When the history of the 2023 New Zealand Aotearoa general election is written and if Labour gets up to win it historians will point to the events of this week as the turning point in what has already been a dramatic year in politics.
Because I cannot believe how bad National’s tax cut policy release has been researched and structured and how bad its release is going.
Its assumption of earnings has been herculean. And you get the feeling that the the advice behind it is cursory and technical rather than reality based.
And David Parker has clearly set out what the problems are.
From Giles Dexter at Radio New Zealand:
One of the four new ‘targeted revenue measures’ set out to fund National’s Back Pocket Boost tax cuts plan, launched this week, was a partial reversal of the foreign buyers ban, which had been in place since 2018.
It would impose a 15 percent tax on houses worth more than $2m sold to overseas buyers (although Singapore and Australia would be exempt, due to prohibitions within the FTAs). National said the move would raise $740m a year, on average.
However Labour’s overseas investment spokesperson David Parker said New Zealand’s international tax treaties could exempt many other markets from National’s proposed tax.
“It could put us in breach of both our trade agreements, and our agreements in respect of double tax agreements,” he said.
Parker specifically singled out China, saying a non-discrimination article in the double tax agreement between New Zealand and China would exclude China from taxes of every kind and description, making National’s income projections meaningless.
“Chinese buyers were 36.7 percent of non-New Zealand house transfers in the year before overseas speculators were banned. When you add Australia (19 percent) and Singapore (3.5 percent), this means at least 60 percent of non-New Zealand house transfers would be excluded from National’s tax,” Parker said.
According to Parker whether it is described as a tax or a fee there are still problems with it:
“Publicly available Inland Revenue advice provided to a Parliamentary Select Committee clearly states that ‘the non-discrimination Article in the new Double Taxation Agreement [between NZ and China] applies to taxes of every kind and description’.
Current National MPs Paul Goldsmith, Andrew Bayly, Judith Collins and Ian McKelvie were on the Finance and Expenditure Committee when it considered that agreement in 2019.
“This means Chinese nationals must be excluded from National’s proposed tax, in addition to the exclusions for Australia and Singapore that they have already admitted”.
If you take Australian, Singaporean and Chinese buyers out of the high end housing market the potential pool is rather small.
The taxation of online gambling also has been heavily criticised.
From Radio New Zealand:
[Labour Minister Barbara] Edmonds on Thursday told reporters at Parliament offshore online gambling operations were already subject to GST after a change brought in by National in 2016, and far more gamblers would be needed to cover National’s expected costs.
“Based on the estimates I’ve seen we believe that New Zealanders lose $350m offshore due to online gambling, that’s based on the GST count that we’re getting,” she said.
Her colleague Kieran McAnulty said the $350m figure was backed up by figures produces by the TAB and Lotto as part of the review of the Gambling Act.
“The TAB has been producing figures to demonstrate why there needs to be regulation of online gambling, Lotto have done the same. If they believed there was four times the amount of people gambling overseas they’d say so because it would strengthen their case.
National’s response has been to refuse to release its costings. From Audrey Young at the Herald:
National finance spokeswoman Nicola Willis has declined to supply critics with the assumptions on which the funding was based. Leader Christopher Luxon used the classic National Party defence along the lines of saying “trust us, we know how to run the economy”.
Of course this could be all a pretext. National may have calculated that some will be sucked in by the promise of a tax cut and not care, and those who do care prefer to get the cold hard cash in their hand. And if this does come to pass you can bet that any shortfall will be met by a blizzard of cuts to services.
And the potential cuts are already showing. National’s Louise Upson has said that a National Government will reverse the Government’s policy of indexing benefit increases to average wage increases and instead index them to changes in the CPI.
And Carmel Sepuloni has given this policy both barrels. From Glenn McConnell at Stuff:
Labour is accusing National of “condemning children to poverty”, after the Opposition’s social development spokesperson said she planned to undo changes that ensured benefits increased with average wage growth.
The Children’s Commission pushed for years to have general benefits indexed to wage growth – which is how pensions have been calculated for decades.
When this change happened in 2020, then children’s commissioner Andrew Becroft called it “the single biggest step to stop children remaining in poverty”.
Labour social development spokesperson Carmel Sepuloni told Stuff National’s proposal would see “thousands” of children sink below the poverty line.
Figures from the Ministry of Social Development estimated that indexing benefits to wage inflation had moved 5000 children out of poverty since the policy came into force.
The proposed changes to interest deductibility make the least sense of all of the tax cuts. The cost is $2.1 billion over four years. The benefits are hard to ascertain, especially since house prices have been dropping since the introduction of Labour’s policy. And Sharon Cullwick who sits on the executive of the New Zealand Property Investors Federation recently gave the game away by conceding that if National’s policy was introduced it would not affect rental levels.
From the Herald:
Cullwick doubted rental prices would come down if the policies were changed.
“It comes back to supply and demand.”
I should declare an interest. I own a rental property bought for a different purpose but currently rented out. National’s policy would be worth about $8,000 a year to me using figures off the top of my head. That is $320 a fortnight. I neither need nor deserve this extra money.
If you want a view from someone who is on the opposite side of the political spectrum to me then try this from occasional Standard commenter Matthew Hooton:
“National’s tax policy was much worse than expected. It reveals a party undeserving of being taken seriously.”
He is right. Time will tell if National has seized defeat from the jaws of victory.
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