Allies warn US on tax moves; HSBC off the hook; China debt growth surges; Australia shines light on tax dodgers; UST 10yr yield at 2.38%; oil up, gold unchanged; NZ$1 = 69.2 US¢, TWI-5 = 72.3

Here's my summary of the key events overnight that affect New Zealand with news the New Zealand currency is rising strongly.

But first, the looming new US tax 'reform' is about to place more strain on America's place in the international arena. Germany, France, Italy, Spain and the UK have told the US this planned corporate tax reform will violate the country’s double-taxation treaties and breach world trade rules. They told the Americans to respect the international obligations the country is committed to.

And just how dodgy the current US Administration is can be seen in their 'analysis' on the impact of these new 'reforms'. They declared them self-funding in a one page analysis that is being widely mocked.

And staying in the US, HSBC said it is no longer under threat of prosecution over allegations of money laundering in Mexico. A US Justice Department investigation said the bank had been a conduit for "drug kingpins and rogue nations".

China's oft-stated goal of reigning in rampant debt growth has not had any impact yet. Chinese new loan issuance in November came in twice as high as for October and +50% higher than analysts were expecting. Chinese authorities seem to have lost control of their debt markets. M2 money supply was up +9.1% year-on-year.

In Australia, the drive to get foreign companies to pay their fair share of income tax is intensifying. That involves some New Zealand companies, Fonterra and Fletcher Building in particular. Fonterra declared AU$1.8 bln in revenues last year in Australia and paid zero income tax there. Fletcher Building had AU$2.8 bln of revenue and also paid zero. These two are joined by 730 others who also paid zero in the 2015/16 tax year. They are part of a group of 2,043 that had details released by the Australian Tax Office.

In New York, the UST 10yr yield is now at 2.38%.

The price of crude oil is up again today, now just over US$57.50 / barrel, while the Brent benchmark is up over +US$1 to US$64.50.

The price of gold is unchanged at its five month low of US$1,245 oz.

The Kiwi dollar however is higher, noticeably so and now at 69.2 US¢ a rise of more than ¾¢. And on the cross rates we are up too at 91.8 AU¢, and against the euro at 58.6 euro cents. That puts the TWI-5 just up strongly at 72.3 and its highest in over a month. This is what a respected and business-friendly pick for the Governor of the RBNZ can do to our currency.

Bitcoin is now at US$16,387 after having ended yesterday in New York at US$15,037. (Bitcoin actually never 'closes' - it trades continuously.)

If you want to catch up with all the changes on Friday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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28 Comments

Mr West paints a picture of revenue versus tax but ignores the fact tax is paid on profit and not revenue.

He suggests multinationals enjoy the Australian roads, but roads are used by people not corporations and the corporation pays PAYG on the salaries of those who use them.

He is cherry picking his 'facts'.

People I employ pay their tax, I don't pay it. They get to work on roads, go to hospital and get educated, get services on those taxes.

These corporations are expecting a free ride and i think world wide the time has come for change.

100 times this. Corporations want to ingratiate themselves into society, but don't want to pay for the cost of a functioning society - except for the greenwash corporate PR opportunities, when they're all over it like a rash. It's fundamentally wrong, and all the while Apple, Facebook, Google, Sanitarium et al are storing Ozymandias sums of money in tax havens - the tax payer has to pay for it, we're subsidizing their product development, revenues, and their shareholders. It's an absolute disgrace, there is no excuse and no reason for them not to contribute their fair share.

That last sentence is a very narrow and simplistic view of a complex problem.

Corporations don't write the tax rules, tax departments do. If these corporations are really breaking the tax law then do something about it and forget silly, empty words like 'shaming'. The ATO ran an audit over Apple in Australia only to do next to nothing at the end because apple had broken no laws.

Some aspects of tax law can be quite unfair. For example, if my Australian company makes a profit the Australian tax office wants its 30%. To recognise the unfairness of double taxation that same tax office issues tax imputation credits so that when any dividend is paid those who receive get a credit on the tax already paid an do not just get the same 30% charged again as personal tax.

But ATO tax imputation credits are not recognised by the NZ tax department. So they expect the recipient to pay the 30% again, creating a situation of double tax. Because both tax authorities are not interested in fairness this situation has remained for many years with no end in sight.

So instead of fixing double taxation and other wrongs we get 'shaming' campaigns where complex issues are reduced to near meaningless sound bites. It is slightly trite to say multination pay not tax when they pay GST directly and PAYG indirectly.

Never forget the situation is so complex and so absurd the EU s suing the nation state of Ireland over it.

They pay GST on things they buy here, office supplies etc..GST on their products is paid for by the consumer.

You're not wrong it is complex, it shouldn't be - you make this much profit here, you pay this much tax here, you've paid that much tax there, you don't have to pay it here, as it wasn't earned here.

The complexity is it would require the whole globe to get on the same bus, and would probably mean a uniform corporate tax rate around the globe - which no doubt would be seen as anti-competitive, but it would stop companies charging out non-existent services to their "satellite" offices, for example, in the UK (staff 20,000, offices 5 ) being charged by
their head office on the Isle of Man (office 1, staff 1 who's a part-time cleaner, and a slightly mangy cat) for patent usage or some such nonsense.

Rampant credit growth in China huh, 9% is about what M2 money was averaging in New Zealand as shown on the interest.co chart, until the data series stopped being published.

Exactly what I thought. NZ more rampant than China at 9.3% household debt growth rate. Okay, that's the peak, at 31 Dec 2016, but it really is not a good look. I mean even the IMF have issued stern warnings about household debt growth above 5% resulting in lower GDP growth for the next five years. If they have finally figured it out you would have thought those brainy types at the RBNZ and Treasury would have a clue too.
https://www.interest.co.nz/charts/credit/housing-credit2

Great links Andrew...no wonder people are buying bitcoin to get outside the rigged system. We all pay our fair share of tax unlike the largest multinationals and it's legal?

After reading through that I just realised the flaw built into bitcoin. The network is supported by investment in mining, which has secondary support by way of charging transactional costs. When the mining no longer pays, the transactional costs become the primary source of revenue to support the network. It isn't interest, but it is still someone clipping the ticket.

I saw Jim Rickards said pretty much the same thing. It's also apparently subject to "painting the tape" price manipulation by miners ie buying and selling to eachother. I'm pissed off that I sold my 10 litecoins for 380 euros. Oh well easy come easy go. Heres Jim Rickards -> https://www.youtube.com/watch?v=6r04gfWfRkE

Jim Rickards is a gold bug and ex CIA

Yeah there may be something a bit weird there. However he did correctly call the greatest episode of capital flight in human history way back in 2012 before it was obvious what was going on. He's obviously an intelligent guy and his claims usually seem well supported by logic and data. What more do you want from an analyst?

Gee you kiwis catching up with bitcoin mining here
Before I left NZ years ago I knew of a legal highs importer who set up his own bitcoin mining operation
Invested a fortune in servers running 24/7 mining bitcoins
Many banks & insurance cos will adapt & use the block chain to save costs & improve security but currency mining is a mugs game
There’s a few here who might be interested on the property blog

Just so you know the bitcoin transaction costs are around $20USD at the moment. Not exactly cheap, and given the power usage for mining not efficient either.

The bitcoin difficulty was always going to be in balance and in fact the whole network could run off one computer cpu mining. However mining is an arms race that has escalated to get a larger share.

There are many flaws in bitcoin and the cryptos spawned from it.

Talking of tax in Australia, the ATO there is interviewing representatives of the richest 1500 individuals and families (http://www.afr.com/news/policy/tax/ato-gets-personal-with-1500-richest-2...).

The idea seems to be to engage with them informally at first, rather than going down the legal route straight away.

None of these wealthy people want to pay tax and yet they go into a rest home and want somebody earning $18 an hour to wipe their bums.

I have been making the same comment here for 6-7 years now. Wealthy is of course relative, in regard to what you claim I would think about 30% of New Zealanders fall into the category you describe. Those same people having their bum wiped would seem to be quite happy to be renting their property to the caregiver at exorbitant rates. It is ironic that we are seen as a desireable location to emmigrate to, but we are totally lacking a moral foundation.

I've said it before here, I feel we've become unbalanced in our appreciation of the need for looking after and investing in generations either side of our own, with the understanding that they will do the same for us. We seem to have become a bit self-obsessed, rather than thinking of what we will be leaving to next generations. We seem happy to demand of them (e.g. that they look after us), but resentful of investing in them or the need to create reasonable outcomes for them.

Rick
To be fair Zachary says he’s taking care of accommodation for immigrants
He says all his tenants are immigrants
The spruikers here who love property more than their spouses are in fact shining a light on the needy
Maybe Peter Jackson will make a movie about them some day

Schadenfreude, noun: pleasure derived by someone from another person's misfortune. A word for the week. Now why did I immediately think of property speculators in regards to this word?

"Americans are taking out mortgages to buy Bitcoin -This is not something a guy who's making $US100,000 a year, who's got a mortgage and two kids in college ought to be invested in."
http://www.afr.com/news/world/north-america/some-americans-are-taking-ou...

More imported deflation to go along with the massive loss of local jobs.
"The fully-imported Holden Commodore will be cheaper than the locally-produced car it replaces, with the company releasing prices for the 2018 range. Holden says the 2.0 litre turbocharged base car will sell for $33,690, almost $4000 less than the locally-built model."

They replaced the real commodore with an Opel insignia, hardly like for like.

Andewwww
To be fair it is the Commodore that used the Opel platform

maybe, but my commodore is parked outside, it has 500k on the clock and never missed a beat. the Insignia is never going to do that.

Many friends in the UK are holding off buying new cars for a few years, waiting to see how electric vehicles pan out.

NZ$ just went up in value so something’s right
You have a nice new government
What can go wrong