Tribeless - Reprise of June (and July'ish)

Mark Hubbard's picture
Submitted by Mark Hubbard on Sat, 2010-07-03 00:26

Tribeless has just rung me on the bat phone, and asked I summarise his favourite posts of the month up on NBR or Hickey's . The choice is just about all from an interview between Hickey and Bill English where the latter stated that he would most probably be attacking property further through the tax system in next years budget, again.

The posts are obviously out of context, but I reckon the points come across. Please note, if these posts were not written at night or in the weekend, then a red line was scrawled across the electronic time-sheet. My commenting time is from this point voluntarily severely curtailed: there is much work to be done as I set about the mundane task known as 'making a living', I need to pull the Net button for a bit.

Post One

... add the Resource Management Act into the mix, restricting the supply of land, then the incredible bureaucracy builders have to go through for consents (and relicencing is set to make all this even worse, and for no gain at all), then the silly prices we have all paid for our existing houses - and most of us kiwis own our own house (I have no desire to rent because I like to live in a nice house with a view) - has been due to the artificial ramping of costs, and the artificial restriction of supply, via government red tape and regulation.

Then add into the mix, another government comes along and decides, on their particular whim of the times, we all invested too much in our homes, (paid too high a price), so it will attack demand by vicious taxation and hope to collapse property prices they'd been responsible for ramping in the first place.

Thus the point of my posts: Nanny State is callous, cruel, utterly heartless. If we'd had free markets undistorted by governments, I'd quite possibly be in my home for half what I paid for it, and would not have to be reading now the threats of brutal politicians informing me of how the most brutal department in the land has been fed an extra $120 million to persecute ma and pa Kiwis within a vague mess of tax laws that would be beyond their ability, or their advisors, to interpret with any certainty - no one can. Hence, the result of central planning incompetence and heavy handedness - the two always go hand in hand - is, as usual, human misery.

Read the history books, this has all been done before, over and over.

Welcome to the Police State. It's a lot more serious than just silly ...

Post Two:

So you were trading properties over at least 2007/08 ex agent. I hope you paid your tax on those profits? (Mr Dunne has just given IRD $120 million to find transactions just like those trades. Great, ain't it Smiling )

NZ's property taxing provisions, including around intention, are incredibly vague: pity Messrs Dunne and English didn't see their way to legislating clear tax rules - even if they meant higher taxation (which I could then complain about) - before unleashing the IRD. What I want is for a taxpayer to be able to know with certainty where they stand before the law: in our mess of tax laws currently, that taxpayer can't. The lawyers will do well, and many investors who do not deserve it, are going to feel the jackboot on their neck, as their own tax money is used against them in the courts.

It's insane, inhuman, unjust. Yet we seem to tolerate this callous incompetence from our legislators (many of whom can't even control their credit cards or keep a receipt).

Post Three:

I'm not a financial planner 12.02am (thank God; that's a hard, hard way to earn money in these markets). I only comment here on taxation matters, and general economics and philosophy: what has that got to do with picking shares? I've never professed any expertise in that field at all, or investment, period, and I don't have time to follow individual companies on sharemarkets across the world so, like the majority of Kiwis, I leave that to professionals. I'm invested via Fisher Funds, JPMorgan (or whatever they call themselves now) and also Gareth Morgan. Not great sums of money, note, but enough to track how the markets represented are going. [And I have no beef with any of those mentioned funds: they're all doing their homework as well as I would expect.]

As I said, mine represent widely diversified funds, and those are the losses from the peak - ignoring the issue of when in time I was invested. If you're beating them by selective investment, fine - a narrow focus is the only way to 'get rich', modern portfolio theory is not about that, just retaining value against inflation, and so forth. But even that wasn't my point.

My point was simply I have a store of a large part of my wealth in the house I live in - in this I'm representative of many other kiwis - and in a holiday house (not bought for investment, but to get myself away from people like you, and so keep my sanity): don't expect me to like it when I see a government apparently hell bent on destroying property prices by the artifice and whim of their distortion of markets, all on the back of a broken, life hating economic theory, and a dysfunctional monetary system.

My only argument throughout these threads is I want free markets, because lack of free markets represents the prevailing philosophy under which I also have no personal freedom. And that aside, at the moment all of my, and your, investments of varous sorts are at the complete whim of governments who through their meddling and Keynesian faith are destroying us. As Kate has said, all of a sudden, via a completely artificial market consisting of only legislation, nothing in objective reality, 'the money is in carbon farming'- snort: well, until that collapses.

Anyway: how are you coping with the complex compliance taxation issues around the taxing of your overseas portfolio under Papa Cullen's new rules? Pretty dreadful aren't they. I even had to correct the report of a large fund manager last year, as their spreadsheet was calculating CV on an applicable investment completely wrong - understandable given how complex those calculations are.

I see the Dow is down again this morning, six days in a row as the Keynesians take us into the double dip - perhaps give us a report on how your shares are doing at the end of this year. But all the best with it in the meantime.

Post Four:

Given English's first target to wipe out property values was to scorch QC and LAQC's, which succeeded only in a compliance nightmare for every sector outside property, I'm scared to think what another blind shot might target: they'll probably take out a city next time.

Mr English: just remove the government from markets. Stop all this distortionary b-ullshit.

Post Five: In response to English proclaiming the advantage of our 28% corporate tax rate over Aussie's 29%, given the Leftist Gillard has chickened out of taking the Aussie rate lower.

I call Mr English's bluff.

If you're a small company, from the line IRD are developing from W33 to Penny and Hooper you'll be done for avoidance if you have the temerity to try and actually use the 28% company tax rate. Really, the only companies that can safely use the low rate are very large companies, and companies with high asset bases and low return on assets (such as farmers). Every other company can forget it.

And then of course we further fill the gap back up again between here and Australia with:

Costs of the ETS - can't see many carbon emitters bothering to look at NZ, and probably a lot of R & D will be going offshore (especially when compounded with the depreciation loading being lost on plant and machinery). And every other company has higher fuel and energy charges - why would anyone try to set up here? With the ETS no firm is going to set up here if their business model is export.

No point investing money into commercial office space or warehousing here, there's no depreciation claim.

Crippling ACC levies.

Crippling excise taxes 'on production':

Quote: "Most New Zealand winegrowers have no plans to increase wine prices in spite of a four cent per bottle tax which has just come into effect. ... "This survey highlights the serious financial pain annual excise increases are causing our small and medium wineries because excise is a production and not a consumption tax. It also makes abundantly clear that those who want higher rates of excise as part of the Sale of Liquor reform will only succeed in putting wineries out of business. That would be bad news for tourism, bad news for the hospitality sector and bad news for the economy."

(Hell, no wonder Groser does his boozing on the credit card at the minibar when 70% of the price of every bottle of spirits goes to the Nanny State - even our pleasures are taxed to death.

Increasing GST when your newly landed director buys his kid an ice cream.

Peter the Persecutor Dunne bragging to the press how he's extorted $120 million from the taxpayer to persecute the taxpayer with; because every audit, whether you're found wanting in our mess of laws or not is a major imposition. I mean really, if you think you trying to attract the business vote, why would you have Peter the Persecutor fronting anything. [Mind you, this government has obviously decided they don't need the business or farming vote, otherwise why an ETS which will otherwise achieve nothing.]

Loss of LAQC and QC regimes across every sector of the economy, bringing an expensive compliance nightmare, and putting all small companies back to the serious problems they had for which the QC regime was originally introduced to fix in the frist place.

And on and on.

This month of May saw one of the most cynical budgets I have seen, as it has to have been, because English is spending 9% more to grow our huge State with this year over even last year.

Christ, it would drive you to drink on a Friday night, only with the increased excise taxes I can't afford it.

If Bill English actually believes that budget made us more competitive, then he's not fit to rule anything. Perhaps his time would be better spent simply devising credit card rules for the kiddies running amok in parliament.