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Tim Watkin slams tax cuts for tax cheats

Written By: - Date published: 12:18 pm, February 1st, 2010 - 16 comments
Categories: blogs, class war, tax - Tags:

On the Q+A blog, Tim Watkin rips into the proposed tax changes. Part of the post:

…You might think that such a new source of tax income would open the door for tax cuts for the poorest New Zealanders; after all, they struggle the most in tough economic times and spend a higher proportion of their income, thereby giving more stimulus bang for their buck. And one of the key goals of this review was to build a tax system that was fairer and more equitable.

But, no, the Tax Working Group (TWG) is instead pushing for tax cuts for the rich

…This must have seemed entirely logical to the rich men who made up the TWG. They’re used to complicated tax structures that hide as much money as possible from Inland Revenue and offshore dealings. As the group itself revealed, only half of New Zealand’s richest 100 people pay the top tax rate , which to my mind says half of New Zealand’s richest are greedy cheats.

So did they take the next step and figure out how to clamp down on such tax avoidance? Nope. They looked to increase the tax burden on the poor. Rather than make our highest earners pay their fair share, they effectively said, ‘rich people will game the system anyway, so we might as well cut their tax rates. We can’t beat ’em, so we might as well let ’em off’.

It’s the tax equivalent of permitting doping in sports. They’ve decided they can’t keep ahead of the cheats, so will focus on toughening the rules for the rest.

What the report effectively says is that because the poor can’t afford to move, can’t hire accountants to juggle their income and the like, they will be asked to pay a larger share. Their words are, “New Zealand’s tax base will need to be less reliant on internationally mobile factors such as incomes of capital and skilled labour”, but it amounts to the same thing.

GST could go up, they suggest. Company tax should come down, they recommend. Cuts taxes for the top tax bracket, they advise, but not for the bottom. In short, the report concludes that the poor are trapped and therefore exploitable. It is, the TWG argues, only efficient. So much for all the talk of fairness and integrity.

16 comments on “Tim Watkin slams tax cuts for tax cheats ”

  1. Herodotus 1

    You could almost apply Winny Churchills “Never in the field of human conflict was so much owed by so few to so many” !!!

  2. Santi 2

    Tim who?

    I want my tax cut and I want it now!

    • Bright Red 2.1

      You got two rounds of tax cuts, one from Labour and one from National. Unless you’re not on a high income of course, in which case you just got one from Labour.

      Have those tax cuts solved all your problems? Do you think another one will?

      And remember, these are tax reforms, shifting the way tax is raised, it doesn’t equal a cut in total tax paid by you as an individual unless you are on a very high income and don’t own a lot of property.

    • lprent 2.2

      You’re had at least one and possibly two (if you were wealthy enough to get Nationals) or three (if you managed to get WFF as well).

      No real point in giving you one. Like a spoilt child you always want MORE….

      • Lanthanide 2.2.1

        Many of the people who actually did get National’s tax cut will see it all eaten away by increases to ACC both last year and this, anyway. I guess those who didn’t will still see their net income decrease from the ACC changes, so it’s still a saving in that respect.

        Personally I put mine into kiwisaver.

  3. tsmithfield 3

    What is the point of all this chest-beating about clamping down on those who find ways to minimise their tax by playing within the rules?

    As I’ve said before, and still haven’t got a rational reply about, when one tax loophole is closed off, it invariably creates another one. The wealthy can afford expensive accountants who are much more clever than those who set the rules.

    As I’ve said before, the best way to combat avoidance is to simplify the tax system by having a flat tax rate. If this were the case, the wealthy would probably end up paying more because avoidance would be impossible. At the same time, probably 70% of the accountants in NZ would be out of a job.

    • Draco T Bastard 3.1

      As I’ve said before, and still haven’t got a rational reply about, when one tax loophole is closed off, it invariably creates another one.

      Only when it’s done by conservatives.

  4. George D 4

    It’s awful isn’t it. I’m glad to know that Labour are opposing tax-cuts for the rich.

    • Bright Red 4.1

      Thre’s a fair case for adjusting the tax thresholds by cpi to partially counter-act bracket creep. Don’t you think? After all, if you don’t then everyone’s taxes go up for the same real income, same for someone on $15K as for on $75L

  5. SPC 5

    Ring fencing LAQC to property only, ends current tax payment flight. It also encourages repayment of foreign debt by those who finance their landlord business on low equity for tax reasons. Yet the Tax Group ignored this reform option. The simplest and neatest closing of a tax loophole there is and a loophole which is disadvantageous to our national economic good.

    The money raised can be used to reduce deficits forecasts for the next 3-5 years. A reduction in foreign debt on our property is an improvement in our national economic position as well.

    As for the crazy idea of taxing equity without ending LAQC, are they totally mad?

    It is the borrowed money used to own rental property that should be taxed, The cynic in me has to suggest the answer no one has considerd. Why not apply GST on the sale of rental property from one landlord to another? The tax not applying on the buying of a home fore a family to live in – it encourages a return to home ownership and as for those who have made untaxed CG let them pay GST if they can only sell the property to ANOTHER landlord in it for the CG.

    • RedLogix 5.1

      Wish I could figure what you meant by any of that. Not a lot of it makes much sense, except that you seem to have the usual chip on your shoulder about landlordsd.

      • tsmithfield 5.1.1

        RedLogix, we probably don’t agree on a lot of things, however I think we would agree on the situation with respect to landlords.

        As I understand it, governments have actually made the tax advantages available so that investors will be encouraged to build housing for rental so that the government doesn’t have to assume as much of this responsibility. Therefore, it seems a bit perverse to take these advantages away.

        If the government does remove some of the tax-breaks for landlords, then the costs will be passed on to tenants. This will end up resulting in the government having to pay out more in accomodation supplements and the like. So it all seems a bit self-defeating to me.

      • tsmithfield 5.1.2

        If my accountant gives me the option of distributing income from my company at the end of the year:

        I can pay myself a salary in excess of 60k and get hit 38% on the extra above the threshold. Or I can pay myself just under the threshold and pay company tax of 30% on the extra. Which do you think I will choose?

  6. As I’ve said before, the best way to combat avoidance is to simplify the tax system by having a flat tax rate. If this were the case, the wealthy would probably end up paying more because avoidance would be impossible. At the same time, probably 70% of the accountants in NZ would be out of a job.

    While this is a service accounting firms do offer to wealthy individuals, it is hardly their bread and butter. I’m sure they won’t be losing any sleep over the potential for tax alignment. Otherwise, why in the world, would a tax working group, dominated by those with professional and academic accounting experience, advocate reforms that would put them out of work?

    Personal tax is simple enough to work out in the first instance, even now with an alleged huge degree of complexity.

  7. A bit of disagreement amongst the socialist ranks here…

    • lprent 7.1

      Ah – I’d get worried if there wasn’t. It is just one of those myths of the right that has no relationship to reality.

      I see more mental cloning in the comments in the sewer than I’ve ever seen on the left.

      That is why I reluctantly went left. There was some intelligent argument there that I could really disagree with.

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