Keith Rankin Chart Analysis – Covid19 Omicron panic: Netherlands, South Africa, United Kingdom

December 20, 2021

Analysis by Keith Rankin.

Netherlands

While the Omicron strain of Covid19 was first sequenced in South Africa, it was found independently in the Netherlands in November. So, while Netherlands was one of the European countries which caught the latest sudden European wave (mainly featuring Delta), most likely the Omicron strain was already spreading there; indeed the main constraint on the growth of Omicron in Netherlands was probably Delta. By now, it seems that Omicron may have already largely displaced Delta. Based on excess deaths, the current wave of infections began in the Netherlands in early September, starting as a Delta wave.

Just as the Omicron panic reached its crescendo in Netherlands, the actual data shows a sharp decline in covid cases, following a similarly fast increase. Hospital admissions are also falling in Netherlands.

Coincident with the spike in cases was a spike in excess (Delta) deaths. For the deaths to be coincident with cases, it means that there was a prior undiagnosed beginning to the spike in cases. Netherlands has always been a country reluctant to surveillance test for Covid19, so we can assume that many early Omicron cases were never counted, just as numbers of early-wave Delta cases were not counted.

My interpretation of the very recent sharp fall in cases is that Omicron is displacing Delta, and because Omicron is less severe than Delta, many Omicron cases are either completely asymptomatic, or mild ‘cold’ symptoms that have not triggered a covid test.

Why the political panic when known cases are falling sharply? My guess is that it’s politics. When things go wrong, Prime Ministers prefer to claim that they were blindsided by something quite unexpected than to admit to having been negligent. Hence, in Netherlands especially, the Omicron scare has all the appearance of being overcooked; of being a politically convenient (or manufactured) crisis.

South Africa

South Africa had a winter wave of covid cases from June to August 2021; a mix of the Beta and Delta variants. October was comparatively quiet, though increased deaths at the end of October suggest at least one region remained covid active. Then the Omicron variant appeared in early November, evidently from Botswana. The sharp rise in cases in South Africa – Omicron – almost certainly began about a week into November, three weeks ahead of what shows on the chart. It’s unlikely that the rise in excess deaths in late November was due to Omicron – it’s just a bit too soon.

Certainly, by December the authorities were sensitised to look for Covid19 amongst deaths, with particular reference to Omicron. But so far covid deaths in South Africa remain very low, despite it now being seven weeks since Omicron has been there. Despite South Africa having a ‘young’ population, it clearly has a covid-vulnerable population, looking at previous waves.

In early December, the rate of discovery of Omicron significantly exceeded Omicron’s rate of transmission. We note now that case numbers in South Africa seem to have peaked.

United Kingdom

In the United Kingdom – Covid19, mainly Delta – has been significantly present since June. Deaths have been low (by 2020 standards) and stable, at about three per million people per day. That looks now to be down to two per million per day (equivalent to 10 daily covid deaths in New Zealand).

This December, it looks as though a rapid escalation of cases – Omicron cases – has been taking place. But much of this represents the rate of discovery, not the rate of transmission. Quite possibly many of the November cases were also Omicron, and many cases of Omicron in November will not have been notified because they were too mild to have triggered a test. Severe cases of Omicron should already be showing in the death data, but they are not. This suggests that relatively few cases of this variant are severe.

As in the Netherlands, I cannot help but feel that there is a lot of unnecessary hype about Omicron in the United Kingdom. Prime Minister Boris Johnson is facing a major political scandal over his staff’s 2020 Christmas Party. Omicron is a convenient if untidy distraction.

Reflection

The biggest concern, I would argue, is that the populations of ‘the west’ are now close to a ‘critical threshold’ (or ‘tipping point’) of anxiety over the pandemic (see The straw that broke the camel’s back for the idea of a ‘critical threshold’ or ‘critical state’). (‘Critical state’ theory is very important for the understanding and prediction of major earthquakes.)

It looks likely that Omicron is evolutionarily superior to Delta because, in the vast majority of cases, it is not creating severe illness in its human hosts. If this is correct, Omicron is not merely ‘coldlike’ as has been described; rather it is a ‘cold’ virus, as is former-pandemic coronavirus OC43.This should be being hailed as good news, and not as an invitation for the human species to go mad with fear. Omicron is dealing to Delta, methinks. Sometimes the solution to a virus is a virus; that’s ecology.

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Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

SPECIAL TAXATION REPORT: Creating the citizen economy

By Stephen Minto -

December 20, 2021

How to stop ‘the normal principles of taxation’ destroying our economy and begin changes to create a citizen economy (Part A)

EDITOR’S NOTE: Taxation is the mechanism for redistribution of wealth to combat inequality and for redirecting resources to build a society. But our current tax principles though largely hidden or not understood by ordinary people, lie at the root of all our current inequality and struggling economy. Struggling at least for ordinary people. This article shows our current tax principles are central to our economic problems. Understand and fix tax and we are on a path to greater economic security and wealth for all, a ‘citizens economy’.

Special Analysis by Stephen Minto.

In my article ‘Housing – We can’t build our way out of this housing affordability crisis.’ on 23 August 2021 I looked at the economic structure driving housing affordability and how to solve it. I identified ‘the normal principles of taxation’ as a major factor driving excessive investor demand.

Those normal principles are helping create three of the main problems we are facing in our society:

tax avoidance,
inequality, generating poverty (including the housing affordability crisis),
environmental damage, and the resulting multiple related crisis’s. (e.g climate).

These three problems show the current ‘normal principles of taxation’ are sending the wrong economic signals to the economy and distorting it away from its primary purpose, the supply of goods and services to meet our society’s wants and needs. But there is a simple reset of the principles that removes the structural drivers currently creating these problems. And a reset is essential to fix these problems as new taxes or laws will just be lipstick on a pig if we don’t fix the underlying structural drivers.

This relatively easy reset does not require any international agreement or loss of autonomy for New Zealand.

NOTE: For your convenience, we have structured this long-form report into five sections. Part A continues below. But you can download the full analysis via this PDF, without cost, which contains Part A, Part B, C, D, and E.

To summarise the five parts:

In Part A we look at six ways the existing normal principles of taxation are damaging the long term economy and subsequently our society. They show the basic principles of economics are being undermined by the normal principles of taxation. I then identify the two main actions of a reset that will fix this damage.
Part B in this series details the full range of required tax reset ideas (e.g. get rid of damaging GST) and goes through the impacts from the full reset and how many of those challenges actually put the economy on a more sustainable and stronger growth base, with more competition.
Part C in this series covers aspects of the Pandora Papers and how it is the ownership structures of companies and trusts that are creating moral and economic problems just like the normal principles of taxation do. I raise some basic questions about how we should/could change the powers of, or scope, in which these entities are formed and operated. It is only in the structural permission about how they work that we can stop the economic problems we currently have.
Part D in this series examines beneficial impacts and reasons why the capital revenue distinction must go. Including how it will operate and impact business.
Part E in this series details impacts on various sectors of the New Zealand economy.

What are ‘the normal principles of taxation’?

At a very high level, income is identified by having three features:

It comes in
It is periodic (not one-offs)
It has the character of income in the hand of the person who receives it.

From these base features principles arose. They have been adapted and interpreted through case law of a capital/revenue distinction. That can be defined as:

Capital is not taxed but revenue is, so some businesses try to label items as capital to reduce their tax bill. A lot of the Pandora Papers covers this type of ‘legal’ activity.
A sale of a farm, as a one off, is generally capital and not subject to tax. You would expect that to be reinvested somewhere rather than used to live off. But the sale of produce from the farm (periodic – used to live off) is taxable.
Expenditure incurred to gain that ‘income’ should be deducted before tax is paid. Money spent to gain income is not really income that can be taxed.
So you get gross income and net income.
Expenditure incurred can’t be questioned.
Costs to run a business can’t be questioned for taxation because it is up to the owners how to run the business regardless of the consequences or how sensible they are.

These are enough principles for my purposes; but inherent and inseparable in these principles are some values:

tax is a cost, and
it is legitimate and necessary for efficiency to minimise that cost. Like you would with any other cost.

But there is the catch in this, tax is not a normal cost.

Why are these ‘normal principles of taxation’ a problem?

Here are six points that explain why the principles send the wrong economic signals to the whole economy and undermine economic growth.

1. They undermine comparative advantage and encourage monopoly

(Small businesses with lower costs should have an advantage in price over big firms. But larger firms use costs to reduce their tax to give them an advantage.)

Business is supposed to be efficient and reduce costs, to be competitive. The theory goes, by driving down costs you drive down price which is better for satisfying consumers wants and needs. This is more efficient and only business can do this as government is wasteful and costly.

But this same efficiency driver on a micro business level sees tax as a cost that a business gets nothing for on a balance sheet. So to avoid tax, a dead cost, the ‘normal principles of taxation’ allow them to grow other costs to not only prevent having to pay tax, but also to do things that drive up the price of their goods and services so they gain more profit.

We all know and experience the marketing techniques that large business use to keep their profits high, or how they run anti-competitive practises to undermine competitors. e.g. run an airline along the routes of a competitor so they don’t grow and move into their high cost routes. And these techniques cost a lot. They rely on big data from loyalty cards, slick advertising, changing superficial designs with new releases, glamorous shops, etc. And they rely on access to debit financing. These are just ‘normal’ large business practises based on behavioural/marketing psychology and finance.

So large businesses don’t mind incurring these costs because they will reduce the ‘dead cost’ taxation they have to pay. And it is a big saving, 28% on every dollar spent. So consumers/taxpayers in having a reduced tax are actually helping large companies pay for techniques to make us pay more money for their goods or services. So we pay twice for their supplied good or service – once on the high/‘discounted’ price and second through the tax subsidy.

Small businesses simply can’t afford to run the same techniques or access debt finance in the way a large firm can. Their whole pricing structure is done differently; they reduce their costs and run a tight ship. These economic rules simply don’t apply to large business because the normal principles of taxation turn costs into an asset for them – a tool to drive out smaller competitors while driving up price. Small firms can’t compete against these large firms no matter how good the quality or price they charge for their good or service.

Another perverse result is large businesses become less concerned about quality and service in part because like any large bureaucracy they have to wear a few problems. But also in part because large businesses not only compete on price and quality, but compete through ‘cost accrual competition’. The ability to accumulate costs that work to their advantage over smaller competitors. And it is profitable and relatively easy and ‘legal’, but it shifts a large business’ focus away from innovation and building quality or low price, and into a focus on gimmicks and primal manipulations to trick us to buy. And it reduces competition as smaller firms can only compete by reducing costs and there is a limit to that.

We can see this most easily in fast food and retail where there has been a slide into franchise. The Chemist Warehouse is one of the most recent. Costs on the floor are tight but the marketing, site location rental, management fees, executive salaries, advertising, debt financing are all high cost. In a generation the smaller owner run businesses taking pride in their business are largely gone from New Zealand. So many small businesses struggle and fail because it’s hard to find niches to escape the larger firms relying on costs and turnover to drive their pricing. Cost efficiency is no longer a key economic driver for a large business; ‘cost accrual competition’ through saving tax is the easiest way to wealth.

In addition larger businesses are more likely to spend on vanity expenses because it still reduces their tax bill so it gives them an advantages over smaller competitors. e.g. take a lease on property in prestigious locations, purchase on finance or lease luxury cars, still get a 50% deduction for business ‘entertainment’ expenses – meals and lunches, tickets and who knows what else.
‘The normal principles of taxation’ remove the natural competitive advantage of a low cost business supplying the same goods and services. These smaller business are normally New Zealand owned and operated. And to catch that advantage all businesses have to follow that high cost model, and treat tax as a cost to be minimised, leading to larger and larger businesses leading to monopoly capitalism. Cost accrual competition is a powerful economic tool and we the taxpayer are subsiding it to only some people’s advantage.

2. They undermine redistribution of wealth (tax) and the resulting economic stimulus

Almost all businesses do not create wealth, they simply accumulate wealth. And to accumulate they rely on the education and health systems to support access to employees and customers. They also rely on infrastructure, courts, police etc in which to do business. Tax minimisation, avoidance and evasion, undercuts the process of redistribution of wealth which pays for the supply of these services and therefore it undercuts the provision of the services the business needs to function with.

Redistribution by taxation also supports demand across the economy which in turn supports business accumulation of wealth. The ‘tax is a cost to be minimised’ attitude comes from the normal principles of taxation, but tax helps promote the multiplier effect which benefits the entire economy. The principles need to change so that no business has an incentive, and mechanism provided by the principles, to minimise tax, as it works against the long term supply of goods and services, within the economy.

Tax is like no other cost as it is not fixed. The principles calculate it as a relative cost based on what income is left over after costs. So on a micro economic level a business see’s an advantage to run up costs to minimise payment of tax. But on a macro economic level that minimisation is damaging the economy in which it functions. Tax minimisation is actually an act of self harm by a business in the long term. The normal principles of taxation are creating the problem.

3. They subsidise risk taking and provide no choice for taxpayers on doing that.

By allowing business to deduct expenses to reduce their income that is liable for tax; it makes the New Zealand taxpayer subsidise the provision of that good or service through sacrificing tax collected. And as said before the saving is not always passed on, prices are held high and profit maximised so consumers are not getting the benefit of the subsidy. The normal principles of taxation allow no choice for society on making this subsidy. e.g. huge amounts of investment resources can be used to subsidise the business of taking rich people on tourism flights to space. Would people vote for that choice, over lifting more children out of poverty? But there is no vote, we have no choice, and it is tax revenue we could have.

The entrepreneur who has the knowledge to make these choices about what costs to incur should take the risk for those choices. Choices and risks should not be subsidised by taxpayers or government as that is not their role.

If the people or the elected representatives decide to subsidise an activity that is okay. And that is very different from a blanket subsidy as happens currently under ‘the normal principles of taxation’.

4. They punish innovation or the efficient use of resources

If two businesses supply the same good or service but one does it at a higher cost than the other, why should the lower cost company pay more tax? This is not good economic policy.

The Lazy Inefficient company B has more expenses ($100) so only pays $14 in tax but the efficient/innovative company A ($50 in expenses) pays $14 more tax at $28.

The normal principles of taxation are sheltering poorly performing companies, and punishing well performing companies. And the taxpayers through having less tax collected are subsidising the inefficient poorly performing company.

And the principles allow more investment income to be made available to this poorly performing company. i.e. wasting scare investment capital. (If B did not get the tax subsidy and had to also pay $28 in tax like efficient company A, then Lazy inefficient B would only get $8 to reinvest).

To those who say the high cost of B could be due to the quality service they provide. Yes, and that will mark them out from their competitors, and that quality should sell them. But there is no way for the blunt instrument of taxation to tell the difference of quality to wasteful spending; so it shouldn’t. If customers don’t want that business’s ‘quality’ then that is a market signal. There is no reason for the taxpayers to subsidise a business’s choices on quality as the entrepreneur might be right or wrong and there is no way to tell, except by the customer.

More can be said on this example but it does not change the fundamental point that the wrong economic signals are being sent. e.g. Company A could have less customers and be price matching to Company B to maximise their profit rather than passing on the savings from innovation to their customers. Company B becomes a tool to make customers pay more as its existence takes up some demand, which slows the introduction of potential new competitors. This is another reason to have B out. This shows tax is only part of fixing the economy but a very very important part.

5. They subsidise environmental damage or resource waste by creating an externality

Of course not all companies have high cost structures because they run anti-competitive practise, or have vanity expenses, or they are just seeking tax minimisation. Some businesses, are just very costly to undertake and there is nothing inefficient about that, e.g. mining.

But should the costs to run those enterprises be subsidised by the taxpayers taking a reduced tax collection? The high costs of those business choices should be borne by the risk taking entrepreneur with the knowledge to take those risks.

For example, if you do the Hump Ridge track you see some great wooden viaducts used to bring out the timber from a milling operation. The devastation of the local forest was complete but the business as reported never made a profit as its costs were so high and the sales income never fully came in. New Zealand got nothing of substance out of this destructive exploitation. Yes workers got wages and scrimped a life of remote hardship. The directors would have got income along the way. Yes there is now some tourism value but it’s probably not much more than if it was left. Overall, the value of the forest asset was wasted without profit. The ecological and cultural value lost can’t be quantified.

The same destruction and waste occurred in the areas around the ‘Bridge to Nowhere’ in the inner Whanganui. All over New Zealand subsistence businesses were supported by ‘the normal principles of taxation’ for people to eke out an existence to the detriment of traditional Maori life and culture, the environment, and their own lives. The ‘normal principles of taxation’ were one of the systems within colonial exploitation that allowed profits to be stripped back overseas without as much redistributive effect from an effective taxation. The principles were a tool to strip value out of the new nation as the costs of exploitation were offset to the income. It is a tool in a class system that strips income away from the redistribution/taxation process.

Colonial legacy justification and creation of an externality

Yes, you can argue that this sort of tax subsidy for business was necessary to enable economic activity in new lands. And that is the colonial argument. From where we stand today we can see the waste and destruction of that legacy and thinking. Our climate and environment is imperilled because of it. But it’s still happening, that structure is still in existence within the normal principles of taxation, and it is helping drive environmental damage and climate change. The rules were made through judge law to favour the wealthy to help drive their, or their class’s, wealth. This reset will at least make the full cost fall on the risk takers and they will at least be more careful in future because the cost will fall on them fully.

Ongoing impact

If income from a business activity almost matches the cost of the activity, then very little tax is paid. So when the good is being sold the price does not reflect the cost of society’s human and physical infrastructure that was required to support that activity. Because tax was reduced this cost is not calculated into that sale price. i.e. a seller will work for the highest price but if the cost of production is subsidised, the threshold for the sale price is being subsidised and the true cost is not reflected in the price resulting in false economic signals being sent to producers. The normal principles of taxation are creating an externality of the cost of society.

A business must fully contribute from its income back to society through paying tax or there is no point in society letting the business be in existence. Like the purchase of the viaducts, or the mill boilers, tax is just a cost that should be factored in and you can’t avoid it.

Each business or activity needs to be viable in its own right so it has a cost that reflects if it is a high cost activity. Current loss offsetting hides a costly activity and dissuades companies funding research or looking for alternatives to get around high costs. Subsidising by tax undermines that drive for innovation.

Environmentally damaging activities like mining are one such activity where if the cost of tax was not able to be avoided, a higher price would generate more focus on recycling, or innovation to find alternatives. See more comment under heading ‘Different sectors have different impacts’

It is no longer appropriate for our business community to be molly coddled and subsidised by socialising their costs onto the New Zealand taxpayer, the government, and the environment.

6. The ‘normal principles of taxation’ are helping cause an international destabilisation problem.

President Xi in China is crushing democracy in Hong Kong as he see’s it as a vehicle to undermine China. But he is fighting the wrong enemy. As a former colony of Great Britain Hong Kong follows the basic outline of ‘the normal principles of taxation’. And most of the tax principles were set through english case law by judges who arguably have acted in their own or their class’s economic interest when making decisions that set precedent. As a colony these tax principles facilitated economic value being stripped away from the colony and the lands near it to the benefit of the ‘mother country’. In the post colonial world we still see these tax principles being used to strip value out of countries with little tax paid, and then into tax havens for the use of the billionaire owners of Google, Amazon, Microsoft and others.

China has become the factory of the world as large multinational companies moved manufacturing there for cheap resources and low regulation. President Xi wants the work and business to stay so it will give stability and economic strength to China. He was recently reported on CNN Aug 18, 2021 by Laura He as pushing on China’s rich to redistribute wealth. So he can see problems in his nation but he is asking business people bound by a tax system to act outside that system. His quest for security by taking on democracy and the Uyghur people means he is no longer walking with his people as a leader, using the wisdom of the crowd to guide his nation but is leaning into an inherently unstable autocratic leadership model. And he is adding fuel to the cold war that leaders in the US, UK and Australia, seem willing to hype up in a new alliance. He has chosen the wrong enemy; it is the colonial based tax structure that is undermining China’s security, e.g Transfer Pricing and Thin Capitalisation are able to undermine revenue and the ability to grow domestic based businesses in a way that spreads wealth. That has to be dealt with by simple consistent rules as suggested here that do not favour multinationals, as the current normal principles of taxation do. Democracy needs to be decoupled from exploitive capitalism and a tax reset will help do that.

And the ‘west’ is also struggling with conflict and polarisation in society, driven through culture war issues like immigration, climate change, vaccines, and abortion rights. In the ‘west’ the culture wars are facilitated through a dysfunctional 4th estate and poor quality democratic processes. These culture wars have some urgency for ordinary people, ‘taking our jobs, taking our opportunities’, but theses are just the scapegoats for the very real economic struggle many are experiencing. It’s about the economy getting polarised. Ultimately the western nations have the same enemy as China in the poor functioning of the tax system. The tax system is helping build monopolies, facilitating tax avoidance, and undermining local businesses. We are all poorer.

The normal principles of taxation are well overdue for a complete overhaul so they build each nation’s economy and redistribute wealth, and that is the purpose of taxation, not to concentrate wealth and build tax havens.

Note: The need for international trade by New Zealand will not be impacted by these changes but it may, or may not, modify it. And with the supply chain disruption brought by the Covid-19 Pandemic, it makes it an excellent time to bring in changes that will ameliorate the disruption we are already experiencing. It will help our nations build back on to a more sustainable path.

How shall we reset ‘the normal principles of taxation’?

In the media and policy world the strongest reset theme for taxation is greater transparency and sharing of information from other jurisdictions (especially tax havens) so tax can be claimed. This is all essential work that needs to be done but transparency and sharing information does not remove the structural problems created by the principles. And the current principles have created a complex set of rules that are an administrative burden.

And the creation of new taxes like wealth taxes will not deal with the structural drivers of wealth concentration. As the Pandora papers show the normal principles of taxation are a major driver of wealth concentration and tax avoidance.

I propose a structural reset that uses existing economic understandings which therefore won’t destabilise the economy, and it works alongside the existing market forces, sending appropriate signals to the economy.

The two main reset actions are:

Remove deductibility for all expenses except for domestic salary and wage payments.

2. No capital revenue distinction for non-individuals.

This is supported by:

A very broad legislative definition of ‘income’ to ensure everything that comes in is taxed regardless of traditional capital revenue distinctions. Even to include related party loans (with an exception for 3rd party loans – perhaps a strict list of who can be a 3rd party). The Pandora papers show this is essential regardless of even this reset. Because the current normal principles of taxation allow a company to make income but then through a series of entities turn it into a loan to be made back to the company or another related party and a ‘loan’ is not taxable. Part C, in this series, gives an example.
No grouping of companies for tax purposes. Companies are separate legal entities and will be treated that way for tax.
- The original intention of grouping was to prevent tax avoidance but it has now been twisted to be a major tax minimisation technique. i.e. Company tax rates in the past had a progressive structure. To avoid paying the higher rates a company created lots of sub companies and spread the income out so each paid an amount just below the high tax rate. This was then stopped by the requirement to group the companies so they did pay the higher rates of tax. But then for anti-competitive purposes parent companies began to run subsidiary companies – not to make a profit but to make a loss (the exact opposite of what companies should be set up for in an economy). Using ‘cost accrual techniques’ and low income. e.g. run a small airline at a loss to compete with a budget airline to preserve their other profitable routes. Grouping then allowed their losses to be offset against the income of their profitable routes so less tax was paid. If a situation arose where the loss company was no longer needed the losses could be retained but limited liability remained as a protection for the parent company. A long time ago the progressive tax rates on companies were removed and company tax was made a flat tax rate but nobody got rid of this ability to group companies. The companies wanted it kept. It is overdue to get rid of grouping.
- Without a capital revenue distinction and strict application of entity status, shifting assets between separate legal entities will generate taxable income because their status as a separate legal entity now becomes important for tax purposes. With less advantage in having separate legal entities, companies will become bigger which will improve transparency and reduce the ability to avoid tax or scrutiny. This reset will work with international trends to improve transparency. With more potential exposure to risk, behaviour and focus will change.
A company to trade in New Zealand must be required to have a company registered and based in New Zealand through which all its activities are subject to tax that are ‘sourced’ from New Zealand. And they must have a New Zealand bank account. An asset in New Zealand can’t be owned by a foreign based organisation in a tax haven as the risk of tax avoidance is too high. If there is not a base in New Zealand, e.g internet sales, then work must be done with banks on how sales can be caught for tax or punishments if not. This is already a tax issue and not created by this reset.
In ‘Part D (of this series) – Beneficial impacts for all with no capital/revenue distinction and less tax minimisation’ I go through more discussion of these points. In particular how taxing disposals of cash accumulations is not double tax but sends a beneficial push into quality and price for goods and services.

Economic policy and tax principles alignment

This reset does four main actions:

1. It removes the structural drivers for all the six economic problems listed above. Obviously other actions need to be taken in addition to tax for issues like international relations. This reset does not restrict actions but better supports them.

2. It stops almost all tax avoidance techniques based on currently ‘legal’ processes. Nobody is telling business how to run their business or control what they do. The choices are all still with the business, it is just the consequences and risks that will be fully carried by the chooser.

3. It removes any incentive to waste or damage the environment, or any assets, as all costs will be fully carried by the producer. Because things will cost more, the throw away culture will not be structurally supported by the tax system. Note – things are costing more now but with no quality improvement. Quality has the chance to come back.

4. It redirects investment capital to producing goods and services to meet the needs of society. With interest no longer deductible for tax there will less demand to debt finance. Finance will therefore be freed up for investment in actually producing goods and services. Yes some capital will be taken up to hold assets like land but that is a good investment at the moment. The purpose of debt financing is largely cost accrual competition. Part B of this series has more on the potential positive changes in how investment may occur.

But is this economically viable? We must look at the numbers.

Financial impact of reset

From the Statistics New Zealand website we have the ‘Annual enterprise survey: 2017 financial year (provisional)’.

It states for businesses/enterprises the:

total income for New Zealand is $644.2b (billion) and total expenditure is $560.7b.

Surplus potentially subject to tax = $83.5b (If the current tax of 28% was applied, this = $23.38b)

2017 Inland Revenue Annual report, says corporates actually paid $14.2b.

For contrast from the Inland Revenue website 2017 annual report –

Total tax in 2017 was $69.2b and Individuals paid 48% ($33.2b) plus GST 26% ($17.9b) = 74% of total tax was paid by you and me.

Taxation under a reset calculation – A soft transition calculation

The existing tax rate of 28% could be used or a lower rate of 15%. But if we aim to increase taxation because it is sorely needed for social purposes, and to pay down debt, and we don’t want to cause too much business disruption, then the following is an option.

Businesses claimed they had $83.5b income over expenses for the 2017 year.

If we initially taxed all companies at 10% of total income, no deductions for costs (except domestic salary and wages). And indexed to go up in future years. This will give a massive boost to small business.

- $644.2b x 10% = $64.42b tax.

As business had $83.5b over costs it means there is income available to pay the $64.42b tax. They would have to shift profit expectations and likely no dividends. Impacts will depend on the individual business. If we add in the Individuals tax, and ‘other’ ($37.1b) tax paid that year (I leave out GST as it must be dropped – as it damages the economy) we would have: a total tax for 2017 of $101.2b

The amount of 10% should be indexed to go up 1% every one, or two or so years, until it reaches 15% or 20% or whatever the government of the time decides. The 10% rate is too low for the urgent needs of climate change and human need. (The cost is higher now because actions were not taken earlier, and business in aggregate has not supported taking action sooner, in fact they hindered action).

Other taxes?

This increase in tax collected is without any new wealth tax or capital gains tax, and with a reduction of the headline tax rate. But there may be other reasons to do new taxes. In times of war. Or environmental crisis. Or a housing crisis. Tax is so low at the moment and the social needs so pressing, plus the debt must be paid down, that the amount of tax to be paid must go up.

Easier compliance

Another reset benefit is it could be possible/investigated to require all money deposits to a non-individual to go through one bank account with an instant deduction for 10% tax. A credit can come back once a salary or wage payment is made in the Inland Revenue employer account. This means no provisional tax or due dates to worry about. A great compliance saver for small business. Obviously all bank accounts would have to be linked to an IR number to prevent avoidance but if all non-individuals bank accounts were automatically subject to tax, then that removes some temptation to avoid tax liability.

The economy context

This reset is still only income that is being taxed; something that has ‘come in’. So money is there. Any realised capital gains would also be taxed because they would have ‘come in’. But as there are avoidance techniques for companies to delay gains coming in I am not expecting much to be collected under this category, initially. But a rising tax rate might persuade them to come forward earlier. But we could use the ‘risk free rate of return method’ to calculate this ‘income’. But that would be at least 15%. Other options to capture unrealised gains are being discussed in the wider media.

If large businesses say they will go out of business, then that shows just how dependent they are on the tax subsidy. So are they truly viable? The slow introduction of a lower but more effective rate would give them time to adapt to moving away from debt financing, and high cost structures. But there are many more effective ways to achieve this change. I don’t expect them to move away from their marketing techniques but they would pay that cost without being subsidised by taxpayers. Issues with marketing and consumer protection can be dealt with separately but those actions will be undermined by the current tax system. Actions will be more effective with a tax reset.

To stick to the concept of government spending being less than 30% of GDP reduces our ability to create wealth through the multiplier effect. A demand driven economy will bring better economic growth that actually satisfies people’s needs. The only risk to a demand driven economy is how to control pricing and inflation, (I propose an article on this at a later time). We tried supply side economics and we have poverty, housing shortages, housing inflation, a struggling health sector, and an education system beholden to overseas students.

Perfect timing

The recent talk about inflation and stagflation in part due to supply chain disruption make it the perfect time for the reset to happen as it will reduce business sector demand. All large businesses will be strongly focused on reducing their high cost business structure which will reduce demand and take pressure off inflation. Recall that a lot of business sector demand is micro business churn to drive price and demand up for their product or service. It is not growing the economy except in an incidental sense. Innovation, exports or savings are not being driven in the macro sense by that spending. By contrast small businesses with the lower tax rate will be opening up, increasing competition. I talk about inflation in Part B of this series but will require a further analysis.

Summary – we must reset ‘the normal principles of taxation’

This reset is not about political sides or ideas. It is about making the economy work as it is supposed to, meeting people’s wants and needs.
If we believe in markets with businesses competing on price and quality then this tax reset must be done because the current tax system undermines that, or
If we see the economic system is failing and people are falling through the cracks then this tells us one of the main reasons why and how to fix it.

The current tax system is breaking the economy and society. We are a frog in a pot that’s been on the stove for a while.

Further evidence the tax system is broken is seen in the US which has the same basic principles of our system and many of their largest companies aren’t paying much tax, e.g. Amazon, Honeywell, Halliburton, IBM, Fedex, Nike, US steel, Chevron, Delta. These companies are even managing through globalisation to avoid capital gain taxes. So we can’t just rely on new taxes to solve the existing problems. The foundation, ’Income tax’ must be fixed and this reset is how to do it so the big companies pay their fair share.

Minimising tax is big business for every large firm. For the cost of a small team of accountants they can structure finances to avoid billions or hundreds of millions of dollars in tax. The purpose of tax is to redistribute wealth but ‘the normal principles of taxation’ are discouraging redistribution so economies and societies are struggling, with small businesses disadvantaged and people’s wants and needs not being met.

The reset here retains largely the same tax system with all business treated the same. But the reset strips the rules down so there is nowhere to hide or shift the money. Because it is in the rules where the loopholes are found. And the rules/legislation are written with the normal principles of taxation firmly in mind, and with considerable input from those accountants who are deeply embedded in tax orthodoxy. The business sector has had a significant input into developing tax law and the business sector likes lots of red tape rules as it offers lots of loopholes.

In this reset you can’t shift money between income (subject to tax) to capital (not subject to tax). A person can’t reduce their tax by claiming expenses real or imagined. There are no losses or capital losses. I suspect the reason why we don’t have a capital gains tax in New Zealand is the fear of capital losses undermining future government revenue along with complexity of the law – but this reset shuts down those fears.
With this reset the tax system becomes much simpler and more transparent. This is why stripping the rules back, as is proposed in this reset, is actually the only way to get a truly broad based low rate income tax system.

———————

EDITOR’S NOTE: For the full analysis, please download the PDF which includes: Part A, Part B, Part C, Part D, Part E of this long-form report.

About the author: Stephen Minto lives in Wellington with his two children. He worked for New Zealand Inland Revenue Department for approximately 33 years and is now enjoying no longer being bound by public service etiquette of being non-political.

Newsletter: New Zealand Politics Daily – December 20 2021

By Bryce Edwards -

December 20, 2021

New-Zealand-Parliament — New Zealand Parliament Buildings, Wellington, New Zealand.

Editor’s Note: Here below is a list of the main issues currently under discussion in New Zealand and links to media coverage. You can sign up to NZ Politics Daily as well as New Zealand Political Roundup columns for free here.

Today’s content

2021 reviews, 2022 predictions, Parliament, parties
Luke Malpass (Stuff): ‘Tis the season for crystal ball-gazing: here are the political issues to watch in 2022
Stuff: The best and the rest: Stuff’s politician of the year and other political awards for 2021
Claire Trevett (Herald): The award goes to … the Politician, Minister and Opposition MPs of the year (paywalled)
Magic: Who are the best and worst in politics this year? Peter Dunne shares his answers
Martyn Bradbury (Waatea News): Māori MP of the Year
Justin Giovannetti (Spinoff): The news that will matter in 2022
Liam Dann (Herald): Yippee-ki-yay, it’s a Die Hard Christmas (paywalled)
Fran O’Sullivan (Herald): If Labour thought 2021 was tough… (paywalled)
Martyn Brabury (Daily Blog): 2021 – The Year a Bat won Bird of the Year & why being Left wing was so hard
Morgan Godfery (Guardian): From Covid-free to Delta and back: New Zealand’s year of living (almost) normally
Bruce Cotterill (Herald): Here’s to 2022 — let’s make it a better year (paywalled)
Janet Wilson (Stuff): Just like soldiers in WWI, it’s time for a truce and a thanks
Heather du Plessis-Allan (Herald): Nothing has turned out as bad as predicted (paywalled)
Steve Braunias (Herald): The Secret Diary of . . . Xmas songs
Public Address: Word of the Year 2021: Covidiot
Victor Billot (Newsroom): An Ode for .. 2021
Bruce Cotterill (Herald): Here’s to 2022 — let’s make it a better year (paywalled)
RNZ: Focus on Politics: An end-of-year chat with the minor party leaders
Peter Wilson (RNZ): The Week in Politics: ‘Outrageous’ spending and traffic light settings
Phil Smith (RNZ): The House: ‘I wish you a wonderful break. You bloody deserve it!’
Bridie Witton (Stuff): Ayesha Verrall: Rookie politician’s big year of policy
Carolyne Meng-Yee (Herald): Jacinda Ardern and Clarke Gayford wedding: Billionaire’s homestead venue, Lorde to sing
Claire Trevett (Herald): Christopher and Amanda Luxon on life as leader, what lies ahead – and Luxon’s bad habits (paywalled)
Luke Malpass (Stuff): Luxon reflects on 2021 successes, failures and summer plans
Bill Ralston (Listener/Herald): Christopher Luxon’s timing was perfect both for him and National (paywalled)
Arielle Kauaeroa (Stuff): Member’s bill to increase accessibility to Māori electoral roll faces uphill battle
Herald: ‘Jessica, then Tova’: Jacinda Ardern grills reporters in ‘reverse press conference’ on The Hits with Jono and Ben
Taylor Rice (Herald): A new right? Why Act can maintain a strong presence despite National’s rise (paywalled)

Govt management of Covid-19
Josh Van Veen (Democracy Project): Omicron could topple Jacinda Ardern
Derek Cheng (Herald): It looked liked Jacinda Ardern was shunning public health advice, but the opposite is true (paywalled)
Ian Taylor (Herald): Politicians and officials go on holiday at arguably the most dangerous time in this pandemic
Alida Shanks (Stuff): Move the focus from conflict to what brings us together
Michael Hanne (Newsroom): Comparing Covid: How New Zealand stacks up
RNZ: Prof Peter McIntyre: refocusing Covid-19 vaccine strategies
Herald: Republican Arizona Senator Wendy Rogers trolled after saying Kiwis are emailing her about Jacinda Ardern and Covid camps

Omicron
John Anthony (Stuff): Ministry of Health assessing border settings in light of Omicron
Michael Daly (Stuff): How long can MIQ keep Omicron out of New Zealand?
Mike Houlahan (ODT): Call for tighter borders
Alice Wilkins (RNZ): Michael Baker wants to delay reopening New Zealand’s border in bid to keep Omicron out
Brittney Deguara (Stuff): Experts warn there could be an ‘explosion’ of Omicron cases in MIQ as variant spreads
RNZ: Summer Omicron outbreak would mirror NSW’s huge jump in community cases – expert
Jo Lines-MacKenzie (Stuff): ‘Each day there’s a better understanding’ – Health Minister eyes Omicron
Vaimoana Tapaleao and Lynley Ward (Herald): Ministers to discuss new strategies in fight against Omicron
John Weekes (Herald): Omicron on collision course with summer as document dump shows holiday challenges, Asian Bubble talk
Herald Editorial: Variant could be first political stress test for National’s new leader (paywalled)
Stuff Editorial: The Covid-19 sequel is worse than the original
Herald Editorial: The critical information policy makers need about Omicron (paywalled)
Michael Neilson (Herald): Dr Ashley Bloomfield says ‘mixed strategy’ dealing with new variant
Ethan Te Ora (Stuff): Omicron in the community would be a ‘game-changer’ for Christmas plans
Alice Bracwell-Worrall (Newshub): Close contacts of NZ’s first Omicron cases stunned high-risk travellers put on their MIQ floor, have stay extended
Nicole Bremner (1 News): Omicron not a concern while in MIQ – Baker
Herald: Everything you need to know about the new variant
RNZ: Prof Gary McLean on rise and (eventual) fall of Omicron
Siouxsie Wiles (Spinoff): The worrying rise of omicron

Border, MIQ
Miriam Burrell (Herald): MIQ cracks revealed as experts urge tighter control with rising numbers of new variant
RNZ: Returnees owe $36m in overdue MIQ fees
Nicholas Jones (Herald): Revealed: Why critical healthcare workers couldn’t get into NZ
Amelia Wade (Newshub): Nearly half of self-isolation pilot spots went to waste, Prime Minister Jacinda Ardern initially unaware James Shaw got one
Katie Harris (Herald): Man visiting dying father stuck in MIQ longer due to being on same floor as Omicron case
Benn Bathgate (Stuff): Omicron at Rotorua Ibis keeping son from father with brain tumour
Steve Kilgallon (Stuff): Immigration says sorry, and welcome back – but won’t let her into NZ
Andrew Macfarlane (1 News): Kiwis in Australia call for clarity on border reopening
Nadine Porter (Stuff): Trans-Tasman travellers fearful border reopening plans will be canned

Covid-19 outbreak
Michael Morrah (Newshub): 732 people infected with COVID-19 made to wait more than a day for a medical assessment
Sahiban Hyde (Hawkes Bay Today/Herald): 15,000 cases predicted for Hawke’s Bay in 2022
Jake McKee (RNZ): Māori and Pacific over-represented in NRHCC hospitalisation figures in Delta outbreak
Moana Ellis (Local Democracy Reporting): Māori urged to ‘take action and work together’ to combat increased Covid risk
RNZ: Claustrophic housing puts Queenstown hospitality sector at risk of Covid-19 outbreak
—————
RNZ: Child is youngest person with Covid-19 to die in NZ – MoH data
Herald: Young child who died was unknowingly infected
Matt Burrows (Newshub): Young boy who died with COVID-19 was not a known case prior to his death
1 News: Child under 10 tested positive for Covid-19 ‘post-death’ – MOH
Jonathan Guildford (Stuff): Asymptomatic Covid-19 case went to Christchurch Hospital’s ED to be treated for injury

Health
Jane Patterson (RNZ): ICU capacity: ‘This is where the rubber hits the road’
Katie Harris (Herald): Wellington doctor claims hospital already pushed to limit
Kate Nicol-Williams (1 News): Emergency departments urge Kiwis to stay safe over summer
RNZ: Rural hospitals ‘largely left out’ of $100m pandemic funding
Ian Powell (Second Opinion): The madness of health system restructuring in a pandemic
Libby Wilson (Stuff): Radiology staffer’s ‘considerable’ overtime prompted limits at Waikato DHB
Damien Grant (Stuff): No smoking, but the Government trusts us with cheese?
The Economist (Stuff): Plan to outlaw smoking for the next generation is misguided
Torika Tokalau (Stuff): Pacific organisations call for ‘village approach’ to help save Pasifika babies
Sammy Carter (Herald): Fears buy now, pay later for alcohol could create ‘generation of juice junkies’ (paywalled)
Leanne Warr (Hawkes Bay Today/Herald): Son’s death inspires Dannevirke parents to fight for more information (paywalled)
Matthew Tso (Stuff): Privacy breach at Hutt Hospital as clinician leaves patient info on street
Esther Ashby-Coventry (Stuff): Health literacy plan to help public navigate medical information

Vaccine rollout
John Gerritsen (RNZ): Schools asked to help with vaccinations for under-12s
RNZ: Ngāti Hine Health trust calls for school vaccination day
RNZ: Health experts call on government to roll out children’s vaccine ASAP and prioritise tamariki Māori
Herald: Prioritise tamariki Māori in children’s Covid vaccine rollout – health experts
Amy Williams (RNZ): Doctors ready for speedy booster roll-out ahead of Cabinet decision
Ellen O’Dwyer (Stuff): Decision on booster gap ‘matter of urgency’, immunologist says
Tony Wall (Stuff): Tūhoe organisation accused of failing to counter Covid-19 vaccine lies
Northern Advocate (Herald): Non-Māori biggest obstacle to Northland reaching 90% vax target, figures show (paywalled)
Peter de Graaf (Herald): Finding the missing 3300: How to lift Northland’s vax rate to 90 per cent (paywalled)
1 News: Disease expert says Covid boosters will be way of life
RNZ: Eight million vaccine doses administered
Herald: New Zealand administers its eight millionth dose of the Covid-19 vaccine
Samantha Gee (RNZ): West Coast less than 1500 vaccinations away from 90 percent target
Kristin Hall (1 News): Health providers urged to warn of rare Covid vaccine side effects
Cecile Meier (Stuff): ‘I feel absolutely worthless’: Chronic fatigue sufferers can’t get Covid-19 vaccine exemption despite expert support
Dan Satherley (Newshub): Vaccine-linked death prompts reminder letter from Ministry of Health to doctors – report
Herald: Expert urges people to get help if needed after autopsy links Dunedin death to jab
Olivia Caldwell (Stuff): Coroner investigating after autopsy links Dunedin man’s death to ‘very rare’ side effect of Pfizer vaccine
ODT: Dunedin man’s death linked to vaccine
Benn Bathgate (Stuff): Platform Advertising revealed as comms provider behind ‘dark ages’ Covid cartoons

Vaccine mandate
Keith Lynch (Stuff): The “pro-choice” argument against vaccines, explained
Nick James (Herald): Police called to Wellington Airport after verbal confrontation over masks
Ruth Hill (RNZ): Domestic airline passengers call for consistent policing of vaccine passes, mask use
Dan Lake (Newshub): Police step in as ‘tense’ confrontation over face masks breaks out at Wellington Airport
Emma Hatton (RNZ): Concerns raised about having to share public transport with unvaccinated people
Lucy Anderson (1 News): Man with mask exemption denied entry into SkyCity
RNZ: Human Rights Commissioner met with Brian Tamaki ahead of anti-vaccine mandate protest
Craig Kapitan (Herald): Destiny’s Brian Tamaki appeals bail restrictions
Sapeer Mayron (Stuff): Destiny Church charities back under the microscope of Government watchdog
Chris Marriner (Herald): Anti-vax protesters ruin pupils’ final day at Birkdale Intermediate
RNZ: Doctor who quit over vaccine mandate continues to challenge Covid-19 guidance
Adam Burns (Local Democracy Reporting): Mid Canterbury GP challenges health officials Covid guidance
George Heagney (Stuff): Unvaccinated banned from tertiary campuses, but online study an option
Lee Kenny (Stuff): Vaccine passes likely needed for hundreds of thousands of tertiary students
Chloe Blommerde (Stuff): ‘We don’t want to be the grinch’: No to vax pass mandates at Matamata-Piako facilites
Herald: Fonterra staff may soon need to be vaccinated
Herald: Ashburton intermediate defends vaccine pass for school camp
Qiuyi Tan (Herald): Auckland no-vax gym seeing new members, say owners
Whanganui Chronicle (Herald): Ruapehu businesses not complying with Covid 19 rules will be referred to police, council says (paywalled)

Auckland border, testing, summer travel
Ellen O’Dwyer (Stuff): Covid-19 PCR saliva test as accurate as nasal swabs, New Zealand study confirms
Wiliam Hewett (Newshub): Police pleased with ‘extremely high’ level of compliance at Northland checkpoints
Imran Ali (Herald): Police checkpoints in North to become mobile with spot checks
Edward O’Driscoll (Newshub): Aucklanders make break for Northland ahead of Christmas, but iwi worried COVID peak yet to arrive
Jamie Ensor (Newshub): Heading away for Christmas? Here are the COVID restrictions for each region
Steve Maharey (Stuff): Why we should be rolling out the welcome mat to double vaxxed Aucklanders

Economy, business, govt subsidies
Brian Easton (Pundit): Where Is Fiscal And Monetary Policy Going?
RNZ: Business confidence on slight decline heading into 2022 – report
ODT: Southland ranked as ‘most pessimistic’ region
Kate MacNamara (Herald): Jobs for Nature creates just one tenth of promised jobs to date (paywalled)
RNZ: Commerce Commission to investigate variety of residential building issues
Michelle Cooke (RNZ): What I really want for Christmas: Kirk Hope
Michael Donaldson (Stuff): Hospitality in crisis: How can we save our bars and restaurants?
Olivia Caldwell (Stuff): Underwhelming summer visitor numbers forecast for South Island hotspots
1 News: Retailers call for people to ‘shop nice’ this Christmas
George Clark (Herald): Retail NZ calls on Kiwis to ‘Shop Nice’ in light of increasing levels of abuse
Dileepa Fonseka (Stuff): The ‘over it’ economy kicks in as the country sits at traffic lights
Richard Meade (Spinoff): As omicron lurks, hard-hit businesses need a new kind of support

Local government
Jonathan Milne (Newsroom): Sprawling governing bodies to allow all councils say in Three Waters corporations
Matthew Tso (Stuff): Living wage policy not reflected in rates for council contractor’s workers
Felix Desmarais (Local Democracy Reporting): Can money be made from human poo? A council’s spent millions trying
Jimmy Ellingham (RNZ): Palmerston North council eyes bowling greens for housing
Anna Fifield (Stuff): Reimagining Wellington: What could we achieve with ambition and bold leadership?
Andrea Vance (Stuff): Most of us want a greener, more sustainable Wellington – but it has to be liveable
Cherie Sivignon (Stuff): ‘Nothing was in scope’ with Waimea dam investigation
Felix Desmarais (Local Democracy Reporting): Can money be made from human poo? A council spent millions trying
Lois Williams (Local Democracy Reporting): West Coast district plan goes out for first look with apology for complex language
Adam Burns (Local Democracy Reporting): Revenue of $16m for Ashburton District Council – annual report forecasts
Steven Walton (Stuff): Council proposes reducing budget due to supply chain issues, cost escalation
Kiri Gillespie (Herald): Inside Tauranga City Council’s toxic sealed-off floor: Mould, mushrooms and Christmas (paywalled)
Laurel Stowell (Herald): Hard look at Anzac Pde flood remedies for Whanganui (paywalled)
Laura Mills (Local Democracy Reporting): Franz Josef floodwalls have 20 years left
John Lewis (ODT): Vandervis criticises city’s police
RNZ: Upper Hutt council to stick with decision to not require vaccine passes for its facilities
ODT: Invercargill City Council funding transferred for fostering activity

Abuse in care, Lake Alice
Daisy Hudson (ODT): The long road to facing up to country’s dark past
ODT Editorial: Abuse redress overdue
Aaron Smale (Stuff): The truth about Lake Alice: Justice delayed is justice denied

Pike River
Conan Young (RNZ): Remains of up to three more men have been located within Pike River Mine, police say
Jamie Ensor and Leighton Heikell (Newshub): Pike River Mine: Further human remains have been discovered
Cherie Howie (Herald): Evidence of further human remains found in mine where 29 men died
1 News: Pike River mum ‘unashamedly cried’ after human remains found
1 News: More human remains found in Pike River mine

Transport
Emma Hatton (RNZ): Transport Accident Investigation Commission spending more on inquiries but completing fewer
Grady Connell (Newshub): Urgent calls for long-distance passenger services to stay as KiwiRail cuts operations
Sam Brooks (Spinoff): Alert: There is no airport bus service in Auckland or Wellington
Hawkes Bay Today/Herald: Napier and Hastings MPs: Lowering the speed limit won’t solve SH5 problem (paywalled)
Kate Nicol-Williams (1 News): Interislander preparing for new ship’s first voyage
Luke Kirkeby (Stuff): Plane crash reveals emergency response shortfalls

Environment, conservation, Climate Change
Marc Daalder (Newsroom): Climate Commission investigating subsidies for farmers
Thomas Coughlan (Herald): Officials warn New Zealand will fail clean car pledge if bold new policies not agreed to (paywalled)
Eloise Gibson (Stuff): Public sector’s carbon footprint remains a mystery, despite 2025 target
Samantha Gee (RNZ): Appeal for information after kea shooting
Joel MacManus (Stuff): Reimagining Wellington: Bringing the capital’s streams back to life and light
David Turner (Stuff): We need sustainable cities our grandchildren will want to inherit

Education, Science
Thomas Mead (1 News): Education Minister suggests ‘external review’ at Teaching Council
Dubby Henry (Herald): School air purifier order ‘progressing’, CO2 monitors on way
Laura Hooper (Stuff): Engineering academy extension to address Southern industry shortages
Amanda Cropp (Stuff): Fears the vaccine mandate for school bus drivers and low pay will worsen the driver shortage, leaving some students without transport next year
Why evolution is true: The “teach Maori other ways of knowing in science class” fracas continues; Richard Dawkins weighs in
Siouxsie Wiles (Stuff): Academics: Use your mana to aid colleagues, not fight them
Morgan Godfery (Stuff): It took science for Polynesians to settle the corners of the vast Pacific

Housing
Steven Cowan (Against the current): Crisis? What crisis?
Brian Gaynor (BusinessDesk): Heavy is the head 2022’s house prices rely upon (paywalled)
Joanna Davis (Stuff): These are New Zealand’s most expensive streets – and the cheapest
Andrew King (Stuff): Instead of demonising property investors, we should be making it easier for them
Mary Holm (Herald): Facing the challenges of a landlord’s life (paywalled)
Geraden Cann (Stuff): Mega landlord who bought 20 homes in a year says those days are over
Mikaela Wilkes (Stuff): What the cheapest house in NZ sold for
Lane Nichols (Herald): Ex skinhead ‘white supremacist’ in state house terrorising Christchurch neighbours

Immigration
Barbara Dreaver (1 News): Research shows devastating effects overstayers face
Gill Bonnett (RNZ): Family’s change in fortunes after sharing story of job loss and visa woes

Police, Justice, corrections
Matt Burrows (Newshub): Police, IPCA agree to start regarding people who complain of mistreatment by officers as victims
Anna Leask (Herald): Christchurch terror attack: Taxpayers foot $392K legal bill for man behind mosque massacre
Christine McCarthy (Newsroom): The long road to humanising youth justice

Media
Russell Brown (Listener/Herald): Media monster: The plan to radically transform public TV and radio in New Zealand (paywalled)
Tom Pullar-Strecker (Stuff): Stuff rejoins Nielsen rankings in top media position

Other
Phil Pennington (RNZ): Oranga Tamariki underspends by $4m on support for child victims of sexual violence
Sam Sachdeva (Newsroom): Oranga Tamariki slashes size of leadership team
Tom Hunt (Stuff): Non-disclosure exit payouts rife in public service, researcher finds
1 News: Construction workers at high risk of suicide, research shows
Katie Stevenson (1 News): Long-awaited Te Pae Convention Centre opens in Christchurch
RNZ: Te Pae convention centre worth $475 million to open in Christchurch
Jenny Ruth (BusinessDesk): ‘The world according to Orr’: growing concern RBNZ losing institutional memory (paywalled)
RNZ: Reserve Bank rejects multiple claims over fake bank notes
Dan Satherley (Newshub): Norwegian terrorist’s manifesto, which inspired Christchurch killer, banned in New Zealand
Matt Nippert (Herald): Oslo terrorist manifesto, cited as ‘inspiration’ for Christchurch terrorist, banned
Sally Murphy (RNZ): Mānuka honey trademark bid: UK ruling ‘insulting to Māori and our culture’, says trust
Sally Rae (ODT): Water battle won, but ‘sour taste’ remains
John Roughan (Herald): Why I am angry about Aotearoa (paywalled)
Tess McClure (Guardian): ‘A wave of joy’: babies born from world’s first HIV positive sperm bank

Eight million covid vaccine doses given in NZ – Māori rate still lagging

By Asia Pacific Report -

December 20, 2021

RNZ News

New Zealand has reached a milestone of eight million vaccine doses administered.

The milestone was featured in the Ministry of Health’s covid-19 update today.

The figure includes first doses, second doses and boosters, as well as third doses intended for those who are immune compromised.

The doses include both the Pfizer — the main vaccine deployed in New Zealand — and AstraZeneca vaccines.

MidCentral and Hutt Valley have also reached 90 percent first doses for Māori, becoming the fourth and fifth district health board (DHB) areas to reach the mark.

However, nationally, the second dose rate for Māori remains at 77 percent.

Canterbury continues to lead the way overall, with 98 percent of eligible people having had a first dose and 94 percent being fully vaccinated.

New Zealand has a population of five million.

55 new community cases, 13 omicron cases in MIQ
The ministry reported 55 new community cases of covid-19 in New Zealand today and five more cases of the omicron variant in recent international arrivals.

The new omicron cases in MIQ take New Zealand’s total to 13.

Four of these cases remain in managed isolation. One person has now recovered and has been released.

The recovered case arrived from London via Singapore on December 7. This case tested positive on day one and was closely managed in MIQ, the ministry said in a statement.

The person was never in the community while infectious.

Of the new community cases, 41 are in Auckland, with the remainder spread between Waikato, Bay of Plenty and Taranaki.

This article is republished under a community partnership agreement with RNZ.

Article by AsiaPacificReport.nz

Jakarta lashes out at UN annual report, denies intimidation of rights activists

By Asia Pacific Report -

December 20, 2021

By Yance Agapa in Jayapura

Indonesia has strongly criticised the United Nations in response to cases of human rights violations in Papua being cited in the UN’s 2021 annual report.

“Unfortunately the report neglects to highlight human rights violations happening in advanced countries, such as cases of Islamaphobia, racism and discrimination as well as hate speech,” said Indonesian Foreign Affairs Ministry spokesperson Teuku Faizasyah.

According to Faizasyah, almost 32 of the countries reported on were developing countries.

Nevertheless, he said, Indonesia condemned all forms of intimidation and violence which target human rights activists.

“Indonesia does not give space to the practice of reprisals against human rights activists as alleged and everything is based on a consideration of the legal stipulations,” said Faizasyah.

Speaking separately last Wednesday, Mary Lawlor, the UN Special Rapporteur on the situation of human rights defenders, warned Indonesia that it must stop threats, intimidation and violence against human rights defenders in West Papua.

Lawlor cited Veronica Koman, a human rights and minority rights lawyer who is in self-exile in Australia.

Koman still facing threats
She said that Koman was still facing censure and threats from Indonesia and its proxies who accused her of incitement, spreading fake news and racially based hate speech, spreading information aimed at creating ethnic and separatist hatred, and efforts to separate Papua from the Unitary State of the Republic of Indonesia (NKRI).

These accusations are believed to be directed at Koman in reprisal for her work advocating human rights in West Papua.

“I am very concerned with the use of threats, intimidation and acts of reprisal against Veronica Koman and her family, which seek to undermine the right to freedom of opinion and expression and the legitimate work of human rights lawyers,” said Lawlor.

Previously, UN Secretary-General António Manuel de Oliveira Guterres cited Indonesia as one of 45 the countries committing violence and intimidation against human rights activists.

This was included in a report by the UN Office of the High Commissioner for Human Rights (OCHCR) which cited Indonesia over violence and intimidation in Papua.

On 26 June 2020, the OCHCR also highlighted the criminalisation and intimidation of human rights activists in the provinces of Papua and West Papua.

One of the focuses was alleged intimidation against Wensislus Fatubun, an activist and human rights lawyer for the Papua People’s Assembly.

“He has routinely prepared witness documents, and analysis about human rights issues in West Papua for the UN. Wens Fatubun has worked with the special rapporteur on healthcare issues in Papua during visits,” said Guterres.

Translated by James Balowski for IndoLeft News. The original title of the article was “Indonesia Kritik PBB Soal HAM Papua”.

Article by AsiaPacificReport.nz

Pro-Macron presidential election committee formed in New Caledonia

By Asia Pacific Report -

December 20, 2021

RNZ Pacific

A committee has been set up in New Caledonia to support the re-election of French President Emmanuel Macron although he is yet to announce whether he will again seek office next April.

The committee is headed by the mayor of Noumea Sonia Lagarde, who said Macron’s support for New Caledonia had been “flawless”.

More than 96 percent voted against independence in last Sunday’s vote, which was boycotted by the pro-independence camp because of the impact of the pandemic.

She said that if New Caledonians voted in three referendums to stay with France, it was due to Macron’s commitment.

However, in both the previous referendums in 2018 and 2020 contested by the pro-independence supporters, the defeat in the plebiscites was narrow, with only 10,000 votes separating the two sides last year.

In 2017, in the decisive second round of the last presidential election, Macron secured 53 percent of New Caledonia’s votes against 47 percent for Marine Le Pen of the National Rally.

In the mainly anti-independence Southern Province, only 46 percent voted for Macron.

In the first round, he came a distant third behind Francois Fillon and Le Pen, with just 13 percent support.

French military vehicle vandalised
A French military truck has been destroyed in an arson attack in the north of New Caledonia.

Prosecutors say two individuals carrying a canister of petrol entered a parking area in Poindimie and set the truck alight.

Another vehicle had been doused with petrol but the two were chased away by an officer on guard before they could set it on fire.

He used an extinguisher to prevent the rest of vehicle park catching fire.

Prosecutors say investigators are being sent from Noumea to track down the two suspects.

If caught and convicted, they risk jail terms of up to 10 years.

This article is republished under a community partnership agreement with RNZ.

Article by AsiaPacificReport.nz

60,000 flee as West Papua conflict deepens, poses questions for region

By Asia Pacific Report -

December 19, 2021

SPECIAL REPORT: By Johnny Blades, RNZ Pacific journalist

Armed conflict in West Papua continues to claim lives, displace tens of thousands of people and cause resentment at Indonesian rule.

But despite ongoing calls for help, neighbouring countries in the Pacific Islands region remain largely silent and ineffectual in their response.

This year, Indonesia’s military has increased operations to hunt down and respond to attacks by pro-independence fighters with West Papua National Liberation Army (WPNLA) which considers Indonesia an occupying force in its homeland.

Since late 2018, several regencies in the Indonesian-ruled Papuan provinces have become mired in conflict, notably Nduga, Yahukimo, Intan Jaya, Puncak Jaya, Maybrat as well as Pegunungan Bintang regency on the international border with Papua New Guinea.

The ongoing cycle of violence has created a steady trickle of deaths on both sides, and also among the many villages caught in the middle.

Identifying the death toll is difficult, especially because Indonesian authorities restrict outside access to Papua.

However, research by the West Papua Council of Churches points to at least 400 deaths due to the conflict in the aforementioned regencies since December 2018, including people who have fled their villages to escape military operations and then died due to the unavailability of food and medicine.

‘Some cross into PNG’
“We have received reports that at least 60,000 Papuan people from our congregations have currently evacuated to the surrounding districts, including some who have crossed into Papua New Guinea,” says Reverend Socratez Sofyan Yoman, president of the Fellowship of Baptist Churches of West Papua.

West Papuan villagers flee their homes due to armed conflict in Maybrat regency, September 2021. — West Papuan villagers flee their homes due to the armed conflict in Maybrat regency, September 2021. Image: RNZ Pacific

The humanitarian crisis which Yoman described has spilled over into Papua New Guinea, bringing its own security and pandemic threats to PNG border communities like Tumolbil village in remote Telefomin district.

Reverend Yoman and others within the West Papua Council of Churches have made repeated calls for the government to pull back its forces.

They seek a circuit-breaker to end to the conflict in Papua which remains based on unresolved grievances over the way Indonesia took control in the 1960s, and the denial of a legitimate self-determination for West Papuans.

But it is not simply the war between Indonesia’s military and the Liberation Army or OPM fighters that has created ongoing upheavals for Papuans.

This year has seen:

more arbitrary arrests and detention of Papuans for peaceful political expression;
treason charges for the same;
harassment of prominent human rights defenders;
more oil palm, mining and environmental degradation that threatens Papuans’ access to their land and forest;
a move by Indonesian lawmakers to extend an unpopular Special Autonomy Law roundly rejected by Papuans; and
a terror plot by alleged Muslim extremists in Merauke Regency in Papua’s south-east corner.

Reverend Socratez Sofyan Yoman … the Indonesian president and vice-president have “turned a blind eye and heart to the Papua confict”. Image: RNZ Pacific

Not only the churches, but also Papuan customary representatives, civil society and the pro-independence movement have been calling for international help for many years, particularly for an intermediary to facilitate dialogue with Indonesia towards some sort of peaceful settlement.

Groups frustrated with Jakarta
The groups have expressed frustration about the way that Jakarta’s defensiveness over West Papua’s sovereignty leaves little room for solutions to end conflict in the New Guinea territory.

On the other hand, Indonesian government officials point towards various major infrastructure projects in Papua as a sign that President Joko Widodo’s economic development campaign is creating improvements for local communities.

Despite the risks of exacerbating the spread of covid-19 in Papua, Indonesia recently held the National Games in Jayapura, with President Widodo presiding over the opening and closing of the event, presenting it as a showcase of unity and development in the eastern region.

“The president and vice-president of Indonesia while in Papua did not discuss the resolution of the protracted Papua conflict. They turned a blind eye and heart to the Papua confict,” says Reverend Yoman.

Beyond the gloss of the Games, Papuans were still being taken in by authorities as treason suspects if they bore the colours of the banned Papuan Morning Star flag.

Regional response
At their last in-person summit before the pandemic, in 2019, Pacific Islands Forum leaders agreed to press Indonesia to allow the Office of the UN High Commissioner for Human Rights into Papua region in order for it to present them with an independent assessment of the rights situation in West Papua.

Advocating for the UN visit, as a group in the Forum, appears to be as far out on a limb that regional countries — including Australia and New Zealand — are prepared to go on West Papua.

However even before 2019, the UN High Commissioner for Human Rights office had already been trying for years to send a team to Papua, and found it difficult securing Indonesia’s approval.

That the visit has still not happened since the Forum push indicates that West Papua remains off limits to the international community as far as Jakarta is concerned, no matter how much it points to the pandemic as being an obstacle.

Indonesian military forces conduct operations in Intan Jaya, Papua province. Image: RNZ Pacific

The question of how the Pacific can address the problem of West Papua is also re-emerging at the sub-regional level within the Melanesian Spearhead Group whose full members are PNG, Fiji, Solomon Islands, Vanuatu and New Caledonia’s Kanaks.

The United Liberation Movement for West Papua (ULMWP) is looking to unlock the voice of its people at the regional level by applying again for full membership in the MSG, after its previous application had “disappeared”.

The ULMWP’s representative in Vanuatu, Freddy Waromi, this month submitted the application at the MSG headquarters in Port Vila.

No voice at the table
The organisation already has observer status in the MSG, but as Waromi said, as observers they do not have a voice at the table.

“When we are with observer status, we always just observe in the MSG meeting, we cannot voice our voice out.

“But with the hope that we become a full member we can have a voice in MSG and even in Pacific Islands Forum and even other important international organisations.”

Freddie Waromi, ULMWP representative in Vanuatu — ULMWP representative in Vanuatu Freddie Waromi … “with the hope that we become a full member we can have a voice in MSG.” Image: RNZ Pacific

Indonesia, which is an associate member of the MSG, opposes the ULMWP’s claim to represent West Papuans.

“They’re still encouraging them (the MSG) not to accept us,” Waromi said of Jakarta.

He said the conflict had not abated since he fled from his homeland into PNG in 1979, but only worsened.

“Fighting is escalating now in the highlands region of West Papua – in Nduga, in Intan Jaya, in Wamena, in Paniai – all those places, fighting between Indonesian military and the National Liberation Army of West Papua has been escalating, it’s very bad now.”

Vanuatu consistently strong
Vanuatu is the only country in the Pacific Islands region whose government has consistently voiced strong support for the basic rights of West Papuans over the years. Other Melanesian countries have at times raised their voice, but the key neighbouring country of PNG has been largely silent.

The governor of PNG’s National Capital District, Powes Parkop, this month in Parliament lambasted successive PNG governments for failing to develop a strong policy on West Papua.

Powes Parkop, the governor of Papua New Guinea's National Capital District. — Governor Powes Parkop of Papua New Guinea’s National Capital District … “We have adopted a policy that is shameful and unethical.” Image: Johnny Blades/RNZ Pacific

He claimed that PNG’s long silence on the conflict had been based on fear, and a “total capitulation to Indonesian aggression and illegal occupation”.

“We have adopted a policy that is shameful and unethical,” he said of PNG’s “friends to all, enemies to none” stance.

“How do we sleep at night when the people on the other side are subject to so much violence, racism, deaths and destruction?

“When are we going to summon the courage to talk and speak? Why are we afraid of Indonesia?”

Parkop’s questions also apply to the Pacific region, where Indonesia’s diplomatic influence has grown in recent years, effectively quelling some of the support that the West Papua independence movement had enjoyed.

Time is running out for West Papuans who may soon be a minority in their own land if Indonesian transmigration is left unchecked.

Yet that doesn’t mean the conflict will fade. Until core grievances are adequately addressed, conflict can be expected to deepen in West Papua.

This article is republished under a community partnership agreement with RNZ.

Article by AsiaPacificReport.nz

Families of victims reject Jakarta 2014 Paniai massacre investigation

By Asia Pacific Report -

December 19, 2021

By Yance Agapa in Jayapura

The Papuan people have rejected the investigation team formed by the Indonesian state through the Attorney-General’s Office (AGO) to investigate alleged gross human rights violations in Paniai on 8 December 2014.

“To this day Indonesia has never solved any cases of gross human rights violations in the land of Papua, especially not the bloody Paniai case,” said Papuan activist Andi Yeimo about the massacre when Indonesian troops killed five teenagers and wounded 17.

“So, we the people of Paniai and the families of the victims are [instead] hoping for a visit by the United Nations High Commissioner [on Human Rights] to see for themselves the evidence and facts on the ground in Karel Gobai, the location of the shootings.”

Yeimo believes that the Indonesian government is incapable of resolving cases of gross human rights violations and the Papuan people are asking for the United Nations to visit Papua.

“We already know that the government talks nonsense. Indonesia once offered four billion [rupiah] (NZ$419,000) in money as compensation. But we, the families of the victims, rejected this evil attempt outright,” he said.

In relation to a UN visit to Papua, Yeimo said that 85 countries had already urged the UN High Commissioner for Human Rights to visit Papua.

But Indonesia had used the covid-19 pandemic situation as grounds to prevent the visit.

Indonesian ‘distractions’
“Domestically, Indonesia [tries] to distract the Papuan people’s focus with the agenda of Otsus (the extension of special autonomy), the creation of new autonomous regions, the National Sports Week and military operations in West Papua,” said Yeimo.

“All students, youth, religious figures, state civil servants and all OAP (indigenous Papuans) unite now, take part in rejecting the [investigation] team formed by the state. We Papuans all know that Indonesia has never taken responsibility for its actions.”

Earlier, Amiruddin, the head of the investigation team into gross human rights violations, said he hoped that the newly formed team of investigators would be able to work transparently.

“The Attorney-General’s move to form the Paniai incident investigation team is a good move”, said Amiruddin in a press release.

Notes from Indo Left News: On 8 December 2014, barely two months after President Joko Widodo was sworn in as president, five high-school students were killed and 17 others seriously wounded when police and military opened fire on a group of protesters and local residents in the town of Enarotali, Paniai regency. Shortly after the incident, while attending Christmas celebrations in Jayapura on December 28, Widodo personally pledged to resolve the case but seven years into his presidency no one has been held accountable for the shootings.

Translated by James Balowski of IndoLeft News. The original title of the article was “Kasus Paniai Berdarah, Rakyat Tolak Tim Investigasi Buatan Negara”.

Article by AsiaPacificReport.nz

Majority of NZ delta covid outbreak hospital patients Māori and Pacific

By Asia Pacific Report -

December 19, 2021

By Jake McKee, RNZ News reporter

New Zealand’s longest covid-19 hospitalisation in Auckland and Northland during the first three months of the current outbreak was 61 days, and an overwhelming majority of patients were Māori or Pacific.

Figures from the Northern Region Health Coordination Centre (NRHCC) released to RNZ News under the Official Information Act (OIA) show 704 people with covid-19 were admitted to hospital between August 17 and November 18, 2021.

“There were 309 Māori patients, 295 Pacific patients, 36 Asian and the rest [64] were of other ethnicities,” Counties Manukau District Health Board chief executive Margie Apa said in the OIA response.

Responding to questions about the response in a statement, a Ministry of Health spokesperson said “protecting Māori and Pacific wellbeing has been an integral part of the ongoing covid-19 response”.

They said the ministry recognised the vulnerability of these communities, “especially given larger family sizes and complex health needs”.

They highlighted how the ministry had redirected $36 million to each of the Māori and Pacific health responses in this current outbreak.

“In addition to providing funding, we remain committed to working with a range of experts, providers, and partners to ensure our response continues to protect Māori and Pacific communities and keeps them safe from covid-19,” the spokesperson said.

‘Unfortunate but predictable’
National Māori Pandemic Group co-leader Dr Sue Crengle said the proportion of Māori and Pacific in the figures was unfortunate but “predictable, given what we know … about how Māori and Pacific communities and whānau are likely to be more vulnerable to transmission of the virus, and also more vulnerable to more severe outcomes”.

She said officials could have learnt and acted faster given the pandemic had been going for more than a year when this outbreak started. But she did note: “we haven’t had a pandemic on this scale since 1918”.

Crengle said there should have been “forward thinking” earlier on.

Apa said there were a total of 870 “patient events” – the difference between this number and the total patient count was because of things like patient transfers between hospitals.

The vast majority — 513 — were unvaccinated, with 124 people having had one jab, and 67 were fully vaccinated.

More than half of admissions (479) were for up to two days, compared with only 73 hospitalisations of 10 days or more.

However, 50 patients ended up in intensive care, seven of them being placed on a ventilator, and on 16 occasions people spent 10 days or more there – including two people who spent 950 hours there, which equated to almost 40 days.

Church deacon
One of those two patients would have been a 50-year-old man, who was a deacon at the Assemblies of God Church of Sāmoa and died in Middlemore Hospital in October.

A caveat of the data in this story was that some people had not been discharged by November 18 – the limit of the OIA request scope.

NHRCC forecasting of “specific hospitalisation predictions” only happened first on October 8, 2021 — more than two-and-a-half months into the outbreak — with the earliest predictions beginning November 9, 2021.

In a graph provided separately by the NHRCC communications team, there were at least three days where intensive care admissions met or were higher-than predicted between November 9 and December 10.

Overall hospitalisations in the same period were always below what NHRCC predicted. NHRCC predicted there would be just under 40 people in hospital in its catchment by 28 December.

Its “specific hospitalisation predictions” did not include modelling on the use of ventilators.

“The use of ventilators is a clinical decision made in response to a patient’s condition and while there are thresholds for use and pathways of care we have not modelled the expected use,” NHRCC said.

More hospitalisations
In contrast to NHRCC, Te Pūnaha Matatini researcher and covid-19 modeller Professor Michael Plank said there had been more hospitalisations than originally expected.

He thought that was likely down to the fact people were being hospitalised “for a shorter stay” so “they have a relatively small impact on the number of beds”.

Dr Plank said intensive care admissions were hard to predict and “to be honest, we haven’t spent a lot of time trying to model that”.

RNZ is awaiting national figures which have been requested from Ministry of Health.

An OIA request to the ministry for national figures was transferred to the NRHCC, a collective of the Northland and Auckland District Health Boards working together on the covid-19 response. National figures have been asked for again.

This article is republished under a community partnership agreement with RNZ.

Article by AsiaPacificReport.nz

UN warns Indonesia to stop reprisals against human rights defender

By Asia Pacific Report -

December 19, 2021

RNZ Pacific

The United Nations says Indonesia must immediately drop charges and look into threats, intimidation and reprisals against human rights defender Veronica Koman and her family.

Veronica Koman, a human and minority rights lawyer, is in self-imposed exile in Australia.

However, she still faces several charges in Indonesia for alleged incitement, spreading fake news, displaying race-based hatred and disseminating information aimed at inflicting ethnic hatred.

The charges were believed to have been brought against her in retaliation to her work advocating for human rights in West Papua.

Veronica Koman was among five other human rights defenders mentioned in the UN Secretary-General’s 2021 annual report on cooperation with the United Nations, its representatives and mechanisms in the field of human rights, according to the UN Special Rapporteur on the situation of human rights defenders, Mary Lawlor, said.

She has faced threats, harassment and intimidation for her reporting on West Papua and Papua provinces, for providing reports to UN human rights mechanisms, and for attending UN meetings, for which she was questioned by security forces.

“This case highlights how human rights defenders are often targeted for their cooperation with the United Nations, which is fundamental to their peaceful and legitimate work in the protection and promotion of human rights,” Lawlor said.

Explosive boxes thrown
Acts of intimidation and threats against Koman’s family have also been reported this year, most recently on November 7, when unidentified individuals threw two small explosive boxes inside the garage of her parents’ home in West Jakarta.

The boxes reportedly contained threatening messages, including one stating “we will scorch the earth of wherever you hide and of your protectors.”

Another box addressed to Koman, delivered to the home of a family member, contained a dead chicken and a message saying that anyone hiding her “will end up like this”.

“I am extremely concerned at the use of threats, intimidation and acts of reprisal against Veronica Koman and her family, which seek to undermine the right to freedom of opinion and expression and the legitimate work of human rights lawyers,” Lawlor said.

“I urge the Indonesian government to drop the charges against her and investigate the threats and acts of intimidation in a prompt an impartial manner and bring the perpetrators to justice,” Lawlor said.

“Impunity for violations against human rights defenders has a chilling effect on civil society as a whole.”

The Special Rapporteur will continue to monitor the case and is in contact with the Indonesian authorities on the matter.

This article is republished under a community partnership agreement with RNZ.

Article by AsiaPacificReport.nz

LONG-FORM REPORT: Creating the citizen economy

By Stephen Minto -

December 18, 2021

How to stop ‘the normal principles of taxation’ destroying our economy and begin changes to create a citizen economy (Part A)

Special Analysis by Stephen Minto.

Those normal principles are helping create three of the main problems we are facing in our society:

tax avoidance,
inequality, generating poverty (including the housing affordability crisis),
environmental damage, and the resulting multiple related crisis’s. (e.g climate).

This relatively easy reset does not require any international agreement or loss of autonomy for New Zealand.

NOTE: For your convenience, we have structured this long-form report into five sections:

In Part A we look at six ways the existing normal principles of taxation are damaging the long term economy and subsequently our society. They show the basic principles of economics are being undermined by the normal principles of taxation. I then identify the two main actions of a reset that will fix this damage.
Part B in this series details the full range of required tax reset ideas (e.g. get rid of damaging GST) and goes through the impacts from the full reset and how many of those challenges actually put the economy on a more sustainable and stronger growth base, with more competition.
Part C in this series covers aspects of the Pandora Papers and how it is the ownership structures of companies and trusts that are creating moral and economic problems just like the normal principles of taxation do. I raise some basic questions about how we should/could change the powers of, or scope, in which these entities are formed and operated. It is only in the structural permission about how they work that we can stop the economic problems we currently have.
Part D in this series examines beneficial impacts and reasons why the capital revenue distinction must go. Including how it will operate and impact business.
Part E in this series details impacts on various sectors of the New Zealand economy.
PDF – Or you can download and print the pdf of this long-form report.

What are ‘the normal principles of taxation’?

At a very high level, income is identified by having three features:

It comes in
It is periodic (not one-offs)
It has the character of income in the hand of the person who receives it.

From these base features principles arose. They have been adapted and interpreted through case law of a capital/revenue distinction. That can be defined as:

Capital is not taxed but revenue is, so some businesses try to label items as capital to reduce their tax bill. A lot of the Pandora Papers covers this type of ‘legal’ activity.
A sale of a farm, as a one off, is generally capital and not subject to tax. You would expect that to be reinvested somewhere rather than used to live off. But the sale of produce from the farm (periodic – used to live off) is taxable.
Expenditure incurred to gain that ‘income’ should be deducted before tax is paid. Money spent to gain income is not really income that can be taxed.
So you get gross income and net income.
Expenditure incurred can’t be questioned.
Costs to run a business can’t be questioned for taxation because it is up to the owners how to run the business regardless of the consequences or how sensible they are.

These are enough principles for my purposes; but inherent and inseparable in these principles are some values:

tax is a cost, and
it is legitimate and necessary for efficiency to minimise that cost. Like you would with any other cost.

But there is the catch in this, tax is not a normal cost.

Why are these ‘normal principles of taxation’ a problem?

Here are six points that explain why the principles send the wrong economic signals to the whole economy and undermine economic growth.

1. They undermine comparative advantage and encourage monopoly

(Small businesses with lower costs should have an advantage in price over big firms. But larger firms use costs to reduce their tax to give them an advantage.)

Business is supposed to be efficient and reduce costs, to be competitive. The theory goes, by driving down costs you drive down price which is better for satisfying consumers wants and needs. This is more efficient and only business can do this as government is wasteful and costly.

But this same efficiency driver on a micro business level sees tax as a cost that a business gets nothing for on a balance sheet. So to avoid tax, a dead cost, the ‘normal principles of taxation’ allow them to grow other costs to not only prevent having to pay tax, but also to do things that drive up the price of their goods and services so they gain more profit.

We all know and experience the marketing techniques that large business use to keep their profits high, or how they run anti-competitive practises to undermine competitors. e.g. run an airline along the routes of a competitor so they don’t grow and move into their high cost routes. And these techniques cost a lot. They rely on big data from loyalty cards, slick advertising, changing superficial designs with new releases, glamorous shops, etc. And they rely on access to debit financing. These are just ‘normal’ large business practises based on behavioural/marketing psychology and finance.

So large businesses don’t mind incurring these costs because they will reduce the ‘dead cost’ taxation they have to pay. And it is a big saving, 28% on every dollar spent. So consumers/taxpayers in having a reduced tax are actually helping large companies pay for techniques to make us pay more money for their goods or services. So we pay twice for their supplied good or service – once on the high/‘discounted’ price and second through the tax subsidy.

Small businesses simply can’t afford to run the same techniques or access debt finance in the way a large firm can. Their whole pricing structure is done differently; they reduce their costs and run a tight ship. These economic rules simply don’t apply to large business because the normal principles of taxation turn costs into an asset for them – a tool to drive out smaller competitors while driving up price. Small firms can’t compete against these large firms no matter how good the quality or price they charge for their good or service.

Another perverse result is large businesses become less concerned about quality and service in part because like any large bureaucracy they have to wear a few problems. But also in part because large businesses not only compete on price and quality, but compete through ‘cost accrual competition’. The ability to accumulate costs that work to their advantage over smaller competitors. And it is profitable and relatively easy and ‘legal’, but it shifts a large business’ focus away from innovation and building quality or low price, and into a focus on gimmicks and primal manipulations to trick us to buy. And it reduces competition as smaller firms can only compete by reducing costs and there is a limit to that.

We can see this most easily in fast food and retail where there has been a slide into franchise. The Chemist Warehouse is one of the most recent. Costs on the floor are tight but the marketing, site location rental, management fees, executive salaries, advertising, debt financing are all high cost. In a generation the smaller owner run businesses taking pride in their business are largely gone from New Zealand. So many small businesses struggle and fail because it’s hard to find niches to escape the larger firms relying on costs and turnover to drive their pricing. Cost efficiency is no longer a key economic driver for a large business; ‘cost accrual competition’ through saving tax is the easiest way to wealth.

In addition larger businesses are more likely to spend on vanity expenses because it still reduces their tax bill so it gives them an advantages over smaller competitors. e.g. take a lease on property in prestigious locations, purchase on finance or lease luxury cars, still get a 50% deduction for business ‘entertainment’ expenses – meals and lunches, tickets and who knows what else.
‘The normal principles of taxation’ remove the natural competitive advantage of a low cost business supplying the same goods and services. These smaller business are normally New Zealand owned and operated. And to catch that advantage all businesses have to follow that high cost model, and treat tax as a cost to be minimised, leading to larger and larger businesses leading to monopoly capitalism. Cost accrual competition is a powerful economic tool and we the taxpayer are subsiding it to only some people’s advantage.

2. They undermine redistribution of wealth (tax) and the resulting economic stimulus

Almost all businesses do not create wealth, they simply accumulate wealth. And to accumulate they rely on the education and health systems to support access to employees and customers. They also rely on infrastructure, courts, police etc in which to do business. Tax minimisation, avoidance and evasion, undercuts the process of redistribution of wealth which pays for the supply of these services and therefore it undercuts the provision of the services the business needs to function with.

Redistribution by taxation also supports demand across the economy which in turn supports business accumulation of wealth. The ‘tax is a cost to be minimised’ attitude comes from the normal principles of taxation, but tax helps promote the multiplier effect which benefits the entire economy. The principles need to change so that no business has an incentive, and mechanism provided by the principles, to minimise tax, as it works against the long term supply of goods and services, within the economy.

Tax is like no other cost as it is not fixed. The principles calculate it as a relative cost based on what income is left over after costs. So on a micro economic level a business see’s an advantage to run up costs to minimise payment of tax. But on a macro economic level that minimisation is damaging the economy in which it functions. Tax minimisation is actually an act of self harm by a business in the long term. The normal principles of taxation are creating the problem.

3. They subsidise risk taking and provide no choice for taxpayers on doing that.

By allowing business to deduct expenses to reduce their income that is liable for tax; it makes the New Zealand taxpayer subsidise the provision of that good or service through sacrificing tax collected. And as said before the saving is not always passed on, prices are held high and profit maximised so consumers are not getting the benefit of the subsidy. The normal principles of taxation allow no choice for society on making this subsidy. e.g. huge amounts of investment resources can be used to subsidise the business of taking rich people on tourism flights to space. Would people vote for that choice, over lifting more children out of poverty? But there is no vote, we have no choice, and it is tax revenue we could have.

The entrepreneur who has the knowledge to make these choices about what costs to incur should take the risk for those choices. Choices and risks should not be subsidised by taxpayers or government as that is not their role.

If the people or the elected representatives decide to subsidise an activity that is okay. And that is very different from a blanket subsidy as happens currently under ‘the normal principles of taxation’.

4. They punish innovation or the efficient use of resources

If two businesses supply the same good or service but one does it at a higher cost than the other, why should the lower cost company pay more tax? This is not good economic policy.

The Lazy Inefficient company B has more expenses ($100) so only pays $14 in tax but the efficient/innovative company A ($50 in expenses) pays $14 more tax at $28.

The normal principles of taxation are sheltering poorly performing companies, and punishing well performing companies. And the taxpayers through having less tax collected are subsidising the inefficient poorly performing company.

And the principles allow more investment income to be made available to this poorly performing company. i.e. wasting scare investment capital. (If B did not get the tax subsidy and had to also pay $28 in tax like efficient company A, then Lazy inefficient B would only get $8 to reinvest).

To those who say the high cost of B could be due to the quality service they provide. Yes, and that will mark them out from their competitors, and that quality should sell them. But there is no way for the blunt instrument of taxation to tell the difference of quality to wasteful spending; so it shouldn’t. If customers don’t want that business’s ‘quality’ then that is a market signal. There is no reason for the taxpayers to subsidise a business’s choices on quality as the entrepreneur might be right or wrong and there is no way to tell, except by the customer.

More can be said on this example but it does not change the fundamental point that the wrong economic signals are being sent. e.g. Company A could have less customers and be price matching to Company B to maximise their profit rather than passing on the savings from innovation to their customers. Company B becomes a tool to make customers pay more as its existence takes up some demand, which slows the introduction of potential new competitors. This is another reason to have B out. This shows tax is only part of fixing the economy but a very very important part.

5. They subsidise environmental damage or resource waste by creating an externality

Of course not all companies have high cost structures because they run anti-competitive practise, or have vanity expenses, or they are just seeking tax minimisation. Some businesses, are just very costly to undertake and there is nothing inefficient about that, e.g. mining.

But should the costs to run those enterprises be subsidised by the taxpayers taking a reduced tax collection? The high costs of those business choices should be borne by the risk taking entrepreneur with the knowledge to take those risks.

For example, if you do the Hump Ridge track you see some great wooden viaducts used to bring out the timber from a milling operation. The devastation of the local forest was complete but the business as reported never made a profit as its costs were so high and the sales income never fully came in. New Zealand got nothing of substance out of this destructive exploitation. Yes workers got wages and scrimped a life of remote hardship. The directors would have got income along the way. Yes there is now some tourism value but it’s probably not much more than if it was left. Overall, the value of the forest asset was wasted without profit. The ecological and cultural value lost can’t be quantified.

The same destruction and waste occurred in the areas around the ‘Bridge to Nowhere’ in the inner Whanganui. All over New Zealand subsistence businesses were supported by ‘the normal principles of taxation’ for people to eke out an existence to the detriment of traditional Maori life and culture, the environment, and their own lives. The ‘normal principles of taxation’ were one of the systems within colonial exploitation that allowed profits to be stripped back overseas without as much redistributive effect from an effective taxation. The principles were a tool to strip value out of the new nation as the costs of exploitation were offset to the income. It is a tool in a class system that strips income away from the redistribution/taxation process.

Colonial legacy justification and creation of an externality

Yes, you can argue that this sort of tax subsidy for business was necessary to enable economic activity in new lands. And that is the colonial argument. From where we stand today we can see the waste and destruction of that legacy and thinking. Our climate and environment is imperilled because of it. But it’s still happening, that structure is still in existence within the normal principles of taxation, and it is helping drive environmental damage and climate change. The rules were made through judge law to favour the wealthy to help drive their, or their class’s, wealth. This reset will at least make the full cost fall on the risk takers and they will at least be more careful in future because the cost will fall on them fully.

Ongoing impact

If income from a business activity almost matches the cost of the activity, then very little tax is paid. So when the good is being sold the price does not reflect the cost of society’s human and physical infrastructure that was required to support that activity. Because tax was reduced this cost is not calculated into that sale price. i.e. a seller will work for the highest price but if the cost of production is subsidised, the threshold for the sale price is being subsidised and the true cost is not reflected in the price resulting in false economic signals being sent to producers. The normal principles of taxation are creating an externality of the cost of society.

A business must fully contribute from its income back to society through paying tax or there is no point in society letting the business be in existence. Like the purchase of the viaducts, or the mill boilers, tax is just a cost that should be factored in and you can’t avoid it.

Each business or activity needs to be viable in its own right so it has a cost that reflects if it is a high cost activity. Current loss offsetting hides a costly activity and dissuades companies funding research or looking for alternatives to get around high costs. Subsidising by tax undermines that drive for innovation.

Environmentally damaging activities like mining are one such activity where if the cost of tax was not able to be avoided, a higher price would generate more focus on recycling, or innovation to find alternatives. See more comment under heading ‘Different sectors have different impacts’

It is no longer appropriate for our business community to be molly coddled and subsidised by socialising their costs onto the New Zealand taxpayer, the government, and the environment.

6. The ‘normal principles of taxation’ are helping cause an international destabilisation problem.

President Xi in China is crushing democracy in Hong Kong as he see’s it as a vehicle to undermine China. But he is fighting the wrong enemy. As a former colony of Great Britain Hong Kong follows the basic outline of ‘the normal principles of taxation’. And most of the tax principles were set through english case law by judges who arguably have acted in their own or their class’s economic interest when making decisions that set precedent. As a colony these tax principles facilitated economic value being stripped away from the colony and the lands near it to the benefit of the ‘mother country’. In the post colonial world we still see these tax principles being used to strip value out of countries with little tax paid, and then into tax havens for the use of the billionaire owners of Google, Amazon, Microsoft and others.

China has become the factory of the world as large multinational companies moved manufacturing there for cheap resources and low regulation. President Xi wants the work and business to stay so it will give stability and economic strength to China. He was recently reported on CNN Aug 18, 2021 by Laura He as pushing on China’s rich to redistribute wealth. So he can see problems in his nation but he is asking business people bound by a tax system to act outside that system. His quest for security by taking on democracy and the Uyghur people means he is no longer walking with his people as a leader, using the wisdom of the crowd to guide his nation but is leaning into an inherently unstable autocratic leadership model. And he is adding fuel to the cold war that leaders in the US, UK and Australia, seem willing to hype up in a new alliance. He has chosen the wrong enemy; it is the colonial based tax structure that is undermining China’s security, e.g Transfer Pricing and Thin Capitalisation are able to undermine revenue and the ability to grow domestic based businesses in a way that spreads wealth. That has to be dealt with by simple consistent rules as suggested here that do not favour multinationals, as the current normal principles of taxation do. Democracy needs to be decoupled from exploitive capitalism and a tax reset will help do that.

And the ‘west’ is also struggling with conflict and polarisation in society, driven through culture war issues like immigration, climate change, vaccines, and abortion rights. In the ‘west’ the culture wars are facilitated through a dysfunctional 4th estate and poor quality democratic processes. These culture wars have some urgency for ordinary people, ‘taking our jobs, taking our opportunities’, but theses are just the scapegoats for the very real economic struggle many are experiencing. It’s about the economy getting polarised. Ultimately the western nations have the same enemy as China in the poor functioning of the tax system. The tax system is helping build monopolies, facilitating tax avoidance, and undermining local businesses. We are all poorer.

The normal principles of taxation are well overdue for a complete overhaul so they build each nation’s economy and redistribute wealth, and that is the purpose of taxation, not to concentrate wealth and build tax havens.

Note: The need for international trade by New Zealand will not be impacted by these changes but it may, or may not, modify it. And with the supply chain disruption brought by the Covid-19 Pandemic, it makes it an excellent time to bring in changes that will ameliorate the disruption we are already experiencing. It will help our nations build back on to a more sustainable path.

How shall we reset ‘the normal principles of taxation’?

In the media and policy world the strongest reset theme for taxation is greater transparency and sharing of information from other jurisdictions (especially tax havens) so tax can be claimed. This is all essential work that needs to be done but transparency and sharing information does not remove the structural problems created by the principles. And the current principles have created a complex set of rules that are an administrative burden.

And the creation of new taxes like wealth taxes will not deal with the structural drivers of wealth concentration. As the Pandora papers show the normal principles of taxation are a major driver of wealth concentration and tax avoidance.

I propose a structural reset that uses existing economic understandings which therefore won’t destabilise the economy, and it works alongside the existing market forces, sending appropriate signals to the economy.

The two main reset actions are:

Remove deductibility for all expenses except for domestic salary and wage payments.

2. No capital revenue distinction for non-individuals.

This is supported by:

A very broad legislative definition of ‘income’ to ensure everything that comes in is taxed regardless of traditional capital revenue distinctions. Even to include related party loans (with an exception for 3rd party loans – perhaps a strict list of who can be a 3rd party). The Pandora papers show this is essential regardless of even this reset. Because the current normal principles of taxation allow a company to make income but then through a series of entities turn it into a loan to be made back to the company or another related party and a ‘loan’ is not taxable. Part C, in this series, gives an example.
No grouping of companies for tax purposes. Companies are separate legal entities and will be treated that way for tax.
- The original intention of grouping was to prevent tax avoidance but it has now been twisted to be a major tax minimisation technique. i.e. Company tax rates in the past had a progressive structure. To avoid paying the higher rates a company created lots of sub companies and spread the income out so each paid an amount just below the high tax rate. This was then stopped by the requirement to group the companies so they did pay the higher rates of tax. But then for anti-competitive purposes parent companies began to run subsidiary companies – not to make a profit but to make a loss (the exact opposite of what companies should be set up for in an economy). Using ‘cost accrual techniques’ and low income. e.g. run a small airline at a loss to compete with a budget airline to preserve their other profitable routes. Grouping then allowed their losses to be offset against the income of their profitable routes so less tax was paid. If a situation arose where the loss company was no longer needed the losses could be retained but limited liability remained as a protection for the parent company. A long time ago the progressive tax rates on companies were removed and company tax was made a flat tax rate but nobody got rid of this ability to group companies. The companies wanted it kept. It is overdue to get rid of grouping.
- Without a capital revenue distinction and strict application of entity status, shifting assets between separate legal entities will generate taxable income because their status as a separate legal entity now becomes important for tax purposes. With less advantage in having separate legal entities, companies will become bigger which will improve transparency and reduce the ability to avoid tax or scrutiny. This reset will work with international trends to improve transparency. With more potential exposure to risk, behaviour and focus will change.
A company to trade in New Zealand must be required to have a company registered and based in New Zealand through which all its activities are subject to tax that are ‘sourced’ from New Zealand. And they must have a New Zealand bank account. An asset in New Zealand can’t be owned by a foreign based organisation in a tax haven as the risk of tax avoidance is too high. If there is not a base in New Zealand, e.g internet sales, then work must be done with banks on how sales can be caught for tax or punishments if not. This is already a tax issue and not created by this reset.
In ‘Part D (of this series) – Beneficial impacts for all with no capital/revenue distinction and less tax minimisation’ I go through more discussion of these points. In particular how taxing disposals of cash accumulations is not double tax but sends a beneficial push into quality and price for goods and services.

Economic policy and tax principles alignment

This reset does four main actions:

But is this economically viable? We must look at the numbers.

Financial impact of reset

From the Statistics New Zealand website we have the ‘Annual enterprise survey: 2017 financial year (provisional)’.

It states for businesses/enterprises the:

total income for New Zealand is $644.2b (billion) and total expenditure is $560.7b.

Surplus potentially subject to tax = $83.5b (If the current tax of 28% was applied, this = $23.38b)

2017 Inland Revenue Annual report, says corporates actually paid $14.2b.

For contrast from the Inland Revenue website 2017 annual report –

Total tax in 2017 was $69.2b and Individuals paid 48% ($33.2b) plus GST 26% ($17.9b) = 74% of total tax was paid by you and me.

Taxation under a reset calculation – A soft transition calculation

Businesses claimed they had $83.5b income over expenses for the 2017 year.

If we initially taxed all companies at 10% of total income, no deductions for costs (except domestic salary and wages). And indexed to go up in future years. This will give a massive boost to small business.

- $644.2b x 10% = $64.42b tax.

As business had $83.5b over costs it means there is income available to pay the $64.42b tax. They would have to shift profit expectations and likely no dividends. Impacts will depend on the individual business. If we add in the Individuals tax, and ‘other’ ($37.1b) tax paid that year (I leave out GST as it must be dropped – as it damages the economy) we would have: a total tax for 2017 of $101.2b

The amount of 10% should be indexed to go up 1% every one, or two or so years, until it reaches 15% or 20% or whatever the government of the time decides. The 10% rate is too low for the urgent needs of climate change and human need. (The cost is higher now because actions were not taken earlier, and business in aggregate has not supported taking action sooner, in fact they hindered action).

Other taxes?

This increase in tax collected is without any new wealth tax or capital gains tax, and with a reduction of the headline tax rate. But there may be other reasons to do new taxes. In times of war. Or environmental crisis. Or a housing crisis. Tax is so low at the moment and the social needs so pressing, plus the debt must be paid down, that the amount of tax to be paid must go up.

Easier compliance

Another reset benefit is it could be possible/investigated to require all money deposits to a non-individual to go through one bank account with an instant deduction for 10% tax. A credit can come back once a salary or wage payment is made in the Inland Revenue employer account. This means no provisional tax or due dates to worry about. A great compliance saver for small business. Obviously all bank accounts would have to be linked to an IR number to prevent avoidance but if all non-individuals bank accounts were automatically subject to tax, then that removes some temptation to avoid tax liability.

The economy context

This reset is still only income that is being taxed; something that has ‘come in’. So money is there. Any realised capital gains would also be taxed because they would have ‘come in’. But as there are avoidance techniques for companies to delay gains coming in I am not expecting much to be collected under this category, initially. But a rising tax rate might persuade them to come forward earlier. But we could use the ‘risk free rate of return method’ to calculate this ‘income’. But that would be at least 15%. Other options to capture unrealised gains are being discussed in the wider media.

If large businesses say they will go out of business, then that shows just how dependent they are on the tax subsidy. So are they truly viable? The slow introduction of a lower but more effective rate would give them time to adapt to moving away from debt financing, and high cost structures. But there are many more effective ways to achieve this change. I don’t expect them to move away from their marketing techniques but they would pay that cost without being subsidised by taxpayers. Issues with marketing and consumer protection can be dealt with separately but those actions will be undermined by the current tax system. Actions will be more effective with a tax reset.

To stick to the concept of government spending being less than 30% of GDP reduces our ability to create wealth through the multiplier effect. A demand driven economy will bring better economic growth that actually satisfies people’s needs. The only risk to a demand driven economy is how to control pricing and inflation, (I propose an article on this at a later time). We tried supply side economics and we have poverty, housing shortages, housing inflation, a struggling health sector, and an education system beholden to overseas students.

Perfect timing

The recent talk about inflation and stagflation in part due to supply chain disruption make it the perfect time for the reset to happen as it will reduce business sector demand. All large businesses will be strongly focused on reducing their high cost business structure which will reduce demand and take pressure off inflation. Recall that a lot of business sector demand is micro business churn to drive price and demand up for their product or service. It is not growing the economy except in an incidental sense. Innovation, exports or savings are not being driven in the macro sense by that spending. By contrast small businesses with the lower tax rate will be opening up, increasing competition. I talk about inflation in Part B of this series but will require a further analysis.

Summary – we must reset ‘the normal principles of taxation’

This reset is not about political sides or ideas. It is about making the economy work as it is supposed to, meeting people’s wants and needs.
If we believe in markets with businesses competing on price and quality then this tax reset must be done because the current tax system undermines that, or
If we see the economic system is failing and people are falling through the cracks then this tells us one of the main reasons why and how to fix it.

The current tax system is breaking the economy and society. We are a frog in a pot that’s been on the stove for a while.

Further evidence the tax system is broken is seen in the US which has the same basic principles of our system and many of their largest companies aren’t paying much tax, e.g. Amazon, Honeywell, Halliburton, IBM, Fedex, Nike, US steel, Chevron, Delta. These companies are even managing through globalisation to avoid capital gain taxes. So we can’t just rely on new taxes to solve the existing problems. The foundation, ’Income tax’ must be fixed and this reset is how to do it so the big companies pay their fair share.

Minimising tax is big business for every large firm. For the cost of a small team of accountants they can structure finances to avoid billions or hundreds of millions of dollars in tax. The purpose of tax is to redistribute wealth but ‘the normal principles of taxation’ are discouraging redistribution so economies and societies are struggling, with small businesses disadvantaged and people’s wants and needs not being met.

The reset here retains largely the same tax system with all business treated the same. But the reset strips the rules down so there is nowhere to hide or shift the money. Because it is in the rules where the loopholes are found. And the rules/legislation are written with the normal principles of taxation firmly in mind, and with considerable input from those accountants who are deeply embedded in tax orthodoxy. The business sector has had a significant input into developing tax law and the business sector likes lots of red tape rules as it offers lots of loopholes.

In this reset you can’t shift money between income (subject to tax) to capital (not subject to tax). A person can’t reduce their tax by claiming expenses real or imagined. There are no losses or capital losses. I suspect the reason why we don’t have a capital gains tax in New Zealand is the fear of capital losses undermining future government revenue along with complexity of the law – but this reset shuts down those fears.

With this reset the tax system becomes much simpler and more transparent. This is why stripping the rules back, as is proposed in this reset, is actually the only way to get a truly broad based low rate income tax system.

Note: Even if the government only takes the tiniest initial step along this path by removing the deductibility of interest. This will slow the incentive to debt finance, which will undercut many of the negative tax practises. And with lower demand for loans it will help redirect investment to new projects or innovation. We will start the journey to a more efficient tax system that builds the entire economy and society.

It is overdue to change ‘the normal principles of taxation’. Write to your MP’s and tell them so over and over again. Because some self-interested businesses do the opposite, a lot. They forever talk about black hole expenditure and of this situation or that. Just recently the government allowed deductions for feasibility expenditure – that is normally capital expenditure and not a deduction. So the rules are going one way all the time to allow more and more costs. This reset removes most of that and simply moves the dial back the other way. This reset is not breaking the tax system anymore than it can be said the feasibility changes are. We all know from the Pandora papers the income tax system is stuffed but surprisingly it’s not impossible to fix.

———————

In Part B of the article ‘Creating the citizen economy’ I expand what is involved with a comprehensive reset and outline the key impacts.

In Part A I outlined the problems the current principles are creating and I outlined the two main changes.

PART B – The six reset actions in New Zealand – for the normal principles of taxation

The six actions are:

1. Remove deductibility for all expenses except for domestic salary and wage payments.

2. No capital revenue distinction for non-individuals (variation for a private home in a trust or other entity).

3. Imputation and other related memorandum accounts should be ceased.

4. Introduce some restrictions on charitable status, and donations.

5. Remove GST as a tax (alternative taxes could be considered to replace if needed).

6. Tax evasion (tax avoidance is dealt with by the above proposals) become fully engaged by the New Zealand Police – financial intelligence unit.

1. Remove deductibility for all expenses except for domestic salary and wage payments.

A deduction for domestic employment gives encouragement to employ people, and to reward them well is not a drag on the business (e.g. no claim for wages if you set up a call centre in another country). Easy to audit the claims as domestic salary and wage records are kept within the NZ tax system.
This removes cost accrual competition and reduces the opportunity to avoid tax. It would structurally set the idea that tax is just a cost that business must pay.
This action gives comparative advantage to low cost locally based businesses. This will encourage small start ups. Small businesses allow more opportunity for ideas and innovation to be pursued. It encourages peoples enthusiasm to pursue their ideas. More people are employed in small businesses.
This action simply aligns costs that set up the business (capital and not deductible) with costs to run the business as (revenue and deductible) so neither expense is deductible for tax (Just like employee’s aren’t allowed any deductions). Currently larger companies find it easier to set up intervening companies which will incur the capital costs but then on-charge the capital costs through the intervening company so they look like revenue costs. This sort of tax minimisation ceases. Smaller companies benefit.
It will promote fair competition, and economic efficiency by recognising the above comparative advantage of a business with a lower cost structure, leading to less waste of resources while encouraging New Zealand based business which could lead to a lower carbon footprint.
The tax system would be easier and less costly to comply with and administer. It would also make the introduction of the second reset action much simpler and less complicated.
There are several significant impacts which will change the way business is likely to be organised (see below for a discussion of impacts). Just as the existing ‘normal principles of taxation’ are encouraging negative behaviour, the reset will encourage positive behaviour.
Drawings would have to be paid through the IR employer system to be credited for deduction so taxed when received and included in social policy calculations. Or there is no deduction and it would still be required to be declared as income.

2. No capital revenue distinction for non-individuals (variation for a private home in a trust or other entity). [This means all money coming into the business is subject to tax unless expressly exempt. Currently if something is called capital you don’t need to pay tax on it. But with the reset all disposals of an asset are income, unless expressly exempt.]

The objective is to simplify taxation and remove the opportunity to re-characterise something that is income into something that is capital to avoid tax. Currently capital ‘income’ (a one off) or ‘gain’ is not taxable because it is not considered income. The reality is this is an accounting fiction for a non-individual. All actions by a non-individual advance the financial interest of that entity so its essence is one of generating income. Like a trader who buys and sells things that are capital items but if you sell with an intention of profit that is taxable. A non-individual often acts as part of a network of entities, or in a scheme of actions, so all actions have the character of income for a non-individual.
Variation is just to allow a person living in a home but under a trust ownership, (somebody might need to protect the home so it is not lost in a business failure or loan situation) to continue to do so. One house only. It would probably need to be a public list to ensure compliance is not an issue. But perhaps there are other ways.
A reset would require a legislative definition of ‘income’ for non-individuals. It would be simple like the feature ‘it must come in’. This would mean realised gains are taxed because liquidity of some sort is available to be taxed. The complexity to track gains drops away if we are just tracking the gains without considering expenses (although using the ‘Risk free rate of return’ method could be done and may be easier). Public companies must publish their financial accounts and they use this to promote their companies so I think the hiding of gains would not be easy. Some work would need to be done to ensure ‘off balance sheet’ gains are included. With a wide ‘income’ definition some specific items could be removed by an exemption (e.g. loans from 3rd parties). In Part C I give a situation where income is converted to a loan so it is not taxed. To stop this requires a very wide definition to be applied.
There would be no losses because it is just gains – ‘it comes in’. There are no expenses to create losses. There would be no allowance of historical loses to roll forward. The risk of the loss remains with the entrepreneur, who has the knowledge to take the risk. Rather than the current situation where losses are socialised through the tax system by a reduced tax take.
This is not a capital gains tax but a definition of ‘income’ issue. Much like the government of the time with the introduction of the ‘Bright line test’ for property ‘rightly’ saying it was not a capital gains tax. And even if some do make the argument it is a capital gains tax this would still be false for individuals, and the fact that you can turn income into loans under current rules shows it is just an income definition issue.
There are some big challenges and changes to how business would think and act for: exports, speculative business, high turnover business, (see below for a discussion of impacts).
Because all disposals of an entity’s assets (capital) become income this changes how some items are viewed. A cash accumulation is an asset. So to send this back to the parent company will mean it is taxed. This has a positive impact on reinvestment in the company. For example, an aged care facility makes profits from caring for elderly residents. Profits can be reinvested to improve services or bring down prices. This is the purpose of the market mechanism. But it is hard to enter the market for aged care business to create a bit of competition (if we want that), meaning the market mechanism doesn’t work that well. So taxation on disposal of profit to an entity outside the company will have the effect of encouraging funds to stay in the company to improve services and pricing, and grow the business through quality and price. In the current tax framework there is too much focus on profit extraction to the detriment of service and quality. However we can predict that the reaction will be to make companies bigger so money is just transferred between units or sites. But still for assets to leave the company it will be taxed. Companies will have to be more careful about structures to ensure they only pay tax once when it leaves the company.
More positive impacts are given in ‘Part D – Beneficial impacts for all with no capital/revenue distinction, and less tax minimisation.’ which will build better more responsible companies with less tax minimisation.

3. Imputation and other related memorandum accounts should be ceased.

It was said to prevent ‘double taxation’. i.e. A person with a 33% personal liability for tax gets a credit for the 28% tax already paid by the company when the company pays the person a dividend. The person then just pays 5% extra or whatever rather than 33% or 38% on the dividend. Removal of the credit would function like a sort of wealth tax so they do pay the 33%, or 38%.
Currently imputation encourages the payment of dividends to shareholders which strips investment capital out of companies. The prospect of taxation would encourage capital to remain in the company for growth, which is good for our economy.
Easy to administer and collect as with payment of a dividend there is clearly income available, and it can be taxed at source. As income it avoids complaints about disposal of assets to pay a tax, which a wealth tax raises. (I’m not against wealth taxes, it’s just it still leaves in place the distorting income tax foundations, ‘the normal principles of taxation’, that lead to monopoly capitalism which necessitates the wealth tax).
The traditional avoidance mechanism of bonus share issues would need to be prevented or declared taxable for an individual (with simple rules not complex ones). For a non-individual the receipt of a bonus share would now be taxable with no distinction of capital – revenue.
Because of imputation, tax rates on wealthy people in New Zealand are low and they are the main benefactors of dividends.

4. Introduce some restrictions on charitable status, and donations.

Amend advancement of religion exemption

A church/religion doesn’t pay tax on a business if they are approved as advancing religion. In a tolerant society your choice of religion should be your own and that personal choice should not reduce a citizen’s wider commitment to society by paying tax.
It is harder in the modern world to see how the advancement of religion is a positive to society, e.g attitudes to vaccines, women etc. Perhaps this exemption should only apply to that income used solely for the relief of poverty, the sick, or those in prison.
The tax exemption means all taxpayers are in effect subsidising a person who might knock on your, or your neighbour’s, door to talk about their choice of religion.

Amend advancement of education

The advancement of education should only apply where it is for the relief of poverty. A business is subject to tax and education is a business for some.
This exemption might have been okay in an age when government did not provide free education to all. Now the exemption is sometimes to support people who want to make a choice about controlling their child’s education. That choice is their own and should not remove an obligation to contribute tax to the wider community.

Remove the donations rebate

Donations should no longer generate a tax rebate. It is an administrative burden and has been subject to abuse. What you donate is your choice but once you can reduce your tax bill through a tax rebate/refund, it makes everyone a contributor to your personal choice. Let’s just keep it a personal choice.
Previously there were arguments that services were not provided by government and this allows the gaps to be filled. In theory private enterprise can now fill those gaps and be self supporting. Government can assess the need and whether to fund that service or perhaps there are lower administration costs if government does it and that is an option.
The current rules, the ‘Peter Dunne changes’, have allowed wealthy people to not pay any tax to government, but pay it all to their preferred charity. This creates a situation of winners and losers in funding rather than a spread of services to fulfil needs, and this is inefficient for the wider society. This is actually not charity or philanthropy but an undermining of community. If tax stays with the government we have better public accountability.
And the experience with philanthropy is not great. The excess of charity to some, what a particular philanthropist thinks is the deserving charity means some charities become vehicles for the fantasies of the wealthy. A well reported example was Bill Gates’ misguided support for small schools in the US which arose from his misunderstanding of statistics. He thought small schools gave better academic achievements but the statistics did not say this. Huge waste and disruption followed his charity work.

The current rules on charities are undermining tax collection and our collective wealth. A rebate is undermining a citizen’s contribution to the wider society.

5. Remove GST as a tax (alternative taxes could be considered to replace if needed).

GST is a regressive tax and is therefore completely unsuitable for a civilised society.
The lie that the cost of GST equaled the lowering of income tax rates means nothing as time goes on and there is any negative disparity of salary and wage rises/changes and inflation. And this is what has happened, wages have not risen with inflation so it is not equal.
GST undermines New Zealand businesses when competing with online overseas firms, for New Zealand purchasers. This especially impacts small New Zealand businesses. Overseas companies may or may not comply with our GST tax rules, and audit of overseas companies is a huge burden (it is questionable whether we even do it).
GST runs counter to Keynesian economics as it suppresses demand from the poorest groups who spend all their money in the domestic economy and stimulate it. Taxation should be directed to the wealthiest people in society as the purpose of tax is redistribution. Recent history of stimulus payments (Japan to halt deflation, the US 2008 bank bailouts, and the US Trump budgets cuts) all gave stimulus to large businesses which tended to save the money or push it into their own stock prices, which did not stimulate the economy or make the lives of its citizens less harsh. These are repeated demonstrations of the ineffectiveness of pushing money into the supply side of the economy. Wants and needs are not being met but share prices have been sustained. We have witnessed the misapplication of Keynesian policies to deliver corporate welfare. The large business community is simply not that strong and effective at supplying wants and needs. We can all see this in our communities.
GST has a lot of complexity in making time-consuming and finicky adjustments for private use of assets and on disposal of assets when the business is ceasing. It is easy to make mistakes and misunderstand what is required. By comparison an income tax on what has ‘come in’ without adjusting for capital/revenue or expenses is much easier. With this reset and no GST business people/owners particularly small owners would be primarily focused on running their business.
The concept of taxation on consumer consumption may appeal to some people who want a less wasteful world, but GST does nothing to determine what is or isn’t consumed or the efficiency of its production.
GST is misnamed. It is actually a tax on salary and wage income collected through the mechanism of people’s purchases. Unfairness arises as some wealthy people get their business or company to own all their assets. So a person can rent their house, their car, all their costs to run the house etc so that these can become costs for the business and GST is collected back through the business. Particularly if owned through a sequence of companies that link back to overseas companies possibly in a tax haven. And their own rent is in effect paid back to them as the beneficial owner. So all the GST from running the ‘business’ is ultimately recoverable to the beneficial individual.
GST is a fundamentally unfair tax as it is primarily paid by salary and wage earners when it is supposed to be paid by all final consumers.
GST is structured by zero rating to subsidise products for overseas consumers. This is damaging. See item D in ‘What are the main impacts from this reset?’ below.
GST is conceptually flawed and failing for all the above reason.

6. Tax evasion (tax avoidance is in part dealt with by the above proposals) becomes fully supported by the New Zealand Police – financial intelligence unit.

Tax evasion is one of the most serious threats to the health of our society and therefore to our democracy.
The current growth of populist leaders is linked to the instability created by inequality which is in part driven by tax avoidance and evasion. Tax evasion must be taken very seriously and aggressively pursued, and any tax investigation work should be at least fully engaged with the New Zealand Police – financial intelligence unit. A threat of surveillance and criminality will be very sobering to the tax behaviour of the business community.

Summary of the six points

All these proposals are within the existing economic and tax structure and mostly only require simple changes to the existing rules. They are low cost to administer as there are fewer exceptions so fewer rules. Accounting rules would remain as they are. It is just tax rules that would change to focus on income only.

Transparency on the amount of tax paid

To support these changes private companies should be required to make public the income aspects of their accounts so a competitor who might be aware of what work is being done by that firm, could then assist or tipoff Inland Revenue if there is not compliance.

A non-individual’s contributions via tax to society should be celebrated and perhaps this should be available to the public. The purpose of entities within an economy is to create supply to meet demands for wants and needs and the supply of tax is part of that process so why should it be hidden, which was the previous assumption. Lack of transparency has not been helpful for combating tax evasion.

The seven principles guiding my reset changes above are:

Tax will be seen as just a cost of business, like any other cost that can’t be evaded.
- These proposals do not completely erase tax avoidance but they go a very long way to doing that. Avoidance in future would primarily be about saying things aren’t income or the value of the income is not as much. There are other avoidance techniques like hiding ownership to pay a lower rate of tax. This is discussed a little more in Part C of this series.
A level playing field for small and large businesses with a clearer focus on what they should be doing i.e. – providing goods and services (Including innovation and exports) not cost accrual competition.
Better economic outcomes for consumers and local businesses.
Simpler voluntary compliance.
Low administration cost.
Lower environmental costs.

What are the main impacts from this reset?

A. Businesses with a high cost structure would have to reflect these in the prices they charge to consumers and/or amend their expectations on a return from capital.

B. Businesses with a low cost structure would become very competitive in the provision of goods and services (competition would help temper the above price increases).

C. There would be an initial burst of inflation.

We had to deal with the same situation on the introduction of GST. We currently have to deal with inflation for building materials and housing – it is a problem that exists regardless of the tax situation and it should not make us afraid of a necessary tax reset. But to deal with inflation –
- The removal of GST would assist at keeping inflation lower for consumers.
- Tax on gross income gives more income to the government to support beneficiaries/people in need, to counter negative impacts from inflation.
- Tax on gross income could allow a government to consider lower tax rates for individuals. But tax is already so low it is damaging society. A new consensus needs to emerge, that the collection of tax helps the economy and is an asset for business.
- A risk of runaway inflation needs to countered, i.e. some firms might ramp up prices to take short term economic revenge to try and return the status quo.

The government could partnership with a New Zealand company, or preferably go it alone, to have a supermarket facility to stock essentials or a range of goods. The government would fund the basic wholesale price using economy of scale purchases and then that preferred retailer or their own organisation would sell with only a 1% or 2% commission on those goods, and the government gets its money back on the wholesale sales (less some sale costs). Or

a percentage of expenses is able to be deducted. Like with property and interest deductibility. Only 75% allowed to deduct this year; then 50%; then 25%. This is not a good option as there is likely to be a rush to buy which might push up inflation.

But inflation may not be as high as feared as some expenses are not hard cash costs, e.g depreciation, so there would not actually be a dollar for dollar rise in prices.
Also large high cost structure businesses would have to drive down their spending plans and shift their business model to a low cost one. Business demand would drop off. This should keep inflation down. With the supply chain problem at the moment, that drop in business demand could push inflation down or steady it. It is the perfect time for a reset to occur.
Also see point F below. If there are less steps between producer and consumer then there is less chance for inflation.

D. Our exports would cost more.

This would create the correct incentive for New Zealand to add value to its products before export; creating jobs and innovation opportunities (e.g. in science, medicine, engineering) in New Zealand.
For example, milk powder auctions. In the reset, production costs are now fully carried by the producer and not socialised to the taxpayer. To try and increase their revenue they are more likely to innovate to increase the return on their product, or go into vertical integration to access parts of the value add chain.
Products sold by contract, for example, logs to China – our logs would cost more and they may – pay the high price, buy less, or not buy. If they don’t buy then we simply do not have a product that is worth selling. We would have to change that log/product using innovation, science and/or manufacturing, into something people did want to buy. Or move into something else.
And there are Research and Development tax credits available to support innovation and they would continue to be available. (But I suspect a perverse situation will arise of getting R&D credits whatever the research. Perhaps the money for R&D is better spent by directly allocating more money to places like Crown Research institutes or tertiary institutions).
In a sale negotiation a producer is aware of what a ‘profit’ will mean for them. Removing deductibility of expenses simply changes the base line for what that profit is. This happens now for any increase in cost.
With the current tax system allowing costs to be socialised, it makes New Zealand taxpayers subsidise products for the benefit of overseas purchasers. It is creating an externality of some of the cost of production which sends the wrong signal about the use of resources and this is bad for the environment and economy.
This creation of an externality is exacerbated by GST zero rating for exports (This is done so our goods remain more price competitive! The principle is the goods are not consumed in New Zealand so there is no GST but all the costs of production are deductible for GST). So all the services that went into supporting that export; education of people/employees, health services to look after people in the business, the courts that enforce laws that make doing business possible within New Zealand – al those costs of running a society are excluded from the cost price by the exclusion of GST to help fund them. Again the New Zealand taxpayer is being asked to subsidise the cost of goods and services supplied to overseas purchasers by having a reduced tax take. Yes the seller will return income from the sale and pay income tax (maybe) but those taxes are now too low. Using current tax system terminology; it is not income to the nation without taking account of the cost of production. This is just another reason GST is a terrible tax and should be dumped.
Producers when negotiating a sale must have all the costs that contributed to that good or service in that cost price so the negotiation is real. Removing the impact of taxation and the services it supports is subsidising the sale.
These reasons show that every country in the world would be doing the environment and their taxpayers/people a favour by moving to the reset changes here.

E. Speculative investments would become more risky.

A traditional corporate raider might buy a company but as the cost to purchase is not deductible, each gross sale of the assets they strip off would be fully taxable. Tax on the sale of each asset could be more than the collective net profit.
This is an important shift in the economy away from rewarding lazy asset stripping practises to businesses having to actually work and produce something to make their money.
It would also take the pressure off prudent boards of directors who want to be cautious and careful and hold assets for a rainy day. These values/skills need to be protected as well as the push for innovation and value add, but not just asset stripping.
If a company decided to buy another company but shortly after they changed their mind. That is a risk they had to calculate before they made the purchase as the sale will be taxable with no expense offset of the purchase price. This fact could pull down the number of potential purchasers which in turn could pull down the purchase price of businesses. And that may not be a bad thing because so many owners sell up for the capital gain and an easy life. Sales are often to overseas investors – who then turn the purchase price into effectively a loan to the business with the interest being tax deductible (subject to Thin Cap rules) and the loan repayments capital. So the choice to sell up would not be incentivised or rewarded with no tax as what happens now.

F. Middle men get squeezed

The more sale and purchases between production and the final consumer the more the product will cost and the greater the amount of tax paid. This creates an incentive to have as few steps as possible between producer and consumer. Currently these middle steps layer in cost for the consumer as each step must make a profit for the function they fulfil. With the new rules the fewer the steps the greater your competitive advantage and the incentive to provide a cheaper product to the customer.
Under this reset a local producer would correctly have the natural advantage of dealing directly with the local consumer. Somebody coming from elsewhere must have a special advantage (a quality or price) to undercut the local. A natural ‘green economic’ advantage will apply of supporting local production. Farmers markets would become even stronger by being price competitive.
Existing business can adapt and achieve fewer steps by:
- Vertical integration – through different divisions of a large company instead of selling through separate companies or by using wholesalers. Perhaps supermarkets are close to this already?
- Producers being more online and visible online to skip any wholesale or retail outlet steps.
- Producers cooperating more and forming into physical or online markets, geographic online markets for easy delivery. The delivery person may be in partnership with producers? It will be clear business people will be avoiding intermediate sales (to reduce tax impact on the final consumer) by co-operating rather than sale transactions. Charging for service but not buying the product themselves.
- It is possible that dairies or private stores could become collection or distribution points for goods purchased?
- Being physically closer to their market.
Supermarkets may have to reimagine themselves if producers band together to create virtual supermarkets. I can only speculate how these powerful supermarkets will react but they will be threatened by change as they have a high cost structure based on palaces in which to sell goods; unlike the less glamorous stores they once were.

G. Investment opportunities

Investment opportunities (to start small businesses) would open up across the New Zealand economy especially in retail and hospitality because the big boys with high cost structures would not have the competitive advantages they currently get from ‘the normal principles of taxation’.
- Opportunities are likely to be with New Zealand based business who own their own premises or who can work from home, so are more community based. Many are potentially more artisan, e.g. artisan bread would be more price competitive with supermarket bakeries. Or small New Zealand clothing designers will become more competitive as they don’t have the high cost structure of central city retail stores (clothes produced overseas may still have cheaper costs but now the freight and retail costs will be fully reflected in the retail price allowing a New Zealand manufacturer to be more competitive).
Further support of domestic production would be needed such as requiring certifications that goods imported are:
- recyclable, and there is a system in place to do it,
- made in a factory with people receiving a living wage in their nation,
- made in a way that is minimising damage to the environment or at least meeting any New Zealand standards.
Certifications are likely to be open and anybody can challenge one. So info on where and when a good is produced is on the certification. An NGO or competitor could check the certificate and a fine made or withdrawal of goods made with a tax penalty? Options can be looked at. If critical goods are not able to meet these standards, then imports could continue but an active search for alternatives should be started in New Zealand.
If we did not require imported goods to meet certain standards then we are undermining our domestic production, our environment, and the lives of citizens elsewhere. We are also perpetuating the exploitive process and systems (like the normal principles of taxation) overseas that damage people and the environment.

H. Increased visibility of criminal activity?

The proceeds of crime need to be laundered and often this is about pushing transactions through several entities to hide it. But if sale and purchase agreements go through here in New Zealand entities, then they will be subject to tax. Almost all other legitimate businesses will be trying to minimise transactions.
I’m sure they will find ways to be criminals but in theory it could be easier to find criminality or more easily get tax if found.
As the Pandora papers show, more work needs to be done and this reset is the simplest and most effective way to help.

I. High turnover low margin activities would have to change their model

Another challenge is businesses that rely on quick buying and selling for turnover. This applies to most retail chains in New Zealand and they will need to adapt to the new competition that would come as their prices will rise.
The sharemarket may need some form of exemption but it seems like an institution that is not performing its function of raising capital that well. An investigation of how well it works for the economy is overdue. It tends to value speed over thought and financial bubbles tend to rise and pop as if it’s a boiling pool more than a secure investment tool to support investment across the economy.
If an exemption was to be given then there would have to be trade limitations or money would pour in to try and make capital gains without the hard work of building infrastructure and having investment ideas. I think an exemption is not a positive or constructive step for the economy as it would enhance the distortion of investing for wealth rather than producing something for wealth. Money is just following money to puff up the sharemarket.
If there was no exemption then the volumes of trades would significantly reduce. The risk is investment could not move into new enterprises without a fear of taxation. Options need to be explored. e.g a short period of time on a regular basis (yearly, monthly?) when trades could be done with perhaps a transparent register of planned trades for that date. The register could close off two weeks before the period. But large trades have to be registered a month or more before the close off. This gives greater security to the sharemarket and less chance of panics or too many people rushing on to one stock. These are just some basic ideas. Many people love the speed and urgency of the market but investors being able to see clearly and in time who is intending to buy and sell a certain stock will create a more reflective and balanced analysis and commentary on what is happening and steps can be taken to fix problems. The urgency back in the 2008 sharemarket crash shows the current system is too vulnerable to collapse.
It should also be explored and options developed on how else the ‘purpose’ of the sharemarket can be delivered or organised. It seems a very fragile framework to conduct investment in. For example, there could be development funds set up for sectors of the economy – health, housing, education, roading etc. And people could invest into the fund or a project being run through the fund. Businesses could suggest projects or investments to be supported by each fund. The project or options would be assessed as to how well it would deliver the need that the fund is trying to support – investors could then chose where they wished to put their money. Businesses would compete for funding of their project. There is a lot of process to establish, but this would be a better way to marshal the investment strength of the state rather than the current sharemarket approach of ‘give us your money as we are big and doing well and we will find ways to invest your money’. This is just one option idea and needs more work. It just shows there are other ways of doing investment.
With these development funds it is possible or likely that the sharemarket will just fade away into irrelevance, but if it works it will stay.
The sharemarket is very much about the better known get the most investment as they are seen as more secure. Borrowing is often possible because of the share price, and debit financing is heavily driven by the tax advantages. This framework is a very blunt tool to stimulate production/supply of goods and services to meet wants and needs in the economy. The reset disrupts these assumptions because it removes the tax subsidy. A company still has the complete right borrow and nothing is stopping them from doing it, excepts the risks involved. This raises the prospects of evolving new ways finance can be raised. So alternatives are about funds or companies projects that people or funds could invest in are one possible way to go. There could be a small business fund for start ups. Investment markets or ‘exhibitions’ could be a bigger feature where investors meet producers to pitch ideas and have demonstrations of product etc.
Ultimately capital regardless of anything I suggest or speculate here, will find a way to make money in the way they wish. Nothing is done here to stop that. It is just tax will not be available to subsidise it.

J. Large capital infrastructure projects

Like they do now, they will struggle. There aren’t any oil refineries, aluminium smelters, or steel works lining up to move to New Zealand. Currently all large infrastructure work rely on significant government support to make them happen so we lose nothing by making expenses non deductible.
The film industry is a political decision to support or not, like the America’s Cup. That situation just continues according to political choices like it always has. Remember by allowing expenses to be offset to income we reduce the tax collected so we the people in effect help pay for it. So it would be a more transparent process if it is clearly brought into the political sphere. There are far more benefits for stopping the allowance of expenses than leaving it as it is.

K. Accounting Reactions

There would be moves by accountants/businesses to have ‘gains’ moved out of entities and to individuals, and called a capital gain to the individual and not subject to tax. Rules would be needed so assets and gains stay within the businesses or are taxed to the individual, rather than just being ‘loaned’ to the business. There are many great simple ideas but here is not the space to discuss them it is just an area of work to fix a small potential tax loophole that some will try and stretch open.
Valuations of items sold will be an issue. Perhaps items will be under valued to reduce the tax payable. So independent valuation if there was a dispute, or if a sale was between related parties.

L. Different sectors have different impacts

Using the table in ‘Part E – Impact on various sectors in New Zealand from making a Reset’
The table shows approximate impacts. It is impossible to tell how much each business could preserve/increase profit by cutting back expenditure. But the table indicates areas where inflation is more likely to be high as costs are so high. And as said before this is an appropriate price signal.
The following are just some examples of how impacts would play out across some sectors of the economy. Statistics New Zealand ‘Annual enterprise survey: 2017 financial year (provisional)’.

My purpose here is just to be indicative of impacts. It is not required information or essential to my central points of the economic impacts. I’m using it to reinforce two points:

Firstly – the argument that non-deductible expenditure would have very different impacts in different industries, ergo it may not work equally. My central point is – that there is different impact is true, but that is not bad. Every sector and business in a sector must pay its way under the reset. Under current rules one sector or business can be in loss to subsidise another sector or business which ultimately favours large firms. For example:
- Mining. For all the cost involved to undertake the enterprise there appears very little reward. Only a 4.6% return over the costs. Is this a good use of investment capital in New Zealand? Is that a better investment than elsewhere? The reset (no deductibility of expenses) forces the business to ask this essential question within new parameters, and by that process it means the state is asking the same question because the state will have its tax. The calculation is different to the current ‘normal principles of taxation’ which allow high costs to be a tool to bring down profit that makes the basic product seem lower cost. e.g. In a vertically integrated company to use the costs to make the mining output a low cost input to their business where value is added later. In effect it encourages the exploitation of the resource rather than the recycling of it. Mining is expensive, and taxing the gross income will ensure it is seen as such. A logical consequence is that the recycling of resources already mined will become more attractive and built into the life cycle of the product e.g. a better collection process for products at the end of life. Royalties can stay as they are or be adapted and work can be done on this.
- Wholesale trade. 4.2% return over costs. I have already explained under the heading ‘The middle men get squeezed’ that this sector will probably have to be specialist to survive or focus on imports. They will have to adapt as the shorter the gap from producer to consumer the lower the cost. This will encourage domestic production to keep that gap short. Exports will be more focused on higher value or value add products. So a high cost forces the wholesaler to more intensively ask ‘is this a good use of investment capital’. If there are shortages the price of a good goes up then the answer is yes. If there are no domestic competitors then the same answer. But if there are domestic competitors, that part of the trade may not be as profitable.
- Financial services. 56.9% income over costs. They can pay the tax on gross income. How they fund that is covered under the discussion on inflation. There should be a reduction in debt financing demand (‘interest’ on loans no longer being deductible) so for their services they may not be able to put up their costs hugely.
Secondly – The argument that higher costs is not proof of being inefficient.
- Again true and I have dealt with this under the heading ‘They punish innovation or the efficient use of resources’. ‘The normal principles of taxation’ in the tax system currently can’t identify efficiency therefore it allows inefficiency to hide and be subsidised. The reset by contrast exposes the inefficient to the risk taker, the business entrepreneur. This must be a good thing to the economy because the person concerned is now accountable for the inefficiency.
- If the good or service is efficient then the higher price needs to be paid. A high price could encourage innovation to find a way to avoid the high price.

M. Miscellaneous points

- Another possible avoidance technique is pricing. e.g. Papua New Guinea with its mines could collect a lot more revenue if tax is based on gross income but it would still face the issue of whether the ore being mined is properly priced before it is on-sold for refining. Does New Zealand face this issue in any trades or products? Transfer pricing is a world wide problem and the removal of expense deductibility will go some way to fixing but not so in some industries where there is strong vertical integration.
- Drawings must become taxable to the receiver when received. And they would have to go through the IR payroll systems in order to get a deduction recorded. The argument that income goes up and down for new business is based on a truism but is a red herring. If you can take the money for a drawing it was there. Just take it as salary/wage. There are no tax losses now so there is no reason to have drawings in case the business is in loss. If the business is in accounting loss well if you took money you must pay tax on it as it is coming out of the business. The business must pay its way.

Planning for change.

In all cases prices would need to be looked at, costs and expectations of the return on capital reviewed, business viability, just like it is done currently for any good or service that is provided when costs rise.

As stated before there will be a spike in inflation and there are actions that can be taken. If inflation was excessive then that will allow competitors to come in and bring prices down. We have had this before with tax changes like the introduction of GST. The government should be on the look out to take action to protect the economy and have a plan A and B etc. There are many ideas about how to control this, or a transition to change. More work needs to done on the very difficult issues of price setting and inflation and I hope to write on it.

A positive change for good business and fair competition

Businesses need to see these six changes not as an existential crisis but as a strategic shift in the economy back to them being focused on delivering quality goods and services to customers in the most efficient way possible. Rather than in many cases having a profit (turnover) focus foremost. Quality and service should be the path to profit.

Further benefits of a reset of the normal principles of taxation

A greener economic system and society?

Without the ability to deduct costs, all costs become a dead cost in the financial accounts. A business will become even more cost adverse leading to a less wasteful approach to resources. Then a greener society has more chance of organically arising. (No longer will there be an effective 28% reduction in price through tax being claimable).
With a shift in competitiveness the current business slide into overseas franchises (with all the risks of profits and investment capital going to overseas owners) may be slowed or halted . If smaller New Zealand businesses pick up there may be less need to carry product around the world to satisfy demand here.
If goods cost more, there is an incentive to buy quality so they last longer and lead to less waste and needless turnover.
More indigenous production can lead to lower cost production. More chance of a business looking for recyclable materials here or low cost local inputs. The idea of just import to fill a need or gap would reduce because price is the natural inhibitor to that.
More smaller businesses would mean more looking for local opportunities to develop and expand. Our local economy could be more dynamic.
But a greener more environmentally sustainable economy needs more than this hope to make it actually happen. The reset advocated here gives a foundation for sustainability that can be more easily built on than our current tax economic foundation.
I do not intend to glamorise small business. It still needs to be held accountable for health and safety, for employee rights. It can be less skilled and therefore less professional, less able to stay up to date. They would need support, training e.g. co-operatives with courses or conferences to keep skills levels up. Maybe circulating staff between different shops to learn and gain experience to bring back. There are options needed that are more than just changing the tax system.

Urban housing impacts

There would be an initial move away by businesses from high cost areas, (central cities and malls) to a more diffuse locating of services closer to communities where services are needed but costs are lower. The existing businesses (the high cost structure ones) reaction to counter this is likely to be by bringing the people to the centres or the malls so the people are co-located with their goods and services. So we could see very large high rises beside or over the existing sites of malls or central cities. The people come down their lifts and into large shopping areas or malls. Again this would reduce transport needs, pollution and the endless road building focus. It would allow people to live within the central city or hubs, rather than the current endless urban sprawl (with costly infrastructure spends) that destroys quality farm land and necessitates lots of commuting with hours of wasted life in traffic.
If the private sector did not react in this way, then these mall or central city sites would be available for government to lead development of urban housing intensification. Intensification I perceive is a government objective and more desirable for people.
If this hub and centre model is properly urban planned and built with a focus on quality, not primarily profit, this would allow preservation of character features of New Zealand cities (gardens, trees, historic houses, other features like parks and greenbelts). If you just intensify based on a private enterprise ownership model alone you will get the endless concrete urban sprawl seen in every third world city where without regulation private enterprise rules.

Tax Administration

The accounting and tax compliance burdens on small business would be significantly reduced as they would only need to think about what their income was and the tax % that would apply. Good business practice would still require proper accounts to be kept. Arrangements could be made with banks to collect the tax money from deposits into bank accounts of non-individuals? (Bank transfers between fully related entities would be taxable unless expressly exempt. Each separate legal entity will be treated as independent. Transfers between different parts of the same one legal company, that is registered and based in New Zealand would not be taxable. But perhaps work needs to be done to make sure there is no twisting of status to bring advantage. A rule could be that if limited liability exists for a separate ‘unit’ there it is separate and tax applies. This is a precaution idea to stop avoidance).

Future possibilities

And if there is no reduction in overseas franchises and a green society does not arise? These six changes still mean New Zealand will collect more tax from businesses to grow our society. It will be harder for overseas parent firms to shift profit out of New Zealand without paying tax on it. Yes, evasion will shift to what is income but a wide definition will be harder to avoid. And over time if tax rates rise so will the level of tax collected, so the costs of these businesses will rise. Eventually a tipping point may be reached and local production will be competitive.

Summary

The New Zealand economy is being given the wrong economic signals by ‘the normal principles of taxation’.

They undermine the comparative advantage of low cost firms and favour large firms which reduces competition and leads to monopoly capitalism.
They undermine taxation which means support services for the business to function within are not as effectual because they are underfunded. They make redistribution of income less effective which means domestic demand for goods and services from businesses is lower than it should be, which inhibits wealth creation in the economy.
They socialise risk taking onto the ordinary taxpayers and government with no choice in the risk.
They punish efficient low cost businesses making the same good or service as another company, by making the efficient pay more tax.
They create an externality through forcing all taxpayers to subsidise environmentally damaging practises or activities. And sometimes without any reward for that subsidy.

Because of these signals we have watched for years our domestic economy slowly and surely slip away from smaller New Zealand businesses and slide into franchise. Yes, the failed neo liberal experiment has exacerbated the problems but ‘the normal principles of taxation’ have been a problem for a very long time and they have fuelled the growth of tax havens. Defenders of the principles argue their fairness and coherence is in treating all business the same without favour. But that is simply not true, they ignore the field (the principles) that is heavily sloped to one side. One side, the small business side, can’t access the advantages like the other. High cost business structures are able to be sustained by large capital accumulations which means ‘the normal principles of taxation’ roll the economy to monopoly capitalism and squeeze everyone else out.

The reset here will make the New Zealand private sector both more adaptive and responsive to domestic demand, and more serious about innovating and exporting for wealth gain. These changes reinforce the need for government to have a strong influence and role in meeting the demands of society. And a key part in that is for businesses to pay tax for wealth redistribution so money is circulated to sustain demand and economic activity within a society to meet the needs of the people.

Without wealth spread across lots of people and ultimately into smaller businesses that ultimately can grow into larger ones, the ability of New Zealand to grow wealth will be undermined. People will just be the manager of the overseas franchise, or the employee in the low wage job of a large corporation.

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In this Part C of the article ‘Creating the citizen economy’ I look at things we need to consider to change the scope and powers we allow to non-individuals when we let them be set up. The current structures are facilitating tax avoidance.

In Part A I outlined six reasons why ‘the normal principles of taxation’ are distorting the economy to monopoly capitalism and how we can take two steps of a reset to fix these distortions and how this would be very beneficial to the economy. In Part B I expanded what is needed in a full reset and I explored the economic impacts of a reset.

PART C – Creating the citizen economy

The Pandora papers repeatedly show a wealthy person hiding their ownership of assets, because ownership is important for taxation. Why?

There are two types of rules to establish whether an activity should be taxed in New Zealand or not.
- The source rules – income is earned in some way in New Zealand so it is taxed here. E.g. a resident of another country like, the United Sates, might visit and work here for two weeks and that two weeks of income is taxed in here. But if they also got rental income or something back in the United States, that is not sourced here so it is not taxed here. And the person has not become a New Zealand resident.
- The residency rules – a tax resident of New Zealand is taxed on all their income from around the world.

So if a company/legal entity is registered overseas and holds assets overseas the source rules and the residency rules do not apply. However through a string of companies/legal entities that ownership may be traced back to a beneficial owner who is resident in New Zealand and therefore under both the residency and source rules the income from those assets should be taxed in New Zealand.
- For example, a New Zealand resident owns a property overseas and they rent it out – it is taxable in New Zealand under the residency rules. But if a company or trust owns the property and then it links to a series of shell companies and trusts set up in tax havens, the beneficial owner is hidden and technically the New Zealand person can claim they don’t own the property. The rental income is therefore not returned as taxable in New Zealand [Or if the rental property is in New Zealand then it is caught by the source rules and taxed here and this is where cost accrual competition is used to minimise tax].

- But wait there’s more, if that tax haven company holding the overseas rental property sets up a loan agreement between it and another one of those related tax haven entities, and they then turn that rental income into a loan that they make back to the New Zealand resident, the ‘beneficial owner’. That resident can then receive the money as capital which is not subject to tax. And of course back in the tax haven there will be some provision that the loan will be written off in some circumstance, like a sale. And ‘interest’ on that ‘fake’ loan is deductible here in New Zealand if that loan is said to be for a business trading in New Zealand, or for the trading of shares in New Zealand. So less tax is collected in New Zealand from income generated here.

We think of borrowing being about providing a company with resources to grow a business to create opportunities and grow the economy. We are all wealthier from this economic growth. But these assumptions no longer apply.

Debit financing is an epidemic in New Zealand that is built on the foundation of the ‘normal principles of taxation’ giving the ability to deduct interest on loans, and reducing tax that could be paid in New Zealand. Debt often reflects a choice by the entrepreneur to structure an arrangement to minimise tax. The positive micro economic effect for the business (less tax paid) is outweighed by the negative macro effect on the economy and our society (less redistribution and stimulus to the economy). Interest deductibility has become a poison to the economy inhibiting growth by reducing tax redistribution.

This reset by removing the ability to deduct costs which includes interest on a loan will at least stop that aspect of tax avoidance. And for the claim that removing interest deductibility is to impede the honest majority because of a few dishonest, is simply not true. The normal principles of taxation allow the dishonest to mimic the honest. And because dishonesty is allowed under the rules, the honest do not see it as dishonest. They have these practices modelled to them successfully and to compete, to maximise profit, you must follow the ‘best practices’. And the result is the six problems I outlined in Part A that show the principles are distorting the economy and damaging it.

No capital revenue distinction for a non-individual (capital is not taxed but revenue is)

But the reset holds out further prospects to limit avoidance through the removal of a capital revenue distinction:
- A reset can include a fake loan as an amount that ‘comes into’ the New Zealand company and therefore can be taxed as income. (But if the loan comes back to a ‘natural person’ the capital revenue distinction still applies). The reset means the definition of income can be used to shape the flow of capital in a positive way. e.g. to identify loans that are not income by – listing reputable entities that do not deal with tax havens, or specify that only approved New Zealand entities/banks can make loans. A reset can therefore lift the context in which honest business can safely and profitably operate, without a descent to a lowest common denominator of tax avoidance. Honest business practice would have a competitive advantage through taxation rather than vice versa. These are possibilities.

A reset doesn’t stop all tax avoidance.
- For example, a company based in a tax haven overseas may own a property in New Zealand.
  - A sale of that property by a non-individual should be subject to tax (not for a family home the beneficial owner lives in). Tax could be collected before a transfer of land title.
  - But if the company in the overseas tax haven that holds the property is sold to another company in the tax haven, the name of the registered owner in New Zealand does not change. There is no trigger for New Zealand to collect tax. (It is possible the two beneficial owners, the seller and the purchaser are both New Zealand residents but this is hidden in the tax haven).

This shows it is difficult to collect this sort of income, or what some would call capital gain. If we just look at taxation there are two main ways to check people are complying and/or to collect tax.
- Search for the beneficial owner information. ie. wait for secrecy to be lifted so that one day we might be able to dig through mountains of overseas information to find out who the beneficial owners are and then argue with them for years over how much tax should be paid. Clear simple and defined rules and exclusions would be easier and less costly to administer.
- Use rewards and fear to undermine tax avoidance. A person who informs on another person over tax avoidance may get a percentage of any penalties. e.g. A beneficial owner in NZ has a series of companies and trusts in a tax haven that owns some properties in New Zealand. If they sell to anybody and try to avoid tax the purchaser is encouraged to inform New Zealand authorities. This makes tax avoidance a constant insecurity of looking over your shoulder. Any risk to business relationships become a financial risk.

But there are more ways to deal with tax avoidance than just changing tax rules.
- The overseas press in response to the Pandora papers reports talk of going after the enablers of tax avoidance. This can be done but it won’t get to the root cause, the structural processes, like the normal principles of taxation. A focus on enablers will not stop the profitability of tax avoidance so new enablers will continually arise like weeds, or like criminals willing to fight a war on drugs.

- We need to look at the structure of companies/trusts and the legal powers we grant to them. The scope they can operate in and the functions they can fulfil are very broad. The context of the development of companies is in the age of piracy and colonial exploitation where there was a lack of concern for other peoples. Companies were designed to protect the wealth of people in the mother nation because some of the early crashes, like the South Sea Bubble, ruined a lot of wealthy people. Also the East India Company was trying to work out how to organise itself to make as much money as possible with as little risk as possible.

- As a consequence there are not many legal restraints or boundaries within the structures of companies. They allow semi-anonymous behaviour, and like in social media, people can get very harsh and self focused when they feel anonymous. The authority given to a company to allow shareholders to avoid debt responsibilities is too wide. Reckless behaviour is advantaged and protected in a company with limited liability. Companies allow some individuals, the shareholders, to possess more rights than natural individuals, because companies are designed that way, and perhaps that is no longer good, if it ever was. Restructuring the rights, scope and functions of a company is a more relevant and productive area to find fixes for tax avoidance than a focus on those who seek to use the existing structures to make money in.
- For example, some ideas to investigate how to put constraints on companies:
  - how many layers of companies or trusts can exist before a beneficial owner is identified. For a non-public company (private) perhaps it is one? Only the names of the natural person beneficial owners may be listed.
  - all ownership should be public.
  - Details of an owners asset wealth is required to be declared and published.
  - What is a better limit to limited liability. Perhaps more must be at stake for an entrepreneur than the current bankruptcy rules allow? Perhaps the restriction on limited liability is ‘limited to a dollar figure? And all assets declared on beginning of an undertaking? Perhaps access to assets is removed?
  - The nature of the company must be declared. It’s trade, or a shell.
  - Tax paid
  - Assets required to be publicly listed.
- These are just some ideas that can be explored as a way to set up boundaries of behaviour through transparency which will build better economic growth across our economy, and build a better society.

The Netflix series ‘Squid Game’ follows an allegory of capitalism about what people will do, not by force and command, but by the context and options you place before them. The context we place our entrepreneurs in – with a series of tools (companies/trusts) without almost any boundaries, tax principles that encourage waste and minimisation of tax, and the provided goals of profit maximisation for personal gain; is not conducive to community (or the provisions of goods and services to satisfy wants and needs). Proof this is a true statement is the current housing affordability crisis; where is affordable supply? But back to community, at our heart, as Aristotle said , ‘man is by nature a social animal’. Our current tax system appears to be working against our best nature.

———————

In this Part D of the article ‘Creating the citizen economy’. I outline some considerations and justifications for having no capital/revenue distinction.

In Part A I outlined six reasons why ‘the normal principles of taxation’ are distorting the economy to monopoly capitalism and how we can take two steps of a reset to fix these distortions and how this would be very beneficial to the economy. In Part B I expanded what is needed in a full reset and I explored the economic impacts of a reset. In Part C I look at things we need to consider to change the scope and powers we allow to non-individuals when we let them be set up.

Part D – Beneficial impacts for all with no capital/revenue distinction and less tax minimisation.

The objective of reset feature number 2, is to simplify taxation and so reduce the opportunity of tax avoidance through recharacterising something that is income into something that is capital and not taxed. Recharacterising for tax avoidance is gone with this Reset.
- Some operational questions arise in not having a capital/revenue distinction.
- A purchase by a company of inputs to produce something could be said to be ‘coming in’ as an asset or gain even though no money has come in, but only gone out. But in case some argue the assets ‘came in’ and they are therefore income and subject to tax, it needs to be clarified that it is not income. Purchase of physical production inputs are exempt, but of course any monies or value from disposals of them are taxable as income.
- If a company purchases a valuable work of art, it has ‘come in’ but is that taxable as income or a gain? I say no. It could be the employer wanted a nice picture on the wall. But it is generally not a production asset. So if it was obtained or traded in exchange for some products/widgets the company normally sells then it clearly has a sense of being income and its value would be taxable. So a definition of income would have to say there must be some sort of reciprocity before what comes back in is taxable. Guidance on this from existing rules would be best and then strongly tightened to prevent avoidance activities. Of course any disposal of that art would be taxable income to the company because the art is owned by the company.
- If a Risk Free rate of return method was used to assess gains then distinctions would have to be made for things traditionally seen as capital/revenue. There are examples to follow on how to do this.
- Without a capital revenue distinction all disposals are income. It could be argued money is disposed of to purchase production inputs so that disposal is subject to tax. Of course it should not be, it’s just the converse of the situation above of production inputs but in relation to money. An exemption needs to be made for this specific situation.
- If the company loans its parent company, its cash accumulation; that is a disposal of an asset and taxable. But what does it get back for the ‘sale’! Nothing! There is no good or service sold and no consideration to pay tax on. Incorrect – It gets the initial investment into the company. It is paying for that investment by making a distribution. Rather than taxing the investment we tax the amount on distribution. We are taxing the purpose of a making a distribution. A specifically permitted registered bank or exempted financial institution making a loan would be exempt as long as it is arms length, or to a 3rd party.
Two issues are raised by this: taxing twice, and it’s a loan to another entity!
- Point One – taxing income twice. i.e. once when goods and services are provided by the company and payments for them are taxed as income, but also when the accumulated capital is taken/loaned to another entity and taxed as a disposal.
  - It is not actually taxing twice because it is being taxed for a different purpose. In this case the purpose of taxing the disposal is to discourage capital extraction from a profitable company. This is about the primary purpose of a company/non-individual, being to supply goods and services within the economy to meet wants and needs. Taxing the disposal occurs because company investment assets are being diverted to a secondary purpose, i.e. to be used as income for a narrow group of people, shareholders.
  - Another way to express the ‘purpose’ argument is that each legal entity is separate and has its own profit motive. A company’s purpose to supply a good or service, and when it delivers it, that is how it meets its profit motive. The company purpose is not as is often stated to earn a profit for its shareholders. This idea comes about due to a lack of intellectual separation between the profit motive of the company and the shareholders profit motive. Some shareholder will say we own the company and it will do as we say. But that position fails when we consider other separate legal entities, like employees, they have rights. e.g. an 8 hour day, sick leave. There is an understanding with natural persons and legal entities that they have an existence and purpose beyond ownership. If you want separate legal entities to run things then the reset tax outcome is that it holds the purpose separately to any shareholder purpose. Because of the over emphasis on the secondary purpose, think of example of the aged care home where money is pulled out for shareholders when it could be used to improve services and prices for users. We have to tax that secondary purpose in order to give a value to or push towards the first purpose. Which is the purpose that society primarily needs from that company. If the company doesn’t make a profit then it fails, but the reward for investors must follow the profit and primary purpose.
  - Also this has to be done because tax avoidance is out of control. Most disposals from a company are to other non-individuals rather than direct to natural person’s. If the disposal is not taxed, then this is still a huge benefit over a distribution that goes to a natural person where higher tax rates apply.
  - Taxation on disposal will also discourage shuffling money though multiple legal entities to hide ownership. Each step is taxed. Tax avoidance/minimisation is linked to these practises.
  - Tax on disposal of an asset, a capital accumulation, will act like a progressive tax rate but only activated on disposal. It is simple to avoid if there is no disposal. This disposal tax rate could be set at a higher level than the rate when income is received.
  - Even if the loan to the parent company or another company is to fund another business activity and therefore to meet another want or need, it is still money being taken from a successful business that could be improving services or dropping prices. Therefore loans as profit extraction must be taxed. The government must take a further share of that investment success to stimulate the wider economy in which that new venture will be undertaken.
  - As noted before, investment capital is often diverted to activities that protect the company rather than work for the benefit of the wider economy. Tax should discourage cost accrual competition. And the inclusion of loans will assist in stopping inefficient spending on cost accrual competition.
  - To argue against this reset idea is to encourage inefficiency in the market. Or perhaps it is to make the case the market mechanism should not belong in some services or industries? i.e. you don’t want goods and services improved.
- Point Two. ‘It’s a loan to another related entity and loans are not income and not taxable!’
  - And that is what makes them a tax avoidance risk. To prevent tax avoidance and for equality of treatment with any other disposal of a company asset. The value of the loan to another entity has to be taxable and not just the interest coming in. See Part C where income can be turned into a loan to avoid tax. To not include a loan as a disposal and taxable would undermine the intent of creating a structure in which a business is encouraged to be more focused on delivery of quality goods and services.
  - Of course in a practical sense there will be little double taxation, if you call it that. This is because behaviour and structure will change. The current business fragmentation into multiple entities will revert back to activities being business units in one company, so money is not moving between separate legal entities so there is no double tax. But this behaviour change will bring the huge benefit of greater transparency of ownership and control in the economy. And that will help bring more accountability through potential liability. See Part C for a little more discussion on hiding ownership to create tax avoidance opportunities, and money laundering. Of course there will be at least one taxing point on disposal when money leaves that bigger company.
  - With less companies, limited liability becomes more about contract negotiation rather than a hard reliance on legislative law, which currently allows the risk takers to avoid responsibility. e.g. Bankruptcy rules are a mockery of accountability. Better business practises should arise with more accountability because there is more risk of liability.
  - This reset and structure change creates a risk the parent company based overseas will claim they just have a business unit in New Zealand and therefore any profit extraction is just moving money inside the overseas company. Therefore, an overseas parent company must be required to register a company in New Zealand to do their trading in New Zealand and all income must go through that New Zealand company and none of it direct to the parent. Assets must be held in a New Zealand entity. More work needs to be done on internet sales which is currently a problem anyway.
  - The payment of a dividend is also the disposal of a capital asset, the capital accumulation. The tax on disposal at 10% could be treated differently. When a dividend is paid to:
    - a natural person, based in New Zealand, this tax could be recorded as a 10% withholding tax that they can claim as a credit on their personal tax return when establishing their personal tax liability. Overseas people raises issue with DTA’s that need to be looked at.
    - for a non-individual whether they are registered in New Zealand or overseas there is no withholding tax credit recorded. The tax is a final amount paid by the company paying the dividend.
  - This framework allows choice for a person on how to structure their finances. A New Zealand resident can choose to have an overseas company registered as the owner of the shares in the New Zealand company that is paying the dividend. So it is fully taxed when paid out and there is no withholding tax credit. But when that overseas company sends income back to New Zealand that is taxed in full when it arrives. Because it is caught by the wider definition of income and it came in, so each step is being taxed. This will help give some equity in how income is taxed when using different structures.
  - If money stays in the non-individual entity it could be an encouragement for the business to pay its staff more because that expense is deductible. And this would improve transparency of financial reward for CEO’s etc. Shareholders would become more long term investors. Dividends paid would be taxed at a higher rate and as shareholders are primarily the very wealthy that is appropriate. Even if the funds are KiwiSaver and linked to salary and wage earners the potential for demand driven growth in the economy is enhanced by the greater tax increase.

———————

In Part E of the article ‘Creating the citizen economy’ destroying our economy and society as shown in the Pandora papers’. I take some basic data and look at the impact on various sectors of the economy.

In Part A I outlined the problems the current principles are creating and I outlined the two main changes.
In Part A I outlined six reasons why ‘the normal principles of taxation’ are distorting the economy to monopoly capitalism and how we can take two steps of a reset to fix these distortions and how this would be very beneficial to the economy. In Part B I expanded what is needed in a full reset and I explored the economic impacts of a reset. In Part C I look at things we need to consider to change the scope and powers we allow to non-individuals when we let them be set up.

Part E – Impact on various sectors in New Zealand from making a Reset

Data is from the Statistics New Zealand website and the ‘Annual enterprise survey: 2017 financial year (provisional)’.

Sector	Total Income	Total Expenditure	% surplus Income to expenditure	10% gross tax payable
Agriculture, Forestry and Fishing	40336	34128	19.6	profitable
Arts, Recreation and Other Services	18747	16613	13.0	profitable
Construction	56424	53148	8.2	short
Education and Training	4391	3932	11.7	profitable
Electricity, Gas, Water and Waste Services	19123	15168	25.9	profitable
Financial and Insurance Services	71345	45493	56.9	profitable
Health Care and Social Assistance	16547	14466	14.4	profitable
Information Media and Telecommunications	14126	12812	10.4	short
Manufacturing	104622	98214	7.3	short
Mining	5511	5224	4.6	short
Professional, Scientific, Technical, Administrative and Support Services	51057	41219	24.2	profitable
Public Order, Safety and Regulatory Services	1350	1265	7.3	short
Rental, Hiring and Real Estate Services	32111	20538	55.9	profitable
Retail Trade and Accommodation	84926	81244	5.2	short
Transport, Postal and Warehousing	24450	21496	13.9	profitable
Wholesale Trade	99094	95705	4.2	short
All industries	approx $644.7Billion	approx $560.7Billion

A transport company if it earned $2.5M total income x 15% tax rate = $375,000. Under the old rules $2.5M less costs $2.1M = $400,000 x 28% = $112,000. So an extra tax bill of $263,000 a year, or $21,916 a month, or $720 a day. Prices would rise to cover the cost.
A mining company $5.5M x 15% = $825,000 . Under the old rules – $5.5M less cost of $5.1M = $400,000 x 28% = $112,000 tax to pay. So an extra tax bill of $713,000 to pay a year, or $59,416 a month, or $1,953.42 a day. And this is appropriate for a high cost activity. Their costs should go up so it signals accurately to the economy the cost of this activity which sends a signal to find alternatives or to innovate to get round the cost. Not use the tax system to get round the high cost.
A warehousing company with a low margin model will struggle. Any industry with this model will struggle. As set out before, these businesses are often interposing between producers and consumers. The less steps between these two the lower the cost of the good or service. That is an appropriate signal for the economy.
The sectors that are short will have to raise prices if they can’t bring down their cost. If industries can bring down their cost they will increase their profit margins. They are then competing on a more level playing field with small businesses. Even the sectors not short will have to consider price rises. GST is neutral for business as they don’t pay it, they just collect it for the government. But GST is not neutral for the final consumer so removal of GST will help consumers fund some small cost increases.

EDITOR’S NOTE: You can download supplementary material that supports this analysis. Please download this PDF that includes: Part A, Part B, Part C, Part D, Part E.

Keith Rankin Chart Analysis – Covid19: Scandinavia, Poland and Australia

By Keith Rankin -

December 17, 2021

Analysis by Keith Rankin.

Sweden

Re Covid19, Sweden remains the enigma country that almost nobody wants to talk about, because the Swedish scientists may have been correct all along (although the Swedish bureaucrats certainly had significant shortcomings in the early months of the pandemic).

The first chart shows five waves of covid in Sweden. The first wave shows the high death rates characteristic of much of western Europe, though not of Germany or other Scandinavian countries. Sweden was particularly negligent in its case diagnosis. Then there was a winter rerun second wave, though this time not as bad as the other non-Scandinavian countries; and this time, with a much better testing regime in place.

As the second chart shows, Sweden’s deaths from Covid19 were overwhelmingly among people over 75 years old, many of whom would have died in 2020 had that been a normal influenza year.

Sweden’s statistics are clearly honest, although the bureaucrats can be slow to release them. The third wave – April 2021 – shows that Sweden now operates a very comprehensive testing regime. One problem with Swedish statistics, though, is that the general reporting of mortality by age seems now to be non-standard. Hence the age mortality data stops in August 2021.

The delta-strain arrived in Sweden in June/July 2021, and its impact can be seen in a very muted fourth wave. Looking at Sweden, ‘delta’ seems not to have been the big beast that blindsided New Zealand’s government in August.

Sweden has – as of 13 December – a greater proportion of the ‘omicron’ strain than most European countries (though less than Norway and Netherlands). The November/December covid outbreak in Europe is overwhelmingly a winter resurgence, driven in large part by waning immunity as well as by the seasonal impact of winter.

Poland

Before looking at Sweden’s Scandinavian neighbours, we may look at Poland, across the Baltic Sea from Sweden and Finland. Firstly, note the scale for Poland, maxing at 3,000 daily deaths per 100 million people (or 30 daily deaths per million). Next, we note that Poland successfully fended off covid’s first wave, as Germany (though to a lesser extent) also did.

We also note that Poland (and Germany and some others) had a surge in deaths in August. This is most likely the beginnings of a new covid wave, driven by the resumption of international travel. We see from Germany that there is typically a small summer epidemic during the peak travel season.

This August surge was contained in Poland, and most other affected countries. It was almost certainly confined to the more-affluent travelling public, and did not then hit the general population.

Then it hit Poland, in October 2020. Wham! Very similar to Spain in March 2020. Poland was completely unprepared. But, as in Spain, the deaths dropped of quickly in response the reactive public health measures. Poland’s general population had become very naïve to respiratory viruses in large part as a result of the first wave of public health measures.

This October 2020 wave was much more powerful in Poland than in Sweden where natural immunity was much higher. But this second wave lasted longer in Sweden; Sweden refusing to introduce any compulsory public health measures. (The one brief measure introduced in Sweden early in 2021 – masks on public transport – was never enforced.)

A new wave struck both Sweden and Poland in March 2021; this was linked to the British ‘alpha’ strain of covid. While Sweden had many cases, voluntary public health measures meant that Sweden had few covid deaths in April 2021. Poland, on the other hand, on tentatively relaxing its measures, got sideswiped a second time.

For both countries the impact in August 2021 of the delta strain of covid is apparent. In Poland, as in Sweden, it’s minimal. Both populations had a high degree of immunity. On vaccinations, Sweden was about average for West Europe. Poland, while less vaccinated, had high vaccination rates compared to much of East Europe.

Interestingly, New Zealand acquired Pfizer vaccines from Poland in August/September 2021; vaccines that Poland felt that it didn’t need. Poland did not have the delta-phobia that was present in New Zealand, and was driven in New Zealand by our innate sense of our heightened vulnerability.

We see that Poland subsequently got the pre-winter October 2021 wave of Covid19, though later than most of East Europe. There are signs that this wave in Poland has already peaked, at least with respect to deaths.

Finland

We don’t hear much about Finland. In 2020 it clearly had rumblings of covid, but was never affected anywhere near as much as its neighbours, at least until mid-2021. Of particular interest is that Finland put up the covid shutters proactively, ahead of the winter 2020/21 wave. No place in Finnish MIQ for Santa.

However we do see a significant rise in deaths in June 2021; probably postponed deaths arising from the reduction in deaths in prior months. But delta also hit Finland, although it is only the ‘excess deaths’ data that show this. Indeed Finnish official covid data has the look of being much less transparent than Sweden’s. Finland has caught the latest winter wave, and it seems likely that excess deaths for this month will show that Covid19 is presently much worse in Finland than even Finn’s themselves presently realise.

Finland, along with Denmark and Norway, in the last seven months performed much worse in the covid stakes than did Sweden.

Denmark

Denmark used widespread public health restrictions to contain the pandemic in its first year (compare to Sweden). The early 2021 restrictions, albeit reactive rather than proactive as in Finland, are shown by the huge negative excess death ‘toll’. Delta however did make a much bigger impact in Denmark, and the present wave in Denmark is much bigger than in Sweden, despite Sweden having more ‘omicron’ than Denmark.

Norway

Norway is much like Denmark, though with negative excess deaths for the whole of the first 15 months of the pandemic. Like Denmark, ‘delta’ has had a big impact in Norway; and – as an ‘omicron’ leader – Norway has many reported cases this December. Further, the ‘delta winter wave’ – with delta, but due to the winter season and to waning immunity – hit Norway before both its reported covid cases and recorded covid deaths reveal. Covid19 deaths since July in Norway are substantially higher than the official data series reveals.

Australia

Australia is interesting because it is New Zealand’s neighbour, and because it has had, like most of Scandinavia, comparatively benign covid statistics. Like Norway, its general experience has been positively negative, meaning a negative death toll. Unfortunately Australia is particularly tardy with its total death data, so we cannot yet see the extent to which excess deaths may exceed official covid deaths.

One chart which is interesting for Australia is this chart of deaths by age group. Note that the data is not particularly up-to-date, and also note that this is quarterly average data, so is much more ‘smoothed’ than is the previous chart type.

What is very apparent, however, is that the covid public health restrictions did not reduce the mortality of the oldest Australians. Rather, the numbers in this age cohort who died in the first half of 2021 well exceeded the numbers who were saved by the 2020 lockdowns. (For a sense of what would have happened – the counterfactual – if Australia had not had covid public health mandates, look at the Sweden age data above.)

The other big question for Australia is: Did covid save many lives of Australians aged 15-84? So far, the answer is yes, although some Australians will argue that other costs of the restrictions will have exceeded the benefit of younger lives not lost. However, the jury is still out. Will 2022 (or 2023?) show death increases for Australians aged 15-84? Will a similar chart made in December 2022 show significant postponed deaths for these age groups, in line with what already shows for those aged over 85?

——-

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

Newsletter: New Zealand Politics Daily – December 17 2021

By Bryce Edwards -

December 17, 2021

Today’s content

Parliament, parties, polling
Richard Harman (Politik): Delta’s big victim; Jacinda Ardern and her Government (paywalled)
Peter Dunne (Newsroom): Time running out for Govt’s big reforms
Sam Sachdeva (Newsroom): Delay to proactive release review at two years and counting
Matthew Hooton: Christopher Luxon’s got the job — now what? (paywalled)
Chris Trotter (Bowalley Road): Luxon’s Tough Assignment
David Farrar (Kiwiblog): What is important in the latest poll for National (paywalled)
Liam Hehir (Patreon): No longer needed: a theory of the case
The Country (Herald): National Party leader Christopher Luxon on Three Waters and carbon farming
Chris Trotter (Daily Blog): Afternoon Briefing: Not A True Story
Whatitiri Te Wake (Māori TV): Green leaders: More Te Tiriti-centric approaches needed
Whatitiri Te Wake (Māori TV): Māori Party year in review – ‘Māori still at the bottom of the cliff’
Rukuwai Tipene-Allen (Māori TV): Major Māori events cancelled -how will MPs kick off the 2022 political year?
Northland Age: Shane Jones, former coalition Government minister, to run for Parliament in 2023

Govt management of Covid-19
Marc Daalder (Newsroom): Buying the vaccine: How NZ almost turned down Pfizer
Gordon Campbell: On fostering the culture of Covid complaint
Derek Cheng (Herald): How contact-tracing capacity has been nearly doubled for summer outbreaks (paywalled)
Ian Powell (Second Opinion): A Covid graph that reveals so much
Diane McCarthy (Stuff): Iwi gather for collective Covid effort in a time of ‘real threat’ to Māori
Herald: Ministry of Health to start new way of providing Covid updates
Herald: PM Jacinda Ardern ‘Tinder liaisons have reopened’ quote goes viral on Stephen Colbert’s show
1 News: Unknown community Covid-19 cases may be in Gisborne
RNZ: Covid-19 wrap for 16 December: Omicron in NZ, vaccine milestones and mandate protests
Herald Editorial: Auckland carried the weight and showed the way (paywalled)

Omicron, Border, MIQ
Keith Lynch (Stuff): Left unchecked Omicron could lead to tens of thousands of cases daily
RNZ: Bloomfield to speak to minister about changes to vaccine booster programme
Jordan Bond (RNZ): Experts advise speeding up vaccine booster doses after variant detected in MIQ
1 News: Time between second dose, booster may be cut – Bloomfield
Rachel Sadler (Newshub): Ashley Bloomfield not ruling out recommending further lockdowns if Omicron gets into community
Dan Satherley (Newshub): Expert calls for border reopening to be postponed, fully vaccinated to be redefined
RNZ: Checkpoint; Omicron can be kept out of NZ – Professor Baker
1 News: Omicron: Baker urges caution around international border
George Clark (Herald): Government should consider delaying border reopening – Michael Baker
Herald: Experts react to New Zealand’s first Omicron case in MIQ
Hamish MacLean (ODT): Omicron next big challenge
RNZ: Omicron case found in Christchurch MIQ
1 News: NZ’s first Omicron case discovered in Christchurch MIQ – Bloomfield
—————
RNZ: Relax immigration rules, open new medical school to tackle health worker shortage – National MP Dr Shane Reti
Matt Burrows (Newshub): Woman in race against time to see mum before she dies as MIQ takes five days to ponder exemption

Health system, hospitals
Michael Morrah (Newshub): Healthline call logs reveal COVID-positive man who died at home wasn’t spoken to by clinician despite low oxygen levels
Margaret Crozier (Stuff): Aged care faces a registered nurse crisis, and we need new thinking to solve it
Stephen Forbes (Local Democracy Reporting): Middlemore Hospital prepares to cope with ED surge as restrictions lift
Newstalk ZB: Health Minister asks for patience when it comes to hospital funding
Mike Houlahan (ODT): Government funds to assist upgrades to health facilities
Megan Wilson (Herald): Tauranga Hospital upgrade: MP says $17.9m funding is ‘too little too late’ (paywalled)
RNZ: Go-ahead for $170m in funding will help people access their health data, Ministry says
Bridie Witton (Stuff): National’s Shane Reti says hospital upgrades don’t help chronic short-staffing

Vaccine rollout, mandate
Qiuyi Tan and Adam Pearse (Herald): The 90% Project – How did we get to 90% fully vaccinated
Liz McDonald (Stuff): New Zealand reaches 90 per cent vaccination milestone
Ireland Hendry Tennent (Newshub): New Zealand hits 90 percent fully vaccinated milestone
RNZ: Covid-19 milestone: 90pc of eligible New Zealanders are now fully vaccinated
New Zealand hits 90 percent fully vaccinated milestone
Denise Piper (Stuff): Northland only DHB that hasn’t reached 90 per cent first dose vaccine target
Dan Satherley and Lucy Warhurst (Newshub): Medsafe approves Pfizer-BioNTech COVID-19 vaccine for children, ball now in Cabinet’s court
RNZ: Medsafe gives provisional approval for Pfizer vaccine for children
Bridie Witton (Stuff): Pfizer vaccine approved for children aged 5-11
Sharnae Hope (Stuff): Wintec staff and students must be vaccinated from 2022
Katy Jones (Stuff): Outdoor education group urges vaccine pass exemptions for students
Luisa Girao (ODT):Invercargill City Council Front-line council staff guaranteed fully vaccinated
Daniel Smith (Stuff): Fletcher Building mandates vaccinations for all on-site staff
Carly Gooch (Stuff): Smartphone sales soar along with app help queries
—————
Justin Duckworth (Stuff): When we talk about freedom of choice, let’s remember those who have no choice
Jenna Lynch (Newshub): Lower turnout at anti-vaccine mandate protest at Parliament with no politicians
Sophie Cornish (Stuff): No arrests after crowd ‘generally well behaved’ at Wellington protest
Whatitiri Te Wake (Māori TV): Anti-Covid protestors mistakenly converge on Parliament a day after the House rises
1 News: Anti-Government protesters gather outside Parliament
RNZ: Bus disruptions, road closures after Covid-19 protest in Wellington
Nick James (Herald): Claims Air NZ pilot wanted to kick unmasked pair off plane, but was told they couldn’t
Charlie Mitchell (Stuff): A black market in Covid vaccine passes is issuing fraudulent, but effective certificates

Auckland border, testing, summer travel
Debbie Jamieson (Stuff): Planes landing in Queenstown but self-isolation rooms not yet secure
George Block (Stuff): Auckland/Waikato checkpoints scrapped after nine-hour queues predicted
John Bishop (Stuff): Sorry Northland, I’m not welcome, so I’m not coming
RNZ: What to do if you catch Covid-19 on holiday

Govt finances, economy, govt subsidies
Bernard Hickey (The Kākā): An intergenerational wellbeing crime scene
Liam Dann (Herald): What today’s GDP data really tells us about the economy (paywalled)
Tom Pullar-Strecker (Stuff): GDP drop of 3.7% in face of Delta lockdowns evidence of economic ‘resilience’
Katie Bradford (1 News): GDP down 3.7%, second largest quarterly fall since 1986
RNZ: GDP falls 3.7 percent in third quarter amid Delta outbreak lockdown

Housing, Building and construction
John Minto (Daily Blog): Labour’s betrayal of low-income New Zealanders
ODT Editorial: Time for a housing-price correction?
Greg Ninness (Interest): Apart from a few soft spots the housing market has a long way to go before prices start falling
Anne Gibson (Herald): Immigrant’s first Auckland house rising $4000/week (paywalled)
Ireland Hendry-Tennent (Newshub): Hamilton real estate agents say sanity is returning to housing market
Te Aorewa Rolleston (RNZ): Māori trusts receive funding to provide ‘whare for whānau’
Andrea Fox (Herald): Sleepyhead set to go ahead as appellants resolve issues
Joanne Naish (Stuff): Council backs down on floor policy after legal threat from builders
Anne Gibson (Herald): PlaceMakers warning: James Hardie products from Australia to cost 10% more next year (paywalled)

Local government
Janine Rankin (Stuff): Ombudsman criticises Palmerston North City Council secrecy
RNZ: Waimea Dam investigation finds no wrongdoing
Cherie Sivignon (Stuff): ‘No red flags’ in information given to councillors over Waimea dam
RNZ: Lawyer engaged over West Coast stewardship land
Felix Desmarais (Local Democracy Reporting): Rotorua Lakes Council reports overall $11.6m deficit for 2020 / 2021 financial year
Stephen Forbes (Local Democracy Reporting): Auckland Council to consult mana whenua, urban Māori on creating Māori seats
Emily Ireland (Local Democracy Reporting): Tensions rise in Masterton’s civic centre talks
Moana Ellis (Local Democracy Reporting): Ruapehu District Council tackles ‘huge’ level of gambling harm
Matthew Rosenberg (Local Democracy Reporting): Southland District Council’s aerial erosion monitoring does not include area in front of old dump site
Aaron Leaman (Stuff): Hamilton City Council puts off Founders Theatre decision, again
Herald: Wellington water woes: Investigation under way after flooding in Lower Hutt
Georgina Campbell (Herald): Privacy breach: Wellington City Council sends rates bills and addresses to the wrong people
Cherie Sivignon (Stuff): Tasman District Council ends financial year with $69.5m surplus
Cass Marriot (ODT): Queenstown Lakes District Council Freedom Camping Bylaw vote unanimous
Devon Bolger (Herald): Christchurch’s delayed $450m new convention centre Te Pae officially opens
Gianina Schwanecke (Stuff): Close to 60 people hospitalised from 2016 Havelock North gastro outbreak, study finds

Transport
Adam Jacobson (Stuff): Auckland Council not in a ‘financial position’ to help pay for $14b light rail
Bernard Orsman (Herald): Auckland Harbour Bridge will not have a lane for cyclists, says transport boss
Adam Jacobson (Stuff): Aucklanders back on the bus following move to Covid-19 red light restrictions
Kate Green (Stuff): New airport bus for Wellington announced
Georgina Campbell (Herald): New fleet of electric buses to service Wellington airport route
David Haxton (Herald): Twenty-five passengers in first flight from Auckland to Kāpiti
Georgina Campbell (Herald): Transmission Gully interim agreement expires, builder now liable for $250,000 a day
Sam Sherwood and Joanne Naish (Stuff): West Coast driving instructor admits falsifying licences for gang members

Police, Justice, corrections
RNZ: ‘As a result, he is dead’: IPCA chair Judge Colin Doherty on action of officers in Allen Ball’s death
Robin Martin (RNZ): Police failed in duty of care to man who died in custody at Hāwera – IPCA
Tara Shaskey (Stuff): Taranaki police officers involved in custody death failed in duty of care – IPCA
1 News: Cops failed to seek medical care for man who died in custody
Robin Martin (RNZ): Partner of man who died in custody pleased someone is finally listening
Karl du Fresne: New Zealand: where being “anti-government” results in police surveillance
Blair Jackson (Stuff): Leading lawyer concerned about Invercargill Prison remand-only proposal
Karen Pasco (ODT): Lack of communication about prison changes ‘diabolical’, staff union says
Loren Portnow (Herald): With Family Court decisions there’s a lot at stake. So how well does it do? (paywalled)

Awards for bravery during Christchurch terror attack
Mark Quinlivan (Newshub): ‘Kind and loving’ man killed trying to take down Christchurch terrorist gets top NZ bravery award – full awards list
Eva Corlett (Guardian): New Zealand honours ‘extraordinary’ bravery of 10 during Christchurch attacks
RNZ: Bravery awards recognise 10 people for saving lives during Christchurch terror attack
Sam Sherwood (Stuff): Prime Minister offers ‘deepest respect and gratitude’ to March 15 heroes
1 News: Officers recount arrest of Chistchurch mosque terrorist
Sam Sherwood (Stuff): ‘Fear’s no good to you’: Officers describe the moment they arrested mosque terrorist
Jamie Ensor (Newshub): Heroic police officers who took down Christchurch terrorist describe apprehending shooter
Kurt Bayer (Herald): Christchurch man who threatened to car bomb city mosques apologises and meets shooting survivor

Environment, conservation, Climate Change
Marjorie Cook (ODT): Mt Iron land sold to QLDC for safekeeping
Nikki Mandow (Newsroom): Sand dredging: What’s yours is mined
Grant Bradley (Herald): Air New Zealand boss Greg Foran – Covid pales into insignificance compared to climate change (paywalled)
Stuff Editorial: Whether we fight or adapt, climate change is here
Brian Fallow (Herald): Grant Robertson makes a down payment on the climate (paywalled)
Piers Full (Stuff): Climate change making hayfever season worse

Employment
Don Franks (Redline): Low paid workers: between a rock and a soft place
Max Rashbrooke (Stuff): Independent operators shouldn’t have to shoulder the biggest risks

Other
Thomas Mead (1 News): Sensitive info published online in Teaching Council privacy breach
Phil Pennington (RNZ): Reports detail Fire and Emergency’s struggle with ageing truck fleet
Karl du Fresne: Why I’m no longer compiling the Five-Minute Quiz
Rob Stock (Stuff): Commerce Commission scores victory in case against mobile trader
RNZ: New consumer credit rules may lead to friends, family asking for loans, financial consultant says
Tom Pullar-Strecker (Stuff): Compromise ruling on UFB revenue caps looks set to leave pricing unchanged
Hamish Rutherford (Herald): Reserve Bank chairman says high senior staff turnover ‘unfortunate but normal’ (paywalled)
RNZ: Reserve Bank appoints three new executives
Chris Tobin (Stuff): Foodbanks report massive increase in demand in lead up to Christmas
Nadine Porter (Stuff): Avalanche of need as Christchurch foodbank aims to feed 11,000 people in next two weeks
Naomi Arnold (RNZ): Bad then, worse now: How Covid-19 will hurt retired women
Camryn Brown (Patreon): A crisis delayed or a crisis averted? A case for retirement age indexation (paywalled)
RNZ: Green hydrogen production on the cards for Marsden Point refinery site

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Screen time – is there such a thing as too much?

Digital toys across age groups

What to bear in mind

Hold the hype

Looking for Christmas joy?

OK, you’ve convinced me

Start now, before the bickering

Versatile and mighty

Withstanding landslides and bushfires

Benefits for gardeners

Florence (2018), Mountains Studio

Fruit Ninja VR2 (2021), Halfbrick Studios

Crossy Road (2014), Hipster Whale

Rooftop Renegade (2022), Melonhead Games

Untitled Goose Game (2019), House House

Today’s content

The problem with having too many toys

What to do if you have too many toys

How to organise toys

Is there such a thing as ‘good’ toys?

Categorising ‘good’ toys

What to do with toys you don’t need

This Christmastide, may God keep you t(r)olling

Away in the manger…the little Malteser lay down his sweet head

Plum puds sans plums, and boxing days without boxes

A closing Christmas cracker

The personal toll of preventable drownings

5 factors driving more summer drownings

How to stay safer by the water this summer

How does the mind perceive time?

Where do memories fit in?

Remembering past Christmases

Build back better

Nations soaring ahead

Building tomorrow’s aircraft

Overcoming turbulence

5 ways to ensure you’re buying sustainable seafood this summer

What to watch out for

What about eating out?

What is archaeology?

How does a dig work?

What you can do (and why you will learn to hate buckets)

How to volunteer

Why do it?

We need an economic engine

Government has to keep doing the heavy lifting

Crisis as a catalyst for change

What will it take to transform universities?

Working for a just and resilient future

How the tests work

How effective are they?

Which test to take when?

How often should I take a rapid antigen test?

How does the Omicron variant affect testing?

More massive trucks on Victoria’s highways

Sydney’s situation is not much better

Rail moving less intercity freight

From a national perspective

Which friends do we want?

Beating social loneliness

Beating emotional loneliness

Ending wrong or ‘toxic’ friendships

When the stomach stops working

The pacemaker of the gut’s rhythm

Looks a lot like government picking winners

Years of rhetoric for little return

Playing the national interest card again

Today’s content

Finding life underground

A lucky discovery

A true millipede at last

Why so many legs?

Finding the unknown

Success 1: Victorians followed the rules and ‘stayed the course’

Success 2: the uptake of the vaccine was incredible

Success 3: determined commitment from our leaders

Failure 1: the Victorian public health system was exposed

Failure 2: hotel quarantine was a debacle

Failure 3: it took too long to control outbreaks in aged-care centres

Failure 4: we struggled with community engagement