Ooooooooh Alex : Don't tell me that these august folk have twigged to Michael Cullen's warping and convolution of our taxation system ? So it was all hunkadory until about the year 2000. And it seemed to go pear shaped after that. And what did Cullen do to the McLeod report of 2001, shelve it ! And what has Bill English done with the McLeod report........nothing. It's still where Michael left it.........Hmmmmmmmmmm

I don't even have the heart to participate in this thread, from this post. The story is depressing, the thread no doubt will be.

Look at what these idiots are doing, using the complexity of the taxing legislation - and no disagreements there, it is ludicrous, and nonsensical in a manner that would be hysterically funny, something out of Pinter, if if weren't for the fact this legislation is used to clobber taxpayers with - but this lot are using it as an excuse for the government to ultimately get a bigger tax out of SAVINGS. You know, SAVINGS, the lack of which is one of the primary things wrong with our economy, and represents one of the biggest problems we as a country face as the baby boomers retire. And this is the first area they are attacking.

Let's not even worry about the contorted nature of tax legislation in EVERY OTHER AREA of business activity that serves to stymie that activity, and before which, as I have said before, often a taxpayer can gain no clear advice on their position before the law, but if they are found wanting will be clobbered with penalties and use of money interest that are obscene. And meanwhile in Australia they are talking about abolishing corporate tax. That's simplification.

The way to correctly solve the complicated tax law relating to investment and superannuation savings, and encourage such savings, which is what has to happen, is NOT to tax them. That's simple. Why does no one who is involved in this process ever able to get themselves to this most sensible of positions?

God save us from academics and the Left - which are always the same. I hate this, and these people.

"(O)ne clear result of this work is that richer, more highly paid individuals are best placed to maximise their after-tax incomes through use of the techniques illustrated in the PensionBriefings. That seems to strike at the heart of equity that should be an important component of New Zealand"Ÿs tax and welfare arrangements," he said.

Whoever wrote this paragraph should have given his qualifications for making the statement, which in this case would have been: 'Qualification: Bolshevism is my guiding principle in life'.

Okay, nothing more to see of this train wreck, back to work please ...

What is so universally complex, regressive and inequitable about NOT TAXING them at all?

Oh dear, it is well known that Labour governments are generally better for tax loopholes as they add layers of regulations each time they try to fix or favour something. National or conservative governments tend to be more financially literate and so tend to close loopholes. High tax rates warp all investment decisions (anyone fancy investing a few million in a vineyard in Otago?).

You study, again, much of which I agree with in the detail, does not aid toward this much bigger "˜revolution' - and that's what it is - which much occur.

Sorry typos - Your study, much of which, again, I agree with you on in the detail, does not aid toward this much bigger revolution - and that's what it is - which must occur.

So I guess we get the uniforms at Postie Plus then, Mark.

Mark

I need to divide the discussion into two sections. The first concerns the issue of New Zealand Superannuation. Despite everything you might have read, we do not face a financial crisis with the future cost of NZS. All the major reviews of this specific issue (1992, 1997, 2000, 2003, 2007) have concluded that what we have is broadly sustainable. Its cost will about double, left alone, because the number of superannuitants will about double. But, even by 2050, the cost of NZS as a proportion of the economy will be somewhat less than many countries are already spending on pensions (before their baby boomers start retiring). That does not mean NZS should be left alone only that we do not need to cut it back on cost grounds alone. It simply isn't a crisis now or in fifty years.

Whether we should have NZS, as you suggest (or allow some kind of opt-out) is another issue. I think NZS is probably the best Tier 1 scheme in the world and, partly as a result of NZS, New Zealand has one of the lowest poverty rates amongst the old of any developed country; also that the old are generally the most content with their lives of any group in NZ, despite their relatively low average incomes. Finally, it also helps to contribute to the fact that about two-thirds of New Zealanders aged 45-64 are saving 'enough' or 'more than enough' for retirement (not including the family home in that calculation). So NZS does a lot of good things. I used to think it should be income-tested but I have changed my mind on that - just look across the Tasman to see why that is so. [Evidence for all these things is on www.pensionReforms.com].

On the issue of tax breaks for retirement saving, if the 'price' were no NZS, there is a certain logic to that and that's kind of what the Australian arrangements are all about. But as the RPRC has demonstrated in those PensionBriefings, if you give me a complex system that allows me to re-arrange my affairs to game the rules, I am sure I will find a way. Bureaucrats are, almost by definition, behind the game on these issues. Financial planners in Australia get about three quarters of their income engineering such arrangements. I don't think that's a good thing.

So, I quite like what we had before 2000 - the universal NZS that we have now plus a tax-neutral TTE environment for all other saving, including employer-sponsored arrangements. That way, individuals will make their own saving decisions in all sorts of ways - paying off debt, building a business, buying shares or putting money into a retirement saving scheme. That is more likely to grow the NZ economy than the tax-subsidised arrangements we have acquired since 2000. And growing the economy is by far the best way of preparing New Zealand for the cost of baby boomers.

We need a debate about when NZS should start and how much it should be but, as someone who has generally looked after his own financial needs, I am pretty content with NZS in broadly its current shape. Given that we already have one of the highest work-force participation rates in the developed world amongst those over age 65, New Zealanders are making their retirement age decisions in ways that suit their wishes/needs. On that basis (and in the context of generally improving health at older ages and mortality/morbidity) we shouldn't be scared of the idea of a later state pension age than 65.

We need a sensible research-based discussion on all these things, something that the government appears to have ruled out (which is a shame).

Michael

This is getting interesting.

Over much of this, we have irresolvable philosophic issues, between you and I, so I will leave those out. But this surprises me:

Despite everything you might have read, we do not face a financial crisis with the future cost of NZS. All the major reviews of this specific issue (1992, 1997, 2000, 2003, 2007) have concluded that what we have is broadly sustainable.

That certainly is counter to everything I have read (in the mainstream media). And I don't understand the logic of it.

You also say its cost will about double, left alone, because the number of superannuitants will about double: that I have difficulty with, no doubt on your site there is a study I can read - I shall have a look over the weekend - but does this analysis bring into its ambit the size of our State and Welfare sector proper, not just the retiree sector?

By that I mean my understanding at the moment is there are about 3 people working and paying tax to pay for two who don't (beneficiaries, retirees, etc), in NZ. My understanding is also that by the time you add state sector employees to the appropriate side of the ledger, beneficiaries (certainly not the productive sector, indeed, a drag on it), then even now it is almost one person paying tax to support almost one who isn't. It's not one for one, but it's pretty close.

I would already call that situation an impossible one, a tipping point if you like. Now looking forward, logically, from that, to a stage when the number of retirees is doubled, plus, by the nature of the welfare state, it continues to grow - and there is nothing to counter that argument - then your studies must be relying on a huge influx of immigrants, or a bigger baby boom (which should be happening about now) to be paying all the tax to cover this future liability?

I would love to read a study on just this factor, because this doesn't intuitively compute for me at all.

(And remembering, even if you're right, it doesn't change my stance, which is made based on philosophy, that is, I want to live in a minarchy, and not this clobbering great big Nanny State that we have. But I shall leave these issues out.)

Cheers Michael. I'll have a good look through your site over the weekend. [I reckon there must be some spurious assumptions in the figures somewhere.]

Michael - I'm struggling with part of your response to Mark "..there is no international evidence to support the idea that tax incentives increase saving overall.."

I'm a NZ'er running my own company but based in the UK. I have a choice of how I distribute my income, either I declare a dividend and wear 40% income tax or I contribute into a pension scheme where my contributions are topped up by almost 40%.

The incentive to save here is sufficiently large enough to change my behaviour from consumption to saving. Obviously I am a sample of one so what goes for me doesn't necessarily work for others.

SimonD - If I were in your situation, I would do exactly the same. I joined KiwiSaver on day 1, not because I think KiwiSaver is good for the country (it isn't) but because it's 'free' money and my taxes will be higher to pay for all other KiwiSaver members' 'free' money.

If you are interested in the academic research on the impact of tax incentives for retirement saving on a country's behaviour, go to www.pensionreforms.com, then use the Search & Options tab and choose 'Taxation' as your topic. In summary, tax incentives certainly affect behaviour as to how people save but seemingly don't affect the quantum of saving made by a country. In fact, because of their high cost, complexity and prompt to behaviour, there is a respectable argument to suggest that they actually reduce a country's 'saving' as economists define that expression.

To answer Mark Hubbard's question, if you were to return to New Zealand, you can transfer the lot to a New Zealand scheme without having to pay tax in the UK, or New Zealand for that matter. That is by far the best of all worlds for you personally. You just need to make sure you don't start drawing down on your benefits before the transfer.

Michael : Shame that the 'free' money you speak of, comes at such a high cost to the tax payer. Pity also, that KiwiSaver will lull people into thinking that it is all they'll need for their retirement. Cullen/English and co. will be long gone by time the penny will drop with the populance that the woeful returns from the fund managers are unlikely to be much above the CPI ( the inflation rate ). And then those X & Y gens. will realise that they too, have been utterly screwed by the same mutinational firms that rooted their parents and grandparents a generation or so before them, with dreadful returns on life insurance products and other savings schemes. A newly signed up policeman showed me the police superfund booklet, and had it been me I'd charged around to the fund manager's office fully armed with tazers.

Wally : The Nats. are in Chch today. Gonna take the ute into town with a "Up the GST, Bill" sign........should get enough of the smelly stuff flung at me to do the vege patch and orchard........"Give us a CGT, Bill". Thanks for the idea. Grand !!!