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Linz's Mario Book—Updated!
Obleftivist Yawon Bwook says Donald Twump is "THE villain of our time." Which of the following best accords with your view?
Yes he is
He's not a villain but a hero
Putin might be a bigger villain
The mullahs might be bigger villains
ISIS might be bigger villains
Ugly Wimmin might be bigger villains
Black Lives Matter might be bigger villains
Snowflake moronnials might be bigger villains
College professors might be bigger villains
Fake News outlets might be bigger villains
Pomowankers might be bigger villains
Obleftivists might be bigger villains
None of the above—specify
Total votes: 10
NZ: Budget - Opinion
Submitted by Mark Hubbard on Fri, 2010-05-21 00:08
From my client e-letter this morning:
I know there are many accolades for yesterday's budget, but it only gets 2 out of 10 from me. (Though you knew that, didn't you).
Firstly, regarding the details of coming tax changes [snip ... the technical stuff].
Regarding my opinion on the budget (because I've been asked for it ) the first email I sent around yesterday said:
And before the budget is even announced, consider the logic. The government is still borrowing a quarter of a billion dollars per week to pay for our huge state sector (that's a billion a month). The lips of the relevant ministers are saying we'll all be better off after the budget, implying overall tax cuts. Again, despite lip service, no significant measures have been taken to reduce the size of the state (NZ currently has 1.75 million people in the private sector responsible - alongside corporates, trusts, and overseas entities paying tax in NZ - paying the wages and benefits of 1.75 million state workers, beneficiaries and retirees: that's one for one. Put all these facts together and you see that the government must be heading for an overall increase in the tax take if they ever want to balance the books in the future? [Relying on increased productivity to do this would be foolish in light of the sovereign debt problem in the northern hemisphere.]
Nothing in that logic has changed on the budget now being announced. Yesterdays budget appropriations increased the size of the State by up to 9% - that's the single most important fact from yesterday (remembering the government is already borrowing a billion dollars a month). According to Bill English the 'deficit' will be bridged from growth -hence more tax on more profits - fostered by the lower personal and company tax rates in his budget. I don't see how that works. You get a bit of personal and corporate tax benefit, but you're paying higher GST, higher ACC, higher excise taxes (from fuel to alcohol), and from 1 July higher energy charges from the (idiot) implementation of NZ's ETS. Some of my clients in the commercial property sector are a lot worse off due to the inability to claim depreciation on their buildings from next year (which 'do' depreciate) and will be paying a lot more tax from next year, regardless of the decreases in headline tax rates. This attack on the commercial property sector will flow through to higher commercial rents (malls, CBD's, office space, warehousing - that will increase the cost of doing business for all of us. Also, regarding the 'growth dividend' I don't see that as realistic in face of the sovereign debt problems in the northern hemisphere - even as I write this global share markets have had a bad night, all down, and the prospect of a double dip recession is becoming more talked about - the first part of the credit crunch in 2008 was private companies going down and being (inappropriately) bailed out by governments, the second leg of the credit crunch is some of those same governments/countries going down and being bailed out by other countries; hence, a German taxpayer now has to pay tax to cover government largesse in Greece [it's a funny old, unjust, world].
And there were a couple of other stings in the tail of the budget, other than the loss of depreciation on buildings:
The change to the LAQC rules is going to be a nightmare for many of you with LAQC's, especially in the dairy sector (given the issues of tainted capital gains [per my email yesterday] I won't in all cases simply be able to elect your companies out of that regime. I will work through all these issues with affected clients over the coming year (the changes don't kick in until next year).
That budget has put an additional $120 million into IRD audit, particularly to audit property transactions. There is going to be a huge increase in audit activity which is very expensive - forget the tax, in professional fees and time - if you're the one under the telescope. If you come up for a full audit, you may as well burn any personal tax benefit you might have otherwise gained for the next two or three years
And thus to end this email: issues from any budget aren't just about tax changes, they're about philosophy (philosophy, politics, economics can never be separated). Therefore, to the tail-piece, so to speak, of this e-letter, in the form of a rant [which is taken from an email correspondence I'm having with someone else, so please forgive me for context from time to time, and repetition with the above]:
Bill English says he is constraining government, but the appropriations from this budget grows government, again - by 9% this time. Without slashing the size of the state none of this adds up, and no one is 'net' better off: you might have a few more dollars in your pocket - debatable with all the tax increases outside the headline rates and the ETS - but with an additional $120 million pumped into IRD audit we’ve all lost more of our privacy, we are all more beholden for our lives to bureaucrats (**), we are all much, much less free.
Living in a free society is not a simple matter of money or tax policy it's about the reach a government has into the minute details of your life and just how much it can scare the hell out of you, and threaten your livelihood.
Big and unfair anomalies in our tax system have not been addressed.The changing and still continuing tax rate differences between companies and individuals continues the compliance nightmare – the hassles of managing imputation accounts, multi-rate FBT calculations, continuing court cases over the salaries paid from companies – where IRD is well on the way to telling ‘you’ how much you earn from your own company [they are actually developing a database of what you are deemed to have earned - to pay tax on - given industry, etc. George Orwell didn't even envisage that in his dystopia, '1984', or in 'Animal Farm']. (Ahem, I have always dealt with the salary issue conservatively, because the IRD penalty system wakes me at four in the morning with panic attacks.)
The attack on LAQC’s will be a disaster for the many industries which legitimately use LAQC’s and that have no links to the property industry (which has been given as justification for the attack). The flow through of profits to shareholders means the LAQC and QC is effectively dead (it's a limited partnership now), but there will be some compliance nightmares in extricating from them (and for many situations where the use of a LAQC created a fairer situation for the business, via the ability to distribute tax exempt capital dividends, there is no longer a ‘fair’ solution).
(**) And getting back to that $120 million to IRD audit, specifically aimed at property transactions: wouldn't it have been nice if government had clarified the rules of what was taxable and what was not on property sales. In many cases this is an entirely subjective decision, especially around intention, and the taxpayer has to continue having a limitless pot of their own money used against them in the court system. Nothing has been done to change this. (Ahemming again, where I have not be able to steer clear of the property sector, my overriding treatment is conservative here also - just in case an IRD officer happens to be reading To be honest, I have tried to avoid this sector due to the tax laws being so complex, vague and open ended. )
A tax system which is not transparent, where taxpayers in many instances cannot know their position before the law - where binding rulings are slow and expensive, and as the banks have found out, often useless - but those same taxpayers are punished harshly when they are deemed to have got it wrong, such a system is one that promotes fear, not freedom.
There, that's my opinion
Statement of conflict of interest: will any political party currently sitting in parliament ever produce a budget I would be philosophically happy with? Answer: NO.
PS: if you want to see how farcical the ETS is going to be, read 'all' of this: http://www.nbr.co.nz/article/b...
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