Capital Gains Tax mooted; National, A.C.T. cry foul


Yesterday morning the Tax Working Group formed to assess the state of the tax regime and recommend appropriate changes, finally delivered its findings. The findings, whose recommendations included a Capital Gains Tax, and a plan to redistribute much of the tax take gained from the C.G.T. in a tax cut, have fulfilled a promise for comprehensive tax reform that was made at the 2017 election.

An announcement that was surely to upset National and A.C.T. did not disappoint in that respect. A.C.T. immediately announced its plan to ditch the C.G.T., labelling it Labours Envy Tax. National was equally unimpressed – somewhat hypocritically for a party that just had nine years to address the issue. That said, they did announce the tightening of rules around the taxation of profit from property sales in 2015.

National and A.C.T. however need to understand that there is more that a C.G.T. covers than just property. It covers the sale of stock, bonds and precious metals as well. The last one has potentially significant value as the value of minerals used in electronics, that are ditched without recovering the metals – especially rare earth elements – is slowly realised.

But is the C.G.T. really that bad? Is it really a tax in an attempt to curb the accumulation of wealth through honest means? Or is it to check the acquisition of property for wealth that one does not honestly have any real use for, but accumulated anyway? I think it is the latter, as no one, except maybe the Greens are suggesting that the family home, the fortress of every New Zealand family able to afford such a place should be taxed and nor should the estate inherited from deceased people.

I have not a problem with millionaires. A millionaire might have been something big in the 1970’s, but now a multi-millionaire or billionaire is more like the new millionaire or multi-millionaire. And if the wealth is the result of starting a business and turning it into a major revenue gathering machine, all I can say is well done. So, this idea that people hate wealth is not true. A better perception is that the left dislike the accumulation of wealth so obscene that it makes up half the total wealth in the world – we are talking about wealth accumulated by only a few dozen people.

And I am not saying a C.G.T. is fool proof either. It is not and – if it get it gets implemented – a range of opportunities will arise for National and A.C.T. to more credibly attack Labour as the C.G.T. is implemented. Whether it is just who is subject to it; how much they pay and so forth are good starting points and there will be others.

But right now when we do not even know if Labour will implement it or any other changes recommended, National and A.C.T. can go suck a lemon and contemplate whilst tasting its bitterness, how a bunch of people more familiar with the N.Z. tax code came to these conclusions.

In Mixed Member Proportional era we are still very much First Past the Post


In 1993 New Zealand voted for the Mixed Member Proportional (M.M.P.) system of representation to replace First Past the Post (F.P.P.). The historic vote changed how New Zealanders vote at the polls. It was an attempt to broaden the spectrum of political parties so that more fringe leaning parties such as the modern day Green Party of Aotearoa New Zealand and Association of Consumers and Taxpayers (A.C.T.) could be represented.The new system as it stood in 1993 was also intended to hold in check by requiring coalition arrangements with other parties, some of the more extreme policy.

But 22 years and 7 election cycles later, are we really an M.M.P. country?

If one looks at the range of parties that have existed in the M.M.P. era, one could argue that on the first count, yes M.M.P. has succeeded in doing what it was meant to. Since 1996, in one form or another a host of minor parties have existed and been part of coalition arrangements, or formed out of disgruntlement with bigger parties. They include the Alliance, Greens, New Zealand First, Maori Party and Mana, A.C.T. have all had time in Parliament. New Zealand First and the Greens as well as A.C.T. are the only minor parties currently in Parliament.

Outside of Parliament two notable attempts at creating brand new parties centred around well known figure or a businessman with a high profile have occurred. One is Conservative Party of New Zealand, which was led by Colin Craig and has contested the 2011, 2014 elections before Mr Craig brought himself into disrepute with alleged advances on his female secretary. The other is The Opportunities Party, which is run by Gareth Morgan, a prominent businessman who is perhaps better known for his crusade against domestic cats because of their predation of bird life. T.O.P. might have done better in the 2017 election had Mr Morgan resisted calling now Prime Minister Jacinda a “pig with lipstick on”.

Neither of these two external parties have made the 5% of the party vote threshhold or won an electorate seat to claim a space in Parliament.

And then there is New Zealand First. Originally the party that made National and Labour look nervously over their shoulders, the party that had the best policy platform of any in Parliament along with a charismatic leader in Winston Peters, New Zealand First are still in Parliament supporting Labour in this particular instance. However the brave policy making, the determination to stand on principle and the slow natural, but relentless aging of Mr Peters who probably has no more than one more term left in him if even that, is gone.

However, the state of the political parties these days is not entirely their fault. All have spent much time and effort trying to mobilise the youth vote where the 150,000 people between ages 18-24 stayed home in 2017 would have done much to swing results had they made the effort. And if one looks at the reasons, perhaps a lack of civics being taught in schools compulsorily, a loss of confidence in politicians or the system.

Of National and Labour though, even after 22 years, there is no doubt that these are still very much the right and left of New Zealand politics respectively. Never mind that there is a centrist party in New Zealand First, a Green Party and an advocate party for consumers and taxpayers. Even after all of this time – and some spectacular political fails along the way – none of them can do anything without the co-operation of National or Labour. Just like in 1990 when Ms Ardern and A.C.T. leader David Seymour were still at Primary School, Mr Bridges in High School, when Mr Peters was a National Party Member of Parliament.

Whilst the number of parties in Parliament has fluctuated considerably in that time, the thinking and the acting in an M.M.P. environment and rapidly changing world is still that of an F.P.P. Parliament.

 

Analysis suggests $28 billion loss if NZ oil and gas ban happens


An analysis of the intention to phase out oil and gas with no new exploration allowed, suggests that New Zealand might lose $28 billion IF the ban goes ahead. The ban, which was announced last year by Prime Minister Jacinda Ardern was meant to address the impact of carbon from man made emissions on the climate.

I say IF for a simple reason. At some point, National is guaranteed a return to power and possibly with A.C.T. as a coalition partner or supporting party. It is only inevitable that one or both parties or some other combination of centre-right parties will try to either overturn the ban, or so weaken it by indirect action that it is no longer a workable mechanism of reducing our man made carbon emissions.

The concerns I have about the likelihood of succeeding in completely winding up oil and gas exploration are matched by concerns about the feasibility of electric cars. Yes there might be a surge in the number of Nissan Leaf’s entering the market, along with new models from Toyota, Mitsubishi and Kia, but looking at the range of these vehicles, only two of them could make the 189km trip from Christchurch to Kaikoura even if they left completely charged up.

Other companies – namely Tesla, Renault, B.M.W. and Hyundai – offer vehicles in New Zealand as well, but the prices as an article on Stuff in October 2018 suggested are far higher. Who is likely to want to shell out for a N.Z.$59,000 Hyundai Ioniq EV? For that matter when one considers disposable income in most New Zealand households, who can even afford one?

The death hold Toyota Corolla’s have on the small vehicle market is growing. A hybrid version now exists, which is basically $38,500 and their very popular petrol version continues. Toyota also have medium size Camry’s, again with a hybrid option.

There is another problem too. Many New Zealanders simply don’t see the need for flashy complicated vehicles and as long as they can get cheaper ones that have had numerous owners and still run fine, then it is a losing argument on simple economic grounds.

Also IF this ban is to be effective, New Zealand needs a comprehensive plan in place to make this happen. So far all I have seen is Green Party chest thumping over getting the ban in place and a lot of hot air from National and A.C.T. about how the economy will be crippled whilst completely ignoring the environmental impacts. A New Zealand Energy Voices advert on Facebook promotes oil and gas.

 

Water shortages affecting parts of New Zealand


Across New Zealand, and in particular the South Island, as the summer bites, many rivers are struggling to supply enough water to meet demand. A near complete lack of rain in many parts across February and below average rainfall in January has left West Coast, Canterbury, Nelson, Tasman among others facing increasing restrictions as rivers fall below their minimum flows – the point at which those with consents to take must cease.

In Nelson, the Waimea River has virtually stopped flowing and a bund has been built across its riverbed in the lower reaches to stop salt water intrusion by make freshwater pressure build up. With high demand still being placed on it to provide water for fighting the fires that broke out over a week ago. And despite a tropical cyclone tracking towards New Zealand possibly bringing rain, only a prolonged period of wet weather will be sufficient to recharge what are now depleted aquifers.

Similarly the famously wet West Coast is drying out as well. Whilst occasional heavy rain warnings are being issued, for a province that has rain recorders known to receive in one instance over 500mm on rare occasions, the amount that has fallen is well below normal. The Whataroa River is normally about 1.00 metre deep where it passes the flow gauge. As of 18 February it’s depth was 0.45 metres; at the same time the Grey River at Dobson which can get to as low as 0.20 is about 0.04 metres, and thereby probably unreliable.

The river catchments in Canterbury that have their headwaters in the Southern Alps are also heavily affected. Many are now on minimum flow restrictions, meaning because the flow in the river at a particular point is below a minimum level set, irrigation and other water takes must cease.

One example is the Waimakariri River, which has a minimum flow of 37m³/s-¹, but which is (at the time of writing this article)currently running at 31m³/s-¹ at the Old Highway Bridge and 45m³/s-¹ at Otarama, upstream of Waimakariri Gorge. Because the Old Highway Bridge is in a tidal zone recording station it is not subject to water take restrictions as the water is not fresh.

Upstream though, at sites on tributaries of the river, the water takes tied to those sites are subject to restrictions. The restrictions depend on how close the flow at that site is to the trigger level, with some being on partial restriction and others being on full restriction. The Waimakariri is not the only river with partial or full restrictions placed on water takes from it. More information is available at the Environment Canterbury website irrigation page.

In a rapidly changing environment, where water supplies are fully allocated in many catchments, issues with supply are only going to get worse during future summers. Some of the flow sites monitored by Environment Canterbury are currently recording levels below the trigger level at which consents are triggered. They therefore have restrictions imposed, and more will join them if there is not significant rainfall in the near future.

Tenure review to get a deserved ending


On Thursday, Minister for Environment Eugenie Sage made an announcement that New Zealanders had been hoping for. After 20 odd tortured, ill thought out, highly controversial years of the land tenure review process, Ms Sage finally announced its impending demise.

When it started in the 1990’s Land Information New Zealand (L.I.N.Z.) was in a bit of a bind. It wanted – and in many respects needed – to get a host of high country properties worth millions of dollars a piece off its books, no longer being able to be the ideal landlord. So, the Government looked at a process that could discharge responsibility for the land, give the lease holders (farmers)more responsibility, which they were asking for, all the while maintaining access for the public.

The idea sounded great – the Government no longer has responsibility for land it could not really manage; the farmers who are the leaseholders would be given greater control over the land in return for making it accessible to the public as far as farming operations permitted.

But the execution of it was appalling. It quickly became obvious that the Overseas Investment Office did not really know what it was meant to be doing, if anything, in terms of regulating the sales that happened. Little screening was done of potential buyers, what they intended to do with it and how suitable as non New Zealanders they were to be in possession of some of New Zealand’s finest farm real estate.

Farmers became frustrated because the sale of properties to buyers became mired in politics. There were several high profile cases with a variety of controversies attached. They include the sale and resale of land in the Mackenzie Basin which became the subject of intensive dairying (and equally intense controversy about the spoiling of high country charateristics with false greenery in a naturally arid area). Another was the sale of the large Lillybank station near Mt Cook, which was bought of Tommy Suharto, the son of Indonesian dictator Suharto. Mr Suharto’s business partner bought a station that Mr Suharto had spent $7.5 million in 1992 purchasing.

Access campaigners also became concerned. Much of the high country farmland had access routes to key camping areas, fishing spots and tramping routes. Many of those who succeeded in deals to purchase such farms often give no hint as to whether they would permit the access to these spots to continue, or recognize the Queens chain. Some were also concerned that those spots would become degraded by non compliant land use.

Many of these concerns were well founded. Some of the buyers indicated little interest in the well being of the communities nearby or for the conservation values held by New Zealanders. As this stoked resentment it was inevitable that controversy should arise.

In the end, with so many frustrated by the way the tenure review was being carried out, the review found itself with few allies. Except for the very few people who had managed to conduct sales of property and whose finances had done very well out of them, there was little support. 30 leases are still in progress, but one has to ask whether it is appropriate for them to continue given tenure review is now at an end.