survive.

by kiwi overseas | 05 Oct 09, 3:40am

Mark Weldon should admit his

Mark Weldon should admit his bias more fully;he badmouths property investors in the hope that the govt will assist his aim of trying to force people to invest in his share market. I am a burnt 87er and few (none?) of the recommendations to make the sharemarket fairer for us were implemented afterwards. He and his ilk appear to sneer at 'Mum n Dad' investors and rig the playing field even worse than the casinos at Vegas.

by Dave S | 05 Oct 09, 8:28am

Jimmy, ANY tax would immediately

Jimmy,

ANY tax would immediately reduce the price of whatever it was levied against, as demand would drop due to the sudden increased cost. However, long term demand would recover, which would increase the price to a level where land supply would balance with the demand. To do this, the supply side would still require an acceptable level of profit.

Basically, this is the guts of it: If this report is right, he's saying that land developers will continue to supply even though the section prices have been reduced by 17%! Yeah right! Let's assume that a developer currently looks to make a 30% margin on sale. A 17% drop in prices, would cut the margin to 13%. How long do you think that would last? There would be a sudden drop in resource consents for sub divisions and a year or so down the track, we would have a section supply crisis which will create another boom in land development.

by Kate | 05 Oct 09, 9:02am

Dave S - that theory

Dave S - that theory makes no sense. The price of ALL land would likely drop to a similar degree - meaning the developer who bought the parcel of land to subdivide would similarly have paid the same deflated price - and hence could retain his margins. The only developers who get caught out are the land-bankers - and they are EXACTLY the ones who presently 'work' the supply side in order to maintain the high prices.

If they want to 'hold' assets in order to do this - fine, as long as there is tax paid during the course of the 'hold' pattern. If I 'hold' my money in a bank, the interest on it gets taxed - why should money tied up in land be subject to tax deductions rather than tax liabilities?

by We are Stuffed | 05 Oct 09, 9:13am

Monday, Ah, a beautiful day

Monday, Ah, a beautiful day for another tax.

by Shorty | 05 Oct 09, 9:21am

Kate - this person you

Kate - this person you know who manages a farm for Crafar can't be very good at his job. If Crafar had competent staff he wouldn't have as many issues as he does.

by jimmy | 05 Oct 09, 9:33am

Dave S, agree with kate.

Dave S,

agree with kate.

by Dave Smyth | 05 Oct 09, 9:34am

Good point Kate. I guess

Good point Kate. I guess there would be a lot of people who hold land who hoped to develop in the future, such as farm holdings or lifestyle blocks who would be disappointed!

I still don't think that any of this is really about making housing more affordable or preventing booms. It's purely about broadening the tax base. CGT or stamp duties did not make any difference in the US, UK or Australia. If they really wanted to reduce land costs, they would reduce development restrictions and if they wanted to prevent booms, they would reduce access to easy credit.

by We are Stuffed | 05 Oct 09, 9:41am

Exactly, it is about screwing

Exactly, it is about screwing the workers for some more tax to waste.

by We are Stuffed | 05 Oct 09, 9:42am

Why try to add new

Why try to add new taxes when they can just tweak existing ones.

Cancel the depreciation allowance on rental properties for a start.

by Dave Smyth | 05 Oct 09, 9:45am

We are Stuffed, We do

We are Stuffed,

We do have a growing problem of funding our existing healthcare, pensions etc with our aging population. However, increasing taxes, just reduces investment. We're already so heavily taxed too =(

by Dave Smyth | 05 Oct 09, 9:47am

"Cancel the depreciation allowance on

"Cancel the depreciation allowance on rental properties for a start."

Depreciation is a real cost though, realised or not.

by Malcolm | 05 Oct 09, 9:51am

A move towards a land

A move towards a land tax tells us two things. Firstly, it is another indicator that government - and those who command them - anticipate a hyperinflationary repudiation of the current debt crisis. They will then be able to impose a lien upon all property - including the family home - based upon its illusory increase in VALUE. By fiat (decree) they will announce you got rich, and must thus pay tribute for your unrealised gains. Of course, this will have to come from your income which, in a hyperinflationary environment, will struggle to keep even the basics purchased. Even if the hyperinflationary rort fails - and the underlying financial pathology of debt deflation proves overwhelming - government will still arbitrarily declare the price of your property to be whatever is required in order to levy sufficient tribute. Put simply - 'heads they win, tails they win'.

The second thing a land tax tells us is that we are moving closer to the 'frank confiscation phase' of private property - which is the inevitable ultimate consequence of our conditions of debt enslavement. This is one of the key reasons for the relentless assault on Christianity - particularly in England - because (irrespective of 'spiritual' issues) Christianity gives repose to a system of property rights that find foundation in the Bible inspired ideas of England's first Monarch - King Alfred the Great. Given that New Zealand follows - albeit belatedly - like some 'whipped ideological cur' behind whatever 'Mother England' commands the portents for the future are rather sobering.

Iain Parker above notes: "government and its advisory agencies nearly have all their ducks lined up in a row" and, although I would disagree with Iain on some monetary issues (being a classical 'gold-standard' man) I think he shows considerable insights into what lays ahead. Look at what has just happened in Ireland - where they have effectively been forced into the repellant affront of the Lisbon Treaty after previously voting against it. Its really quite simple. Firstly you 'hyper-gear' a nation through debt money. Then, later on, you bust that same nation. Then you offer them 'terms' for their de-facto liquidation - crumbs from the rich bankers table dressed up as salvation. In Ireland's case 'the price' was surrender to the constitutional affront of that dastardly treaty. Previously, they had embarrassed Europe's ruthless ruling elite by their courageous opposition to a final surrender of national sovereignty. Yet that action, by one member state, threatened to derail the forthcoming new 'European Reich'. So the former Celtic Tiger was shown 'the abyss of poverty into which it would be plunged' if it failed to comply. In New Zealand's case it could be the total surrender of our mineral and agricultural wealth - when that sombre day comes when those to whom we have enslaved ourselves demand 'tribute'.

by The Bank Manager | 05 Oct 09, 9:51am

179 posts on a non-issue!

Non of these property related tax proposals will ever happen under a National government.

We have in the past had a land tax and stamp duty on property and prices still went up.

by Pete | 05 Oct 09, 10:02am

Dave S says "ANY tax

Dave S says "ANY tax would immediately reduce the price of whatever it was levied against, as demand would drop due to the sudden increased cost"

Dave can you offer even one example where levying a tax on something has lowered its price. Anything, anywhere, anywhen.

by muzza | 05 Oct 09, 10:29am

Can't cut Government spending much

Can't cut Government spending much as most monies go into massive entitlements like National super etc [cut people's/voters entitlements at your peril], plus delivery of important government services, which everyone will howl about if they are not available when you require them. In reality huge amount of government expenditure goes to paying the wages of those who deliver the services and you can't/shouldn't cut the wages to our nurses, teachers etc unless you want to make them an even less attractive and ultimately run-down vocations in NZ.
The Land tax proposal seems to be an over-reaction to simply making investment in property less appealing by ring-fencing losses losses as tax write-offs on other income.

by We are Stuffed | 05 Oct 09, 10:34am

"Depreciation is a real cost

"Depreciation is a real cost though, realised or not."

What a load of cr*p.

Houses appreciate.

Your rental does not physically depreciate as you maintain it. (paint, repair roof etc) Any maintenance is claimed as a tax deduction in the year you incur the debt.

Unless you are a slum landlord, you will not let your investment depreciate.

by Mark Hubbard | 05 Oct 09, 10:37am

A very interesting article on

A very interesting article on TV1's Sunday last night, about the burgeoning family homeless problem in Australia.

In every family case study shown, it was of young families having lost their private rental accommodation due to an extreme shortage of private landlords, and thus having to be housed in below standard, crowded hotel environments, no more than 15 days each stay, because there was not enough State housing.

Now, when the Australian government holds the inevitable State run taskforce "“ a bureaucrat fest, if you like - to look into this, I will put my money on it their solutions will be that of the social workers involved in the piece: we need more state housing (that is, much, much more taxation). Whereas a solution lies just across the ditch: as in NZ, Australia should drop their capital gains tax on investment properties, allow private landlords to charge too low rents on the hope of a capital gain, even if this results in losses they have to sustain and subsidise throughout their investment property ownership. It's certainly not my cup of tea, I would have no wish for such an investment, fraught as it already is with tax risk "“ I'm a very conservative man - but NZ's history has shown there are plenty of landlords, apparently, who are prepared to take the risks and the low returns, and consequently provide low cost housing far cheaper than the government could provide through State housing.

And in light of this, how ironic NZ's own taskforce are here advising that the fix to the distortions of over taxation in every area of our planned and moribund economy is yet another tax, and the very tax, whether CGT or land value, that will replicate the homeless problems in Australia.

Where are the reports stating that our real problem is the huge size of the State, and the enormous level of taxation, direct and indirect, that we pay, and that if the State was slashed, all taxes, starting with the indirect ones, could be slashed likewise, reducing the cost of living for us all, and thereby increasing our standards of living, while increasing our freedoms? That's the promised land we should be seeking, for that is what humanity has always been about: the quest for freedom. I was pondering this, while filling my car on holiday, last Thursday, one day to late to avoid yet another 3 cent tax on petrol (that's what you get for sleeping in, in this country).

by Alan Brown | 05 Oct 09, 11:03am

Re CGT I think we

Re CGT
I think we are all forgetting that this government isn't collecting enough revenue.
CGT discussion has been around for a while , I was asked to discuss this with a UNi
masters student in 2006!

The government wants more revenue , and an easy way to collect.
My belief is that it will come in as some form of "duty" on all house transactions .
I also agree that with all the noise about - don't invest in houses -invest in business :
assistance should be given to do this. It is 10x's harding to fund a business buy than
a home. If the Govenment wants us to invest in businesses they need to correct this
imbalance .
Alan Brown - dare I say An Accounant in Public Pratice!

by Roger Thompson | 05 Oct 09, 11:09am

Agree with you , Mark

Agree with you , Mark , about the size of the state . 9 years of Labour debilitated our economy , as they used the productive sector , to build the unproductive state . And yet , looking at the " Risk of Failure " map in the top 10 @ 10 , we are most " stable " , along with other high tax regiemes , Scandanavia , Switzerland , and Oz . Go figure !

by jimmy | 05 Oct 09, 11:35am

David S, "CGT or stamp

David S,

"CGT or stamp duties did not make any difference in the US, UK or Australia. "

Hmm - if you check out that economist graph you will see

1) NZ a lot more expensive than the UK and the US - no it wont prevent booms, but arguably prevents them getting as big and reigns them in quickly when they do because other investments are not punished relatively
2) Aus does have a CGT but a) it was halved recently and the Henry report says this fed the boom b) Aus also has other silly incentives such as first home owners grants whose increase recently was clearly a factor in the house price falls stopping and turning around in Aus. Aus also does not ring fence -ve gearing, (the US does)

by jimmy | 05 Oct 09, 11:44am

Mark, "Whereas a solution lies

Mark,

"Whereas a solution lies just across the ditch: as in NZ, Australia should drop their capital gains tax on investment properties, allow private landlords to charge too low rents on the hope of a capital gain, even if this results in losses they have to sustain and subsidise throughout their investment property ownership."

Pull your head in. Investors have incentive a plenty in Aus, including reduced CGT and -ve gearing which according to every man and his dog who own invst property is the be all and end all (to make a loss that is). Yet funnily enough, despite all these policies which landlords tell us are good for renters, rent has increased AND supply has reduced. Now why would this be????????? Hmmm - maybe because its easier to buy and sit and do nothing and wait for the untaxed gains and claim the loss.

Introducing policies as you suggest will:

a) make housing more unaffordable and therefore require more rental for those who cant afford it
b) require higher rents to offset the additional cost.
c) result in less houses being built because the land is too expensive

Out of interest, yields in Melbourne are around 4% - pathetic (in my area round 2-3%). This does not mean renters are subsidised by landlords. It means renters are paying what supply/demand dictates. the discrepency is caused by SPECULATION ie "investors' who do not look to YIELD but who look to CAPITAL GROWTH. Removing CGT completely from Aus is only going to exacerbate this.

by Steptoe (Steps) | 05 Oct 09, 12:30pm

Dave Smyth Says: "â€œCancel the

Dave Smyth Says:
""Cancel the depreciation allowance on rental properties for a start."

Depreciation is a real cost though, realised or not."

Rubbish....one can right off cost of maintaince, this appreciates the asset....
The if depreciation is written off, this is almost double dipping...
If no maintance is ever done, yes eventually the house will fall down...and this is very rare in the real world, and rarer for an investor...

by Dave Smyth | 05 Oct 09, 12:42pm

I think depreciation is a

I think depreciation is a little more complex than simply maintenance cancelling it out. Agreed that there's some overlap. However, is a well maintained 1970's property as desireable as a brand new home? Also consider that most capital gain is in the value of the land.

by Steptoe (Steps) | 05 Oct 09, 1:21pm

"However, is a well maintained

"However, is a well maintained 1970's property as desireable as a brand new home?"

Yes for many 1st home buyers...they cost about 25K back then, sell both as rental investment and 1st home buyers now between 250K to 320K depend if have a swimming pool etc....

A tidy 90msq 3 bed home on a 700msq section goes for high 200K now, and the 110msq 4 bed home next door on a 1500m sq section would be lucky to go for 320K, not because of the land but the house....

by Kate | 05 Oct 09, 1:30pm

Shorty said, "Kate - this

Shorty said, "Kate - this person you know who manages a farm for Crafar can't be very good at his job. If Crafar had competent staff he wouldn't have as many issues as he does."

No, the person (well actually it's a farming family working and managing the property) managing the Crafar farm, actually sold his smaller land holding for a stupidly inflated price, banked the proceeds and took on a job working for someone else who was stupid enough to pay the inflated land price for the larger property in the same area.

My smart friend has had a hassle free wage income for the last couple of years, earns interest on his capital, gets free accomodation as part of his salary package and the farm he runs is well run. I doubt it's profitable because CraFarms paid too much for it and likely purchased it with no equity (or based on the unrealised capital gains on the other land holdings in the group) - so yep, it's likely going under but that's due to the inability to service the loan - it's got nothing to do with the day-to-day management of the property.

If a new owner purchased it at the new valuation price - they'd have a tidy, profitable unit.

by Shorty | 05 Oct 09, 1:38pm

I was thinking more along

I was thinking more along the lines of the livestock and environmental issues Crafar is having rather then the financial side. Most of that is the responsibility of those managing the farms. Your friend either directly condibuted to the problems or failing that knew about it and did nothing.

by Wally | 05 Oct 09, 2:14pm

You are all going to

You are all going to be paying a bundle of higher and new taxes so Bill can pay the interest on the billions he has to borrow to pay for Labour's bloated state sector and keep the 10% of unemployed on the dole for the next 20 years. Add that to the massive amount you fork out to your landlords the banks, for the huge piles of dosh you were dumb enough to borrow, so you could pay far too bloody much for some crappy property in the idiotic belief that prices would rise and rise forever. Us savers are set to see rising deposit returns and falling property prices because Noddyland and the big mining hole across the ditch are set for the same property collapse as the rest of the debt bloated western pigsty economies.

by Richard | 05 Oct 09, 2:42pm

It seems to me the

It seems to me the root of the tax generating/collection problem is to hard for Kiwis to address. or want to consider.
That is our business cycles are to violent, wealth and accumulated hard work is vapourised in varying degrees, in 7 year or so cycles. Hence, existing business don't invest beyond what they see as, I won't do that or I might lose everything zone.
The financial/investment institutions if anything, shorten this cycle by, leaving the business owner more exposed if conditions tighten, than he in a reasonable world would be.
So people, including business owners, invest, in what has proven to be safer areas. IE houses. They might drop in value, but to date haven't become valuless. Unlike finance companies, and shares still yet to show any stability. These were espoused, to be the prefered investment options, to property, by financial institutions/government, and commentators, the same ones now calling for tax changes on housing investments.
So what is required is a recognition, that doing business, and investing in areas other than houses in NZ, currently paralells a monopoly game, Govt, banks, financial insitutions. All enjoy the biggest, bite of the revenue stream, irrespectave of the trading conditions.
The business does what it can with the varying degrees of profit left from dealing with the issues at the coal face.
Little left for a return for an investor, unless in a few cases as currently appears to be the mantra, accumulated, company value is only recognised, an offset to a new investors, loss if it eventuates.
The current fashionable perception being created by the financial fraternity is that the only area considered to be of value being bought to the table is an injection from an investor, to "grow the business" . If he is game.
Three possible avenues for an investor.
One the business, owner percieves, he is signing away, all his hard work, and accumulated wealth for little value. Considers it a bad idea. Which of course it is if it goes pear shaped, it is his accumulated value, that diminishes to pay the investor any shortfall. So he blocks this idea. No room for an investor here, certainly not under the current financial institution models.
Frontera being an example that fits here.
Two The Brierlies of the 80s type strip out, ensues, as the investor has the same aversion to risk as the company owner, and wants a quick return, before the cycle, turns against them. Nothing for the future here, short term tax collection, on the strip out of accumulated assets and profits.
But very few companies left in NZ to strip. Frontera seems to fit again. Can't help but notice the enthusiasm for a float of Frontera by the Financial commentator fraternity. As above one of the last opportunities, in NZ, to quickly realise some accumulated value and profits by investors.
Most of the rest have no spare funds , available in there revenues, to give an investor a degree of comfort.
Three
It all goes swimmingly well, encumbent business owner and investor share fairly in the gains. Unfortunately, this utopia type outcome, rarely comes to pass. This is obvious, by the headlines, of the very small number of companies that are headlined, with big smiles of success. IE Navman, Trademe, probably a few others. My point being not many.
In short, currently the financial, and share broking, institutions, and advisors have no credability, there performance and advice, in there areas of self appointed expertise. has been dismal. A savvy investor in housing, has proven to be wiser, so far.
So I would like to see that instead of the, Government/financial institution, commentators bashing of housing investors, with, your spuriously created guilt, and tax penalties. Almost it seems punishment for not investing in your crap financial/share investment/business environment.
Work towards creating a business, and financial environment that investors, will with a degree of comfort invest in.

by Wally | 05 Oct 09, 2:55pm

But Richard, that's the last

But Richard, that's the last thing they will do. Expect tons of BS and spin but no change to the pigsty property speculative economy trying to float higher on a lake of debt by putting more debt into the lake. Forget it. The economy is stuffed. The banks are in control of the govt and they will manipulate like mad to keep the bubble from imploding, which sooner or later it will. Staggering to think people still have faith in politicians!!!! and still believe overpaid bank bosses have the interests of the people at heart. What a joke.

by Roger Thompson | 05 Oct 09, 3:15pm

I think that Wild Bill

I think that Wild Bill has lost his mojo , in Austin Power's parlance . Years ago he'd have hacked into the public service ( an oxymoron , if ever there was one ) , and would've taking the sword to Labour's election bribes , the WFF rort , and the interest-free-loans for students debacle . But now , not a murmur from the man . Hauled into line by John-boy , or just plain lost the plot . Either way , an ineffectual finance minister is a great asset to Goff'y chances at the 2011 election . Shame , seems a golden opportunity right now to trim Gumnut spending , particularly on unproductive Gumnut agencies ( family commission , anyone ! ) , rather than try to borrow more , to keep the whole she-bang afloat .

by Matt in Auck | 05 Oct 09, 4:34pm

Yeah Roger Bill is transforming

Yeah Roger Bill is transforming into our former Minister of Finance before our very eyes!!!!!
Why aren't they taking a sword to WFF? Playing it safe no doubt, political consequences etc.
Why stir things when you are so far up in the polls!!!!
short term politics at its very best!!!!

by Sally | 05 Oct 09, 5:27pm

Is it just my imagination,

Is it just my imagination, but I couldn't find this post on B Hickeys interest.co.nz website. I had to go into my history to load it. I have to wonder why?

by Iain Parker | 05 Oct 09, 5:43pm

Thanks Malcolm, good to know

Thanks Malcolm, good to know occasionally that one is not just yelling into the void. If folks take the time to read the below information and still cant see how we are having debt held to our head like a gun, we are stuffed, we are stuffed.
http://www.interest.co.nz/ratesblog/index.php/2009/10/03/opinion-are-we-...

This is the same Bill English we are talking about who appointed WorldBank tutor and economic hitman Chris Scott to reset the Ministry of Finance back on the unfettered freemarket and unimpeeded direct foreign investment course from which it had, very slightly, strayed under the Fourth Labour government. The proof as always from the horses mouths here, some of the regular readers of my stuff my recognise the first third, but the next two thirds I assure you will find very insightful as to what goes on behind the diplomatic curtain:
http://publiccreditorbust.blog.com/2009/06/19/john-key-brings-back-roger...

by Wally | 05 Oct 09, 6:28pm

Fair go Roger..."Goffâ€™y chances at

Fair go Roger..."Goff'y chances at the 2011 election"...must be somewhere between zero and naught. Oh you mean of holding on to leadership of the Labour failures!

by Jacko | 05 Oct 09, 6:42pm

Isn't it amazing that even

Isn't it amazing that even without,

http://www.absoluteastronomy.com/topics/Country_quota#encyclopedia

NZ's tax system so subsidises and favours a few, still, why is that?

Talking of amazing, maybe the TWG would care to watch the film, 'Amazing Grace'.

Guys, there's no point trying to stall the inevitable with fiddling and pussy-footing, in the end the right thing will get done. You guys could make that happen in a more timely manner, if you've got the kind of balls Wilberforce, Newton and Clarkson had.

by Les Rudd | 05 Oct 09, 6:50pm

Worth a read: http://www.listener.co.nz/issue/3622/features/1413

Worth a read:

http://www.listener.co.nz/issue/3622/features/14137/house_of_pain.html

"Our love of housing is fuelling the high and volatile Kiwi dollar "“ which in turn is strangling our export industries. What's the solution?"

Note to TWG - I think that's a question you ought to be addressing in your work. Don't miss the big picture.

by We are Stuffed | 05 Oct 09, 6:53pm

that's right Ian. We are.

by Iain Parker | 05 Oct 09, 7:28pm

What is needed is for

What is needed is for the Labour membership to insist upon some say in what the Labour parliamentary division is/has been doing since it was infiltrated and destroyed by the corporate raiding co-operatives Douglas, Prebble, Basset, Gaygill, Moore and someone needs to remind the Labour grassroots of the founding ideals of the International Labour Movement in England 1918, brought to NZ by Walter Nash,Michael Joseph Savage etc, which were taking monopoly of credit money supply back of the private bankers. They succeeded in 1934 when they took back control of RBNZ and issued debt free public credit to build our state owned housing project, our own money backed by our own resources spent into circulation without interest attached, a debt free monetary base that served society, as opposed to the private debt based monetary system that currently puts society into servitude, as always supporting information from the horses mouths here:

http://publiccreditorbust.blog.com/2008/07/28/labours-original-ideals-we...

http://publiccreditorbust.blog.com/2009/09/11/michael-joseph-savage-expl...

Between them Walter Nash and Rob Muldoon spanned 60 yrs at the core of NZ monetary policy, any serious student of NZ economics should read the excerpts from their books below:

http://publiccreditorbust.blog.com/2009/10/05/excerpts-from-walter-nash-...

http://publiccreditorbust.blog.com/2009/05/30/rob-muldoon-made-a-scapego...

by Iain Parker | 05 Oct 09, 7:31pm

we are stuffed, I vote

we are stuffed, I vote you for Primeminister for being very sharp in picking up on that pun.

by We are Stuffed | 05 Oct 09, 7:46pm

I accept. Now, how do

I accept.

Now, how do I go about applying for the ministerial housing allowance?

by Gerald Tait | 05 Oct 09, 10:37pm

Within the British Labour Party

Within the British Labour Party there is an active group called the Labour Land Campaign. wwwlabourland.org They have a manifesto that can answer most questions about land tax.
The introduction of a land tax should be accompanied by an equal reduction in GST (preferably) or income tax with education on television to show that the new tax is not just another tax on top of the other ones. When we had the two per cent land tax on commercial land over $160,000 up till 1988, the office at the Inland Revenue Dept. in Masterton was staffed by twelve people. They accessed the land values from the Trentham Computer Centre and sent out invoices. You can't get an easier tax system than that. In reply to a submitter who said that local bodies collect land tax through their rates, land taxes can now be an insignificant part of the rates bill. Masterton collects 29.5% of revenue by uniform charges and most of the rest by capital value. The Wellington Regional Council rates are on capital Value.
The Shand report on rating recommended capital value with its main reason being 'equity'.
If this is followed up by the National Government, then it follows that the new Super City will be on capital value with disastrous results for the new city.
It follows just like the old window taxes in England where property owners bricked up their windows to escape the tax, that if you tax improvements then you are going to have less of them.

by Home Investors | 06 Oct 09, 1:27am

Thanks for the posting. Your

Thanks for the posting. Your blog is great with beneficial content.

by Roger Thompson | 06 Oct 09, 4:05am

Spammer above , Bryan /

Spammer above , Bryan / Alex . How come you guys aren't up at 1 : 27 am to nip this sort of thing in the bud ?

by Les Rudd | 06 Oct 09, 8:26am

Jacko - re. the 'Country

Jacko - re. the 'Country Quota', interesting. The status quo, as I've come to think of it, seems to have been maintained nonetheless. Who needs to systematically rig electoral systems?

by Wally | 06 Oct 09, 8:45am

Ready for another day of

Ready for another day of poodle media BS boys? We should get a dose of English today. Silly sod is trying to talk down the kiwi while talking up the joint as a good investment....go figure. Me thinks the HongKong savers will turn him into chop whatsit.
Oh the tax working poop....yes well what a lot of hot air....all aimed at keeping the peasants busy debating how many dancing pollies can fit on the head of a pig.

by Malcolm | 06 Oct 09, 10:10am

Gerald Tait - I had

Gerald Tait - I had a quick look at www.labourland.org and, immediately, my mind was swept back best part of a thousand years to the aftermath of 1066 and the Battle of Hastings. Correct me, but wasnt it after that event that William the Conqueror instigated something similar to what our Labour Party friends are proposing: "First off, the value of every piece of land in this country should be assessed".

Would this be the same Labour Party planning to 'punish' people audacious enough to live in areas that - thus far - have been spared their relentless drive to turn England into something resembling downtown Baghdad?

http://www.dailymail.co.uk/news/article-1202173/Secret-Labour-tax-having...

As I have stated before, the debate being currently fermented, is the precursor of the confiscation of private property - based upon specious claims of some largely illusory 'capital gain'. It is, in a sense, a re-run of history in which the now hated 'middle class' are subject to a variation of Emperor Diocletian's earlier policy of 'Christian denouncement'. Moreover, the British Labour Party has been instrumental in handing over the entire British nation to alien, unsympathetic, autocratic, and frankly evil administration by Europe's new Reich - the EU. Within this are we seriously supposed to believe that they have the remotest concern for 'Joe Public's' property rights?

Our number one requirement is not new taxes - but the restoration of control over our own domestic money supply. It is the bankers and their supplicant politicians who inflated land and house prices to absurd multiples of our declining real incomes - and the only answer is to boot the bankers out! Ironically, with its considerable 'in-ground gold' New Zealand could rebuild its capital base ahead of the inevitable 're-monetization' of the yellow metal - which history demands will again have its rightful place at the head of the monetary table. Of course, the current mob will simply use any resource wealth to 'gear' more debt to ensure - at the behest of their masters - a future of perpetual debt enslavement for all Kiwis.

by Wally | 06 Oct 09, 10:52am

Bang on Malcolm..."debt enslavement"....Noddylanders believing

Bang on Malcolm..."debt enslavement"....Noddylanders believing they own property and too thick to realise the banks own them...hahaha.

by Roger Thompson | 06 Oct 09, 11:00am

Wally : Even if you

Wally : Even if you do own your property freehold , the state and local councils can , at their whim , saddle you with extras , as per Malcolm's second link . An extra fee for being close to a bus stop , or for having a patio , or a double glazed conservatory . And lest we think it can't happen here , had Clark & Cullen won the last election , we would now have squiggly light bulbs , and water regulators in shower heads . Socialists love to boss the minions around . Socialists know more than you do , what is best for you . Nanny will decide .

by Les Rudd | 06 Oct 09, 3:19pm

Hot off the NZMEA press...

Tax Working Group needs Government leadership.

The latest report from the Tax Working Group has identified that the 200 billion dollar rental property sector essentially operates tax free and has looked at various ways to close this loophole. The New Zealand Manufacturers and Exporters Association (NZMEA) is calling on the Government to act quickly on this as it has had a devastating impact on New Zealand's productive economy along with a negative impact on tax revenue.

NZMEA Chief Executive John Walley says, "Loopholes are one thing, but the effect the distortions of a narrow tax base have had on the performance of our economy have been ignored for too long. The tax system as it stands promotes investment in unproductive assets drawing capital away from our productive industries that create wealth. A house performs the same function regardless of whether it is worth $200,000 or $400,000, whereas higher value machines can deliver the productive outcomes that the economy needs."

"The Tax Working Group is working its way through the details and issues associated with broadening the tax base. Some Government officials point to concerns over the collection and efficiencies of land or capital gains taxes, but there is agreement that they ensure efficiency and fairness in the tax system as a whole."

"Transitional issues are discussed in the background papers; we are the odd one out in the developed world so we can learn from the implementation experience of others and the choices they made in regard to the introduction of a broad tax base."

"The Tax Working Group is laying out the options; politicians must now direct the working group towards their preferred outcomes so they can shift their focus towards implementation. A balanced investigation is important, but it is vital that efforts begin to focus on outcomes."

"We are already starting to see the same imbalances that contributed to our economic decline reappear so tax reform that will support the real economy must be a priority."

by Les Rudd | 06 Oct 09, 3:22pm

The TWG, which comprises individuals

The TWG, which comprises individuals from the private sector and academia and also includes tax policy officials from the Treasury and Inland Revenue, has the following membership:

Bob Buckle, Faculty of Commerce and Administration, VUW (Group Chair)
Rob Cameron, Cameron Partners
Paul Dunne, KPMG
Arthur Grimes, Motu Economic and Public Policy Research
Rob McLeod, Ernst & Young
Gareth Morgan, Gareth Morgan Investments Limited
Geof Nightingale, PricewaterhouseCoopers
Mike Shaw, Deloitte
John Shewan, PricewaterhouseCoopers
Casey Plunket, Chapman Tripp
John Prebble, Law School, VUW
Mark Weldon, NZX Limited
David White, Centre for Accounting, Governance and Taxation Research, VUW

Members from Inland Revenue Department
Matt Benge
David Carrigan
Robin Oliver

Members from the Treasury
Norman Gemmell
Michelle Harding
Bill Moran

In addition, experts in various areas have been invited to attend some sessions:

Len Burman, Syracuse University, New York
Andrew Coleman, Motu Economic and Public Policy Research
Peter Conway, New Zealand Council of Trade Unions
Lew Evans, Victoria University of Wellington
Phil O'Reilly, Business New Zealand
Susan St John, The University of Auckland

Why is this list so devoid of people who understand the needs of the productive sector?

TWG needs more than leadership, it needs more appropriate people to form a mix that properly represent the productive sector in this work.

http://www.interest.co.nz/ratesblog/index.php/2009/09/24/exchange-rate-r...

Why not?

by Wally | 06 Oct 09, 3:30pm

Because Les, it's one giant

Because Les, it's one giant load of BS with just one aim, to keep the peasants happy thinking their life might get better. There are so many tax reports in the cellar of the Beehive, they are papering the concrete walls with them. This load of fluff is destined to go the same way.

by Wally | 06 Oct 09, 3:38pm

Roger, the best act of

Roger, the best act of theft is when the thieving govt claims ownership of any mineral resource on or in your land. Which is why the Westcoasters say nothing about their wee bottles of yellow stuff.

by Selwyn | 06 Oct 09, 3:42pm

Les my understanding is this

Les my understanding is this was not a government initiative (Rather one they jumped on to) but was set up to get some tax reform going and for that these people should be applauded. Yes the list is lacking in areas but the real lack is one of guidance. What's the mission and why might be a good question to ask. Improve tax revenues, compliance and efficiency of collection is interesting but not inspiring. But these people where not tasked with being inspiring. Surely that should come from the Beehive. Anyone heard anything inspiring recently?

Didn't think it was my ears. Putting in place any policy without the ability to articulate the goal and capture the country is a hiding to mediocrity and we have had decades of that. The quote I remember from someone in the media was "John Key has great antenna but no compass and isn't that proving to be true. He can pick the mood of the people (10/10) but where the hell are we going (1/10).

Managing a country on an issue by issue basis is a good way to go around in circles over a few years and not even know until the reporters play back the quotes from a few years before. Any business worth their salt has a strategic and business plan and we don't seem to have either as a country. Is it just me or is that a commonly held belief and fear.

by Harriet | 06 Oct 09, 3:51pm

As I have suggested before,

As I have suggested before, Selwyn, John Key is interested in (10/10).... John Key, and being PM of NZ is a necessary prerequisit to attaining his goals. UN, anyone? He can follow the path of his appointee, and hopefully go further? Nothing wrong with ambition at all, but let's hope he doesn't acheive his goals to our detriment.

by Les Rudd | 06 Oct 09, 3:57pm

Selwyn - interesting information, thanks.

Selwyn - interesting information, thanks. In that case they should be applauded, especially as their work has been compromised from the outset with unsurprising political steerage from Bill English and John Key - "don't come back with proposals that are not politically feasible", "I do not support a capital gains tax."

So they have had leadership of a sort. Just the wrong kind.

One of my concerns from the outset, has not only been the lack of representation from our sectors, but the mild, near visionless terms of reference. A problem that also seems evident with the PWG.

Or maybe Wally has got it bang on.

TWG - proves us all wrong.

by Roger Thompson | 06 Oct 09, 4:23pm

I'll back Wally any day

I'll back Wally any day , over that lot in the TWG .

by Wally | 06 Oct 09, 4:35pm

RBA raised the rate....hoho...now watch

RBA raised the rate....hoho...now watch the rates rise here!

by Les Rudd | 06 Oct 09, 4:55pm

Does anyone know anything about

Does anyone know anything about the origins, thinking, behind the 'Intent Rule'?

On a thread far, far away I mused this through:

"Back to the present "˜intent rule', I have not found anything on it's original purpose. However going back to my point about how New Zealand has derived most of its wealth, I suggest it's original purpose was not only to distinguish those trading assets for a living, but to ensure that those taking on the risk of ownership of an asset as a primary source of income for themselves and others would, a) not be penalised for the risk of ownership of that asset (farm, forest, wood mill, etc.), especially as in some circumstances of failure or loss at resale they may have no way of loss adjusting in the future, and b) because having paid tax on income derived from the asset it would have seemed like being taxed twice if the capital gain was taxed at resale."

If this were the case, say, BUT it is now the case that, working an asset is NOT generally about generating the primary source of income (quite the opposite in fact, see above comments in this thread and some associated with ag, the dairy sector) but the primary source of income from the asset IS SPECIFICALLY via capital gain from appreciation of the asset, then should that capital gain NOT be taxed, no matter how long it takes to eventuate? This would erradicate the frequency, time of holding vagaries associated with the 'Intent Rule', but perhaps the best way to deal with the 'Intent Rule', is simply to abolish it completely. Recognising it's inappropriate applicationin todays investment landscape, which along with other wee rorting-loop-holes have contributed to the structural imbalance we have in our economy today? ("rorting-loop-holes" see above comments in this thread - we all knowwhat they are.)

Why is the TWG not addressing the obvious?

by Gerald Tait | 06 Oct 09, 10:30pm

The first person to promote

The first person to promote a land tax was Henry George in the latter part of the nineteenth century, and to this day there are organisations in many countries that still promote this tax as the one that is socially just. Australia has "Prosper Australia," Britain the "International Union for Land Value Taxation," and the USA has the "Robert Schalkenbach Foundation,"
Since George's day it has been recognised that the economic rent generated by land also applies to every other natural resource. There is an enormous source of revenue out there that is presently monopolised privately.
The monopoly game was first invented by Quakers in the USA to show the pernicious effects of land monopoly. The â‚¤200 for passing GO was wages. Gaol was Debtors' Prison, Chance is the modern Lotto, and Community Chest is Social Welfare. Free Parking is any public land that the homeless can lay their heads on.
The Quakers invented a second game where the site owners had to pay their ground rents to the Bank which distributed credits to the other players. Of course this game went on forever and no one could be a winner in the Monopoly sense.

by Mark Hubbard | 07 Oct 09, 12:00pm

Looking at the composition of

Looking at the composition of this taskforce is interesting, given it is stacked with vested interest, thus conflict of interest, toward creating a new tax.

I'm not impugning any individual member of the committee, I'm sure they think they are acting in NZ's best interests (just a pity this always seems to mean the growth of Big State slavery), but every sector represented on this committee has a conflict of interest.

The Treasury and IRD members are paid by the State, so know tax revenues are falling to pay their wages, and that of the entire overblown State sector, currently being paid via borrowing. Can anyone cite a report out of either of these departments that has recommended slashing the staff numbers of their own departments so that the government doesn't need so much tax, and the productive sector can be given substantial tax cuts, as with workers in that sector, so they can save, and our economy can then grow from savings, not counterfeit capital ( http://pc.blogspot.com/2009/10/dairy-bubble-starts-to-pop-and-guess.html ) ?

The accountancy and law firm members also will profit from having to administer yet another tax. Bread and butter stuff for them.

And the member of a funds management company, surely, has possibly the biggest conflict of interest of all: much money leaving housing, one would think, will end up in the funds management industry, thus this task force's recommendations will be a boon for that industry.

Why are there no Libertarians on this Taskforce to give at least one opposing view?

So, anyway, okay, let's go: we further distort the market by iimposing another tax, rather than dealing with the real problem: the size of the State and the tax take needed to keep it fed, and the distortions of the free market by the State, starting with Bollard's distorting of the cost of credit, and the Reserve Bank sanctioned fractional banking system. We are so far removed from a laissez faire markets, there are so many non productive working mouths to keep fed now, there is no way back is there? Crony capitalism, rent seeking through game playing with the State, and the welfare state, remain my prison to the end of my days.

And for the record, unrelated to the above, there is already an effective CGT on land transactions under our existing taxing legislation, as has been stated by so many, so this taskforce was yet another waste of my tax money. How do we find the total cost of this taskforce?

by Mark Hubbard | 07 Oct 09, 6:13pm

Again, per my above post,

Again, per my above post, is there any way to find out the total cost of this task force - all reimbursements, venues, wages, etc?

by Jacko | 07 Oct 09, 6:24pm

@MarkH, it's called an OIA

@MarkH, it's called an OIA request. Keep them to the 20 day rule. Google and sus.

by Mark Hubbard | 07 Oct 09, 6:28pm

I will. Cheers Jacko.

by stevek | 07 Oct 09, 6:39pm

Selwyn - "Managing a country

Selwyn - "Managing a country on an issue by issue basis is a good way to go around in circles over a few years and not even know until the reporters play back the quotes from a few years before. Any business worth their salt has a strategic and business plan and we don't seem to have either as a country. Is it just me or is that a commonly held belief and fear."

Bang on. John Key is no better than Helen Clark. Both wanted to be PM from an early age and achieved it via different routes, but when in power became "grey" managers devoid of vision or spine. Unless Key has a rapid transformation, his epitaph will be "nice guy but presided over the biggest loss of sovereignty and wealth in New Zealand's history"

Mark Hubbard - I don't agree with your libertarian fundementalism, but you are dead right on the scourge of quangos and consultants in the public sector. How many ex politicians are now chairmen or consultants to government departments, or to quangos like the tax commission. I know, lets ignore the advice of the policy analysts on $40,000pa and bring in some outside consultants at $200-500,000pa to give "better" and "unbiased" advice. Yeah right. Its a complete rort. Hundreds of millions could be saved by getting shot of consultants.

by jimmy | 07 Oct 09, 7:19pm

Mark, There is NOT an

Mark,

There is NOT an effective CGT in place. It is poorly enforced and catches only a few property speculators. Lets face it, with yields at 4% how can you be anything but a speculator these days????

As for this being additional tax revenue you miss the point. The review is about coming up with revenue neutral proposals. A land tax would be accompanied by a drop in personal rates.

It wont add work for accountants etc, as the intention is to reduce the incentive to avoid tax. Once personal rates are lower there is less incentive to circumvent the taxman. The beauty of the land tax is there is NO way to circumvent it as it would apply to ALL ie homeowner, investor, company, foreigner - So regardless of what entity holds the land, a tax will be due. NO ability to offset costs, NO ability to put into a foreign company name, NO ability to put in your wife's name, NO ability to hold off sale to wait until you are in a lower tax bracket (ie retirement) ETC ETC ETC ETC.

In theory a CGT is a better tax - but in practise land tax is all encompassing, easily and cheaply enforced and forces those currently enjoying tax free capital gains to pay a bit more of their fair share. LETS GET BEHIND IT!!

oh - and it just might help deflate our housing bubble

by Les Rudd | 07 Oct 09, 7:37pm

Mark - you are an

Mark - you are an accountant, right, so can you help me with my question above. Thx, Les.

by Jacko | 07 Oct 09, 7:39pm

@Mark H, don't forget to

@Mark H, don't forget to use the ombudsman if they stall. Maybe you should ask about the cost/benefit of their work, if successful - always a killer with gov. dept. talk fests.

by SORE-LOSER | 07 Oct 09, 7:45pm

Let us be clear on

Let us be clear on what JOHN was and is. No better than his predecessors.

JOHN was a manipulator of currencies for which he was Royally rewarded. A rort is a rort whatever you call it dealing or not.

However NO thought was given to the victims of his DEALINGS.

For every winner...there is a WHINER.

Similarly in the current state of his employment he cannot lose.

In fact as someone else pointed out he is able to take Holidays with his New Pals overseas, whenever he likes, though most New Zealanders are struggling to get 3 weeks per year and pay his Wack.... too......again..

In fact being Prime Minister will help him in his rort to succeed. What his own agenda is, is anybodies guess, but it is not to put NZ right for normal New Zealanders.

Likewise OBAMA, his Agenda is not for the USA's benefit, but his masters. In fact he is just like that old Gramaphone Company logo.....HIS MASTERS VOICE.

His abysmal failure trying to get the Detroit Olympics finalised was a case in point, just a bit of SPIN and Flim-Flam to take the suckers minds off their woes.

A fixer he certainly AIN'T.

As to why anyone would employ Consultants, it is mostly to confirm their own Agenda, not do the right thing by their Constituents/Companies/TAX situations etc.

I have known many Consultants and the first item on the Agenda was to find out what the BOSS/MAYOR/BOARD etc wanted to achieve and then put a final report that stated that case.

Well it wasn't the final thing,that was to pick up their inflated check.

Unfortunately the Agenda, didn't always turn out in the best interests of the Company/Staff/Opponents/ELECTORATE/Investors.......whatever....just to maintain the snouts in the trough.

Jobs for the boys, often followed. We call it Fonterra, MMP. UN...etc.

A bit of SPIN never went amiss. A SNOWSTORM of it was heaven sent.

If a few soldiers, investors, constituents got hurt in the process, that was just par for the course. A little of the wasted billions of other peoples money stuck to Sticky Fingers.

Unfortunately this has led to the fiasco we have today. And a lot more people being hurt.

The CLASSIC world wide PONZI schemes. to perpetuate the MANTRA and Lifestyles of the idle rich.

Except this one has got really out of hand....

Have I got a CON for you...and it was not short for CONSULTANT.

UNBIASED ADVICE...another TUI....me-thinks..Stevek.

NEVER NEVER let anyone play with your MONOPOLY money.

by jimmy | 07 Oct 09, 8:00pm

SORE-LOSER, I kind of agree

SORE-LOSER,

I kind of agree re John Key. I dont think he speaks or comes across well, and contrary to popular belief he has not suceeded in business - he worked in a bank for pete's sake. I would be much more impressed with a producer/exporter leading this country given that we rely on them so much (and then crap on them with policies rewarding speculation).

by The Bank Manager | 07 Oct 09, 8:04pm

Jimmy - Bankers rule the

Jimmy - Bankers rule the world mate!

by Jacko | 07 Oct 09, 8:08pm

@ BM, ever heard of

@ BM, ever heard of Goschens mate?

Coming to some islands near you.

by Iain Parker | 07 Oct 09, 9:14pm

Mark - you poor upside

Mark - you poor upside down lost chappy, I have already asked the questions of the answers you seek of the last Labour government in this article here:
http://publiccreditorbust.blog.com/2009/03/18/just-who-does-the-hiring-a...
Not only does it give you an indication of how much is spent on external contractors and consultants($27 mil over 4 yrs they would tell me for free) over and above the 400 odd core state services staff per MP, but also a clear idea of the multilayered process of hiring and firing that just see's the elected representatives rubber stamping the appointments, at local and national govt level, that the captains of corporate industry recomend.
Mark - hopefully it might help you get your world in order, because at the moment its like a tumble drier.

by Leif Pratts | 30 Jan 10, 3:35pm

Thank's 4 The Good Article!

Thank's 4 The Good Article! I have heard Free Annual Credit Report is definitely a excellent site to check my free credit report and get the score 4 nothing. Anyone else used it?

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