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Taxpayer Update: Taxes going up at the pump ⛽💲 | Tick-Tock on the Debt Clock 💰⏰ | Apology to ACT 🥺🙏🙇
Tell Grant Robertson to Freeze Fuel Taxes ⛽💲
After a very successful Taxpayers' Union campaign earlier this year, the Government cut fuel taxes by 25c per litre (that's 29c once you include the GST). This policy victory saw a $1.39 billion ($715 per Kiwi household) saving at the pump.
But as an early Christmas present, Grant Robertson has announced that the Government will hike taxes in two stages in February and March next year. With inflation still at more than 7 percent, we say this tax hike will hit New Zealanders hard and simply push the cost of living up further.
Based on the current price of oil and processing, these tax hikes will see Kiwis return to paying more than half the cost at the pump in tax.
Grant Robertson and other opponents of the reduction make the claim that non-road users are 'subsidizing' the cost of petrol for car drivers, but this is nonsense on stilts. Actually, road users are subsiding the costs of rail travel, walking, and cycle ways, and ineffective campaigns like Road to Zero through the National Land Transport Fund (which fuel taxes are paid into).
Demand the Government to freeze fuel taxes until inflation is back under control and the tax is used for motorists
New Zealand used to pride itself in ring fencing money raised from fuel taxes to spending on roads. But as politicians have raided the National Land Transport Fund to fund their pet projects, you're now paying for everything from advertising campaigns Government 'Road to Zero' propaganda to expensive cycleways no one uses. We say that until motorists' money is spent entirely on roads, taxes should not be hiked.
>> Send the Government a message at www.fueltax.nz <<
Stop the Clock: Government debt continues to climb 💰⏰
Last week, the Treasury opened the books as part of the Half Year Economic and Fiscal Update. The Update reports on progress against the fiscal and economic projections published in May's Budget.
We sent our economist down to Treasury to go through the fine detail in the media and analyst lock up. His analysis was damning: Despite tax revenue being at record-high levels, and above projections, Grant Robertson continues to spend even more money than budgeted, and far more than is being raised in taxes. That means the Debt Clock is running hotter than ever.
While it is easy to understand why government might have expanded during the pandemic, there is no justification for the current high spending. The public service has ballooned in the past five years but the growth in managers has far outpaced frontline workers and New Zealanders have seen no improvement in the delivery of public services.
With the Official New Zealand Government Debt Clock updated to reflect the latest figures, you can watch in real time how much the Government is adding to your household's mortgage.
It'll be our kids and grandkids who will be forced to pay for all this spending in the years to come – plus interest on top. We say the Government needs to tackle its addiction to spending – and quickly.
Ahead of next year’s election, we will be putting pressure on all parties to show how they will balance the books and set out exactly how they will pay for new spending pledges or tax cuts.
>> Click here to view the New Zealand Government Debt Clock <<
ACT and Indexation: An Apology 🥺🙏🙇
In our last newsletter, we shared an opinion piece by our one of our interns, Connor Molloy, which outlines why we think ACT has got it wrong with its opposition to tax bracket indexation. In that opinion piece, Connor mentioned David Seymour's support for Simon Bridges's indexation bill as an example of how ACT's policy on this issue has shifted.
David Seymour got in touch to point out that he made clear in his speech that his support for Bridges's bill at first reading was conditional on an amendment that would use the revenue earnt from fiscal drag to lower the top tax rate and flatten the tax system. He is quite correct and this particular criticism was unfair and we apologize for the oversight.
No taxation without indexation 💸 ‼ 🪧
Looking into this issue a bit further, however, we did come across remarks made by one David Seymour in an earlier parliamentary debate back in 2016 when he posited the question 'since when did a centre-right government support fiscal creep as a means of raising revenue?' and stated that 'This Government should be indexing tax brackets to inflation'.
We also stumbled across a 2017 ACT press release where Seymour has another go at National for 'refus[ing] to permanently tie brackets to inflation'.
Now that ACT are resolutely opposed to tax bracket indexation, we will leave it up to you, dear reader, to decide whether or not its position has changed. Was our young researcher wrong to allege a U-Turn?
Either way, until ACT reverts back to its previous policy of a flat tax, bracket creep will continue under whatever reformed tax system it proposes. The principle therefore still stands and your humble Taxpayers' Union still believes ACT is mistaken to oppose indexation.
End of year Taxpayer Talk with Peter Williams: Hon. Ruth Richardson and Jordan Williams 🎙️
In this year's final episode of Taxpayer Talk, Peter Williams hosts fellow Taxpayers' Union board members Hon. Ruth Richardson and Executive Director, Jordan Williams, to review the highs and lows of 2022.
As a former Minister of Finance, Ruth is well placed to provide analysis of the political year, the state of the economy and the Reserve Bank.
Jordan provides an insight of the year inside the Taxpayers' Union and gives his predictions on what the big issues will be in 2023.
Listen to the episode | Apple | Spotify | Google Podcasts | iHeart Radio
This is my last Taxpayer Update for the year so may I take this opportunity to wish you and your family a very merry Christmas.
Thank you for your support throughout 2022 and best wishes for the new year.
Yours aye,
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Media coverage:
Contractor Should the Government apologise for Dome Valley?
NZ Herald National and Act in government on latest poll
Stuff National and ACT remain in strong position to govern, poll suggests
RNZ New poll continues downward trend for Labour
Newstalk ZB Barry Soper: political editor on the Government making decisions on oil and gas exploration
Guest post: GST on online purchases
Greg Harford, the General Manager of Public Affairs at Retail New Zealand has drafted the following on proposals to reduce the threshold for GST for imported goods purchased online.
Many people agree that tax is a necessary evil that we need to provide core Government services. Many people also think that, if we have taxes, they should be as low as possible, and enforced both fairly and consistently.
Retail NZ was interested to see that the Taxpayers’ Union is running a poll on whether the Government should reduce the threshold at which GST is collected on imported goods. At the moment, a loophole in the law means that if you buy $399 worth of books from your local bookshop, you pay GST, but if you buy them from a foreign website, GST is not paid. This means that those shopping in local stores pay more than their fair share of GST, while those shopping online from offshore don’t pay their share. It also means that the New Zealand Government is effectively applying a reverse tariff against New Zealand businesses, and that it’s harder for Kiwi firms to compete for Kiwi business.
Retailers have long argued that the Government should close this loophole. New Zealand (and Australia) are well out of line with international best practice on this, and it is time for change.
It has been suggested that the arguments against this are that collecting GST would be administratively burdensome, that the tax collected may be less than the cost of collection, and that consumers will be forced to wait longer for the delivery of products.
The administrative question is a bit of a red-herring. Retail NZ and Booksellers NZ have been lobbying for the GST registration of foreign companies selling to New Zealand – so GST would be collected by foreign websites in exactly the same way that it is collected by New Zealand-domiciled retailers. This would largely remove administrative cost (the cost would be no different to the costs imposed on domestic businesses), ensure that the tax collected is greater than the cost of collection, and ensure that most goods would flow freely across the border, without delay or inconvenience to consumers.
The big foreign etailers are all in a position to “switch on” sales tax collection for New Zealand (they do it for some other jurisdictions). If the major etailers registered for GST, this would mean that GST would be collected on the vast majority of items imported into New Zealand.
The current process may, however, be required for goods purchased from boutique companies that do not register for GST. However the volume of items processed in this way is expected to be very small. This would, we expect, lead to a substantial reduction in costs to Government overall, which would be good news for taxpayers.
No tax system is perfect. GST is not a new tax. It has long been a tax on the consumption of goods and services in New Zealand. Some people may wish to have an argument about whether GST is a fair or appropriate tax system for our country. But if we have such a tax, it should be levied universally, irrespective of where the transaction takes place.
I was slightly concerned to read in a Taxpayers’ Union email that foreign websites could be banned from trading in New Zealand. To my knowledge, this has never been mentioned in the debate either here or in Australia, and we would certainly not support such an approach. We are not against online shopping, but we are concerned about a tax that is unfairly applied and seriously disadvantages New Zealand businesses.
Our point in relation to the 'banning' of foreign websites is that it is the inevitable conclusion if a foreign domicile website (say one offering music downloads) simply refuses to apply NZ's tax law. We of course hope that it never happens!
New report on why a sugar tax won't curb obesity
The Taxpayers’ Union is today launching a report which corrects the recent claims of New Zealand campaigners about the effectiveness of sugar taxes in curbing obesity.
The report contains Nielsen sales data, which is being publicly released for the first time in New Zealand. The data shows that Mexican sales of sugar sweetened beverages have not moved, despite the introduction of a sugar tax. While Auckland University’s public health activists are choosing to use interview data which supports their campaign, the real sales data does not lie.
Fizzed out: Why a sugar tax won’t curb obesity, sets the record straight, and examines honestly whether taxes on food and drink, such as that introduced in Mexico, are likely to reduce consumption and affect obesity rates.
Key findings:
Only 1.6 per cent of New Zealanders' total energy intake comes from the added sugar content of sugar sweetened non-alcoholic beverages- New Zealanders' consumption of sugar and sugar sweetened beverages is trending downward
- New Zealanders are still getting fatter despite consuming less calories, suggesting that we’re not burning as many calories
- Sugar taxes hurt the poor and do not result in the decreased consumption tax-supporters claim
- Similar taxes overseas have not worked - Mexico’s tax on soda resulted in no decrease in consumption, despite recent claims to the contrary by New Zealand campaigners
The report's author, Joshua Riddiford, sums up the politics of food and drink taxes in his executive summary:
Proposing a 20 per cent tax on sugar, as some groups have suggested, appears to be more about value judgements on sugar than actually helping New Zealanders towards better health outcomes.
Christopher Snowdon of Britain’s Institute of Economic Affairs, has written a foreword to the report which concludes:
A sugar tax is attractive to politicians because it allows them to engage in mass pick-pocketing with a sense of moral superiority.
It is not good enough to say that anything is worth a try in the campaign against obesity. A policy that is known to incur significant costs without reaping any measurable rewards is a policy that should be rejected.
The report which can be viewed below or downloaded as a pdf. Hard copies are also available on request.
Local councils want ability to impose regional income, fuel and sales taxes
Local Government New Zealand, is spending considerable ratepayer money on a campaign promoting local income taxes, regional fuel taxes and regional GST-style regimes to increase the tax burden of local councils. LGNZ today launched a review document on various options for new taxes. You can download the paper here.
This diagram illiterates well the growth of local government (source):
New Zealand’s average rates bill has doubled in the last 20 years, tracking at twice the rate of inflation.
Instead of focusing on the quality of councils' spending decisions, LGNZ appear to be using ratepayer money on studies and propaganda promoting new taxes. We have long been concerned that LGNZ too often represents the interests of councils, rather than those paying the councils' bills! Nowhere in the discussion paper for example, do we see a disciplined analysis of why local government spending is out of control.
We've also been alerted to emails where LGNZ spin doctors are sending draft opinion pieces to local mayors so that they can 'leverage local media' and promote these new taxes.
"Trust us we're politicians"
In the LGNZ press release, the lobby group's President, Laurence Yule, says that:
“The goal is not to increase the overall tax burden for New Zealand, but rather to determine whether a different mix of funding options for local government might deliver better outcomes for the country.”
Mr Yule is telling the public that the goal isn’t to increase the overall tax burden while at the same time releasing a report that isn't on ways to save money, but on ways to tax more.
Former North Shore City Councillor, North Shore City Council David Thornton writes:
LGNZ Review is about more money for more spending
Few ratepayers object to the principal that all citizens should contribute to the cost of running their communities, and that those contributions should be within the ratepayers’ ability to pay.
The Local Government New Zealand funding review revisits many of the issues raised in the Independent Rates Review of 2007 and repeats some of the same conclusions reached then.
The difference between the two reports is that the 2007 review was looking for alternatives to rates, while this new report is aimed at raising new funds in addition to rates.
In other words LGNZ, on behalf of all councils, wants to spend more, and needs more money to feed those expansive ambitions.
We agree. The Taxpayers' Union isn't against new taxes per say. Our view is that new taxes should replace old ones (i.e. an equal decrease to compensate). In the case of local government though, LGNZ's efforts are so the local government spending binge can continue...
Poll: Should councils be given new powers to impose local GST, fuel and income taxes?
Fizz using Health Research Council's logo without permission
The Taxpayer’s Union has discovered that the 'Fizz' group of academics campaigning for a ‘sugar tax’ on soft drinks appears to have been falsely claiming the endorsement of the Health Research Council of New Zealand (HRC).
A group of academics who have received a lot of publicity recently, calling themselves "Fizz" and pushing a sugar tax, appear to have been caught out. On the 'programme guide', which was available on their website, fizz.org.nz they listed the Health Research Council of New Zealand (HRC)'s logo. The full document is available here.
We wrote to the HRC asking what the nature of its support is for Fizz. We wondered why this group of academics, clearly pushing for political ends (i.e. a sugar tax) were receiving taxpayer support from the HRC.
We found that "Fizz" were fibbing - HRC are not supporting their sugar tax campaign.
The letter from the HRC's Chief Executive, Dr Robin Olds, is below. It states that Fizz is not receiving any support form the HRC and suggests that Fizz has been misleading its supporters, the public, and the media.
Subsequently, we've also learned that Dr Olds has asked that the HRC logo be removed from Fizz’s promotional material. In an email to the Taxpayers’ Union Mr Olds said,
“In a phone call to the conference organiser we pointed out that using our logo was inappropriate, given that [Fizz] did not seek our permission, and that some appeared to interpret the logo as the HRC endorsing the conference."
We've also written to the other government bodies that are apparently supporting this Fizz group. We want to know whether they are supporting Fizz's political activities or whether Fizz is also falsely claiming support.
In the meantime, we think that one has to be sceptical about a group claiming to be 'evidence based' and about science when they use the HRC’s logo without permission. We think it potentially calls into question their academic credibility.