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GST and online sales

The Government has announced that it is currently investigating ways to ensure New Zealanders are charged GST on purchases they make online from foreign vendors. Netflix was one of the first companies to state that they do not intend on charging New Zealanders GST to use their service.

Just how the Government intends to levy GST on all online purchases is anyone’s guess. The devil will be in the detail.

The key question for taxpayers is whether this ‘itunes tax’ is about fairness, or revenue gathering. If the politicians are to be believed that this is purely about creating an equal play field, then there is no reason why the extra tax collected shouldn’t be used to lower New Zealanders’ tax burden in other areas.

It should come as little surprise that retailers in New Zealand are welcoming the announcement. Online purchases, especially of physical goods, have the ability to erode their market share, and with it taxes that the Government would otherwise receive. Any regime would also have to carefully look at the impact of compliance costs.

Yet on the other hand, the Government’s proposal seems fraught with difficulty, especially in relation to digital content. New Zealanders live in an increasingly globalised world. The internet allows the free flow of information, communication and access to content. And let's face it, IRD can't possibly reach every online retailer.

Two ISPs, Orcon and Slingshot, have lead the charge to open-up access by providing their customers with a way to access otherwise geo-blocked content. Certainly there are other ways for users to access international content, whether that be anonymity software such as Tor, or by using a VPN. When these workarounds are combined with virtual credit cards, like Entropay, users are free to consume content from wherever, whenever, in whatever jurisdiction has the best price.

The potential for a 15% increase in in the price of digital content may easily lead to an increase of people finding workarounds or increase the number of people engage in illegal file-sharing.

We look forward to scrutinising the proposal that the Government eventually releases, with a view to ensure that the Government offsets any increase in the tax take by reducing the tax burden elsewhere. 

Ratepayer-funded fashion advice at Auckland Council

Back-office Council staff have been receiving chic stylist advice courtesy of Auckland ratepayersweb-image.png

Despite the Council cutting services and library hours, the council seemingly has money for make-up and fashion advice for back-office accounting staff.

Material we’ve just released us show that the Council accountancy team hired image consultants Fox & Mae to run “Brand Me” sessions for the back office team to learn about grooming at work, what to wear and smart-casual Fridays.

Most employers expect their employees to be tidy and well presented, even if they are a back-office worker. Image consultants are normally employed by celebrities, the very wealthy, and front-facing staff who are acting in a front-facing role.

It is sadly ironic that the accountancy team, the very people whose job it is to keep Council spending under control, have been wasting money on what looks to be ratepayer-funded fashion and make-up advice.

Northland Bribe-O-Meter

While the by-election is a show-down in Northland, the cost of politicians’ pork-barrel politics will impact upon the pockets of all New Zealand taxpayers

Northland Bribe-O-Meter banner

Today we are proud to relaunch our election Bribe-O-Meter to keep track of the pork-barrel promises being announced on the Northland campaign trail. The Bribe-O-Meter was introduced in the 2014 General Election as a way for taxpayers to gauge what parties were promising, and how much those promises were going to cost taxpayers.

It hotly contested elections, politicians will be quick to pull out the taxpayer-chequebook. This projects endeavours to ensure that taxpayers know what their candidates want to spend, and how it’s going to affect taxpayers throughout the country. Upon the launch of the Bribe-O-Meter – Northland Edition, the leading candidates have already made some big ticket announcements.

The National Party’s promises currently total $28.37 per New Zealand household, while our estimates of announced New Zealand First policies comes to over $180 per household.


 Over the flip is a breakdown of the promises and our methodology.

Public sector pay rises a tax on private earners

When the Prime Minister announced an overhaul of the way that MPs’ pay would be calculated, after an embarrassing 5.4% pay rise form the Remuneration Authority, we at the Taxpayers’ Union were cautiously optimistic.

While it was reassuring to see politicians from across the political spectrum admit that the proposed pay rise was hard to swallow, the solution proposed by the Prime Minister creates some potentially perverse incentives.

The Council of Trade Unions, along with the Labour Party, more or less welcomed the changes proposed by the Prime Minister. The CTU’s chief economist, Bill Rosenberg, said that MPs’ salaries should not be indexed to the private sector.

That’s a sentiment we agree with. Too many of our aspiring politicians take a significant pay increase upon becoming an MP – a pay rise that is completely out of step with their earning potential in the private sector.

The Prime Ministers’ proposal for MPs’ pay would see increases indexed against the public sector. Every time our policy-makers increase the pay of taxpayer-funded public servants, they will in turn increase their own pay packets.

The real losers in this arrangement? Taxpayers.

On yesterday’s Firstline Labour leader, Andrew Little, answered a few questions about MPs’ pay and what approach his party would be taking.

We were staggered with the former trade-union man’s free and frank admission that public sector workers had been receiving more generous pay rises than those workers in the private sector.

Paying public sector workers more than those in the private sector does not get New Zealand ahead. It means those in the private sector pay more taxes and take home less. Does Mr Little not realise that or is he pandering to public sector unions?

Unless the Prime Minister ensures that public servant pay rises are reined in, he may find next year’s Remuneration Authority poses an even greater embarrassment.

Massive cost blowout at IRD

In what is the largest example of government waste the Taxpayers' Union has exposed so far, we can this morning reveal that the Government is about to blow $163 million on back peddling 2013 changes to the IRD's child support system.


In 2013 the Government passed significant reform of the Child support system that, among other things, changed the formula for the calculation of child support, and how it is collected.

Last week the Government introduced a Bill to Parliament that includes a number of changes to the tax system. The Bill didn't go unnoticed, but the Government's PR machine focused on the changes to the GST system which we welcomed.

But amoung the 211 pages, the Bill proposes to roll back a number of the child support measures passed in 2013. These significant changes to child support, as far as well know, haven't received any public attention nor were flagged by the Government. This is presumably why no one has yet exposed the significance of the turn around, the reasons and the eye-watering amount it's going to cost.

In the IRD's Regulatory Impact Statement (a report which officials must prepare explaining the policy reasons behind a proposed law) is the following:

The original 2011 cost estimate for the programme to implement the [2013 child support] reforms was $30 million. As the legislation was developed and greater details on the specific changes were determined and finalised, a business case was prepared in 2012. The business case revised the estimated cost up to $120 million over the ten year period from 2011-12 to 2021-22 (costs in the latter half of the period cover ongoing depreciation, capital charges and ongoing additional staff costs to administer the modernised scheme). The increase reflected a greater appreciation of the complexity of the changes proposed by the new formula. One of the main assumptions in the business case was that the vast majority ofthe expenditure would be operating cost. 

During 2013 Inland Revenue re-assessed the time and costs associated with the programme and the assumptions underlying the business case. It became clear that the work could not be implemented, to the level of quality and certainty required, by the original legislative deadline. More time was required. Also, the assumption that the majority of development costs would be operating and not capital expenditure was proving to be incorrect as the reform was implemented. Capital expenditure comes with associated depreciation costs and capital charges leading to a higher overall cost for the reforms. If the correct assumption had been made in the business case, the cost of the reforms would have been much higher than $120 million. In early 2014, the legislative deadlines were delayed a year to allow time to complete the first phase to the standards required. The revised estimate of the project, including costs from the delay and the higher ratio of capital expenditure, is now $210 million for the ten year period from 2011112 to 2020/21. The majority ofthe higher cost is the depreciation and capital charge associated with the capital expenditure.

That's right the $30 million cost for implementing the child support reforms has ballooned to $210 million!

'Depreciation and capital charge associated with the capital expenditure' is bureaucratic code for an IT cost blow out

So what is the Government doing?

Clearly a $180 million (or 700%) cost blowout is an unacceptable course of action. That's what the U-turn in the Bill introduced last week will remedy right?  If only it was that simple.

Elsewhere in the same document, officials say:

The cost ofimplementing phase 1 and part of phase 2 of the reforms [contained in the new Bill] is estimated at $163 million. 

There will be an additional cost ofmigrating the reforms to the new "transformed" environment. 

What a complete shambles. $163 million is what it will take to implement the revised policy! An extraordinary cost - more than $100 for every New Zealand household with not a single dollar of it going to vulnerable kids or struggling families.

The Revenue Minster has some explaining to do. We hope that opposition parties will be ensuring this happens when Parliament return on the 10th.

Click here to read the Regulatory Impact Statement on the IRD's website.

Politicians pontificating on pay-rise policy

Crocodile tears

This morning we called the bluff of MPs, some of who are crying crocodile tears in the media about their pay hike. We wrote to each asking whether they will be accepting the backdated pay increase.

We asked each MP the following: 

Dear Member,

Given various public comments that yesterday’s determination by the Remuneration Authority is unnecessary or unjustified, we seek your clarification by 5pm tonight whether you will be: 

a)    accepting the increase in pay and back-pay;

b)   refusing the amount (or refunding it to The Treasury); or

c)    giving the amount to a charity.

If you intend on giving the money to charity, please specify which charity.

The responses we received have been quite disappointing. One National MP was quick to respond with a one-letter message, “A”. We also received an odd response on behalf of all Green MPs.

Rather than answer our questions, the Greens provided a few points as to what their policy would be for the Remuneration Authority and future payments to MPs.

That’s all good and well. While their proposed solutions differ to ours, it would undoubtedly see a reduction in the rate at which pay rises occur. But what good is proposing a solution unless you practice what you preach?

When we pressed them further, the Greens refused to say what their MPs would be doing with their pay increases. We can only assume that despite their policies, they will be pocketing it.

No one fighting for taxpayers

dollar-money-cash-1200.JPGThe Remuneration Authority has approved another five and a half percent pay rise for backbench MPs, backdated to July last year.

With inflation close to zero this 5.4 percent boost is a slap in the face to taxpayers. In what other profession do you get paid an allowance for your family’s travel expenses?

For too many backbench MPs, $156,000 is the most money they will earn in their lifetime. How does that reflect the community service element of being an MP?

The current model has screwed the scrum against taxpayers. Not only should the remuneration be set once every 3-year Parliamentary term, but taxpayers need a voice in this decision. The Authority has a union representative for public sector workers, but no one representing taxpayers.


We've launched a petition calling on the Government to appoint a taxpayers'  representative (ideally an economist). We need someone in the room to push back against the continued creep of higher and higher salaries for MPs.

Click here to sign the petition

Auckland Council's ten very expensive tickets

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This morning we have released documents we've obtained from the Auckland Council revealing that ATEED, Auckland Council's economic development agency, has gifted $50,000 of ratepayers' money to the prestigious Remuera Golf Club for the Holden PGANZ Championship.

Auckland Council claims to have no money, but finds $50,000 of 'spare' ratepayers' money to give a hand-out to Auckland's richest golf club. While the spin doctors might label it 'economic development' - how can this hand-out possibly be given priority over roads, rail and housing?

Ten tickets - that'll be 50k

We found out about this $50,000 gift after a Council run social media account advertised a competition, offering ratepayers ten tickets to the event. We suspect the ten tickets are all ratepayers are ever going to see of the $50,000! 

Officials have told us that there is a project sharing agreement in place where the Council receives 50% of any profits from the event over and above $150,000. We think that the answer shows that officials are trying to have it both ways by claiming that the grant is an 'investment' rather than a ratepayer-funded handout to sport. When it proves to be a flop, we suspect they will probably call it a tourism expense...

If anyone really thinks that this amounts to a genuine investment that will provide a decent return to ratepayers, well, we've got a bridge to sell ya... 

Click here to view the Council's response to our information requests.

We did it!

New Zealand Taxpayers' Union Inc.

You spoke and they listened!

Steven Joyce has announced that no taxpayer money is going to be used to support SkyCity’s convention centre. Instead, SkyCity are going back to the drawing board to come up with a cheaper design. Fantastic.

In just a few days more than fifteen hundred people signed our petition and the message got through to Mr Joyce and SkyCity. This is a win for the little guy.

While there could be devil in the detail - and don't worry we'll be making sure that SkyCity don’t now try to build something a fraction of the size that was promised - today at least taxpayers can breathe a sigh of relief.

Join Us

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With your support we can make the Taxpayers' Union a strong voice exposing waste and standing up for Kiwi taxpayers.

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