As part of our campaign to Clear the Air, we have written to Minister of Commerce and Consumer Affairs Kris Faafoi to highlight the government-led misinformation that prevents smokers from switching to less harmful alternatives, and saving up to $2 billion a year in excise tax.
With Jacinda Ardern now on maternity leave, Winston Peters has finally grasped the wheel of power.
However, Mr Peters has had significant control over spending since the Government was formed late last year. Since then, Winston has negotiated for an array of projects, policies, and prizes for him and his NZ First Ministers.
This includes the Provincial Growth Fund, significant increases in spending for the Ministry of Foreign Affairs and Trade, and the Ministry of Defence, a vanity project (re)re-branding of the Ministry for Children, and a tax credit for hot horses, among other initiatives.
Winston's Dowry as at 21 June: $5.132 billion ($2960 per household)
The total cost so far is $5.132 billion - or $2960 for the average New Zealand household, although depending on how Winston behaves from the 9th floor, that figure could grow in coming weeks. We'll be watching closely for announcements from NZ First Ministers and the acting Prime Minister so we can update Winston's Dowry.
"The Dowry" to date:
- Provincial Growth Fund: $3 billion or $1735 per household
- Additional funding for the Ministry of Foreign Affairs and Trade: $1.144 billion or $661 per household
- Additional funding for the Ministry of Defence: $426 million or $246 per household
- Additional funding for learning support: $272.8 million or $157 per household
- Additional funding for Oranga Tamariki: $269.9 million or $156 per household
- 'Hot horses' tax break, the new Forestry Hub, and a rename for the Ministry of Children: $20.2 million or $11.70 per household
Over the last 25 years, public sector incomes have grown much faster than the private sector, while public sector employees also enjoy a higher rate of sick leave costing taxpayers $173 million, according to Public Sector Wage Gap: The taxpayer-funded premium for working for the government, a new report we've released today.
If you work for the Government, you earn a third more on average, with taxpayers footing the bill.
This report seriously undermines the public sector unions’ claim for 9-15 percent pay hikes for their members. It blows to bits claims the last Government did not pay bureaucrats enough.
The public sector pay gap nearly doubled since the 1990s. If anything, a wage freeze, not hikes, would be fairer.
Left wing activists and unions would have the public believe that the public sector has undergone nine years of neoliberal hell. But this shows that to be a lie.
Key findings of the report:
- The gap in weekly earnings between the public and private sectors has grown since 1990, from 18.9% of private sector earnings to 34.6% in 2017. The gap peaked in 2010 at 38.4%. The premium is even higher for hourly earnings (as public sector employees, on average, work fewer hours).
- If the Government had retained a public sector earnings premium of 20%, taxpayers would save $2.5 billion per year, or $1,445 per household in lower taxes or reduced Government debt.
- The public sector took an average of 8.6 and 8.4 days of sick leave in 2016 and 2017, compared to the private sector average of 4.7 days per year.
- If the public sector reduced its rates of sick leave to private sector levels, the taxpayers would save $173 million per year, or approximately $100 per household per year in lower taxes, or reduced Government debt.
- The Government should set a goal of returning to a 20% public sector earnings premium by placing constraints on public sector wage growth and focusing on growing productivity.
- If private sectors stagnate or decline (such as in a recession) the Government should be willing to cut public sector wages to match.
You can also download the report here.
Rt Hon Winston Peters has now released the terms of reference for his review of the racing industry, due to intervention of the New Zealand Taxpayers’ Union and the Ombudsman.
New Zealand First has a long history of promoting handouts for the racing industry, with an all-weather track and new tax breaks just the latest examples. So naturally, we were very interested when Winston Peters announced a review of the sector.
Whether this type of review leads to impartial policy advice or just proposals to prop up an industry with taxpayer money depends on the questions raised in the review’s terms of reference.
We were stunned when the Minister refused to release the terms, saying there was no document literally titled ‘terms of reference’. After we involved the Ombudsman, the Minister has now released to us the letter to the review head that outlined the scope of the review.
There seems to be nothing remarkable about the released terms of reference, which begs the question of why Mr Peters’ office was so secretive in the first place.
Mr Peters could avoid the perception of cronyism if he were more transparent about his tinkering with the racing industry.
The New Zealand Taxpayers’ Union can reveal that The Spinoff have broken the terms of their agreement with IRD to publish content in their Tax Heroes project.
The Tax Heroes project, which featured a number of articles from writers associated with The Spinoff, intended to highlight the public good of paying taxes, and in doing so promote compliance with tax obligations among the public.
Due to an official information request, the Taxpayers’ Union can reveal that The Spinoff was paid $40,000 ($46,000 including GST) by the IRD to publish the series.
The IRD is required to be politically neutral – especially so for matters currently under consideration by Sir Michael Cullen’s Tax Working Group.
The Spinoff’s contract with the IRD specifically states: The Spinoff agrees not to refer to any political party or their policies in the content.
However, an IRD-branded article by Maria Slade, published on 31 March, ignores the contractual obligation.
See also the disclosure statement at the end of the article:
The article “Why the lack of a capital gains tax is letting property companies off lightly” advocates for a Green Party policy, a capital gains tax, violating the agreement.
Further, the article’s very first sentence references Labour, which again violates the agreement.
Other overtly political articles bear the ‘Tax Heroes’ tag, but without IRD branding. IRD and The Spinoff must explain whether any of these articles were paid for with taxpayer funds.
If not, and IRD funding was only used for the articles labeled ‘partner content’, then the cost per article was approximately $6,600 – which seems extraordinary.
Taxpayer’s Union Executive Director Jordan Williams says, “The Spinoff appears to have misused $40,000 of taxpayers’ money to push a political message. It is disgraceful, and they should pay the money back."
“The IRD needs to be extremely careful about its place in our constitutional environment. Taxpayers expect our revenue collection service to be strictly apolitical. Any movement away from that norm is unacceptable.”
“Putting aside the breach of agreement, the Tax Heroes series was a terrible use of $40,000 in taxpayer money. The articles were effectively taxpayer-funded pro-tax propaganda, with the first article pushing the Orwellian message that ‘Tax is love’.”
“This kind of taxpayer-funded media rort may keep quasi-news platforms like The Spinoff afloat, but do it does no good for ordinary taxpayers. The IRD should not have been funding pay-for-play websites in the first place.”
Amazon’s decision to pull out of Australia in response to a new online shopping tax shows the peril of the New Zealand Government’s plan to introduce its own ‘Amazon tax’, says the New Zealand Taxpayers’ Union, in conjunction with its sister organisation the Australian Taxpayers’ Alliance.
Australian Taxpayers’ Alliance Director of Policy Satya Marar (who is currently on secondment in New Zealand) says, “The Australian Government’s online shopping tax denies shoppers and families the same consumer choice available to billions of shoppers worldwide.”
“If this happens in New Zealand, Kiwis will be denied access to about 500 million products, most of which are unavailable locally. So instead of creating a level playing field, it only harms consumers.”
“Last year, an Australian senate inquiry was told that the online shopping tax would not make Australian retailers competitive, would not raise a significant amount of revenue and that the cost of implementing the tax would force major online platforms to exit the market or cease serving Australians entirely. Now we see these consequences in action.”
“New Zealand faces the same risk as it introduces its own Amazon tax. The Government wouldn’t need to assist domestic retailers with taxes on overseas competitors if it addressed local pressures such as zoning laws, strict labour regulations and red tape.”
In the coming weeks, we will be launching a new project: Winston's Dowry.
Marriage can be expensive, but normally the guests aren't given a bill at the end of the ceremony. In a political marriage, the cost of attendance can be significant. The aim of Winston's Dowry is to calculate the total cost to taxpayers from the demands of two-time coalition divorcée, Winston Peters.
We will be updating the Dowry regularly as new vanity projects, expensive trips away, and pork-laden policies are announced or appear on our radar. If you have any examples of expensive projects or eye-watering trips abroad related to Winston Peters' presence in Government, you can send them through to our tipline.
Our analysts have just left the Government’s Budget lock-up having pored through the largest budget media/analysts pack we can recall and listened to an early version of Finance Minister Grant Robertson’s speech which he has just read to Parliament.
Except for the appropriations, Budget documents are essentially political. The key announcements the Government is hanging its hat on, are listed at the bottom of this email.
Government books and the economy looking rosy
Robertson’s first budget was written in extraordinarily benign circumstances. The economy is growing at a sustainable rate of around 3%, tax revenues for the June 2018 year will exceed Budget 2017 estimates, unemployment is down to 4.5%, employment levels are very high at 73.1%, and public debt at 21.7% of GDP is low and trending downwards.
The economy is in vastly better shape than any new Government has inherited since 1972. That year Labour leader Norman Kirk won with a thumping majority and an inexperienced team. Labour lost to National’s Rob Muldoon, with a similar majority in 1975, and no more clues as to how to manage structural problems with the economy, which led to the economic crisis of 1984 and the Lange/Douglas reforms.
Prime Ministers Bolger, Clark and Key would have been over the moon if they could have assumed office with today's economic fundamentals.
Two big wins for taxpayers:
- Fiscal responsibility
It is very encouraging that the Government is remaining within the pre-election ‘Budgetary Responsibility Rules’. We think Steven Joyce's allegations that Labour had an $11.7 billion hole (which Labour vehemently denied) had also been helpful in keeping the Government restrained in the face of criticism from some on the left who say they should borrow more.
- Independent election policy costing office
Budget 2018 announced that “public consultation will be launched in August on establishing an independent body to better inform public debate in our democracy.” This is something the Taxpayers’ Union has been pushing for since 2014 – for transparency and accountability of what political party policies will cost taxpayers.
For decades political parties during election campaigns have made allegations about expenditure policies of others. That’s why we worked so hard last year with our election “Bribe-O-Meter”.
Tax cuts for hot horses
In terms of tax relief, unless you breed horses you are out of luck. Winston Peters has announced $4.8 million in tax reductions for ‘high quality’ horses (defined in the media release as being based on bloodlines, looks, and racing potential!).
More corporate welfare (this time green)
The Greens’ major budget announcement was a “Green Investment Fund” to “transition to a net-zero-emissions economy by 2050.” The budget sets aside $100m for this corporate welfare capital funding.
Treasury forecasts average earner paying top tax rate by 2022
Budget 2018 projections show that the average worker will be on an annual income of $72,000 by 2022. That puts them in the highest income tax threshold (33%) which still kicks in at $70,000.
This was inevitable after eight successive Budgets that have not delivered income tax relief, or indexation of tax brackets. We will be using these new projections in the next round of submissions to the Tax Working Group to push for indexation.
Growing the pie vs dividing it
Overall, Budget 2018 is far more focused on dividing the pie than growing it. With the exception of the already announced R&D tax credits, there is nothing to stimulate business confidence, industry, investment, and wages.
In terms of the R&D tax credit scheme, our view is that the breaks are marginally better than handing out corporate welfare grants (which are bureaucratic intensive with high transaction costs) but will almost certainly lead to gaming of the tax system.
In the weeks to come our team will be working through more of the detail, but in the mean time our initial comments to media are available here:
Labour Delivers Predictable Budget In Sweet Economic Times Barrie Saunders
A Billion Dollars A Year For 900 Fewer Tertiary Students. WTF? Jordan Williams
Megan Woods Breaks Word – Gives Into Callaghan Self-Interest Jordan Williams
New Green-Tint Corporate Welfare Scheme Mistaken Joe Ascroft
Thank you for your support in ensuring there is a strong voice for taxpayers in the corridors of power.
New Zealand Taxpayers' Union
Key announcements of Budget 2018
- $4.05 billion for Health, including:
- $2.2 billion in additional funding for DHBs.
- $362.7 million in free GP visits for under-14s and subsidised GP visits for community service card holders.
- $750 million in capital funding over the forecast period for hospitals and health infrastructure.
- $100 million in capital funding for deficit support will be available to DHBs in the 18/19 financial year.
- $1.934 billion for Education, including:
- $394.9 million in capital funding for new schools and classrooms.
- $370 million for 1,500 new teacher places by 2021.
- $590.2 million in additional funding for early childhood education.
- $249.3 million in additional funding for learning support programmes.
- $1.216 billion for Justice, including:
- $298.8 million to fund an additional 1,800 police officers over the next five years.
- $1 billion for R&D tax credits over five years.
- $1 billion in funding for the Provincial Growth Fund, including:
- $245 million for the One Billion Trees planting programme over ten years.
$904.9 million in additional funding for Foreign Affairs, including:
- $190.7 million in direct funding to the Ministry of Foreign Affairs and Trade to hire an additional 50 diplomats and open an embassy in Sweden.
- $714.2 million in additional foreign aid and development spending.
- $367.7 million in additional funding for the Defense and Veterans portfolios.
- $100 million for a 'Green Investment Fund' to invest in low-emissions projects and businesses.
- $181.6 million in additional funding for the Department of Conservation
This morning our team delivered our petition to end taxpayer funding for the Clinton Health Access Initiative, a subsidiary of the Clinton Foundation. All up, the petition received an impressive 6,400 signatures.
In addition, around 1,800 people have used our website to write to the Minister of Foreign Affairs, Winston Peters, imploring him to stop the rort.
We had hoped to deliver it straight to Winston Peters’ front desk, but his staff insisted we used Parliament’s (taxpayer-funded!) mail service.
No doubt, the heavy stack of papers will have made an impression. Now we await his official response.
Budget 2018 projections show that the average worker will be in the top income tax bracket by 2022 unless urgent changes are made to tax thresholds to adjust them to wage inflation.
Taxpayers’ Union Economist Joe Ascroft says “This is the eighth successive Budget that has not delivered income tax relief. While most New Zealanders expect only the most well off should pay the top rate of tax, if the current trend continues, even the average taxpayer will be paying the top rate.”
“In fact, much of the wage growth over the last eight years has actually just been keeping up with inflation, so while many families don’t feel much better off, they are paying more in tax than ever before. Inflation will similarly push families into the top tax bracket over the next four years.”
Note to editors: Treasury project the average annual income will be $72,000 by 2022. The highest income tax threshold (33%) kicks in at $70,000.