A review of the Tax Working Group interim report


On 20 September 2018 the Tax Working Group established by the Government to review our tax code and establish how it can be made to work for all New Zealanders published its interim report.

One of the hot topics of this report is whether or not a Capital Gains Tax should be introduced on secondary property. A C.G.T. is politically problematic – National despise the tax and promise that if elected in 2020 they will repeal it, yet some National Members of Parliament have admitted to wanting the tax so that they have something solid to campaign on. And the introduction of such a measure is not as straight forward as some think, according to A.N.Z., who believe that the determination not to impose it on primary residential properties – the property that one lives in for most of a calendar year – undermines the idea of it being applied fairly.

It depends on how one intends to implement it. To me a G.S.T. should only be imposed on gains that are surplus to actual needs – one needs a home to live in; a small business is ones source of income, so neither of these should be taxed. But a holiday home (permanent structure used for relaxation/recreational purposes)should be. I largely agreed with the A.N.Z. submission

G.S.T. was one idea that got a clear cut response in the report, which recommended that no new cuts or increases be introduced – in other words G.S.T. will be kept at 15%.

I view G.S.T. on council rates as a tax on a tax, and therefore it should be abolished. Former United Future Leader and Minister of Revenue Peter Dunne used to campaign heavily on this, but when he was in office it was not advanced any further.

Interestingly the Working Group saw use for environmental tax initiatives. Various environmental issues will require significant leadership in the near future, which might include financial controls to guide the thinking and actions of businesses and individuals.

I assume these might take on the form of Pigouvian taxes which are only triggered if something like a National Environmental Standard is breached. With waste management becoming increasingly important incentivising businesses to take steps that reduce their ecological foot print might also come into play. These might be something like no tax on the gains made from implementing energy savings.

Income tax does not seem to have made it into the report summary.

I would have no problems if the top tax rate was increased and maybe attached to the upper 5% of income earners, adjusted annually by a consumer price index or other relevant measure.

It is important to note that not all money raised will come from taxation. Some money will be gained from other measures I support, such as requiring all visitors to New Zealand to have health insurance; the confiscation of drug cash, and other gains made from criminal activity; a uniform levy on all tourists of say $75 to cover maintaining amenities.

Feedback on the interim report was received by 1 November 2018 and a final report is expected to be released in February 2019.

 

Will there be a banking sector collapse in 2019?


When I was a kid I was taught two basic things about economics and money. One was to be prudent and save what one can for rainy days. The other was to keep debt to a minimum.

As a result, I am trying to put away a consistent sum of money each week as emergency funds. I pay my credit card in full and on time. I wonder if all New Zealanders tried to do the same, what the outstanding private debt would be.

So the suggestions of a collapse grow from one year to the next. One of the more alarming suggestions in 2018 suggested a U.S.$10 trillion crash in household assets. The whole of the New Zealand GDP per annum is N.Z.$210 billion

But how likely is one to actually happen?

It depends on who one talks to. Sure it sounds radical but if one takes an honest look at what was – and was not – learned from the Global Financial Crisis, I think the Nots are the clear cut winners. The G.F.C. was caused by the spectacular mismanagement of toxic mortgages, a highly dangerous mix of Wall Street and household borrowing well beyond their means as well as regulatory break downs and systemic ethical malpractice at all levels.

In New Zealand banls

Sure the banking sector here is not the same as the United States, but in the 2007-2009 crisis 30+ financial companies here imploded. Between them they took over N.Z.$2 billion worth of individuals finances to the bottom. Anyone who wants to know about investing is right to be a bit alarmed. A decade later with some economists warning of another meltdown, has New Zealand learned anything?

Last time it was China’s insatiable appetite for raw material that helped Australia and New Zealand. Coal in particular was in high demand. With a slowing Chinese economy are our products in such hot demand anymore? I do not know the answer to that.

The Lehman Bros, Fanny Mae and others in the United States were meant to be indestructible institutions, worth hundreds of billions of dollars. In New Zealand Capital Merchant Finance, South Canterbury Finance, among others were our equivalents. A few executives in the most damaging cases were implicated.

Instead of running down debt by paying it back, the key countries have all run up new mountains of debt. So huge are these that I think a number of countries will be wishing they had been like Iceland, which bravely jailed its bankers and was the first country to declare an end to the 2007-2009 Global Financial Crisis.

The need to reform employment assistance in New Zealand


A few months after finishing my Graduate Diploma of Sustainable Management I find myself in a familiar situation: trying to figure out how to wield my latest academic acquisition to the best effect, in a constantly changing job market where sometimes it seems I am always behind the 8-ball.

If we wind the clock back to 2004, I was in a similar situation. I completed my undergraduate degree (Bachelor of Science)in Geography. My G.P.A. was poor – about 3.5, but I was finished in 3.5 years, which for someone who needed assistance with note taking and had a writer for exams was probably not a bad achievement.

The job market had moved a bit in that time. Not necessarily a problem at that point, because I had always intended to go back and try postgraduate study part time at some point, which I started in 2005 and completed in 2006 with a G.P.A. of around 4.5

By the time I finished though the job market was about to experience the effects of the Global Financial Crisis of 2007-2009. The market for environmental/planning/natural hazard jobs dried up. A solitary job came up in September 2008, which I went for, lost at the interview stage, but got offered a temporary job anyway.

When I took my job at Environment Canterbury it was a summer student job that was meant to end at the end of February 2009. It lasted until mid April 2011. During that time I discovered the limitations of my office skills – I was fine on Word, but not Excel, my report writing style was substandard.

So, after the quake whilst casting around for a job I enrolled at Vision College to do a Certificate of Business Administration. The course content addressed all of those deficiencies and a few I did not realize I had.

Re-entering the job market was still not any easier. Thousands of jobs had been lost in Christchurch in the quake and the market had changed considerably. The agencies normally tasked with helping people find work or re-enter the work force found and – I suspect still find – themselves grinding against straight-jacketed social welfare law.

For example, between February 2017 and October 2018 I was working on a Graduate Diploma of Sustainable Management. The purpose of gaining this Diploma was three fold:

  1. Renew dormant research skills that I know I have, but which my current employment does not allow the use of
  2. Show employers that I am still capable of learning
  3. Do original research

Now as I seek once more to try to change my employment direction, I realize that this might be my final throw of the academic dice – it is certainly my best. I do not know what my G.P.A. is, but my guess is that a high end B average is probably nearly 7.0.

I wonder what the future holds for those who are being rehabilitated back into the work force. Employers want to know – rightfully – why one has not been working for extended periods of time. However they often take an unnecessarily conservative approach that I think costs them potentially very loyal employees who not only would stick around, but who could be developed into people capable of bigger roles such as team leaders or managers.

Yes some of these people have had a prior criminal history. They might have been on drugs in their youth after leaving school with no qualifications and have committed a crime 25 years ago. But what if they have done the time, renounced the drugs, got a stable partner, gone back to school or some other educational institution and done a trade or a degree?

Well done to them for rebuilding their lives. Do they not deserve a chance? I think they do. Otherwise it is not only they who suffer, but if it leads to a relapse in their condition then the whole of society suffers.

Some people have medical history, like me. Diagnosed at age 8 with severe hypertension. Coupled with hearing impairment, I have struggled for work in the fields of academic endeavour that I studied in. Part of it might be because employers, seeing that I have hypertension possibly suddenly become nervous about hiring someone that they worry might have an accident on their watch. It is kind of interesting that I hold a steady 40 hour a week job in the rental car sector, a sector I knew nothing about and had no connections in. I have now been in it for nearly 5.5 years.

Will this continue to limit me? I hope not. In some respects I have been lucky to have good parental support, a good current employer, but not everyone is like that.

 

 

 

Lake Wakatipu e-coli scare symptomatic of bigger problem


A few days ago there was a report about the dying aquatic ecosystem in Lake Wakatipu, which is the water playground of Queenstown, the lake whose waters the steamer T.S.S. Earnslaw travels laden with tourists seeking a farming experience and the lake which feeds the Kawarau River. Whilst all might have seemed fine to tourists, Queenstown locals are aware of a growing problem with the fresh water quality.

In late 2017, just before Christmas, Otago Regional Council announced tests were being done for E-Coli, after it was found in Frankton Bay, which is very popular with tourists and locals as Queenstown’s water front. In March 2018 further concerns were raised about E-coli in Lake Wakatipu after high levels were again found. Now, days after a damning report into the state of the Lake Wakatipu ecosystem was released, there is another E-coli alert. Before we look at the critical factors in fresh water quality, it is important to know the role of E-coli.

E-coli is an important bacteria in ones intestine as it helps produce Vitamin K and prevent colonisation by disease causing bacteria. However it has two strains that are problematic to humans, called STEC and VTEC. The latter is not so common as STEC, which causes the vast majority of E-coli related health alerts in New Zealand. Most STEC cases in New Zealand stem from instances of people being in farm environments, drinking untreated water or consuming unpasteurized milk.

E-coli is just one problem afflicting Lake Wakatipu though.

It is important to note a host of other sources including:

  1. freedom campers,
  2. a major increase in tourism,
  3. industrial area run off that has not been adequately treated and
  4. a possibly unsustainable growth in the population around Queenstown.

Queenstown’s infrastructure struggles to handle the fluctuations from Summer to Winter in population and the resultant demands placed on it. The rate payer base are often business and property owners as many locals find it too difficult to live in a town where rent sometimes swallows their entire pay, and where many of the day to day population are transient people who are on work visas and will only be around for a few weeks to a few months before moving on. All of this limits Queenstown’s choices for infrastructure that can cope. Whilst Queenstown struggles to afford appropriate infrastructure, pollutants will continue entering the lake from sources that should be better contained.

Freedom campers are generally people looking to travel New Zealand whilst spending as little time as possible in official camping grounds. They often park in places where camping is not permitted and do not always dispose of rubbish properly.

The rapid growth of tourism in New Zealand over the last few years has become unsustainable in many respects. From a huge growth in the rental car industry and the associated increase in rental vehicles on the road, through to problems with rubbish, demands on infrastructure and a reluctance among politicians to introduce fiscal or other measures to address the problem, all of these factors are combining to cause a major headache.

With Queenstown’s growth, associated light industry has been established to support the town’s economy. However with that growth industry there does not appear to have been a matching growth in efforts to contain “grey water”, which is a nick name for storm water and industrial runoff. This winds up in streams, of which Queenstown has several nicely landscaped ones running through the town, which wind up in Lake Wakatipu.

But the biggest problem facing Lake Wakatipu might actually be Queenstown itself. Constrained as it is by its geographical features, Queenstown is spreading into side valleys and along Lake Wakatipu. In an attempt to keep the town from stagnating new developments are popping up in all directions. Nearby locations such as Arrowtown and Wanaka are becoming dormitory suburbs of Queenstown. With this growth comes an increase in artificial land cover that acts as a surface to collect pollutants; an ever more constrained infrastructure network, to say nothing of more tourists as the towns reputation grows.

Good for the economy. Crap for the environment, which ultimately as one of Queenstown’s biggest draw cards, might be crap for the economy.

Do you see a nasty cycle here?

Challenges for New Zealand in 2019


A range of social, economic, political and environmental challenges loom large on New Zealand’s horizon as the year 2019 gets underway. In a turbulent world and stressed domestic situation New Zealand finds itself trying to live up to the international reputation bestowed on it as a clean, friendly and – for the most part – safe place to visit, live and do business. Addressing these challenges will go some distance towards improving our future. So, what are those challenges?

Environmental challenges are numerous. But they also present some opportunities which are beyond the scope of this article, and which will be discussed at a later time.

  • Our fresh water continues to be stressed by the demand placed on it by domestic consumption, dairying, industrial and other uses. Despite increased acknowledgement of the threat posed to it there is still resistance in some economic and social sectors, who view it as green wishy washy politics.
  • Waste is a rapidly growing problem and despite moves to tackle plastic bags, it ignores significant other sources such as electronic waste, food waste, packaging and our poor recycling. This may threaten our reputation for being clean.
  • The level of carbon in our atmosphere is the highest it has been for 3 million years. Whether one believes in climate change or not, this carbon is having serious effects on the marine environment, peoples health through air pollution and potentially cancerous dioxins

Economic challenges exist both on the world stage and domestically. Some are challenges that are decades old and some are challenges that have only arisen in the last few years:

  • A trade war between the United States and China might have flow on effects for New Zealand and other trade partners of these two countries – no immediate talks on ending the hostilities which started last year seem likely in the near future
  • A continuing reluctance to diversify our economy so that fewer eggs are in the same proverbial basket means opportunities to develop niche sectors such as recycling and environmentally friendly technologies are being passed up
  • New Zealand is supposed to be carbon neutral by 2050, but the Ministry for Environment and the Ministry of Energy and Resources have not given thought as to what a long term blue print for this might look like.

Tackling social challenges might be one of the bigger success stories of the Sixth Labour Government. In adopting a policy of greater kindness and compassion, Prime Minister Jacinda Ardern took a great step forward in including the more vulnerable parts of society that have been marginalized by market economics. But challenges remain:

  • Whilst moving to address the effects of drugs on society is a laudable action, clearly some such as heroin, cocaine and methamphetamine have more damaging effects on individual than cannabis – having a referendum on cannabis will not address the need to be firm on the manufacturers, importers and sellers of these more damaging substances
  • Our road toll – what a disaster it has been these last few years and too much of it caused by offenders thinking that a wet bus ticket judicial system is a licence to reoffend. Whilst true simple ownership of attitudes will also go some distance towards lowering the road toll as well.
  • Reform of the labour laws is necessary to stop New Zealand developing a wild west reputation for employing non-New Zealanders and then exploiting their likely lack of knowledge about their rights and responsibilities under our laws

New Zealand has some serious decisions to make in the near future politically. What sort of constitutional system do we want? Is our flag still relevant? Do we want Prince Charles as our head of state?

An alternative New Zealand flag. Designed by R. GLENNIE

The above is a flag design that I conceived over Christmas and New Year. Whilst I supported the New Zealand flag in the referendum, that was not so much because I like the design of the existing one, as I found it suspicious that replacing it should suddenly be a raging priority. The time to have that debate is when we are forced to address the constitutional issue, which I suspect will be when Queen Elizabeth II passes on.