The Taxpayers’ Union is today releasing its latest briefing paper, entitled “$49 Dollars a Week – What Treasury Owes the Average Kiwi.”

This paper explains how much extra income tax a New Zealander on the median salary of $66,196 is paying thanks to bracket creep, compared to when their tax brackets were last adjusted in 2010.

Commenting on the release of this briefing, Taxpayers’ Union Policy and Public Affairs Manager, James Ross, said:

“The inflation tax is robbing Kiwis of $49 a week, every single week. No one voted for this, and it’s long past time for the Government put a stop to this backhanded practice.

“Government spending is out of control, and it’s everyday families who get smacked with the bill. People have been paying more and getting less for far too long.

“Nicola Willis promised tax relief in Thursday’s Budget. Anything less than $49 a week is just shortchanging New Zealanders on what they’re owed.”

A new report published by the New Zealand Taxpayers’ Union analysing the impacts of taking GST off fresh fruit and vegetables concludes that the policy would be expensive, complicated, poorly targeted and would see most of the benefits going to supermarkets rather than consumers. 

Using a collection of the leading research on GST and VAT systems from around the world, the report concludes:

> Evidence of significant litigation internationally over the categorisation of certain food products demonstrates the significant cost and bureaucratic complexity of determining whether different items should be zero-rated or not.  

> The inherent complexity of a GST system with a zero-rating regime adds significant compliance costs to small and medium sized businesses who currently enjoy the benefits of a system that is simple to calculate and administer. 

> Taking GST off fresh and frozen fruit and vegetables will not see a 100% pass through to consumers and is likely to be substantially less than this. Any pass-through of less than 100% therefore leads to wasted money which would be more effectively spent on other social policy tools such as an increase in Working for Families payments.

> The lack of competition in the New Zealand grocery sector means that consumers are even less likely than their international counterparts to see the GST reduction result in lower prices at the checkout. 

> Removing GST off food items is a poorly targeted way of reducing the cost of living for those most in need with most of the benefit going to those on higher incomes.

> Undermining the GST system for fresh and frozen fruit and vegetables is likely to lead to a slippery slope where lobbyists push for more exemptions to be made to other products such as other basic foods, sanitary products and children’s nappies which would further erode the efficiency and simplicity of the current system. 

In response to the report, Taxpayers’ Union Campaigns Manager, Callum Purves, said:

“A flat-rate GST system with few exemptions is one of the few things economists have been able to almost universally agree on as being good policy. It is a shame that certain politicians and political parties are willing to go against the overwhelming consensus for a policy that supposedly focus groups well.   

“The Finance Minister’s own comments in relation to GST before the policy was announced shows that he knows creating GST exemptions is a bad idea, a sentiment which was also shared in earlier comments from former Revenue Minister David Parker and former Prime Minister Jacinda Ardern. The Labour Party strategy seems to be one of simply hoping that New Zealanders are too silly to see this policy for what it is.

“If the Government wants to bring down grocery prices for struggling New Zealanders, they should focus on removing overseas investment barriers for supermarkets, particularly those relating to the purchase of land, and also cutting the red tape in our resource management system that make it so costly and complex for any major developments to occur.”

A new white paper on international best practice towards vaping regulation features a case study on New Zealand, with data showing how increased vaping uptake has correlated with significant progress towards our Smokefree goal.
 
The white paper is published by the Property Rights Alliance, with contributions from the UK, New Zealand, France, and Canada. The New Zealand case study is written by New Zealand Taxpayers’ Union Campaigns Manager Louis Houlbrooke.
 
Mr Houlbrooke says, “Historically, public health commentators have attributed reductions in smoking rates to annual excise tax hikes. But now, despite an end to annual tax hikes, we see progress accelerating. This latest data makes it increasingly difficult to deny that it is alternative products like e-cigarettes – not tax – that will ultimately bring New Zealand to our Smokefree goal. However, the question remains to what extent our progress will be slowed by new regulations currently being implemented to reduce access to vaping products.”

Commenting on the white paper, Centre of Research Excellence Director Dr Marewa Glover says, “Enabling people to switch from smoking to vaping is not only delivering on reducing risk to health, the New Zealand experience is proof that access to vaping can reduce inequity in smoking rates. Despite the FCTC saying countries should ensure that Indigenous peoples also benefit from tobacco control measures, the gap in smoking rates between Māori and  European New Zealanders has never been reduced. The higher rates of daily vaping among Māori compared to European New Zealanders is the first sign that this inequity may be lessened. It is significant also, that daily vaping prevalence increases in line with higher deprivation. The lower the income quintile the higher the smoking prevalence, but also the higher daily vaping occurs.”
 
The white paper has been published ahead of the WHO’s COP9 conference, which will be attended by delegates from across the world as they consider updates to the Framework Convention on Tobacco Control.
 
“We’re urging New Zealand’s delegates to tell our story with pride," says Mr Houlbrooke. "During our long period of essentially unregulated access to vaping products, the sky did not fall – in fact, smokers took the opportunity to switch in droves. This success has been reflected by the Government’s own information campaign on vaping, which highlights vaping as an effective means to quit smoking, with a 95 percent reduction in harm relative to cigarettes.”
 
This morning Mr Houlbrooke joined a live webinar hosted by the Property Rights Alliance along with contributors to the white paper. Click here to watch the recording.

Two thirds of the forecast revenue from the Tax Working Group’s proposed capital gains tax is the created by the proposal’s failure to adjust for inflation, reveals the Taxpayers’ Union in its new report, Inflating the Cost of Tax: Why failing to adjust capital gains tax for inflation is unfair.

Jordan Williams, Executive Director of the Taxpayers' Union, said:

“Michael Cullen defends his proposal on the basis of ‘fairness’, but it is not fair to tax New Zealanders for inflation that they have no control over. If the Government fails to fix this aspect of the tax, it will be guilty of a cynical revenue grab.”

“This tax will hit New Zealanders at far higher rates than advertised, it would thieve from those who are not necessarily getting any richer, and it would reward politicians who fail to control inflation with extra revenue.”

Joe Ascroft, Economist at the Taxpayers' Union who authored the report, said:

“The compounding effect of inflation creates large ‘paper gains’ on assets in the long term. Under the Working Group’s proposal, these gains would be unfairly taxed, even though they don’t represent any real increase in value.”

“This will result in some asset holders paying real tax rates far higher than the advertised 30 or 33 percent. In fact, in some cases the tax on capital gains will be well over 50 percent.”

Key findings*:

• Over two thirds of the tax’s forecast revenue can be attributed to the effect of taxing paper gains (based on the Working Group’s own assumptions about expected capital gains).

• A typical $500,000 rental property could face a real capital gains tax rate of 55.7 percent when sold after 20 years.

• A typical $450,000 bach could face a real capital gains tax rate of 76.5 percent when sold after 30 years.

• A typical $800,000 family home / lifestyle block could face a tax rate of 30.35% when sold after 10 years.

• A typical $500,000 bach that experiences zero real capital gain could still produce a $64,000 tax bill when sold after 25 years.

* based on an inflation rate of two percent.

The Taxpayers’ Union is campaigning to stop the capital gains tax at AxeThisTax.nz. Inflation adjustment was one of the Five Rules for a Fair Capital Gains Tax published in February.

The Taxpayers’ Union, with support from the Auckland Property Investors’ Association, Auckland Ratepayers’ Alliance and Democracy Action today launched a briefing paper on Auckland Council’s new Mana Whenua Cultural Impact Assessment provisions. The paper, entitled The Taniwha Tax: Briefing paper on Auckland Council’s new Mana Whenua rules.

We believe that every Auckland homeowner or potential homeowner needs to know how the new provisions affect them.

Most affected property owners will not become aware of the provisions until they suddenly find there is a site on or near their land, or they are told they may need to get a Cultural Impact Assessment (CIA) when applying for resource consent. Worse, the Council isn’t even sure that some of the 3,600 sites deemed ‘of value’ even exist. It didn’t bother to check.

The Briefing Paper quotes extensive criticisms of the provisions made on behalf of some of New Zealand’s largest corporates, including Vodafone, Spark, Chorus, Transpower, Vector, Watercare.

If you thought that navigating RMA red tape was hard, these provisions could require you to negotiate with up to nineteen Mana Whenua groups in order to gain development consent, the rules mean that resource consents may be subject to expensive modifications, even if the reasons are entirely spiritual in nature.

The Council has previously tried to dampen public concerns, claiming that not many Cultural Impact Assessments have been required so far. They ignore the cost and delay of applicants having to go to iwi groups to ask whether a CIA is required.

Most of the messages contained in the Paper are not those of the Taxpayers’ Union. We have deliberately repeated what would otherwise go undiscovered in the files of lawyers, planners and Council insiders. Our work is to shine some democratic light onto what has happened."

The report is available to download here. 

UPDATE: To check if your property is one of the estimated 18,000 affected by these provisions, please click here for our guide.

This morning the Taxpayers' Union is appearing before the Government Administration Select Committee, in support of a petition to reintroduce ten year passports for New Zealanders.

We will also be presenting a briefing paper by Jordan McCluskey, 'Sky High: Briefing paper on passport affordability'.

Our research shows that New Zealand is out of line with the rest of the world

Contrary to statements made by the Government, most of our trading partners issue ten, not five year passports.

The per year cost of a New Zealand passport is more than any other country we examined.

In addition, the Government is sitting on a whopping surplus of $20.8 million because of excessive passports charges.

Click here to read the full briefing paper on passport affordability.

In 2005 the Government introduced biometric technology to passports, made them more expensive and reduced their validity from ten to five years.

Our research shows that the New Zealand passport is now the most expensive in the world on a per year basis. Even if the New Zealand government issued ten year passports, at current prices, New Zealanders would still be paying more than citizens in most countries with whom we traditionally compare ourselves.

Contrary to the Government’s claims that five year passports are necessary for security, New Zealand is swimming against the tide, with Canada, China and the Netherlands all recently increasing their passport validities to ten years.

Kiwi travellers are paying more and getting less. We’re calling on the new Minister of Internal Affairs, Peter Dunne to do the sensible thing and reintroduce ten-year passports. 

The research suggests that current regime isn’t about security, it’s about raising money for the Government.

Click here to download the report.