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  1. #21
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    Quote Originally Posted by Aaron View Post
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    In my opinion David Seymour heading the TOP party sounds insane, ACTs ideologies are almost at the opposite ends of the political spectrum (although TOP party is not even close to communism FP) to the TOP parties even if they both think it is the best way forward for the country. ....
    An unlikely combination I agree, but it would be a combination I would like! I do think that TOPs tax reform would lead to more investment in commercial (as opposed to investment in high priced land) profitable businesses. I would envisage a boost to the NZ stock market and fewer nz businesses ending up being owned by foreign concerns. So in that respect, TOP could boost NZ capitalism.

  2. #22
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    Quote Originally Posted by fungus pudding View Post
    For a start, I am not rich; and I think you'll find an annual equity tax would be unacceptable to most NZers and a complete disincentive. People would go to all sorts of lengths to avoid it - even more than they did with death duties.
    Come on don't be modest FP. You sure your not rich? I can't argue with you on that as I don't have a definition for rich in NZ. I used to be concerned about the top ten percent owning all the wealth until I realised just being born in NZ might put me in the top ten percent globally. I didn't see it as a big problem after that.
    An equity tax would not be popular. I can agree with you on that. I have yet to see a popular tax of any description. A disincentive??. What do you mean by that? A disincentive to invest and grow your wealth? I am not sure about that. Would you prefer to be homeless rather than paying an equity tax? Personally I wouldn't. We have an income tax and last time I looked most people were still working. The income tax is not popular, at all but people still work. An equity tax would help to spread the load more evenly maybe. The example that gets trotted out is someone living in a million dollar house pays no tax on the rental benefit but a person with a million dollar term deposit pays tax on the interest benefit. Even worse the guy working his guts out day to day to get ahead pays income tax on his hard earned income while the guy who has a large portfolio of appreciating assets only pays tax on the income they produce not the capital gain. He may not even work very hard for the capital gain. An economic system that requires 2% inflation every year pretty much guarantees his success.

    And to quote Bjauck
    "Investments in one's own home (as opposed to investments in businesses and companies) have always had a privileged position in NZ's revenue raising system. So obviously there is a strong feeling held by many of entitlement that this privilege continue. However as home ownership is increasingly unattainable for many, it could be time to review the tax system to ensure NZ's capital is being taxed fairly, and is being deployed efficiently and effectively."

    Talking of communism Prosser's statement regarding power companies sounds a lot more like communism to me.

  3. #23
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    Quote Originally Posted by Bjauck View Post
    People will always try to minimise tax, no matter the type.
    Kerry Packer summed it up:
    "I am not evading tax in any way, shape or form. Now of course I am minimizing my tax and if anybody in this country doesn't minimize their tax they want their heads read because as a government I can tell you you're not spending it that well that we should be donating extra."

    A reasonable fair taxation system usually means that the incentives for evasion are deterred by the likelihood of enforcement and penalty and that the incentives for avoidance are not usually cost-effective enough to bother. Many countries that have reduced high marginal tax rates for income often collect more tax revenues when they have reduced rates and increased enforcement/penalties as the reward for evasion is lowered and the deterrence factor raised.

    In terms of TOPs tax policy, wealth taxes such as land tax presume that an asset actually produces an income that can fund the tax - most of the time there have been exemptions for the family home as an owner-occupier doesn't have an income stream such as a rental although the countervailing argument is that they don't have to pay rent instead. You could argue that a pensioner living in a mortgage free house in Auckland is sitting on $1m (based on a median value) and they could sell their home instead and release it to the market to fund their retirement but as a society we have to consider if that means that they have to rent or move outside of the area that they have lived their lives because arbitrarily the market now values their home at a level that they are considered wealthy - so it's complicated.

    We could start means testing the pension instead (wealth tax by stealth) or tax cash-poor and asset-rich folk out of their homes - but neither is going to make middle New Zealand particularly happy especially when they find their parents spending their inheritance on rent or moving in with them.

  4. #24
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    Quote Originally Posted by Rep View Post
    ....
    In terms of TOPs tax policy, wealth taxes such as land tax presume that an asset actually produces an income that can fund the tax - most of the time there have been exemptions for the family home as an owner-occupier doesn't have an income stream such as a rental although the countervailing argument is that they don't have to pay rent instead. You could argue that a pensioner living in a mortgage free house in Auckland is sitting on $1m (based on a median value) and they could sell their home instead and release it to the market to fund their retirement but as a society we have to consider if that means that they have to rent or move outside of the area that they have lived their lives because arbitrarily the market now values their home at a level that they are considered wealthy - so it's complicated.....
    The net benefit derived from investing one's capital in one's home is currently tax free whereas if that capital had been invested in a business instead, all the profits/net benefits derived therefrom would be taxed. So the incentive is there to build up the nest egg by way of an expensive home rather than by way of a prifitable business or portfolio of financial investments. The stats for NZ household wealth bear that out.

    If there is to be a change to the tax system. I would suggest that the change be gradually phased in, so that the pensioners who have relied on the current tax system are not unduly affected. For example, if a single pensioner without much other income is living alone in a multi-million dollar house, then the asset tax (to the extent it would exceed the income tax payable) should be allowed to accrue as a charge on the property.

    With an asset tax, eventually I would anticipate that residential property values (and other assets currently producing little taxable income) would settle at more affordable and realistic prices than as currently under the current tax system.

    Middle NZ may find that their kids would be able to afford to buy their own homes and move out of home.
    Last edited by Bjauck; 25-08-2017 at 02:46 PM.

  5. #25
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    Quote Originally Posted by Bjauck View Post
    The net benefit derived from investing one's capital in one's home is currently tax free whereas if that capital had been invested in a business instead, all the profits/net benefits derived therefrom would be taxed.
    Im not sure that is true. If I buy a share (part of a business) for $5 (capital), and this business does well and I sell it down the track for $10, I have a tax free gain.
    If I buy a house for $5 and down the track I sell it for $10 I also have a tax free gain.

    If my business pays me a dividend of $1 I pay tax on that $1. IF my house provides me rent of $1 I pay tax on that rent.

    If I borrow to buy my share in the business, the interest is tax deductible.
    If I borrow to buy my house, the interest is also tax deductible.

    I fail to see the difference?
    Last edited by blackcap; 25-08-2017 at 03:18 PM.

  6. #26
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    Quote Originally Posted by Rep View Post
    Kerry Packer summed it up:
    "I am not evading tax in any way, shape or form. Now of course I am minimizing my tax and if anybody in this country doesn't minimize their tax they want their heads read because as a government I can tell you you're not spending it that well that we should be donating extra."

    A reasonable fair taxation system usually means that the incentives for evasion are deterred by the likelihood of enforcement and penalty and that the incentives for avoidance are not usually cost-effective enough to bother. Many countries that have reduced high marginal tax rates for income often collect more tax revenues when they have reduced rates and increased enforcement/penalties as the reward for evasion is lowered and the deterrence factor raised.

    In terms of TOPs tax policy, wealth taxes such as land tax presume that an asset actually produces an income that can fund the tax - most of the time there have been exemptions for the family home as an owner-occupier doesn't have an income stream such as a rental although the countervailing argument is that they don't have to pay rent instead. You could argue that a pensioner living in a mortgage free house in Auckland is sitting on $1m (based on a median value) and they could sell their home instead and release it to the market to fund their retirement but as a society we have to consider if that means that they have to rent or move outside of the area that they have lived their lives because arbitrarily the market now values their home at a level that they are considered wealthy - so it's complicated.

    We could start means testing the pension instead (wealth tax by stealth) or tax cash-poor and asset-rich folk out of their homes - but neither is going to make middle New Zealand particularly happy especially when they find their parents spending their inheritance on rent or moving in with them.
    TOP policy offers no exemption from the tax for a private dwelling. Morgan is emphatic about that. Regardless of pros and cons, that makes it dead in the water as far as ever getting it accepted by voters.

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    Quote Originally Posted by Bjauck View Post
    An unlikely combination I agree, but it would be a combination I would like!
    Trying to marry Act's policies with Top's, would be like trying to mate a mosquito with a phone book.

  8. #28
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    Quote Originally Posted by blackcap View Post
    Im not sure that is true. If I buy a share (part of a business) in a for $5 (capital), and this business does well and I sell it down the track for $10, I have a tax free gain.
    If I buy a house for $5 and down the track I sell it for $10 I also have a tax free gain.

    If my business pays me a dividend of $1 I pay tax on that $1. IF my house provides me rent of $1 I pay tax on that rent.

    If I borrow to buy my share in the business, the interest is tax deductible.
    If I borrow to buy my house, the interest is also tax deductible.

    I fail to see the difference?
    The discussion had been on owner-occupied housing (one's own home.) So it will never pay you a taxable rent as you live in it without having to pay tax on the value to you of being able to do that (i.e. the dividend from the equity in owner-occupied housing is always tax free). Despite being unprofitable, experience has shown that owner-occupied residential housing increases in capital value! If you rent out a room in your home, then that is a different matter.

    With shares in listed companies - you can get those that do not pay dividends yet do go up in value. Many are companies in their growth phase with hopes of becoming profitable in the future. Also some have investments in land...
    However it is difficult to get banks to lend you money to invest in shares - so your chance of leveraging as many capital profits as with land or houses is more limited.

    If a business has no prospect of being able to afford to pay its participants/employees an income or turning a profit, is it in fact a business? Whereas owner-occupied housing will under the present system never be profitable or tax-paying except in so far as it pays rates (which in effect is payment for services rendered anyway.)

  9. #29
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    Quote Originally Posted by blackcap View Post
    Im not sure that is true. If I buy a share (part of a business) for $5 (capital), and this business does well and I sell it down the track for $10, I have a tax free gain.
    If I buy a house for $5 and down the track I sell it for $10 I also have a tax free gain.

    If my business pays me a dividend of $1 I pay tax on that $1. IF my house provides me rent of $1 I pay tax on that rent.

    If I borrow to buy my share in the business, the interest is tax deductible.
    If I borrow to buy my house, the interest is also tax deductible.

    I fail to see the difference?
    Because there is no difference.

  10. #30
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    Quote Originally Posted by Bjauck View Post
    The discussion had been on owner-occupied housing (one's own home.) So it will never pay you a taxable rent as you live in it without having to pay tax on the value to you of being able to do that (i.e. the dividend from the equity in owner-occupied housing is always tax free). Despite being unprofitable, experience has shown that owner-occupied residential housing increases in capital value! If you rent out a room in your home, then that is a different matter.

    With shares in listed companies - you can get those that do not pay dividends yet do go up in value. Many are companies in their growth phase with hopes of becoming profitable in the future. Also some have investments in land...
    However it is difficult to get banks to lend you money to invest in shares - .
    Most banks couldn't care less what you want to do with money you borrow. They are only concerned with the security you offer.
    And do residential homes increase in value? No. It's an illusion. Buildings depreciate, and money depreciates.

  11. #31
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    Quote Originally Posted by fungus pudding View Post
    TOP policy offers no exemption from the tax for a private dwelling. Morgan is emphatic about that. Regardless of pros and cons, that makes it dead in the water as far as ever getting it accepted by voters.
    Your right fairness and equity do not top self interest. How else has National stayed in power so long if it weren't for the universal pension bribe and finding capital gains taxes too difficult to comprehend let alone discuss.

    Our GST is one of the most pure in the world. I don't think I have come across another consumption tax that didn't have exemptions for basic foodstuffs. That got past the voters though. Maybe NZers aren't that bright or perhaps they don't care if it is a regressive tax as it only hurts the poor and the poor don't vote or don't appreciate they are getting a raw deal.

  12. #32
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    Quote Originally Posted by fungus pudding View Post
    TOP policy offers no exemption from the tax for a private dwelling. Morgan is emphatic about that. Regardless of pros and cons, that makes it dead in the water as far as ever getting it accepted by voters.
    That's why I had the final comment: "We could start means testing the pension instead (wealth tax by stealth) or tax cash-poor and asset-rich folk out of their homes - but neither is going to make middle New Zealand particularly happy especially when they find their parents spending their inheritance on rent or moving in with them."

    It's a dead duck whatever the merits because it's not a policy that's electorally acceptable at the current time. That's not to say it won't be in time - if you'd asked people 30 years ago when they scrapped the Auckland Harbour Bridge Tolls that they would be tolled for using the motorway or entering the main city, you'd have been laughed as much as the Takapuna City Mayoral candidate who said his main objective was to have barriers, bells and signals at every level crossing in the city (he was from out of town and seemed unaware that there is no rail on the North Shore).

    In any case, if you slowly boil the frog then progressively you might get there but it's too big a leap right now for the electorate and I'm sceptical it will actually make any difference to the housing market in the long term.

  13. #33
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    Quote Originally Posted by Rep View Post
    That's why I had the final comment: "We could start means testing the pension instead (wealth tax by stealth) or tax cash-poor and asset-rich folk out of their homes - but neither is going to make middle New Zealand particularly happy especially when they find their parents spending their inheritance on rent or moving in with them."

    It's a dead duck whatever the merits because it's not a policy that's electorally acceptable at the current time. That's not to say it won't be in time..
    Changing the current tax advantages for those who own their own homes would definitely be electorally unpopular at the moment. But this may change if home ownership rates continue to slide and more of the voting segment of the population may find they cannot afford home ownership...

    Other countries try to address these tax advantages by having tax free financial investment allowances. Not in NZ however, so kiwis stuff as much as money and credit as possible into the expensive family home. Hardly any money is left over for investing into shares, which has helped to result in a small share market and so many of our successful companies being owned by foreigners.

  14. #34
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    Seymours policy takes center stage and is thoroughly explained in his book. even if you don't like the guy, he has a solid, understandable set of principles that anyone here would more or less respect if they took the time to read his book without a predisposition to hating whatever he says.

    If you slap a National logo on top of ACT's policy portfolio you would have a winning campaign - National are not prepared to deviate to a place that will keep the young and forgotten happy enough - where the Labour/Greens/NZF have big change planned, but all while towing a huge fiscal burden behind itself - not sure why throwing even more money at a bunch bureaucrats with no skin in the game would be advantageous to one of the greatest cash burners known to man " the government" ( this is satirical, but sort of true )

    My understanding of NZ politics is that National will forever have a huge voter base that could not fathom voting for the " fiscally loose, social policies" that come with L/G/NZF - it, of course works both ways with people hating National for anything and everything ( more or less lack of anything ) they do, but these voters are not always convinced by the opposition parties and have to be enthused and pushed into the voting booth. ( Jacinda has the momentum with these fringe voters )

    Politics always brings out the worst in people, it often divides a set of seemingly intelligent individuals and moulds them into one great big mass of ones and twos - in politics there are only binary options despite what MMP sets out to achieve.

    All in all, I am voting ACT and I believe if you take the time to read Seymour's book, research his policy and see for yourself how it has been executed overseas you might just do the same.

    I appreciate any opinions you have on how my vote for ACT is wrong and I am happy to change my opinion if persuaded by a solid argument.

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    Quote Originally Posted by hardt View Post

    I appreciate any opinions you have on how my vote for ACT is wrong and I am happy to change my opinion if persuaded by a solid argument.
    We should remember are both essentially left to centrist parties. Both want to tax as much as the can. Both want everyone to be beneficiaries. Neither are business friendly. Both dreaming if harming NZérs will change the climate. Both feeding a sense of entitlement, You need to look at the other parties for clear alternatives

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    Quote Originally Posted by Bjauck View Post
    Changing the current tax advantages for those who own their own homes would definitely be electorally unpopular at the moment. But this may change if home ownership rates continue to slide and more of the voting segment of the population may find they cannot afford home ownership...

    Other countries try to address these tax advantages by having tax free financial investment allowances.
    Which countries, and what type of investments?

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    Quote Originally Posted by fungus pudding View Post
    Which countries, and what type of investments?
    The USA have tax deferred401k retirement plans, which encourage larger retirement savings more effectively than the fixed tax credit for KiwiSaver. Also there are non-retirement tax preferred
    schemes such as 529s to encourage people to save for their children's education. Various states have other schemes too I believe. In the UK they have had non retirements tax reduced pep (personal equity plans) for shares and fixed interest investments and ISA (individual savings account) with annual tax free allowances.

  18. #38
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    Quote Originally Posted by Bjauck View Post
    The USA have tax deferred401k retirement plans, which encourage larger retirement savings more effectively than the fixed tax credit for KiwiSaver. Also there are non-retirement tax preferred
    schemes such as 529s to encourage people to save for their children's education. Various states have other schemes too I believe. In the UK they have had non retirements tax reduced pep (personal equity plans) for shares and fixed interest investments and ISA (individual savings account) with annual tax free allowances.
    Locked in schemes. We used to allow life insurance premiums to be tax deductible. Australia's system of self funded retirees is interesting. In a nutshell - for those who have built up a decent income from investments and assets can forget about receiving their superannuation and in return pay no income tax.

    https://www.catchtherisingtide.com.a...ed-retirement/

    I have a few mates who have opted for the scheme. They're very happy.
    Last edited by fungus pudding; 02-09-2017 at 09:01 AM. Reason: added url

  19. #39
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    Quote Originally Posted by fungus pudding View Post
    Locked in schemes. We used to allow life insurance premiums to be tax deductible. Australia's system of self funded retirees is interesting. In a nutshell - for those who have built up a decent income from investments and assets can forget about receiving their superannuation and in return pay no income tax.

    https://www.catchtherisingtide.com.a...ed-retirement/

    I have a few mates who have opted for the scheme. They're very happy.
    The Australians also have an interesting way of dealing with Health costs with high income earners getting a rebate for private insurance premiums and an extra levy if they don't take out private insurance, if I understand their scheme correctly.

    And in the UK and Australia real estate and some other property transactions often have stamp duties. However, true, there are various caveats put on the financial investment schemes. However the incentives to invest in financial investments, half-hearted though they may be, are more attractive than what NZ has in place for either retirement or non-retirement savings. Hence the continuing overwhelming appeal in NZ to use the tax-preferred owner-occupied housing as a means of investment as well as the provision of home and shelter.

    At least the NZ imputation scheme was introduced to resolve the double taxation issues from NZ dividend payments. A next step will be to eliminate the taxation on the inflation component of a fixed interest investment's return.

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    Quote Originally Posted by Bjauck View Post
    The Australians also have an interesting way of dealing with Health costs with high income earners getting a rebate for private insurance premiums and an extra levy if they don't take out private insurance, if I understand their scheme correctly.

    And in the UK and Australia real estate and some other property transactions often have stamp duties. However, true, there are various caveats put on the financial investment schemes. However the incentives to invest in financial investments, half-hearted though they may be, are more attractive than what NZ has in place for either retirement or non-retirement savings. Hence the continuing overwhelming appeal in NZ to use the tax-preferred owner-occupied housing as a means of investment as well as the provision of home and shelter.

    At least the NZ imputation scheme was introduced to resolve the double taxation issues from NZ dividend payments. A next step will be to eliminate the taxation on the inflation component of a fixed interest investment's return.
    What is the inflation component of a fixed interest investment?

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