Taxpayer Update: Media funding backfires | IRD goes bonkers | Corporate bludgers

Dear Supporter,

If you're a business owner this update is more important than usual: we're blowing the whistle on backroom changes to IRD's rules that will result in enormous tax bills for small and medium-size business owners. We've also been busy on multiple campaign fronts, from Three Waters to wealth taxes, and we've had huge win on the Rotorua Bill. Broadcaster Peter Williams has also joined our Board.

But first...

Revealed: Taxpayer funding for media backfires

This week we released the results of a new scientific poll confirming what we have long suspected: New Zealanders don't trust Government-funded media outlets to hold the Government to account.

Payments from the likes of the $55 million "Public Interest Journalism" Fund present a clear conflict of interest to media outlets like Stuff and the NZ Herald, who now have millions of dollars at stake in electing a government that protects their funding.

Whenever we challenge media bosses on this they always insist that their company is immune from editorial influence. But they can no longer deny that the decision to accept funding has eroded readers' trust.

One day after the poll's publication, the media outlets failed an obvious test: not one of the outlets to have received PIJF funding has covered the results of the poll.

The poll has however been covered by The Platform – a new outlet with a policy of not accepting taxpayer money. Graham Adams's article explains how funding recipients are pressured into skewing their coverage of Treaty/co-governance issues.

For the record, we are tracking all payments from the Public Interest Journalism Fund on our website. Click here to find out who got taxpayer money.

We're calling on media outlets to salvage their credibility by repaying taxpayer funding, and declining any future payments.

Click here to sign the petition calling for the media to Pay Back the $55 Million.

Changes to IRD rules will see an enormous new tax burden on business owners

When the Government announced its new 39% income tax bracket, we warned that high earners would simply shift income into companies and trusts.

David Parker eventually cottoned on to this problem and asked Inland Revenue to investigate ways to "crack down". Now Inland Revenue has been quietly consulting on an alarming set of proposals that are – frankly – bonkers.

• Inland Revenue has proposed whacking most small business owners with a tax on retained earnings (i.e. profits reinvested in a company) if they sell shares. Those earnings have already been taxed at the company tax rate of 28%, but Inland Revenue has suggested an extra tax upon the sale of the business to make up the difference between 28% and 39%. This means that for any non-listed company that, say, takes on a new business partner (or sells to the next generation) that proportion of retained earnings will be immediately taxed at the marginal rates for the previous owner, all in the one income year!

• Next, and even worse, Inland Revenues proposes severely limiting which businesses will be eligible for the 28% company tax rate. A business owner who provides more than 50% of his or her company's services would now be denied access to the 28% company tax rate, even if they have dozens of clients.

To add salt to the wound, big publicly-listed companies will be exempt from these tax hikes. As our tax advisors put it, "Inland Revenue is aiming for the kings but shooting the peasants".

The full details of the complex proposals are actually even worse than I have space to describe here – for many business owners it will result in more tax payable than if there was a full capital gains tax.  You can read our formal submission on the proposals here, with analysis from one of New Zealand's leading tax advisory firms.

Inland Revenue is not taking further submissions, but we would still encourage business owners to add their voice by emailing [email protected]. The good news is we understand that having read our submission and those of other experts identifying similar problems, officials are now tearing their hair out over the mess they made of the recommendations. Our sources within IRD tell us that officials know the only opportunity the Government has to ram these changes through is in this year's omnibus tax bill expected before Parliament in the next few months. Even the mandarins in Wellington know this is an election year stink bomb.

Remember Ardern's wealth tax promise?

Despite earlier promises, Jacinda Ardern is now refusing to rule out the introduction of a wealth tax if she's re-elected.

Our team put this ad together which is now running across social media and Youtube to remind New Zealanders of Jacinda Ardern's 2020 promise to never introduce a wealth tax while she's Prime Minister:

Click here to watch.

Wealth taxes are notoriously difficult to implement fairly or simply. Someone who owns a house in Auckland may look wealthy on paper while still struggling to pay weekly bills.

Fundamentally, a wealth tax is a tax on savings and investment – it punishes New Zealanders who have been productive, made prudent financial decisions, and who have already paid more than their share of taxes.

Under pressure in Parliament this week, Ardern attempted a tougher line, saying "I stand by my ruling out the wealth tax policy that was put to me in 2020". The problem is, the wealth tax put to her in 2020 was the Green Party's policy. She is intentionally leaving herself wriggle room for Labour to introduce its own wealth tax.

We've relaunched our Three Waters television ads

Thank you to everyone who chipped in to our Stop Three Waters campaign fund in the last week.

With your support, we've been able to secure a number of prime time spots for our Three Waters television ad. Here's what we've booked so far:

We're pushing this campaign hard because we know that the more New Zealanders learn about Three Waters, the less they like about it. By the time official consultation opens, New Zealanders will be primed to swamp the select committee with submissions against the scheme.

But advertising alone is not enough. In the next few weeks will be announcing the next steps for this campaign. We will be targeting those few councils and mayors that are not yet standing up to the Government to protect the theft by Nanaia Mahuta of local community water assets.

We're also going to be specifically holding to account Labour's provincial MPs who we think are the key to overcoming the strong Māori caucus within Labour that is driving the Three Waters and anti-democratic co-governance agenda. Watch this space...

Peter Williams joins our Board

You might have received an email from Peter Williams recently asking you to support our campaign to stop Three Waters.

We’re delighted to confirm that Peter has joined our Board. As one of New Zealand’s most trusted broadcasters, he is an authoritative champion for our mission of lower taxes, less waste, and more transparency.

Peter says: 

It's appropriately coincidental that my appointment to the Taxpayers' Union board is announced as New Zealand’s inflation rate hits its highest mark in over 30 years. That number alone reinforces the need for prudent government spending.

The Taxpayers’ Union is a significant watchdog of how our taxpayer money is spent, or as has been the case too often lately, squandered. Taxpayers’ Union campaigns have a significant strike rate in changing or amending government policy, and I’m looking forward to ensuring there are many more such successes.

Peter’s appointment follows those of former CEO of NZIER and current NZSO Chair, Laurence Kubiak, former ACT Party Chief of Staff and current Hutt City Councillor, Chris Milne, and former Finance Minister Hon Ruth Richardson, earlier this year. All our Board members are unpaid volunteers who provide strategic guidance and wisdom to our team and lend substantial credibility to the efforts of the Taxpayers' Union.

A classic taxpayer-funded "non-job"

At the Taxpayers' Union we like to keep track of some of the dumbest jobs in the Government sector.

Here's a doozy from the Department of the Prime Minister and Cabinet: someone is being paid $132,000–$155,000 to lead a team in charge of handing out awards to recognise people involved in the COVID-19 response. We understand the prize is a lapel pin.

If you know of other public sector "non-jobs" that deserve attention, let us know in a reply to this newsletter.

Finance Minister cuts debt by... re-defining debt

In a pre-Budget speech, Grant Robertson announced he will change the way the Government measures its net debt, which will make our new debt figure look 20 percentage points lower.

The trick is that the new formula includes assets managed independently from the Government, such as the New Zealand Superannuation Fund.

One side effect of this is that the reported Government debt figure will fluctuate more wildly depending on the performance of the Super Fund's international investments.

Our prediction for years ahead: when the Super Fund performs well, Finance Ministers will claim credit for improved debt; when it performs poorly, they'll blame higher debt on "international conditions".

Taxpayer Talk: Should the Government finally privatise state-owned enterprises?

The Government owns or partly owns 18 large businesses with combined assets of $78 billion. The Treasury has found that many are underperforming.

Jordan and co-founder of TDB Advisory Phil Barry sat down to discuss why these businesses would be more productive and experience higher rates of return if they were privatised – bolstering New Zealand's economic resilience and standard of living. Click here to listen.

You can find all of our Taxpayer Talk episodes on Apple Podcasts, Spotify, Google Podcasts, or iHeart Radio.

This newsletter is getting long...

A few more items of Government waste to round out this Taxpayer Update:

• Taxpayers continue to be haunted by the ghost of Auckland's scrapped bike bridge. Waka Kotahi forked out an estimated $600,000 to lease prime waterfront office space for the project just three weeks before it was cancelled.

• Remember the public sector's COVID-19 "pay freeze"? Newshub reveals that more than 2500 Government workers earning over $100,000 a year got pay rises that were only meant to be granted in "exceptional circumstances". 

• In a new column, Invercargill Mayor Tim Shadbolt has complained that in 2019 the Taxpayers' Union obtained his ratepayer-funded expenses with "no exclusions for sensitive expenditure or for my privacy." We still think highlighting these expenses was the right thing to do – such as exposing that ratepayers were paying for custom "I met the Mayor" wristbands. Click here to find out how Tim Shadbolt spent ratepayers' money.

As always, we are indebted to the thousands of Kiwis who donate and make this work possible.

Have a great weekend,

Louis Houlbrooke Campaigns Manager New Zealand Taxpayers' Union

Media coverage:

The Platform  Graham Adams: poll shows how badly the $55 million media fund has damaged public trust

Newstalk ZB  Bryce Wilkinson: Former Treasury director says the Auditor-General is right to raise concerns around Covid response fund spending

Stuff  Three Waters is still a shameless asset grab

Stuff  Likelihood that Te Pāti Māori will be 2023 'kingmaker' increasing

NZ Herald  Mike Hosking: Open and honest government? What a joke

Gisborne Herald  Way to go for National to form next Government

Kiwiblog  Huge majority believe media independence has been undermined by government funding

Newstalk ZB  National surges, Labour plummets in new political poll

NZ Herald  'The public are sick of the spin': Luxon says National's surge in polls shows tide is turning against Ardern

Otago Daily Times  National continues rise over Labour in latest poll

Local Matters  Road ad campaign criticised

Homepaddock  Quotes of the month

Homepaddock  Three Waters worse

NZ Herald  Bruce Cotterill: Looking for the Super in the City

Stuff  How the office of Invercargill's mayor has vanished into a vacuum

NZ Herald  Bill Ralston: Political propaganda hard to swallow when Kiwis can't afford veges

Stuff  Three Waters reaction: Mayor Phil Goff says Auckland is being penalised, LGNZ welcomes ratepayer certainty

Rotorua Now  Controversial sculpture set for repaint

NZ Herald  From security pacts to dancing kiwifruit - was the PM's overseas trip a success?

Stuff  Controversial Rotorua sculpture set for repaint 18 months after installation

Homepaddock  Three Waters worse

RNZ  Politics: Inflation fixes, Luxon's leadership, Ardern's Asia trip

Stuff  The media has trust issues, but that's not necessarily a bad thing

Newstalk ZB Louis Houlbrooke: We need to ensure tourists cover their costs

Newstalk ZB  Nats take lead in latest poll

Newstalk ZB  Jason Walls: She’ll be looking back home at those poll numbers

Newstalk ZB  David Farrar: It’s a very stark trend

The Northland Age  Northland speed review consultation starts next month, May

NZ Herald  National takes lead in latest poll, but could not govern without Te Pāti Māori

Newshub  Nats polling higher than Labour among female voters shows 'women going to vote for best ideas', former Deputy PM Paula Bennett says

Democracy Project  Byrce Edwards: A polarising co-governance decision for Parliament

Stuff  High inflation a lose-lose for the Government, but it won’t be panicking – yet

Newshub  How NZ Govt can bring down cost of living - ACT's David Seymour

NZ Herald  Inflation nation: Matthew Hooton – Government needs to make bold moves to head off cost of living

NBR   Inflation hits a 30-year high

NZ Herald  National leader Chris Luxon’s off-piste moments and who is winning the inflation wars

Stuff  The shaky claims and untested ideology underpinning Three Waters