So John Key’s “bold” vision for the future wasn’t quite as radical as the pre-announcement hype led us to believe.
Key’s ‘most important speech ever‘ was more about what the government was not going to do than what it was going to do: no capital gains tax; no land tax; no risk-free rate of return tax for residential property investors.
Property investors will now have to wait for the detail in the May budget to see how they’ll be slugged. Everyone else’s attention has been expertly diverted to worrying about a GST increase.
Away from the main theme, however, Key’s speech strayed from making vague assertions about closing property tax loopholes to voicing loose ideas on how to help New Zealanders reduce their “heavy reliance on property investment”.
“We want New Zealanders from all walks of life to be able to invest their savings in productive businesses, either directly or through funds, with more confidence in the regulation of those capital markets, and with the knowledge they need to make informed choices,” Key said.
I liked that last bit – the “knowledge they need to make informed choices” – it is particularly obtuse. Do New Zealanders know they have to make more informed choices about investments and, if so, who is going to inform them?
Key was short on detail in regards to this but he did have a lot to plough through including promoting this obscure idea of making New Zealand “a hub for financial services in the Asia Pacific region, specialising in providing high-value middle and back office functions for the funds management industry”.
This is not vote-winning territory, or vote-losing territory either. High-value mid and back office providers to the funds management industry don’t have much of a public profile. Key really had nothing to lose by giving these mysterious ‘industries’ his whole-hearted support but even in this he came down on the side of further consultation.
“The Government is keen to see if this or similar new industries could be developed here and we have asked officials to determine what steps we would need to take to make that a reality,” Key said.
How about giving them a tax break?
Tags: David Chaplin
I liked this article. He’s obviously still reeling from the criticism he recieved early on and is too scared to commit to anything. This suggests he really has no great ideas alleviete recession pressures. One thing is for sure, adding to taxes is in a recession not going to win hearts or votes. Mr opportunity is going to have to do some hard work on the peoples side for a change and it’s proving difficult it seems.
Response to Daniel
I think you are being misleading with your insinuation that Key is raising taxes in a recession. It is time that we stop taxing people earning money and start taxing people spending it, by default that increases taxes for those who spend more (the rich) and decreases it for those who spend less (the poor). This leads to a more equitable situation than the current environment where the rich are able to hire accountants to help them pay the minimum amount of income tax legally possible.
On the change in General
The argument being pushed by the main stream media about single mothers not being able to cut back on buying bread is rubbish. If there is an matching increase of income (wages or benefits) to the increase in GST than the worst outcome is that there is no net gain in income. While that is regrettable it leaves them the opportunity in the future when their circumstances have changed to use that extra income as they wish not continue paying it in income tax.
Good reply and explanation Gareth. While I like the idea of taxing the spendthrift whether they be beneficiaries or high income earners, I feel there are too many base costs, or, needs in our everyday life for this to be practical.
Let’s say I earn $20 per week and you earn $40 per week. We’re both hearty savers and go with pams bread usually at $1 per loaf which would go to, let’s say $1.05c. The .05c is .25% of my income yet it is only .12% of yours. The impact on my income is double that of yours and aids to further separate the poor from the rich.
This applies to far too many everyday costs and bills and won’t just get those buying KFC when they should be buying vegetables.
Clothes, school items, utility bills, essential foods, car costs are just a few of the everyday expenses we face.
So what do we do, increase GST on KFC or anything but pams and copy that throughout each industry? Targeting over spenders is too tricky to get right and this is why we have tierd tax on earnings which brings me to the next point
It’s lazy too to look at capital gains taxes. It can work of course but it is quite simply the most glaringly obvious form of untaxed income which tells me they havent gone deep enough into their researches and options. We need to get smarter and more innovative, look at the tax ‘avoiders’ and make changes there. Let’s not just accept that they can hire accountants to ensure they pay minimal tax like you have suggested. Let’s close their avenues for doing so and get the tax they should rightly be paying. Then we don’t have to effect the low income earners
Maybe it is time for NZ to have a tax free threshold on all personal income to, say, the first $15,000? There would be no argument as to the equity of such a move, and this would enable all members of the economy to receive the cut (about $3000?)
I love that idea Kanchan! Unfortunately our government is the ‘Key’ overspender (see what I did there?
. NZ has big loans and owes a lot of money. Along with cutting government spending, a large portion of the money to repay these loans can come from us through taxes which is why they are looking at ways to increase tax, not decrease it. They’re trying to figure out how to do it fairly though which is proving the difficult part.
Targeting the tax avoiders is my solution. Would be very interested to know how much tax revenue is lost to this
[...] my blog of fortnight ago, I referred to the ‘industries’, which would form around the hub as [...]