Media Enquiries: 04 2820302 (24hr)

Lower Taxes, Less Waste,
More Transparency

Championing Value For Money From Every Tax Dollar

Taxpayers' Union Response to MP Claudette Hauiti charging Australian holiday to the taxpayers.

National MP charged Australia holiday to taxpayers The New Zealand Herald - 16/07/2014

National Party MP Claudette Hauiti has given up her parliamentary charge card after she used it to pay for a personal trip to Australia.

Ms Hauiti entered Parliament in May 2013, replacing disgraced list MP Aaron Gilmore.

Taxpayers' Union Executive Director Jordan Williams said workers have been sacked for similar offences.

"If an employee charged a trip to Australia on the staff card, they would be sacked. How can someone be trusted to run the country when they can't be trusted with the plastic?"

Earlier this year Ms Hauiti was caught out breaking Parliament's rules by employing her civil union spouse in her electorate office.

"This is not the first time that Claudette Hauiti has played fast and loose with taxpayer money. Although she replaced Aaron Gilmore, she should be setting a higher standard.

"Rather than cover-up MPs' actions, Parliamentary Services should let the public be the judge of how MPs are spending taxpayer money. We are calling on Parliamentary Services to disclose the full details of all MP misspending."

Click here to read the full article in the Herald.

Would performance pay justify paying MPs more?

Stephen Franks blogs:

Incentive pay for MPs

The moot for the New Zealand Initiative's youth debate semi-final this year in Wellington is a good one -

"Should New Zealand tie MPs' and Ministers' salaries to a multiple of the average national income?"

When the Remuneration Authority was asking MPs about reform of the system 10 years ago, I urged that:

a) Parties be given a material amount they could distribute among their members according to their pre-Parliament incomes, to do three things:

  • reduce the income cut involved in going to Parliament for people for whom there is much more to lose, and
  • reduce the overpayment of the kind or people who would never be thought useful enough outside Parliament to get anywhere near their Parliamentary income, so they don't cling quite so desperately to their places; and
  • have the supplement reduce each year after entry to Parliament, to encourage turnover of people who have not progressed.

I also suggested a trailing commission, to induce longer term thinking among MPs. Exec incentive schemes that fail to add a trailing element or to defer vesting encourage manipulation of reporting and incentivise short term results. In politics that there is already more than enough incentive for false reporting and short-temism, in the 3 year electoral cycle.

Accordingly MPs should have a material part of their remuneration deferred each year. If the MP demands immediate payment is should be substantially discounted. The deferred amount (say half) might be paid out say five years later, multiplied by 2 times or 5 times the GDP or average income growth in the five years. If it shifted MPs horizons, it would be money incredibly well spent even if they tripled or quadrupled their incomes.

For an even longer perspective, simply make the deferral period longer.

From the taxpayers' perspective, paying MPs a little more, if it resulted in better performance is a no brainer. How would you structure it though? Drop us a line, or comment on our Facebook page.

Science and Innovation Minister Steven Joyce publicly responds to Taxpayers' Union criticism

Joyce slams Taxpayers’ Union attack The National Business Review - 11/07/2014

Science and Innovation Minister Steven Joyce has slammed the Taxpayers’ Union’s attack on the minister as a “fundamental misunderstanding” by its executive director Jordan Williams.

Mr Williams described the $31 million worth of grants to eight new company incubators – under Callaghan Innovation’s incubator support programme – as an example of politicians thinking they know more than IT entrepreneurs.

Mr Joyce says that Mr William’s comments show a fundamental misunderstanding of both technology-based start-up companies and the intention of the government’s policy.

NBR ONLINE asked the Minister how Callaghan Innovation justifies a 3:1 funding ratio, with the taxpayer taking 75% of the risk?

Mr Joyce replied that the incubators would be funding early stage companies that have arisen from public research organisations, where generally the taxpayer has paid up to 100% of the costs of the research.

“International experience suggests around 60% of the incubated companies repay the grant.”

Mr Joyce did not, however, comment on where the remaining 40% leaves the taxpayer.

Click here to read the full story in the National Business Review.

In a press release we responded to Mr Joyce:

Good Intentions are not Good Policy Media Release - 11/07/2014

“The Taxpayers’ Union isn't questioning the intention of the Callaghan Innovation grants, our objection relates to the outcome, where taxpayers bear the risks and private businesses get the reward."

“Justifying the 3:1 funding ratio, where taxpayers take on 75% of the risk, Mr Joyce is effectively saying that 75% is better than 100%. He appears to ignore that under his policy 0% of the profit is returned to the Crown."

“We hoped to be proven wrong on our fear that the grants are interest free. Instead the Minister confirms the worst, with 40% of the grants expected to be written off and the rest not even adjusted for inflation.”

In February the world's third largest software maker, SAP, which last year posted a profit of €1.80 billion, received a similar ‘growth grant'.

“The SAP example shows that this isn’t some business IVF program," says Williams.

"We call on Mr Joyce to please explain what our ‘fundamental misunderstanding’ is. Where is the evidence that the return taxpayers get from the successful start-ups compensate for the money lost on the half that fail? In addition, who is ensuring that the decisions made by politicians on what businesses to back are better than what would have happened had the money stayed in taxpayers' pockets?"

Click here to read our full media release.

 

 

 

Guest Post: Larry Mitchell on Auckland Council's finances

Auckland Ratepayers “Wake Up” at last

Bernard Orsman's analysis last week of Auckland Council's financial trouble got right to the heart of the matter. The section headed "Hey Big Spender you’re in a deep financial hole" accurately nails the central issue facing Auckland’s overtaxed ratepayers. With a new 2015-2025 long term plan gearing up, Auckland Council's control of its expenditure long based on borrow and spend, at long last  will now be put under the microscope.

The best place to start with the analysis is the new purposes of local government post the 2012 changes to the Local Government  Act. Section 10 (requiring "cost- effective infrastructure expenditure")  and section 11 (which lists the "core" activities) suggests that the Council is now staying well outside the typical activities we associate with councils.

Of course, Auckland  Council has been quick to run to Wellington for funding of its plans, but I think Central Government should withhold any consideration of tolls, regional sales taxes (or other alternatives) until Auckland Council can produce solid evidence of its adoption of a principled "cost effective" "core" services-based budget. At present it is anything but.

In his regular blog this week, Joel Cayford, Reflections on Auckland Planning makes some telling and useful points with his advice directed straight at Auckland Councillors. These include the suggestion that in place of existing assumptions - that ratepayers should foot the bill for the city’s growth-infrastructure, affordability to ratepayers must become the central issue:

“Under the Council's present policy settings, ratepayers can't afford the Auckland Plan, and it's not equitable to require ratepayers to subsidise Auckland's economic growth. It's not that urban growth is a bad thing ... it becomes a bad thing, an unaffordable thing for existing ratepayers ... that does not justify overloading existing Auckland ratepayers with growth infrastructure costs”

Other worthwhile suggestions he makes for Auckland Councillors to consider ... “while they are at it’ are all matters that echo sentiments  true of many other New Zealand Councils. These include:

  • Ratepayers, not just self selecting focus groups should (“novel thought”) be asked “whether they would prefer cuts in their local services (parks, libraries, waste management, plantings, gardens, community services), or whether they would prefer you to spend less of their rates on growth infrastructure projects - then I think you'd get a clear answer. Local council and community services are highly valued in a liveable city”.
  • Watercare, (the Council controlled water company), itself, a huge burden of cost on ratepayers additional to Council rates, is accountable both to Councillors and ratepayers. Joel ruminates that “Watercare,  possibly knows something that the rest of us don't know, maybe the reason is that it has been ratcheting up its connection fees (thereby) giving strong warnings that water and wastewater rates are on their way up” ... and “ Councillors should not assume that Auckland Council would raise a ratepayer funded loan for Watercare’s plans.
  •  He points out where the accountability buck stops:
     “Don't think you can escape responsibility for Watercare charge increases by keeping rate increases down a bit. Watercare is your responsibility too. You govern it. No-one else does”.
  • In the context of consultative process relating to budgetary assumptions Joel insists that ratepayers are a living breathing part of the decision loop:
    “I think you would be assisted in your task if you asked officers for typical household scenarios with different policy settings. You should be provided with information at the individual ratepayer level of all the consequences of your plans, policies and assumptions. This would tally up rates AND Watercare charges AND any other Council charges - so you can see the total funding impact of your potential decisions on typical Auckland ratepayers across the region”. Hear Hear to that!

Joel concludes by taking a swing at the vexed Housing Affordability conundrum, not merely an Auckland issue. He presents it in this way:

My biggest policy concern with the growth pathway Auckland is headed down is the assumption that existing ratepayers will subsidise costs of growth infrastructure needed to accommodate new ratepayers ..., then the true costs of new accommodation will not be paid by those buying into that part of Auckland's property market. This inbuilt subsidy is already causing property market failure. The craziness of Auckland's property market is partly driven by Auckland Council growth policies.

Let’s hope that this time, Auckland Councillors do two things:

First: They must be persuaded of the importance of achieving what was hoped when the former Auckland councils were amalgamated in the first place. It was supposed to be driven by excellent performance management and reporting, high standards of accountability and value for money and

Secondly: They should take up the enlightened constructive suggestions of Joel and other commentators - in the interests of their long-suffering ratepayers.

Waste Watch: Auckland Council spends 100k on a curtain

Sometimes the truth is stranger than fiction - the Devonport Flagstaff reports:

$100,000 curtain raiser for Devenport

A $100,000 budget has been set aside for a space-dividing, silk curtain in Devonport’s new library.

But the public art piece will be mostly invisible during the day.

Creator of the curtain, Judy Millar, was selected from 85 artists to design an object ofpublic art for the new building and bring a unique energy to its interior.

Auckland Council project manager David Thomas said the curtain will be three metres high and made out ofdouble-sided silk. It comes with its own dry-cleaning schedule and a ten-year maintenance or replacement budget 0f$30,000. “We expect that people will want to touch it,” Thomas says. A large part of the project’s total $100,000 budget is going into the tracking, railing and security system to hang the curtain, as well as the printing and sewing ofthe piece, he said.

The curtain will be visible from the street after business hours, when it will be used to divide off and secure the facility’s main area from the community room that remains open to the public.

During library opening hours the curtain will be stored next to the new fireplace, where it will also be shaded from being bleached by the sun, Thomas says. It will also need to be treated with non-flammable chemicals, he says. Read more.

This is an inexcusable waste of ratepayer money. Does Auckland Council have no respect for those who pay its bills?

The culture of big spending in Auckland Council needs to stop. As our Ratepayers' Report shows Auckland already has eye watering debt, the highest in New Zealand on a per ratepayer basis, even before the big infrastructure projects have started.

 

Good intentions not enough for good policy

Science and Innovation Minister, Steven Joyce hit back at us regarding our recent criticism of the Government's corporate welfare efforts, such as the millions of taxpayer dollars going into ‘company incubators’. The NBR reported on Thursday:

Eight new company incubators are to receive funding under Callaghan Innovation’s incubator support programme.
Callaghan, the government funded innovation hub, has included three new technology-focused incubators and five founder-focused incubators in its latest funding round. 
The three new tech-focused incubators are PowerHouse, Astrolab and WNT Ventures, and will be eligible for up to $450,000 worth in repayable government grants, with the incubator companies matching funding at a one to three ratio of up to $150,000.
...
The tech-focused incubators will focus on commercialising Intellectual property, primarily sourced from publicly funded research organisations, like universities and Crown Research Institutes.
The repayable grants are a trial programme, which was allocated $31.3 million over four years in the 2014 Budget.
...
However, the Taxpayer’s Union executive director Jordan Williams has described the government grants as an “example of politicians thinking they know more than IT entrepreneurs.

On Friday, Mr Joyce went the offensive:

Joyce slams Taxpayers’ Union attack
Science and Innovation Minister Steven Joyce has slammed the Taxpayers’ Union’s attack on the minister as a “fundamental misunderstanding” by its executive director Jordan Williams.
Mr Williams described the $31 million worth of grants to eight new company incubators - under Callaghan Innovation’s incubator support programme - as an example of politicians thinking they know more than IT entrepreneurs.
Mr Joyce says Mr William’s comments show a fundamental misunderstanding of both technology-based start-up companies and the intention of the government’s policy.
Unfortunately Mr Joyce does not tell us what the 'fundamental misunderstanding' is, rather just explains what the 'purpose' and 'intention' of the policy is. The article goes on to say:
NBR ONLINE asked the Minister how Callaghan Innovation justifies a 3:1 funding ratio, with the taxpayer taking on 75% of the risk?
Mr Joyce replied that the incubators would be funding early stage companies that have arisen from public research organisations, where generally the taxpayer has paid up to 100% of the costs of the research.
“The projects that are funded via the incubator are still very early stage, with significant technical risk. The aim of the programme is to get private sector expertise in very early so that the projects have a greater chance of success. 

We have called on Mr Joyce to explain what the ‘fundamental misunderstanding’ is. Instead of rebutting our criticisms of the policy, Mr Joyce has just reiterated what the ‘intentions’ are. Unfortunately even the worst policies have the best of intentions.

We hoped to be proven wrong on our fear that the grants are interest free. Instead the Minister confirms the worst, with 40% of the grants expected to be written off and the rest not even adjusted for inflation.

In February the world's third largest software maker, SAP, which last year posted a profit of €1.80 billion, received a similar growth grant'.

For us, the key question are:

  • Where is the evidence that the return taxpayers get from the successful start-ups compensate for the money lost on the half that fail?
  • Who is ensuring that the decisions made by politicians on what businesses to back are better than what would have happened had the money stayed in taxpayers' pockets?

Guest blog post: Tony Joyce - KPMG Tax Partner

About two weeks ago Labour released its tax policy programme that it intends to implement if elected Government come 20 September.  Predictably the increase in personal tax rates by 3% to 36%, and the confirmation of a capital gains tax, was widely criticised by senior National ministers as envy taxes and a hindrance to investment.

Whatever one’s personal view, the good news for voters is that for perhaps the first time in a number of elections there are now very clear differences between the two large political parties on taxation policy. While tax will unlikely be the determining factor of which party voters will support, it is at least good to see some very clear and distinct alternative thinking between the two main political parties. The most obvious difference being a capital gains tax.

There is little doubt that a capital gains tax will come to New Zealand eventually. Whether it is in 2015, 2018 or 2028, New Zealand will get a capital gains tax. We are one of the only developed countries not to have a capital gains tax and while it is true that it takes some years before it becomes a significant revenue contributor, once implemented it will influence investment decisions and also contribute towards our infrastructure requirements and social spending needs. It is difficult to rationally argue against a capital gains tax on economic grounds. However, the timing of when such a tax should be introduced, and the immediate impact this might have on investment, are issues that voters will be weighing up. 

As someone that has a good understanding of how large companies structure their New Zealand business investments, it’s disappointing that almost all parties continue to seek to score political points at the expense of multi-nationals. Labour is no exception in making its tax policy announcement, highlighting its intention to provide additional funding to enable many specialist tax investigators to base themselves in the downtown offices of those multi-nationals considered to be serial tax avoiders. Apparently some $200 million per annum of additional tax revenue will be raised simply by doing this. Whether this is politics or a genuine expectation on the part of Labour’s finance spokesman David Parker is something that could be debated well into the night. National has not been innocent of similar point scoring and regularly highlights how much extra resource and effort it is putting into the fight against large multi-national tax avoidance.

The actual reality of the situation, however, is that our Inland Revenue Department is already perhaps one of the most aggressive revenue authorities in the developed world when it comes to applying the tax avoidance provisions to collect additional revenue. Where taxpayers legitimately take a tax position that the Commissioner does not like, all too often the response is not one of challenging the technical merits of the position, or recommending to Parliament a legislative response is required, it is to jump straight to applying the tax avoidance provisions to achieve the outcome the Commissioner considers just.

The impact of this approach on new investment in New Zealand is difficult to gauge, however, there is little doubt that foreign investors are not only aware of the “avoidance risks” of investing in New Zealand, they also place a risk factor on New Zealand investment that did not previously exist. Basing many specialist tax investigators at the premises of multi-nationals is therefore highly unlikely to bring in any more additional revenue than is already being collected; and certainly not the $200 million per annum that Mr Parker has budgeted. 

Without fundamental reform of how we tax non-residents, there is little that can be done to collect tax revenue from companies that do not have a significant presence in New Zealand. The solution lies in making New Zealand a jurisdiction where multi-nationals wish to be based, not in applying the tax avoidance provisions to those companies that currently are based here.

Remembering that this “tax avoidance” initiative announced by Labour is about ensuring everyone pays their fair share of tax, it was disappointing that perhaps the most obvious source of additional revenue under the “paying your fair share” heading has been overlooked. Rather than seeking to gain headlines at the expense of multi-nationals, a much greater return on investment could be achieved by targeting additional resources at our black economy. Estimated at as much as $20 billion by some economists, if only GST was collected on just 20% of this, an additional $600 million more tax revenue would result. This is greater than all of Labour’s personal tax hike, the capital gains tax and the additional $200 million avoidance revenue combined. If income tax was also collected this additional revenue could potentially double. Reduce the black economy by half, and up to $3 billion of additional tax revenue could be collected.

If Government, regardless of political persuasions, is serious about ensuring everyone pays their fair share of tax, then surely this must be where the significant investment is made. Better use of technology and a more strategic approach to information sharing could result in enormous amounts of additional revenue coming from a large sector of society which illegally operates outside the tax system.

Grandstanding at the expense of multi-national companies, whose investment dollars New Zealand needs if we are to prosper long term, is not a good look and will do nothing to raise additional tax revenue or encourage new investment. Our Inland Revenue officials are already overzealous in their application of the tax avoidance rules and if anything they should be encouraged to pull back a tad rather than become even more aggressive.

Regardless of the winner on September 20, the challenge for the post-election Government is to grow our revenue base in a manner that does not discourage investment and truly does result in everyone paying their fair share. Tax should be used as a tool to encourage, not discourage investment….and anyone operating outside of the tax system should be the focus of significant additional audit activity.

This article is the opinion of KPMG Tax Partner Tony Joyce

Seven Sharp: How much gas do you really get for your dollar

How much gas do you really get for your dollar: Seven Sharp - 01/07/2014

Yesterday we headed down to Z Energy Vivian Street where TVNZ's Seven Sharp filmed us refunding people's petrol tax. Not a single motorist guessed that for every dollar spent at the pump only 57 cents goes in the car!

The Government has locked in another 3 cent increase on petrol excise for next year  - now that we are back in surplus we're calling on the Government to ditch the tax hike.

Screen_Shot_2014-09-30_at_8.14.19_pm.png

How much gas do you really get for your dollar: Seven Sharp - 01/07/2014

New problems at BNZ Harbour Quays building

We've received confidential minutes and a briefing via the tip-line relating to CentrePort’s problematic BNZ building which suggests the building will not be fully reoccupied until the end of October.

What should be one of Wellington’s most modern and safest buildings looks to be still plagued with problems eleven months after the Seddon earthquake.

We understand that CentrePort is having to fork out more ratepayer money on seismic restraints on the risers and that there are now new problems with windows popping out in Pier 3.

If ever you needed an argument as to why ratepayers should not be underwriting property development, the BNZ fiasco is it.

Greater Wellington needs to abandon its policy of secrecy and explain how much these problems at the BNZ building are costing ratepayers. Latest estimates are in the tens of millions.

In May the Taxpayers’ Union revealed that the Greater Wellington Regional Council guarantees CentrePort’s debt, including borrowings related to property development.

 

MN_Minutes_PCG Meeting

 

Taxpayer's money spent on 'junket' - Taxpayers' Union

The Department of Conservation has spent over $100,000 to send staff overseas to learn how to conduct controlled burn-offs, despite the practice not being used by DoC, a taxpayers' lobby group claims.

The Taxpayers' Union says 47 DoC staff travelled to Australia this year at the taxpayer's expense to learn how to conduct controlled burn-offs - a skill that is not applicable in New Zealand.

DoC says the trip to Australia was about developing leadership qualities in the staff to deal with high stress situations.

However, the Taxpayers' Union says documents suggest the department was looking for an 'excuse' they could use for why they were sending staff members on the trip.

The documents also contained feedback from one staff member who made the trip admitting that the group didn't "really do much fire stuff", despite that being the apparent purpose of the trip.

"The documents reveal that DoC has been left searching for ad hoc excuses to justify this expenditure. Are DoC staff so well equipped that they need to send staff on training programs for things that only assist conservation in Australia?" says Taxpayers' Union Executive Director, Jordan Williams.

This isn't the first trip DoC has made to Australia. The department previously sent 25 staff on a trip in 2012.

It's estimated the 2012 and 2014 trips have cost taxpayers $106,000.

DoC says the trip to Australia was about: "enabling staff to experience a variety of fire behaviour in a controlled setting, applying fire control and suppression methods in different circumstances and generally allow staff to experience the intensity associated with large fire events and practice the appropriate responses."

Click here to read the story on the ONE news website.


Join Us

Joining the Taxpayers' Union costs only $25 and entitles you to attend our annual conference, AGM and other events.

Donate

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

Tip Line

Often the best information comes from those inside the public service or local government. We guarantee your anonymity and your privacy.