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Economic weather report: 5 reasons why John Key’s tax plan won’t deliver a ’step change’
February 10th, 2010
Bernard Hickey delivers an Economic Weather Report in association with BNZ that details 5 reasons why National Prime Minister John Key’s tax reform plans announced yesterday won’t deliver the ’step change’ in New Zealand’s economic performance he wants.
Key talked about the need to encourage investment in productive assets and pull property into the tax net. Instead, Key’s decision to tax property only lightly and exchange a higher GST for lower personal income taxes is more of a giant ’side step’ of a tough decision.
1. The NZ$600 billion hole in the tax system (total value of residential property) has not been patched up or even vaguely squeezed. John Key commented after his speech that his unspecified references to measures to tax property investors referred to the removal of depreciation on buildings as a taxable expense. The Tax Working Group estimated that could bring in NZ$1.3 billion if it was applied to all buildings.
KPMG has since pointed out that 70% of that cost would be borne by commercial property owners, many of who are owner-operated businesses. That means residential property investors face a tax hit of NZ$390 million on assets worth NZ$213 billion (0.18%). Most tax experts believe that NZ$1.3 billion is a maximum figure and many property investors will be able to prove actual depreciation and avoid being hit.
2. The GST hike fixes nothing. The proposed hike in the GST rate to 15% from 12.5% would nominally raise over NZ$2 billion, but the Tax Working Group pointed out that compensation to poorer taxpayers most affected by the hike would mean the net benefits would be closer to NZ$200 million.
John Key suggested after his speech that the compensation would come in the form of reductions in the lower 12.5% and 21% income tax rates, along with increases in benefits. That would be better than Working for Family-style tax rebates suggested by the Tax Working Group. But it still raises the question: why bother employing a whole bunch of bureaucrats to administer the compensation when the net benefit is so small? It leaves little fiscal headroom for a significant reduction of the top income tax rate of 38% or the corporate tax rate at 30%, which may be necessary if Australia cuts its rate from 30% to 27% or even 25%. It will be very difficult to equalise the top personal tax rate, the family trust rate and the corporate tax rate with such a small increase in new revenue.
3. There isn’t enough money to make a difference. Without a land tax or a capital gains tax the net revenue raised from denying depreciation on buildings, changing thin capitalisation rules and removing depreciation loading on plant and equipment would raise around NZ$2 billion. John Key said after the speech the ‘across the board’ income tax cuts would cost NZ$3 billion to NZ$4 billion. Where is the money coming from? He will certainly find it immensely difficult to pay for any corporate tax cut necessary to follow Australia.
4. The GST hike could prove politically very difficult. John Key pledged before the election that he would not need to raise GST if he was a half decent manager of the economy. See the link here. This doesn’t look good. It also reduces the likelihood of any sort of politically sustainable ‘grand coalition’ with Labour to shepherd a wide-ranging tax reform programme through Parliament.
5. The new tax system would not be broad enough. A land tax or a capital gains tax would have ‘captured’ that part of the economy that is effectively untaxed at the moment. A land tax that included a tax-free threshold of say NZ$50,000 and the ability to defer payment until the property is sold would have hurdled the political problems of grumpy grannies in Remuera and shirty farmers.
Instead, the tax system will be focused on extracting more income from those PAYE taxpayers without families who are unable, unwilling or ignorant enough not to have bought rental investment properties. It will have failed the Tax Working Group’s drive for a fairer, broader and flatter tax system to cope with an impending increase in government spending needed to pay the health care and pension costs of baby boomers.
Tags: Economic weather report, Tax Working Group
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February 10th, 2010 at 5:50 pm
You forgot “they’re not actually addressing the problem.” The problem isn’t the size of the tax base, it’s the size of the Government budget.
February 10th, 2010 at 5:58 pm
Bernard, why are you so keen on the Government to take more money off people by taxing people more and more? To me, the less every one of us pays in tax the better – zero tax would be ideal. So, no CGT, no RFRM, no land tax, tax cuts in general – all of these are great! Pitty they still intend to crank up GST and disallow depreciation claims…
February 10th, 2010 at 6:28 pm
The figures that you are quoting will be meaningless, as the TWG knows full well, professionals worth their slate will think up some way around any complexity in any system. The problem with the governements books is that they are spending too much. DPF at Kiwiblog points to having 100 people come off DPB saving the taxpayer $10m. Isn;t this the sort of useful target to aim at. You are advocating taking more off people who are attempting to secure their financial futures through investment, because today it’s property, tomorrows rich prick getting a free ride will be a shareholder, the following week/month/decades will be the business owner.
Its all too much stick and no carrot. It would be better to offer lower tax scenarios for those who export if that is the activity that you want to see more of. The end result is increased productivity, whose spin off will be more employment, greater profits for the risk takers, and thus a bigger pie alround.
Key has been forced into a situation where he has to accept that the social good of housing the poor is not going to be ever effectively met by government, because any attempt to do so would bankrupt the country. The basic necessities of life dictate that for a productive worker, they must have some form of protection from the elements. By shunning this investment class you effectively close out the inherent competition in the system that keeps rents for these people down.
The reality is, it now costs in excess of $900/ sq m to build housing, and a standard 3br house of 100m2 would cost 125k to build (materials, fees, consents etc). A this is just the house, not including the land, which given today’s draconian RMA, and imbecilic town planning policies, costs at least 150k to bring to market. In order to meet the outgoings on this property it must yeild at least 26k per annum. Is Joe Punter going to pay $500 per week to live in a Keith Hay style house?
Will you be happy when your taxes have to go up to pay for the govt provision of the estimated 100k newly acquired state houses that would be needed to house these people?
I doubt it immensely.
February 10th, 2010 at 6:51 pm
Better to attack the use of trusts that shelter income. Work it oput. Tax trusts at 39% and company and personal at 30% and see the taxable income go through the roof. Then we can reduce taxes. Trusts began as a means of protecting assets but are now widely used to shelter income. Hence the growth in trusts and the huge number of people who arrange their affairs to collect WFF.
Not new of course, the same tactic has been applied to university subsides and rest home subsidies and others.
Bernard, LAQC’s ain’t the problem Trusts are.
February 10th, 2010 at 7:34 pm
I have a niggly naggly feeling that Key has misfired , and hit commercial property in the guts , rather than residential rentals .
As someone above said , a crucial point is the level of government spending . We are living beyond our means . Michael Cullen’s spendfest continues unabated .
And as you say , BH , the balance of tax remains largely unchanged . Production will continue to be taxed heavily .
As unpalatable as this is to say , we gotta give Key our thumbs-down at the 2011 election . ……………. . You keen to have a run at it Bernard ; El Presidente Hickey ?
February 10th, 2010 at 7:54 pm
I think you’ll find the answer to:
3. There isn’t enough money to make a difference. Without a land tax or a capital gains tax the net revenue raised from denying depreciation on buildings, changing thin capitalisation rules and removing depreciation loading on plant and equipment would raise around NZ$2 billion. John Key said after the speech the ‘across the board’ income tax cuts would cost NZ$3 billion to NZ$4 billion. Where is the money coming from?
Is classic politiking – the answer is in (2) – the $1-2b gap is the same $1-2b that low income earners will be compensated with to account for the GST rise:
2. The GST hike fixes nothing. The proposed hike in the GST rate to 15% from 12.5% would nominally raise over NZ$2 billion, but the Tax Working Group pointed out that compensation to poorer taxpayers most affected by the hike would mean the net benefits would be closer to NZ$200 million.
John Key suggested after his speech that the compensation would come in the form of reductions in the lower 12.5% and 21% income tax rates, along with increases in benefits. That would be better than Working for Family-style tax rebates suggested by the Tax Working Group.
At least I think that’s how its going to “work” (and I use that term very loosely).
February 10th, 2010 at 8:06 pm
Bernard Hickey, Labour’s stooge. He encourages everyone to leave NZ so that his Labour mates like Jacinda Ardern can have a field-day in the house. Bernard Hickey comes down hard on John Key because he pines for the halcyon days of Clark and Cullen, when there was no housing bubble. Bernard Hickeys dream team would be Phil Goff as Prime Minister with Mark Weldon as Minister of Finance. Bernard Hickey wants John Key to bring in radical policies all in one fell swoop so that National will be an unpopular one-term government and his Labour mates can get back in power. Bernard, why not start a ‘Share Market’ political party so you can form a MMP alliance with Labour. Chardonnay socialists, gotta love em.
February 10th, 2010 at 8:16 pm
Bernard,
I don’t think you are fighting the wrong battle – rather I think you are in the wrong war.
John Key and the National party are there to defend the status quo – that is all they understand, and what they will do untill they are thrown out.
The government that replaces the current coalition will be drawn from amongst currently existing parties. They will be elected in the hope they will to do a better job of defending the status quo, but they too will fail and be replaced.
At that point there is some hope for change from a political party probably not yet in existence – one formed in the hope of changing the status quo.
So, my suggestion is that you give up trying to fix the unfixable, and start work on building knowledge and understanding of a system to replace the current one when it collapses in perhaps 4-10 years.
February 10th, 2010 at 8:35 pm
OS : You say zero tax would be ideal?
That is nuts. A country needs a certain level of Infrastructure to function properly. How should that be funded?
reduced tax yes, zero tax no way.
In your ideal world
Zero tax might imply nationalisation of assets to provide income for the infrastructure needs of the country. A bit like a middle eastern kingdom and oil revenue.
is that what you want? the govt running the entire show.
or maybe you would prefer the opposite, eveything in the hands of business where we would pay and pay for every little service we required.
I have a feeling this would end up costing more ?
Far better the middle road, no? where we all pay a stake and provide for the needs of our country together as a community?
Reduce spending? Cut benefits yes- A comparison : In Japan if under 45 years of age you may claim, in the majority of cases, the unemployment benefit for 90 days only, after that you are on your own.
I am sure that little rule must save the govt of Japan bucket loads.
If you are over 45 years you can get it a bit longer, up to about a year max.
Interesting the way other countries deal with issues so easily that we find so..taxing?
February 10th, 2010 at 9:03 pm
Bernard
I very much appreciate your considered thoughts and agree with about 90% of them. You are a genuine thinking person who cares deeply for the future and future generations in New Zealand. I have a lot of time for you and the likes of Roger T and the misnamed “Sore Loser” ( a sore loser he is not, but instead a sweet and eloquent voice of reason).
I do support of a land tax in New Zealand on all residential rental properties across their entire land and buildings value ( and potentially commercial property, farmland and owner occupied housing above a threshold). The land tax quantified to derive rate and base so that it yields Government around net $5 billion per annum on all residential rental properties ( expansions on other bases would increase the net tax take). I do not support any of the other tax reform renenue raising measures proposed. But land tax has to be accompanied by a range of other measures including a three year transition to full abolition of WFF, extensive welfare reform to remove significant numbers who should not be receiving a cash handout and reduction in top personal rate to no more than 33%. And a genuinely tax incentivised system for saving for retirement for Joe Average ( not the anaemic and flawed kiwisaver), as New Zealand superannuation in its current form has is totally unsustainable in the short to medium term.
I’m mindful that a land tax on the residential landlord could very well create some sharp and painful dislocations in the economy. To mitigate “rent squeezes” and some of the other hardships, I propose a suspensory loan scheme SLS for first home owner occupier buyers of New homes. If a married couple , neither of whom has owned residential property anywhere in the world, can raise deposit equity of $40,000, they get a suspensory loan of $20,000. If they can raise a deposit equity of at least $70,000 or increase their home equity to $75,000 in the first three years of ownership , the suspensory loan can rise to a total $30,000 Principal between the married couple. Suspensory loan runs for 21 years maximum . In first three years, SLS does not attract interest. Thereafter , interest at Govt borrowing rate plus a modest margin ( variable rates with resets) and the interest is never forgiven. At end of 21 years if couple has paid off all other debt on home and observes other conditions, then SLS Principal is forgiven – turned into an outright tax free grant. Other conditions include : no recipient can have received WFF in last 5 years prior to application; all applicants must be 23 – 45 years of age; SLS teminates and becomes non concessional interest bearing loan at trading bank rates with no potential for Principal forgiveness if any applicant is in receipt of a welfare benefit while SLS loan is on foot; concession permitted for applicants to experience OE for up to 7 years – during period of absence interest at non concessional trading bank rates applies , but on return opportunity to continue as before with chance of Principal conversion to grant. Applicants must have been NZ citizens or permanent residents 15 years prior to application. Single applicants have 35 % size of SLS of married SLS caps. SLS statutorily placed ahead of first mortgages in insolvency pecking order. Rules for early payouts and house sales – proportionate reductions in conversion of SLS to grant – eg if sell home with a SLS in year 4 and have observed all other conditions, then conversion to grant on Principal is 4/21 but rest of Principal of SLS is repayable to Govt. SLS scheme takes applicants for a period of 7 years.
Advantages – gives young capable people wishing to contribute to NZ and raise a family without welfare an incentive to stay and contribute and acknowledges their value to the economy and Society. A stimulus for building industry across the new 7 – 10 years and encouarges supply. Encourages thrift to raise a deposit and could be further fine tuned to encourage even greater equity in home. Moves at least the good young people off the landlords and counterbalances rent stresses – takes the good demand out of the rental sector. An intervention that improves the qualitative level of people and moderates both new and used and rent prices, given the “magic” of the supply side factor.
PG
February 10th, 2010 at 9:07 pm
Hey Robert, why would tax go through the roof if you taxed trusts, the problem is the multitude of tax rates, not the vehicles. Tax trusts and trusts would not declare income, income would make its way to the lowest tax rate as it does now.
If you tax fairly and evenly people don’t alter where the incidence of tax falls.
In fact if you lower taxes the tax take will go up, people forget about the secondary effects of providing the right environment, currently we have too many people sucking off the tit of the governent and dont want to strive for anything, and expect an ever increasing share of the pie with an ever decreasing amount of effort.
And people wonder why the gap betwen rich and poor gets wider.
February 10th, 2010 at 9:23 pm
PG don’t you think that these loans will just inflate the prices moderately and tie up tax payer funds for now other reason then to have all kinds of administration costs. Why would you want this in place, there are lenders giving loans of up to 95% to people who can afford it. I think that you will find banks have become experts at judging who can afford a loan after years of practice.
What we need is less tax all around, which is what John Key is trying to achieve, basically if you buy more things then you pay more tax.
Why do we keep trying to compete with Australia, why don’t we look at our strengths as a country and try and support those industries. I think less taxes for corporates is a stupid idea, as it is we are one of the only OECD nations not to force business to look after ongoing employees welfare, such as health insurances and retirement.
The property bubble is just a symptom of a greater problem, restraining it will just cause a different asset bubble.
February 10th, 2010 at 9:34 pm
Hamish : Agree that we can enjoy the uniqueness of life in NZ . But , and this but is bigger than Jenny Shipley’s , we gotta stay in touch with Oz . If we don’t , we will see a continual drain of companies and skilled people to them .
And the points Bernard raises are about re-balancing the tax system here . Not increasing it . It appears to have tilted over to favour unproductive endeavours and consumption .
Labour 1999-2008 massively ramped up government’s share of the country’s GDP , and now we can’t afford it . The commodities boom , predictibly , ended . We are borrowing $ 250 m. / week to prop up Labour’s policies . That is living beyond our means .
February 10th, 2010 at 9:36 pm
A National Govt was never going to come down hard on property despite what the TWG recommended.
Anyone who thought the Nats would was a total dreamer.
February 10th, 2010 at 9:41 pm
BM – yep, Wally has been right all along on this one. It’s just about holding the status quo. Cheers, Les.
February 10th, 2010 at 9:45 pm
John, thats exactly the point. There is plenty of dosh earned by trusts that are filtered to individuals according to their tax rate. Now that can be manipulated to the greatest advantage. So tax trusts at a higher rate so the the income is allocated properly to the taxpayer and then we will remove the rorts and then we can all have a lower tax rate.
Guarantee that if trusts were taxed at 39% instead of individuals and individuals had a 30% rate the number able to cry poverty whilst benefiting from their trusts would fall hugely and the number proffering their correct earnings would allow the rate to lower.
This is where the rort is not LAQC’s which only allow income offsets, which a trust can also do. Its the little sting in the tail of trusts that cause the problem.
February 10th, 2010 at 9:50 pm
Bank manager; you are correct because that’s about 500,000 plus voters, many of them National.
Instead we have been granted a guaranteed increase in the value of our housing. Couldn’t be happier. Thanks very much. And who cares about depreciation anyway.
combined depreciation in housing 3%
Increase in value due to increased GST 2.5% Equals the same but better. ain’t it great.
Ha.
You have all been attacking the wrong proposition.
February 10th, 2010 at 9:53 pm
Mor, $900 won’t buy you much and most subdivisions won’t allow that type of housing. Known as covenants.
Even HNZ won’t buy into that sort of building. Light weight and too easily damaged.
February 10th, 2010 at 10:59 pm
Thanks esp. for the links for further reading! The problem will be, that all too little too late efforts to reach the shore of fiscal probity will come to nought since OECD spending spree states are already past the brink.
February 10th, 2010 at 11:12 pm
Robert – you are right.
Increase GST means homes cost more to build = house prices go up
Cut personal tax rate and people can afford a larger mortgage = house prices go up
Cut personal tax rates and tenants can afford to pay more rent
Let investors write of major repairs in year they are incurred = more incentive to buy rental properties – more rapid recovery than depreciation method
February 10th, 2010 at 11:39 pm
Aren’t the NZ government borrowing about 250 million every weeks just to run the economy. If so, 200 million extra from GST per year is nothing. I guess they could use inflation to inflate away our debt. I just can’t see how NZ isn’t bankrupt already.
February 11th, 2010 at 12:11 am
Rob,
Maybe no-one wants to tell us!
Maybe someone wants all of Australasia, rather than just the smaller parts (scary joke).
Could Australia be shielding us at the moment?
Ever heard of flak and smokescreens – well now, property taxation may have worked!
Sell the sheds quick!!
February 11th, 2010 at 1:06 am
ugg boot joke for rt
http://lifestyle.msn.co.nz/nzmenslifestyle/jokes/844348/small-laugh
February 11th, 2010 at 1:26 am
I was disappointed with Key’s announcements earlier this week.
I had e-mailed him prior.
—– Original Message —–
From: A Renter
To: bill.english@national.org.nz ; john.key@national.org.nz
Sent: Saturday, January 30, 2010 7:09 AM
Subject: Tax Reform
Dear Bill & John. I am supportive of tax reform, specifically the closure of the tax loop holes relating to investment property.
If tax avoidance through property investment is targeted by this government I believe this will lead to a more equitable society.
I want to buy some land and build a house but the high cost of land has kept me locked out of owning my own home. Instead, I am forced to live in a rental property owned by a property investor.
My wife & I pay tax on every cent we earn & on every cent interest our home deposit earns in the bank. Yet, many property investors are legally avoiding tax. This is not equitable.
Grow some balls gentlemen & make New Zealand a better place to live for honest tax paying workers like my wife & I.
Kindest regards, A Renter
I think Key is like politicians everywhere. Totally lacking vision and only able to see as far as the next opinion poll.
February 11th, 2010 at 4:01 am
http://www.interest.co.nz/ratesblog/index.php/2010/02/10/top-10-at-10-john-key-just-smiles-and-waves-gst-hike-pointless-tax-reform-laughable-euro-crisis-dilbert/#comment-59951
February 11th, 2010 at 5:22 am
http://www.nzherald.co.nz/video/news/video.cfm?c_id=1501138&gal_cid=1501138&gallery_id=109222
You have caused quite a stir Bernherd!
But I can’ t thank you for planting a seed in my youger siblings head about all going to Aussie now!
Bottom line core spending is $18-22million per annum. 2.2 billion on WFF, $18000 per minute (9am-5pm) on WINZ and associated benefits. We are borrowing 250 million per week
I am resigning myself to the fact that NZ is full of politicians that take with one hand and give with the other.
Cut the hand outs, cut the top tax rate and this would make a big difference.
February 11th, 2010 at 6:49 am
‘Govt eyes clearer capital gains tax’
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10625424
“English also confirmed that ring fencing, or preventing tax losses on investment properties from being used to offset other income, was another option still on the table. Ring fencing was one of the options considered in 2006 in the context of supplementary instruments to take some pressure off monetary policy and the export sector. Officials were critical of the idea both in principle and as difficult to police.”If the advice hasn’t changed we will get the same advice,” English said.”
Bill, anyone who buys a property other than to live in themselves does so to make money, whether it be termed revenue or capital gain, whatever period of time is considered – just remove the intent rule on everything but the owner occupied family home – that won’t be too “comprehensive” will it?
As for advice changing, just do what you normally do with advice – ignore it, and get on and ‘ring fence’ losses. Either that or allow all homeowners the same deal as property investors – make mortgage payments deductible. That would even up the playing field, eh?
Cheers, Les.
February 11th, 2010 at 7:50 am
No Deposit UGG
Special UGG
Cold ? Walk in UGG
Live-IN UGG
UGG 4.U.
UGG 4 PORG
Mike : Little Person ugg
BH : big head UGGG
Wally : uGG
JK 15 % UGGg
February 11th, 2010 at 8:36 am
Two words….agriculture and tourism……NZ has it all we just not managing it right, pull money out of housing investment and put it into these areas, we would be winning!
February 11th, 2010 at 8:54 am
Fundamental my dear chap…country is broke…growth is a distant dream…debt is a serious threat and a bleeding sore…govt is frozen…voters are conditioned to expect pork…capital flight is a major risk…reduced soverign rating is very likely…cost of servicing private and public debt set to rise…resulting in the economy shrinking…less jobs…less spending…less investment…capital flight…labour flight…
In comes the IMF when we are labeled the Greeks of the South Pacific. The IMF will do the job our gutless politicians run away from. Govt expenditure will be slashed to the bone. Taxes will go up. Benefits and pork handouts will get the chop. Pension pork will be tossed on the BBQ. In short, a bloody big fiscal axe will be used to balance the books.
And any polly pipedream that a wave of immigrants with any skills will head to Noddyland once they see the approaching shite..pure fiction.
The longer the fools in the Beehive remain in their ‘do buggerall’ mode…the worse the IMF axe blows will be.
February 11th, 2010 at 9:40 am
Berarnd what you say is absolutley spot on, the goverment should also abolish the use of LAQC’s as a tax loss Haven for off setting income by individuals.
February 11th, 2010 at 9:46 am
Yep….. it’s all going along nicely at the mo …..tum tee tum tum..tra la la 15% tee tum tee tee… whats that Bill ..? they won’t what..?…. ah f#&k em,.. back to the rort la la.
February 11th, 2010 at 9:59 am
Les, what about holiday homes/baches?
February 11th, 2010 at 11:34 am
Taxman – I’d reckon test of owner occupation, only, with no other purpose. If so, another purpose, eg. deriving revenue via income, capital, the rules apply. What percentage of people have holiday homes? What percentage of polys have holiday homes? Oh, no chance, with this then.
Or, allow all homeowners the same deal as property investors – make mortgage payments/losses/expenses deductible. Why not? That would even up the playing field, eh?
Cheers, Les.
February 11th, 2010 at 11:52 am
Whoever accused Bernard of being a Labour supporter – it makes no difference.
Both major parties advocate growth, thus advocate an unsustainable path.
Both are past their use-by date, and we will soon come to see Key as the last of the old, not the first of the new.
Come on Bernard – the growth debate if you please. Or are you like the folk who reported the emperors new clothes – afraid to buck the mainstream horseshit?
We have to address a reducing regime – an ordered retreat. If not we have a major global war over the residue – and all bets are off.
On behalf of my kids, I prefer the former. You see the problem, don’t you? Most of the folk here want to increase their ‘wealth’, and presumably think you can stick money (numbers) into something and magically expect more back.
Doesn’t work beyond peak supply of resources (that’s peak rate of supply, note, not the end of the quarry).
Time someone told them that they – and the taxman – are all operating under a sinking lid now. Time they understood that ‘property investment’, along with shares and anything from here on in – is in a less-than zero-sum game. You can only profit at someone else’s expense.
No wonder a land tax was proposed – no more blood left so it’s time to call in the stone.
February 11th, 2010 at 2:33 pm
I think Key/English make a good move.
For those property owners not trading/flipping for a profit, not being able to offset depreciation is FAIR. For those who do trade/flip for profit and pay capital gains, not being able to claim depreciation is simply a timing thing as it’s recognised in the end. This provides much needed taxes. I expect this move to be matched with a 7-8% improvement in housing afford ability.
A clear line in the sand around flipping is also very very positive e.g. 2 yrs. Intent is word that should be used to differentiate manslaughter from murder, not for tax evasion.
A more aggressive land tax might push the housing market into turmoil, while I personally support this so that I might one day afford a house, this is surely not good for NZ economy, the general tax take or Grandma who has been living in the same old house in the nice burb, now living on a pension.
February 11th, 2010 at 5:30 pm
Dear Bernard
There is no need to be yet another sore loser. Our country doesn’t need whingers and unpatriotic people like you. For a start the NZ Government is likely to draw a line in the sand to state that property ‘investors’ buying and selling houses within 3 years or so is taxable income (as trading stock) even if you get cancer and have expensive treatments to have to pay for and live off proceeds of your property. The NZ Government is also likely to trim depreciation on building structure to 1% (from 3%DV or 2% SL). Chattels like carpets, light fittings, curtains and the like certainly do need regular replacing and must be said to in fact depreciate.
The fact is as the very post poster said, the government is over-spending. Over-taxing and creating new taxes doesn’t help this. As more right thinking people get turned off by your sensationalist website, you willl also learn that you have to be popular and fight over the middle ground too Bernard.
Crushing residential property investors only hurts New Zealand taxpayers as Housing NZ picks up the slack (or more correctly the financial pygmies), as we insist on having all New Zealanders that want a house in a house (rather than under bridges and in parks & reserves). The lies perpetuated by the Tax Working Group and misinformation supplied to government are a disgrace. Only in 2 years of the past 28 have there been net tax refunds given to property investors. That is 26 years of profits. Time to stop the drama queening about 2008 where interest rates were disgracefully high at over 10%, causing huge interest costs to NZ property investors and a Government that punished citizens wanting to get ahead.
New Zealand has a pathetic sharemarket. We should invest in Australian shares as I do for better capital growth and governance and less penny-dreadfuls. Stay in NZ, invest globally is the message.
So Bernard, instead of telling younger generations of New Zealanders to leave, why don’t you be a leader and not a follower and leave for Australia yourself?
February 11th, 2010 at 10:53 pm
Wally, you don’t get it Im afraid, the IMF never does the job for your benefit, they do the job for them, they are one and the same a financial institution of the privately owned central bankers network of incorporated investment banks, commercial banks and subsidiary multinational corporations, its simple loan a nation more created credit than it will ever be able to generate enough commerce to repay, then send your receivers in (IMF), force nation to reduce predatory loans(national debt) by selling its publically owned necesities of life into the private hands of their very own majority stakeholder owned corporate subsidiaries, plain and simple, repeated throughout the world, eventually monopolise the target nations entire means of production and prostrate its citizenship with usurous payment of tribute.
February 11th, 2010 at 11:11 pm
Forgot to add that for a bit of fun as your are forwarding the target nation enough created credit for it to drown itself, you also create bubbles in the equities markets that some kind politicians you paid off allow you to cross-own, pump the markets up by issuing excess created credit, sell out, switch the credit tap off, sell naked shorts and profit from the collapse of what you just hocked of to the Mums, Dads and pooled pension funds.
Fred, it helps to know exactly what you need to put checks and balances around before writing up what is required. Until you comprehend that what I describe above is one great big casino designed by the house mathematically in favour of the house, you will never be capable of successfully combatting it.
February 12th, 2010 at 2:10 am
DING DING : End of round 15 , fight over . 15 to Iain . Well done you two …………. ahhhh , where’s Wally . Think you’re in there scrapping on your own Iain , the last threee rounds ! Nevertheless , for formalities sake we’ll go to our 3 ring-side judges and tally up the score . Be right back . And now , a word from our sponser …………
February 12th, 2010 at 2:15 am
UGG !
February 12th, 2010 at 2:23 am
Okey diddily dokily and we’re back . Oh dear , oh dearie me ………..You’re not gonna like this Iain . Never before in the annals of sports entertainment have we had a result quite like this . Our judge from Goldman Sachs has gone off , across town , with a group of bodyguards , to cash his bonus cheque . How bizarre ! Our judge from Macquarie Private Wealth spent the whole 15 rounds perving on GQ and Sports Illustrated ( swim-suit edition ) , and completely missed the fight ………And Tony Alexander , who at least was paying attention for the whole 48 hours of this 15 rounder , has it 200 for 7 in the 6′th inning , and it’s your kick for goal !
Sorry ………………………. And back to our sponser !
February 12th, 2010 at 3:25 am
I still own property in NZ which I rent out. Or rather, my trust owns the property. The trust pays a much higher tax rate than my non-resident status would. Not everyone establishes a trust to lessen tax; I have one so that my second wife doesn’t scoop up as much as the first. It’s a pity that GST is going up as it rather ruins the old joke that after three failed marriages one should be called Mr GST.
February 12th, 2010 at 6:47 am
PDK
I agree. It appears to me that many of the contributors to the site have chosen their side (Labour / National) without realizing both sides are trying to play a slightly different variation of the neoclassical economists game. And they don’t step back and question whether there is a wholly different game that should be played. (Iain Parker aside, I believe he thinks Labour / National are as bad as each other
Labour & National both appear to be sucking at the teat of neoclassical economic ideology and dogma as fed to them by Treasury.
PDK, Keep plugging away. Iain Parker keeps coming back like a Toltoy, and he has earned respect for the way he calls bullshit in a civil way. You can never keep him down.
If you don’t counter the propaganda and group-think, that has had over 25 years to imbed itself into the heads of most of the populace, then the debate will keep going down the neoclassical path. That is, the taxation path pushed by Bernard.
I believe Bernard needs to recognize there are other possible contributors to the housing bubble NZ experienced. Constant population growth being one. Factors affecting credit supply being another.
While a Fair Rate of Return on house purchase prices was debated, what has not been debated is a Fair Rate of Claimable Interest.
For example, If you pay 100% for a property, then a Fair Rate could be assumed to be around OCR.
One scenario would be to assume the Fair Rate on your purchased property is related to the amount of rent you recieve.
If you receive $5,000 rent per year, then, if that is considered to be what you would receive from $100,000 in the bank, then you can only claim interest charged on the first $100,000 of the debt taken on.
Then you would have the scenario where properties purchased for, say, $1 Million, with rental return of say, $30,000, would be allowed to claim the interest charged on $600,000
And the interest charged on the balance would have to come from the Landlords pocket.
The beauty of this one is that it would catch the batches that are only rented out for a very short period of time but that the owners claim full deductability on.
There would be some upward pressure on rents. Counter balanced by less extreme peaks in the bubbles.
February 12th, 2010 at 7:02 am
Gibber – I think there a growing number that see the glaring weaknesses in Neo.libism, and in particular NZ’s interpretation:
http://www.interest.co.nz/ratesblog/index.php/2009/11/06/opinion-how-neoliberalism-has-failed-new-zealand/
I like your fair rate of return/fair rate of interest claimable, idea.
There are reasonable alternatives, Tara, sorry I mean Bill.
Cheers, Les.
February 12th, 2010 at 8:29 am
Don’t ya just love that social credit bloke…blames the bank for printing the dosh and not the ones who want the dosh…Cannot see that there are many people happily living their lives without using other peoples money(credit–whatever)Ditto some countries have govts which refuse to borrow money from other countries. Surprise surprise they are not broke…they do not pay interest to anyone…indeed they save so much by being frugal and prudent that they lend it out to the wasteful splurging idiot govts like the one in Noddyland.
You see Iain, if you don’t borrow…it costs nothing. The same is true for a country.
February 12th, 2010 at 8:38 am
UGG cash only
NO credit : UGG !!!
baby ugg’s free
Happy UGG Land
February 12th, 2010 at 8:47 am
Gibber,
Well put:
We are not going anywhere positive until that changes, and neither Labour, National or Treasury are capable of realising it – their cultures and thinking are simply too entrained.