- Date published:
6:00 am, May 20th, 2023 - 146 comments
Categories: open mike - Tags:
Open mike is your post.
For announcements, general discussion, whatever you choose.
The usual rules of good behaviour apply (see the Policy).
Step up to the mike …
Very sad she was a good person
Yes Barfly, our chess player son is sad as well. A complete shock.
I don't know if others have already commented on this, but it is brave and wonderful that in the budget the tax rate for trusts was raised from 33% to 39%, the same as the top income tax rate, to fix the rort/anomaly where trustees used trusts to only pay 33%.
Luxon will doubtless change this back-Standard readers need watch for the Nats policy position on this.
Agreed that is a positive takeaway from the budget…but it only addresses one part of the trust tax-evasion problem..
The operation of those trusts needs to be more transparent…
Agree with that Philip
is that income tax?
Trust income, in short if you found yourself in the 39c tax bracket you would once you reached it put the money into a trust which would pay 33c. For it to be a worthwhile work around you needed to earn 300k and up
so people whose assets are in a trust, and are earning income from that, but whose income would otherwise be in a lower tax bracket, will pay 39% on the trust income?
Yes unless they disperse the income from the trust in which case it will be paid at the recipients nominal tax rate.
ok, that makes more sense. So people who have a trust but aren't high inome earners, and who aren't trying to rort the system, can just take out the income each year and pay their normal tax on that rather than the 39%.
There is no 'rort'. Beneficiaries don't benefit from a different tax rate in the trust because as soon as they are paid a distribution, their personal tax rate kicks in.
so are Cricklewood and BG wrong when they say that the income being earned by the trust was being taxed at 33% but if it was personal income wealthy people would be paying 39%?
In the next financial year income coming into the trust will be taxed at 39%. Are you saying that if that stays in the trust until the following year but then is paid out that the beneficiary gets a rebate (assuming they pay less than 39%)?
In answer to question 1, ultimately what beneficiaries pay comes down to the nature of the distribution and the personal tax rate of the beneficiaries.
Increasing the trust tax rate to 39% is meaningless, because trustees will simply distribute all profits in the year they are earned (as most do now), and beneficiaries will pay whatever they pay, somewhere between 39% and zip.
It can be a rort. Parents who don’t have a trust have to meet the cost of their child's upkeep from their own income. With a trust, however, a child beneficiary's upkeep cost can be recovered from the trust, saving the parents a fair bit of money.
It would be useful to have legislation making it illegal to pass income to a child (or to anybody for that matter), through the use of a trust, without good reason.
how does that save the parents money?
2. School Fees paid by a trust are distributions to the beneficiaries, and so attract the recipients rate of income tax.
3. Funds used to establish a trust have already been subject to the individuals rate of income tax.
there is no rort.
I have friends who set up a trust so that they could hide income so that they could claim working for families. My understanding is that this is a widespread rort
If they are beneficiaries of the trust, the IRD will cut straight through the trust and effectively void the transactions. It’s the same scenario as gifting to avoid the cost of rest home care.
a lot of that stuff got tightened up ages ago.
No rorts, of course – just an example of NZ punching above its weight.
Too much of a 'good' thing?
Re David Parker's claims – https://thestandard.org.nz/open-mike-20-05-2023/#comment-1950631
Re the rest of it – you need to read up on foreign trusts. A clue is found in your last reference and talks about the criteria for a foreign trust only being tax free when neither the settlor nor beneficiaries lived, or derived income from New Zealand.
For a few wealthy Kiwis, tax avoidance is a way of life. Sad, if you really think about it – maybe it gives them some small pleasure?
Is the only real problem with tax evasion ‘getting caught’? So many thrilling 'stories', and this is a great opportunity to post them here. Will there be more opportunities? I do hope so.
If you believe that "the use of trusts" and "tax avoidance" are whole different conversations, then I have an old car to sell you
Seems fair to me – have NAct promised to reverse it yet? Not paying your fair share of tax is an optional perk of wealth the world over.
Re tax evasion:
Just the one, as far as I can tell.
"If you believe that "the use of trusts" and "tax avoidance" are whole different conversations, then I have an old car to sell you"
They are completely different. Evidence of tax avoidance is not evidence that trusts are used for tax evasion.
Nope. The clue is in the title of the article about that “silly“, “faulty and shoddy” (in your opinion) report, specifically – "spike in trust use to avoid tax."
Why might you be finding that report so difficult to comprehend?
"Nope. The clue is in the title of the article about that “silly“, “faulty and shoddy” report, specifically – "spike in trust use to avoid tax.""
Your link is to an article that includes this pearler:
Auckland University law professor Mark Henaghan said the increase was down to one thing – a growing awareness of how trusts could be used to reduce tax bills."
Seriously? The good professor ought to know there are a) many reasons people put homes in trusts that have nothing to do with tax, and b) any use of trusts to lower tax could easily be mirrored by other vehicles. Find better sources, Drowsy.
It appears you are firmly of the opinion that "the use of trusts" and "tax avoidance" "are completely different", so let's agree to disagree. Others can make up their own mind after considering the evidence.
"For a few wealthy Kiwis, tax avoidance is a way of life. Sad, if you really think about it – maybe it gives them some small pleasure?"
Do any of those examples include the use of trusts? We can have a whole different conversation about tax avoidance if you want.
Having a trust is not always evidence of an attempt to rort or tax evasion. Taking advantage of Trusts and companies set-ups is not prima facie an indication of wanting to rort.
It is only a rort really when tax is evaded.
The financial planning for tradespeople can often include trusts and companies. The prudent financial planning for people who have children from a prior relationship and/or assets from a prior relationship often use the Trust avenue to protect the children should a subsequent relationship break down. I mean why should a subsequent husband/wife be entitled to assets from a prior husband/parent who worked so hard?
Trust have always paid a higher tax rate so keeping assets for children in this way is not all beer and skittles. Neither is making payouts to beneficiaries, despite what is being said here. (There is pretty onerous record keeping involved) Many trusts have assets that are not liquid and cannot do that anyway. Many settlors of Trusts keep the assets within the trust and so any earnings are taxed at a higher rate.
I have no problem with a higher rate for tax for Trusts but long term it is not going to yield big bucks….better to spend the time and money on ways to catch the evading group (ie the large group paying less than a person on the lowest income rates, or to look at a capital gains or wealth tax or even a modest death duties regime.
I appreciate railing at the so-called tax and Trust bogey does fit in with the depression inducing cry 'its not fair' but ultimately it gets us nowhere.
"Having a trust is not always evidence of an attempt to rort or tax evasion."
"I appreciate railing at the so-called tax and Trust bogey does fit in with the depression inducing cry 'its not fair' but ultimately it gets us nowhere."
"And there is this…"
That article is full of nonsense. Take this statement:
"Because trust income can be spread across a number of beneficiaries, who are often lower earners, the income is often taxed at a lower bracket, he says."
The author fails to understand that exactly the same result can be achieved without a trust.
Superb work Drowsy.
And there is this…
Which I have linked previously…The whole Mega landlord series from Stuff (who I actually rate) lifts the rock from the land"lord". Exposing what has happened to NZ.
If a property is transferred to a trust the income from that property is taxed at a much lower rate if the beneficiaries are children, than would be the case if the parents themselves continued to own the properties, and paid tax on the income from those properties at their own tax rate; assuming of course that the children's tax rates are much lower than the parents (which of course is normally the case). The parents can then charge the children for their upkeep, and be compensated thereby from their children's trust income.
It should be mandated that parents support their children themselves rather than turning that support over to a trust.
Wrong. There are rules around what can be distributed to children under 16, and all distributions at balance date are taxed at the trust rate of tax.
"parents support their children themselves"
Well there goes working for families.
Incorrect. If the assets are held within the trust it does not matter who the proposed beneficiaries are and what their individual tax circumstances are.
So a Family Trust with a range of possible beneficiaries pays tax at the tax rate for trusts, now the highest rate. The process for allocating to beneficiaries is time- and document- intensive & the benefits so marginal, for my family Trust anyway. This is because many of the beneficiaries the Trust could allocate to now have marginal tax rates above the lowest personal tax rate, that we have not bothered.
NB One of a common way of avoding tax is simply not to pay PAYE for employees or FBT etc. While these crimes, when caught, are heavily penalised, that the financial state of many of these people ensure that tax to pay and penalties can be repaid on the 'never, never' or even if bankruptcy ensues may be paid a low rates in the $$$$
And even then, any distributions to beneficiaries attract tax at their personal tax rate, so at the top end, the 39c applies eventually anyway. Trust income can only escape the higher rate if it is retained in the Trust. The lifting of the rate is largely symbolic.
Looks a lot more than simply ‘symbolic’ to me.
So the change is forecast to contribute just 1.75% of the total additional tax NZ'ers will pay according to Treasury forecasts.
Stuffed up the block formatting, so re-posting rest of comment…
2. Total Trustee income in 2021 was $17.1bn.
Trustee tax rate to increase to 39% | Budget 2023 | Deloitte New Zealand
So the estimated $350m is just 2.05% of total trustee income from 2 years ago.
Tax rate change enacted along with big-brother information gathering powers | Tax Alert | December 2020 | Deloitte New Zealand
350 million dollars a year (7 billion in 20 years) pays for a lot of cycleways and public transport.
The way this government wastes money, it's a drop in the bucket.
Indeed, nothing ‘symbolic’ about $350m a year. The “m” is not a symbol but a prefix that means one has to add another six zeros to get the real figure, in real dollars.
Not going after this money would indeed be tantamount to ‘waste’, so you should be fully behind it, yet you are not, which is rather odd and counter-intuitive.
My comment was a specific reply and specifically mentioned the nearly $6b income a year by high-earning New Zealanders. (NB the “b” prefix means that you add nine zeros to the figure) So, why are you diverting, again? Instead of putting up a decent argument you divert and/or post a wall of selective quotes or links, which is your MO here.
You seem to have a real bee in your bonnet about the increase in trustee tax but no compelling counter-arguments!? Go figure!
"My comment was a specific reply and specifically mentioned the nearly $6b income a year by high-earning New Zealanders."
My comment referred to the lifting of the trust tax rate as symbolic. I then went on to demonstrate precisely how insignificant the $35m is in the context of the budget in which it was introduced. Your $6bn is irrelevant and a diversion.
"Not going after this money would indeed be tantamount to ‘waste’…"
No, it really wouldn't. As I have pointed out, there is a real chance this change could raise little additional or even less revenue.
I see, you believe you’re a clever troll.
It’s neither irrelevant nor a diversion (nice try!) but at the core of the Government decision:
Well, if you keep dropping zeroes it will become insignificant. However, your incorrect $35m (the correct figure still is $350m) is neither ‘symbolic’ nor ‘insignificant’ and you have ‘demonstrated’ only that you’re a disingenuous troll.
Only four days ago you argued (https://thestandard.org.nz/nationals-policy-machine-is-a-thing-to-behold/#comment-1950174) about much smaller amounts being wasteful:
On the one hand, $330k is wasteful but OTOH, $35m or $350m is ‘symbolic’ and ‘insignificant’!?
For someone who doesn’t have a Trust nor the desire to have one (https://thestandard.org.nz/open-mike-20-05-2023/#comment-1950619) you have an awful lot to say about this topic, which raises the question what your agenda is with this?
Good commenters here are wasting their time engaging with you, which I have noticed and noted before.
"It’s neither irrelevant nor a diversion (nice try!) but at the core of the Government decision:"
The estimated benefit from the change is $350m. I demonstrated clearly that is immaterial (and therefore symbolic) when I compared this amount to three seperate benchmarks…a) the total amount of additional tax estimated over the next four years, b) the total trustee income from 2021, and c) the % of top income earners the new 'top tax rate' would effect.
I have also demonstrated (if you had bothered to read through the thread) that the $350m may end up being much less or even zero.
You either don't have the understanding of this subject to engage in an informed matter, or you're just being a dick for the sake of it. I'll go with the latter. It's in your MO.
[You want us to believe that $6b yearly income by high-earning New Zealanders and that could net $350m in extra tax could magically disappear and become zero even, which would indeed be ‘insignificant’ as you claim. High-earning means that they are or should already be paying 39% tax on any profit, be it from a Trust or elsewhere, and regardless of how they distribute the profit. The fact that Trustee tax was 33% strongly suggests (!) that those high-earning individuals saw a strong enough reason in moving about $6b of their yearly income into Trusts. If this wasn’t a legal loophole used by high-earning New Zealanders then I’d agree that the move is ‘symbolic’. However, the numbers suggest this to be unlikely and implausible. Have the Opposition declared yet that they will repeal the decision? If not, why not? Stop trolling and stop dicking around – only because I’ve been busy you’ve got this far with your trollish claims (e.g. your BS allegation about this government wasting money on “a movie about a Green party MP” here: https://thestandard.org.nz/nationals-policy-machine-is-a-thing-to-behold/#comment-1950174). This is your warning – Incognito]
"Good commenters here are wasting their time engaging with you, which I have noticed and noted before."
Really? Like Shanreagh? Red Logix? Both of whom have taken the same position as I have during this thread.
"You want us to believe that $6b yearly income by high-earning New Zealanders and that could net $350m in extra tax could magically disappear and become zero even, which would indeed be ‘insignificant’ as you claim."
Well, on the issue of significance, I'll quote Grant Robertson, who seems to agree with my assessment:
Budget 2023: No ‘Major’ New Taxes But $80b More Tax Revenue | Newsroom
On the issue of the $350m, I'll again leave this to Grant Robertson:
Budget 2023: No ‘Major’ New Taxes But $80b More Tax Revenue | Newsroom
A small amount of NZ'ers. The vast majority of trusts aren't set up by the rich, and only a small number of trusts will pay the extra tax.
That should have rung alarm bells right there. Most trusts are for the benefit of less than wealthy NZ'ers, who will simply distribute all income (rather than potentially retaining some income in the trust and paying a higher tax rate) to beneficiaries on a lower tax rate.
And here's the kicker…the $350m is exactly 6% of the $6bn, meaning they are suggesting they will collect the extra tax on every cent of that income. They are dreaming.
[I can’t see anywhere where commenters here on TS and/or Grant Robertson said or implied that $350m extra tax intake is ‘insignificant’ and ‘symbolic’. It would indeed raise serious questions as to why Robertson would have made the decision if this were the case. My take is that you are twisting words & meanings & intentions, as per usual, to score your points. Essentially, you want us to believe that those high-earning New Zealanders – and you keep diverting away from this specific sub-category – shifted nearly $6b of their yearly income into Trusts and they will now hand over control of those Trust assets/income to others just to avoid paying any tax on it (“even zero”!? The mind just boggles at your naivety! Time will tell how that $6b of yearly income will be taxed or ‘vanish’ from the IRD radar, as you seem to want us believe. Frankly, I have enough of your gaslighting days here on TS and I reaffirm your Mod note and don’t want to waste anymore of my Mod time on this – Incognito]
"I can’t see anywhere where commenters here on TS and/or Grant Robertson said or implied that $350m extra tax intake is ‘insignificant’ and ‘symbolic’. "
Re Grant Robertson:
You didn't look very hard. From my comment you were moderating:
'Pales in comparison'.
Re: Other contributors:
I didn't claim they "implied that $350m extra tax intake is ‘insignificant’ and ‘symbolic’". Look back at comment https://thestandard.org.nz/open-mike-20-05-2023/#comment-1950730.
There are a number of other contributors here who have concurred with a variety of opinions I have proffered across this thread.
"you want us to believe that those high-earning New Zealanders – and you keep diverting away from this specific sub-category – shifted nearly $6b of their yearly income into Trusts and they will now hand over control of those Trust assets/income to others just to avoid paying any tax on it (“even zero”!?)
Tax is not paid on the assets in a trust, or even necessarily by those who exercise control over those assets. Tax is paid on the income from the trust (either by the trust or by beneficiaries on distribution). That $6bn you refer to will simply find its way to beneficiaries with a lower tax rate, or into other vehicles.
[I’m not too surprised that you continue to waste my time and keep digging & doubling down and now denying your own comments aka gaslighting, twisting & turning.
Have it your way: take 10 days off for ignoring several warnings about trolling and wasting moderator time – Incognito]
But if you don't need any operational income from the Trust for personal use like paying for groceries, rent, power etc., you can leave the money in the Trust. And the Trust re-invests it and earns more income at the same discounted tax rate, which you then re-invest in a spiral of increasing wealth accumulation. The accumulated wealth might not be dispersed for years, or to the next generation, where lower personal tax rates might apply.
The money-grubbing classes are very good at this sort of game – they always find a way of getting an advantage over others. Like a sewage leak, the rest of us have only a vague, passing sense that something whiffs a bit, then you pull up the floorboards and realise the whole edifice is rotten.
Ultimately the money is distributed and tax paid. Anyone can set up a trust. Do you have one? If it is so beneficial, and you don’t, why not?
If it is so beneficial, and you don’t, why not?
Because it is essentially a tax dodge. There are many shady loopholes in the tax system: this is one of them. Unfortunately the measure introduced in the budget will not achieve much because it doesn't address the main problem.
Trusts are not a tax dodge. That ship sailed a long time ago, like the use of gifting to avoid or minimise rest home costs.
Trusts are primarily used now for asset protection, particularly in conjunction with pre-nups.
When did the ship sail? How long ago and what were the reasons for her departure? In a similar analogy, the reasons for emigration by ship in the 19th century ranged from a search for freedom and personal advancement to colonial exploitation.
Yonks ago. For years (from 2010) the highest personal tax rate was 33%, so there was no tax advantage. Before that – from the 1980's through to 2000 the highest personal tax rate was also 33%.
Look at it this way: if trusts were abolished and everyone paid the correct amount of tax on the income they derived from their assets – rents, dividends, profits, etc., would you consider they were being unfairly treated? No? But that is what is happening when income is passed to beneficiaries whose tax rate is lower. And “protecting assets” is often just a weasel word for diddling one’s creditors, including the IRD.
Yes. There are some legitimate uses for trusts, but when there is a stampede to form trusts when the top tax rate is increased from 33% to 39%, one can hardly be blamed for being suspicious.
"Asset protection" is just a weasel word for tax evasion.
No it isn't. Asset protection is precisely what it says. People with assets (eg property) put them into family trusts to protect them from matrimonial property claims, not tax.
No it isn't. Asset protection is precisely what it says. People with assets (eg property) put them into family trusts to protect them from matrimonial property claims, not tax.
Oh – is this where you pretend that someone so ungenerous as not to share with an intimate partner embraces the IRD like a soulmate and gives them everything they're due?
Oh you sweet summer child! Naive even by the standards of the irredeemably stupid Right.
"Oh – is this where you pretend that someone so ungenerous as not to share with an intimate partner embraces the IRD like a soulmate and gives them everything they're due?
Not necessarily just partners or spouses. Sometimes people establish trusts to protect assets from future partners of their children. You should read up on it.
Zoom……if the so-called 'intimate partner' is so ungenerous to find a new partner while still married to the first and claims the assets built up by a prior spouse/partner for the children of that marriage.
You do not appear to know what happens on marriage break-up. I had to get another mortgage to pay my former husband out. Payment being made as a single person is very different from two working and being able to pay and is pretty poor when he had not contributed half of the value….
But you go the way with the fluffy ducks and the perfect marital bliss. It does not work that way sometimes in the real world and some of us in the real world do actually want to live in the homes we built up.
I can smell the aroma from here
I somehow don't think that paying the higest rate of tax is a discounted rate!
Not all people who set up a Family Trust fall into the categories you are throwing around. I worked hard to save and get ahead and after paying out a husband who was quite happy to take half of the 'wealth' in the home I had on marriage and which he moved into I saw sense and set up a Trust to protect myself and family. I had to re mortgage the house and pay for it again. This was with all the care to separate our earnings at the time.
But you go on slamming people who have Family Trusts.
It has meant that that the earnings in the Trust are taxed at much higher rates than I would have had if I was earning but the Trust has protected me and what I have worked hard for.
The real problem, as opposed to the philosphical problem that some see of so-called 'rich pricks' and their 'mega property deals', like me apparently, is people like this:
This bloke did not pay lawful deductions made on behalf of IRD for employees kiwisaver etc and there does not appear to be any chance that he will. I mean going to prison is hardly likely to get the lost money into employees KS accounts.
I think IRD is onto the Trust tax dodgers quite promptly whereas with people like this it can take at least a year, if PAYE is paid annually for something to be seen as amiss.
With employee pay software able to generate payments to IRD weekly, fortnightly or monthly etc it is time a bit of legislative force was used to make all employers pay IRD regularly. I know large employers can be required to pay IRD for PAYE etc more than annually but looking at this person you can see how a smaller employer who is not prepared to play by the rules can have a debt mount up.
As the daughter of two accountants i know that some scummy employers do use their employees PAYE/KS etc payments to meet cash flow problems and to bankroll expansion. Hoping on the never-never that the ship might come in with additional money to fix it up before year end. Sometimes though the ship salis away and doesn't come back.
My dad had views that this is theft from IRD and a brake on the amount of money that could be used to run the country. He told his clients this and those who were not prepared to mend their ways duirng the year were dropped.
As far as my Trust is concerned the piece of mind that this has brought has been immense and I know that the Trust pays more in tax than I would pay personally but this is a small price to pay. As a retiree I am not able to meet a mortgage to pay anyone out and staying put where I am means much to me.
Liberty….why are you getting so get up if the change from 33 to 39 makes no difference? Methinks thou doth protest too much.
I don't have a trust, and no desire to have one. The notion that people with trusts are rich pricks trying to avoid tax is a common misconception among left wingers. It's part of the whole tall poppy thing we suffer from in this country.
You are 100% correct. Unfortunately the people you are responding to have zero interest in learning anything. Their motives come from a different place.
Wrong Red….read my link below. Billions are being laundered through trusts to avoid tax.
Why do people who are not rich pricks use trusts? Why on earth do trusts exist?
Most people with trusts are not rich.
Budget 2023: No ‘Major’ New Taxes But $80b More Tax Revenue | Newsroom
Trusts exist these days mainly for asset protection, often in conjunction with 'prenuptual' agreements.
You're probably thinking of squat poppies – those morally stunted and undeserving persons that, at every opportunity, seek to avoid their social responsibilities, and imagine that, when called out, that they are victims.
Tall poppies cheerfully bow to the common good.
Who are these 'squat poppies'? Care to name one?
The litmus test is the claim to be a tall poppy.
Real tall poppies have no need to make that claim.
Not true Liberty. Read this.
Parker either doesn't have a clue, or he is simply dishonest. It showed in the silly report he had compiled about the proportion of income tax paid by the wealthy.
And I'll quote from the article:
Clueless, dishonest and/or just plain "silly" – you be the Judge
As for the quote @9:06 pm yesterday, the Taxpayers' Union's campaigns manager Callum Purves might very well say that…
Imo there's nothing honourable about tax avoidance – absolutely nothing.
Re tax evasion:
After all, what’s sauce for the goose…
Parker's study was faulty and shoddy, right down to not including tax transfers. It was a politically motivated sideshow.
A far better study is the Oliver Shaw research (Rich are paying fair share of tax, research finds | Newshub).
Is that the study that found "those paying the highest average effective tax rate were single, unemployed people in rented accommodation"?
It's the study that found that not including tax transfers in a report of comparative taxation is really, really silly.
Ah, then that is the study that found "those paying the highest average effective tax rate were single, unemployed people in rented accommodation." Nice to have that cleared up.
The study done for tax consultancy OliverShaw – not a lot of "single, unemployed people in rented accommodation" on their books, to be fair.
The firms principal is a former deputy IRD commissioner. But play the man if that makes you feel better.
And Don Brash was a former Governor of the RBNZ. Your point?
BTW, this is about the research methodology and findings:
Do the wealthiest New Zealanders pay their fair share of tax? | interest.co.nz
LB, why is the Sapere study “a far better study“, in your opinion?
Is that the Parker one that doesn't take into account transfers but included unearned income?
"And Don Brash was a former Governor of the RBNZ. Your point?"
That playing the man (or in this case the organisation) is rather cheap.
Your appeal to authority shows your bias. DMK rightly pointed out a possible conflict of interest that may cloud the judgement or bias the opinion of ‘the man’. This is not ‘playing the man’ per se but a good counter attack when you’ve run out of arguments and refuse to agree to disagree and insist on scoring points. Context is important, but you seem to apply it only when it suits you.
DMK rightly pointed out a possible conflict of interest that may cloud the judgement or bias the opinion of ‘the man’.
Anyone can insinuate a conflict of interest. It's a cheap shot.
Appealing to authority is a weak & lazy shot.
"Appeaing to authority is a weak & lazy shot."
You probably should apologise to DMK. His long, but nevertheless informative posts are full of them.
He’s not on Mod watch, you are. Don’t tell me what to do here, you are not a Mod, I am.
There's an IRD one (uses data on 311 wealthy (net worth generally >$50m) NZ families) that includes all income, a NZ Treasury one, and a Sapere one.
What makes the Sapere one the best, and the IRD one "silly", "faulty and shoddy", in your opinion?
"What makes the Sapere one the best, and the IRD one "silly", "faulty and shoddy", in your opinion?"
My response (with help from David Reddell Parker, taxation, and that IRD report | croaking cassandra).
1. The IRD report is effectively a survey of 311 families. As David Reddell points out:
2. The IRD survey didn't take into account that in NZ, tax on property is already above the OECD median. In fcat , as David Reddel notes, that was one OECD chart left out of the IRD report. Conveniently.
3. The IRD survey includes unearned (unrealised and hypothetical) income for those individuals, but exclude that same unearned income from other tax payers. David Reddell noted of Parker that
4. The IRD survey takes no account of the rate of inflation.
As David Reddell states:
5. The IRD survey takes no account of improvements performed on any of those assets at the tax payers expense.
6. If you refer to page 45 of the IRD report (report-high-wealth-individuals-research-project.pdf (ird.govt.nz)), at paragraph 4.17, you will find this comment:
Above that comment is table 4.1, which shows that the ETR net of transfers at each decile:
D4: – 2%
The Michael Reddell critique is worth a read, but there are others. The poor quality of the IRD work smacks of political interference. Michael Reddell sums it up in this understated manner:
"David Reddell" (or is it "Michael Reddell"?) is one (or two?) economists, "and like lawyers I can give you another one that will give a counterview."
LB, if you believe this wealth distribution is sustainable in the face of climate change, pandemics, food scarcity, war, environmental and economic crises et al., then I have an old car to sell you.
Nah – keep 'em hungry?
Sorry – getting David Parker and Michael Reddell conflated! But your pithy comment about economists and lawyers is of course quite true!
"f you think this wealth distribution is sustainable …'
Wealth and income are not the same thing and not always directly related. Nevertheless, your comment is a great segue, because the political messaging around the IRD study has cleverly conflated wealth and income to create a faux justification for more taxation.
The IRD report is fundamentally about the fairness or otherwise tax paid on income, not wealth. In fact it goes to great pains to justify itself by classifying unearned and frankly 'phantom' gains as 'income', when (ASGFIK) nowhere in the world is unearned income treated this way.
And David Parker further stokes this confusion in his opinion piece foreward:
Wealth and income are not the same, and Parker knows it.
Further to this, the ETR table clearly shows the tax system in NZ is already achieving significant income redistribution. We are at a point where the highest income earners pay a hugely distportionate amount of the total tax take, and a much higher ETR than low-income earners.
LB, for all the huff and puff that "the IRD report is fundamentally about the fairness or otherwise [of] tax paid on income, not wealth", isn't it up to the IRD to say what the IRD report is fundamentally about?
Not knowing the first thing about economics or accounting (as long as I've got enough money to get by, I'm happy), I googled the term 'economic income', and apparently it's a thing – go figure.
Hmm – while there might be bugger all diferrence between 'taxable income' and 'economic income' for much of the population most of the time, I can see why 'high wealth individuals', and their accountants, might have 'concerns' about using economic income to calculate a median effective tax rate of 9.8%.
Imho, this is about striking a fair balance, and we're not there yet.
"isn't it up to the IRD to say what the IRD report is fundamentally about?"
Of course. My emphasis added.
The report is a 'project' about ETR's, and as table 4.1 shows, the TWG found that higher income earners pay considerable higher ETR's than those on lower incomes.
"I googled the term 'economic income', and apparently it's a thing – go figure."
It is. But is it ever used in taxing individuals? And if the IRD or David Parker were remotely honest, they would have taken into account the economic income of every earner in NZ, not just the one class they wanted to highlight.
"I can see why 'high wealth individuals', and their accountants, might have 'concerns' about using economic income"
I don't know whether they are concerned or not. But I can see why Parker and the IRD would be far less amendable to repeating study and including the impacts of the past year or so, with asset values (particularly house prices and managed funds) having fallen.
The entire exercise was political, with a predetermined outcome built in to its methodology. It was dishonest but it got the headlines the government wanted, so perhaps they're happy.
So far you've taken issue with: the [dishonest, silly, faulty and shoddy] IRD report; Attorney-General David Parker [stokes confusion and either doesn't have a clue, or is simply dishonest]; Auckland University law professor Mark Henaghan; an article on ‘Mega Landlords: 48 per cent rise in homes owned by trustees 'suggests tax avoidance' [full of nonsense]; and our Govt [The way this government wastes money, it's a drop in the bucket.]
Imho the report on the IRD project outcomes is interesting, but anyone can read this 2-page summary [PDF] and decide for themself.
The purpose of the project is no mystery, and what Table 4.1 shows is stated clearly on page 31 of the full report.
Elements of economic income are used in many countries for the purposes of taxing individuals. Of the seven happiest countries (all OECD members) in 2021, six had higher Tax-to-GDP ratios than NZ (ranked 9th for happiness) – go figure.
Maybe this excerpt from the Sapere report will help.
The reasons for concern about using 'economic income' to calculate the effective tax rates that the very wealthy 'labour' under is obvious.
Some wealthy individuals think the ETRs calculated using 'economic income' are problematic, and I agree with them.
"So far you've taken issue with:"
Oh I've done more than that. At https://thestandard.org.nz/open-mike-20-05-2023/#comment-1950815 I set out very clearly the basis for my criticism of IRD report. The invitation is open for you to address those points, not selectively.
"Elements of economic income are used in many countries for the purposes of taxing individuals. "
What elements? Specifically where and how is unearned income taxed that is not consistent with how we treat similar income in NZ?
"Unlike ETRs based on economic income, these ETRs do not comprehensively take account of untaxed sources of income, such as capital gains."
"The purpose of 'the project' is no mystery, "
I answered you with a reference from the report itself.
"Some wealthy individuals think the ETRs calculated using 'economic income' are problematic, and I agree with them."
What is wealthy? Are these the 300 or so families who the report failed to recognise are actually taxed as individuals? If so. which ones? If not, who are these 'wealthy' people who are concerned? Michael Reddell doesn't appear to be wealthy.
"Maybe this excerpt from the Sapere report will help."
Not really. The accountants will be rubbing their hands together at the prospect of a new and complex taxation regime.
The concerns about changes causing a reduction in investment are valid. When low decile income earners enjoy a negative ETR, and higher income earners are carrying an increasingly disproportionate share of the tax burden, money will leave the country. It's another reason the aforesaid accountants will be loving this.
Don’t know about “pricks”, but more likely rich than poor, surely?
Hmm – maybe a mix of Kiwis, 'concerned' for different reasons?
For example, individuals in the 41 families who wouldn't cooperate with the IRD project, might be 'concerned' about over-taxation.
While other wealthy Kiwis are concerned about under-taxation. You may not agree with wealthy Kiwis who want to pay more tax, but everyone can appreciate their point of view.
"Don’t about “pricks”, but more likely rich than poor, surely?"
Somewhere in between.
Budget 2023: Government cracks down on trustees, increases tax rate | Newshub
As others have noted here, most trusts are family trusts, set up as vehicles to protect assets for future generations. The 'rich prick with a trust' attutide is alive and well, and ignorant.
"For example, individuals in the 41 families who wouldn't cooperate with the IRD project, might be 'concerned' about over-taxation."
Might be. Might be concerned at the government using (to quote Michael Reddell) the "coercive powers of the state" to prepare a politically motivated attack on success.
"Some of the wealthiest Kiwis in Aotearoa know they pay lower tax rates than most – and have signed a letter explicitly asking to pay more."
Tax Justice Spokesperson among the 97 wealthy Kiwis calling for higher taxes (newstalkzb.co.nz)
Huh? He signed the letter of 'wealthy kiwi's' but isn't wealthy?
We can scratch deeper if you want.
Edit – oh this is beautiful. At the foot of the list are two buttons to click if you want to donate. Not, BTW to the IRD, but to either Oxfam or TJA.
"Somewhere in between" – cute. So what's the value of income from trusts set up by Kiwis living in poverty? Take your time.
You seem very prickly
Is there a practical diff between concerns about over-taxation, and concern about politically motivated attacks on financial success?
Those such as Seymour, Luxon and yourself, who leap to the defence of poor put-upon wealthy Kiwis, no doubt have the purest of motivations. It must be truely awful being a wealthy Kiwi, when so many people want to tax your wealth.
Some Kiwis simply can't stomach even the thought of contributing more money to our Govt by way of tax – ‘unfair‘, they cry, Unfair!
If you like, but is there any need? Various motives are clear enough. For many wealthy Kiwis, current tax settings are barely tolerable – they already feel over-taxed, and inequality is certainly not their problem. Other wealthy Kiwis take a different view – maybe they're all silly, confused, dishonest, faulty and shoddy?
""Somewhere in between" – cute."
Somewhere in between rich and poor does not include people in poverty, does it?
"Is there a practical diff between concerns about over-taxation, and concern about politically motivated attacks on financial success?"
Of course there is. For example, I'm concerned about both, but for different reasons. I'm concerned about high income earners paying a disproportionate share of tax, because NZ desperately needs investment. I'm concerned about politically motivated attacks on financial success because they are part of an attitude of mediocracy that is prevalent in NZ.
"If you like, but is there any need? "
Well that depends on you. You posited the idea that this letter was the work of 'wealthy' NZ'ers, which is clearly untrue. Doesn't that concern you?
The trustee can distribute, to the beneficiaries, as much, or as little, of the trust's income as he chooses. Only undistributed income is taxed at the trust rate: formerly 33%, now 39%. Distributed income is taxed at the beneficiary's rate, which can be as low as 10.5%.
"Only undistributed income is taxed at the trust rate: formerly 33%, now 39%."
Yes, that's what I've been saying. In my experience most family trusts distribute all of the income annually already. (Many of those are below the 39% threshold). Perversely, if this tax rate change prompts even more to fully distribute, and to beneficiaries on tax rates lower than 33%, it's entirely possible the government won't draw anywhere near the level of additional taxation they are forecasting.
All of this is quite true LB.
But think of the useful mental health outlet this thread has provided for the 'its not fair' brigade who lump all people with trusts into the category of rich pricks buying mega lots of houses.
I've found that those who engage in trust's often are lacking in trust.
Forced birther poured $120k of his own money into an effort to force a recount of a referendum affirming abortion rights, forcing him to cheap-out on the airworthiness of the light aircraft he was rebuilding. Which then crashed and killed him.
Well, thats peanuts compared to whats coming.
The article goes on to say that that is enough money to fund two of the hugely influential conservative Heritage Foundations plus another sizeable organisation without touching the principle.
What's coming for tens of millions of women is a return to the 19thC.
Directors of women’s health care services at Idaho hospitals are bracing for what’s next: 75 of 117 Idaho OB-GYNs recently surveyed by the Idaho Coalition for Safe Reproductive Health Care said they were considering leaving the state. Of those, nearly 100% — 73 of 75 — cited Idaho’s restrictive abortion laws.
An exodus could affect broader medical coverage for women who rely on OB-GYNs for routine and urgent gynecological care unrelated to pregnancy, like menstrual disorders, endometriosis, and pelvic pain.
Idaho is one of 15 states that have implemented strict abortion laws since last year’s Supreme Court decision overturning Roe v. Wade. And while there is no official nationwide count yet, anecdotal evidence shows that women’s health specialists from states where abortion is criminalized are beginning to relocate to places like Washington state, which has strong abortion rights laws.
Yep, save maybe $100-$200 per year at the pharmacy but your mortgage payments go up massively.
And pity the renters who will inevitably pay more as a consequence of this.
Alan-When a cyclone causes 10 billion plus expenses that need fixing asap it is not possible to cut government expenditure unless you are proposing mother of all budget cuts to benefits and other payments that go to the less well off.
Why did Labour rule out the use of a short term cyclone levy?
Targeting high income earners, it would have taken money out of the economy offsetting the Government expenditure on the cyclone repair.
In other words, inflation neutral.
Big Hairy News interviews Shamubeel Eaqub on Budget
Once over lightly, where Shamubeel discusses the predominant spend on infrastructure, plus Pat also asks him about Covid response spending.
What is the point (if any) that you are trying to make by posting this link?
Oh, the irony!
That was a good find
If you are getting prescriptions for drugs that are affected by Robertson's proposal there is not a single household that needs to be paying more than $100/year.
An entire household can't save more than $100/year under the scheme even if you were a family with 6 kids and were getting 20 prescriptions/month. Every single one after the first 20 in a year is free,
Arena Williams has been caught telling porkies about that.
Labour MP Arena Williams fact-checked by Twitter community note over post about scrapping of prescription fee | Newshub
Rent goes up regardless of economic conditions. It doesn't matter if it's pharmacy fees or cheap offshore labour, rent always and inexorably goes up.
One thing the landlord class is very good at is extracting every last cent out of tenants, for profit. Pity they are not so good at providing housing safe from illness and fire. It's business, you know!
It's all good, renters are used to being abused as second class citizens.
The whales know. And they hate us.
Orcas have attacked and sunk a third boat off the Iberian coast of Europe, and experts now believe the behavior is being copied by the rest of the population.
Three orcas (Orcinus orca), also known as killer whales, struck the yacht on the night of May 4 in the Strait of Gibraltar, off the coast of Spain, and pierced the rudder. "There were two smaller and one larger orca," skipper Werner Schaufelberger told the German publication Yacht. "The little ones shook the rudder at the back while the big one repeatedly backed up and rammed the ship with full force from the side."
Yes Joe90, snap. I had noticed two or three reports of whale attacks in the past six months, and was wondering whether it was Nature fighting back with tooth and fin against humans and that global warming shit.
I have read elsewhere a story where orcas and humans co-operated over decades in fish drives in a harbour somewhere on the Canadian west coast, I think. Until the humans stuffed it up one year somehow, and the pact disintegrated.
A fabulous sight one autumn afternoon years ago was watching a pod of orcas playing around in the Waitematā harbour.
So many decades, but little has changed. Just like Cash and Kristofferson wise words in the Paul Holmes clip a few days ago.
Robert F. Kennedy, Jr's. Presidential Campaign takes a kindness approach.
Whereas, Trump takes a strength approach.
Sure if you vote by numbers of sanctimoneous abstract nouns, go right ahead.
On the other hand if you like policy, RFK JR:
– Lobbied Congress to enable parents to evade vaccinating their children
– Has a Non Profit called Child's Health Defence which paid for more than half of the ads on Facebook lying about vaccines, and was then barred from instagram
– Published a book titled The Real Anthony Fauci, accusing the doctor of promoting "a historic coup d'etat against Western democracy."
– Promoted a documentary falsely claiming that vaccines give you autism
I'm sure he's done a lot of good particularly in environmental defences of rivers, and of course he's younger than Joe Biden.
But … nah
I don't vote in the US election.
I was merely interested in the two different campaign approaches.
RFK Jnr is a nutter. So different campaign approaches for the same fruit cake 'winner'
Would you prefer Biden to win?
A deep dive into Jr's dangerous, dishonest lunacy.
The only ‘herd immunity’ we need is against abysmal candidates like RFK Jr. He has spent decades as a professional liar and is not the kind of person who should be anywhere near power.
Let’s establish at the outset that Robert F. Kennedy Jr. is someone who lies constantly in ways that seriously endanger the public. In fact, his lies have probably directly caused people to get sick, and possibly die.
To those who accept the scientific consensus around the efficacy of COVID-19 vaccines, someone like Kennedy can appear to be a mere “nut” or “crank.” But it’s important to understand that anti-vaxxers like Kennedy aren’t just “crazy.” They’re skilled manipulators of statistics who are great at fooling people using pseudoscience. Waving them away as
And there's always the possibility that Jr's a player in one of Roger Stone's rat-fucking schemes.
Seems some have a bee in their bonnet re his vaccine stance.
Nevertheless, it also seems he's polling rather well regardless.
Trump is too, so not sure of the relevance. Both crazy in different ways so 'you takes your chances and you makes your choice' between whatever flavour you like.
Yes, I've seen that Trump is also polling well.
I wonder which approach American voters will favour?
As I have long told my US cousin the choice of the President of the US is far too important to be given to Americans…… when Trump got in we agreed that anyone other than Americans, preferably NZers, should have been given the vote for the US Pres & that way they might have avoided Trump. She's a Democrat but who knows, she's not an anti vaxxer.
Her father on the other hand used to tell all his family here in NZ that he would be coming back to NZ each time a Labour Govt got in, in the UK. But of course he never did.
Anti-vaccine stances are directly responsible for the return of vaccine-preventable diseases that disproportionately affect children.
Those who oppose a crank magnet who poses an existential threat to millions of children have a little more than a bee in their bonnet.
Is it really the anti-vaccine stance that is responsible, or could it be the failure to convincingly refute them?
Maybe those who oppose a crank magnet should be reconsidering their own tactics?