Want a fair New Zealand? Then Stop Your Cheatin’ Ways

Met a builder out on a stroll this weekend, told me how much he liked TOP’s flagship policy on closing income tax loopholes.

“I’m sick of working for buggers who want me to quote a price for a “cashie” on their mansions”, he said, “They are proud of how little tax they pay, how the property market has made them rich. It sticks in my craw to think these guys, who are just so well-off, can’t get cheating the tax system out of their minds, it’s sick”.

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And there you have it, a young fella right in the thick of the property sector who just sees tax cheating all around him, who sees quite clearly how tax cheating raises the burden of tax on everyone else. He would love to expand his operation but just can’t raise capital – because of course as a household sector we save bugger-all, and what we do save we leverage up and speculate on property. He yearns for a world where everyone gets a fair go, where we all pay our fair share of tax, and where investment capital is not all soaked up in property speculation. He is “aspirational”  Paul Henry.

Then there are my friends who have hardly ever paid a dollar of tax in their lives, but own a few houses and live well. Their secret? They buy a house do it up and either sell it after a couple of years or gear up and buy another, living off the mortgage in the meantime. They hate TOP’s tax rebellion – “this is the only way we know how to make a living”, they plead.

Are you like me and yearn for the days when you never had to lock your car or house? Those are simple but meaningful outcomes from a fair society, where everyone being given a ‘fair go’ is second nature to us all. If you drive inequality ever higher then you lose those sort of values. We can get them back but it takes a concerted effort by us all, first recognising that many of us enjoy tax privileges not available to all. Such discrimination is just wrong – the game is rigged. Do too much of that and the people discriminated against lose respect for the system, crime rises.

TOP’s tax rebellion is the most significant reform since income tax was introduced, at least on a par with the introduction of GST. And like GST the goal is to have no exceptions. Many people don’t realise it is not an additional tax (indeed not one dollar of additional tax is taken and we get 80% of people better off). What it does is close a loophole and that has had far-reaching implications for New Zealand’s low savings rate, lack of local capital for business, and terrible record on productivity. It’s not just about stopping the property market rort, it’s more far-reaching than that. It has a major impact on the business sector.

Under this reform all businesses have to declare an income for tax that is at least (say) 5% of the capital the business have deployed. If a business already does that then the TOP policy has no affect on them. But if their gross taxable income is say only 3% of the capital they have on their balance sheet, then they’re liable for a tax TOP-up.

Of course there will be allowances for “temporary” losses in terms of cashflow relief, but there will be no more businesses in New Zealand that run at losses year after year and by so doing, escape all tax liabilities. Those businesses deliberately structured that way to avoid tax, and intended as a tax shelter for their owners, will be a thing of the past.

You could see the policy as an attack on lazy capital – if you can’t provide a credible return on capital (that is more than you can get for no risk at all from investing in government bonds), then you will pay the difference. The truth is of course that this capital isn’t lazy, because people aren’t that stupid. They are getting a return on capital, but in ways that ensure that return isn’t getting taxed. There are a variety of loopholes here, and our tax rebellion is the most efficient way of closing them all.

TOP’s whole policy approach is driven by fairness. We believe that prosperity cannot be sustained on a foundation of privilege and discrimination. Fairness and prosperity go hand in hand.

People ask me which voters TOP is targeting. The best way I’ve found to answer them is to outline who we’re not targeting. Firstly the political extremes of Hard Right and Loonie Left are well outside our target – these are the folk who have deep ideological positions that are either self-centred or in denial of extraordinary reward for effort or genius. To us those positions are simply untenable for civilised and prospering societies.

Secondly there are the Established Party loyalists – those who vote for their party right or wrong. This type of tribalism is just too far beyond rational thought for us. We’re only into evidence-based policy, the antithesis of post-truth politics if you like. Besides, these tribal voters never determine elections, they’re irrelevant in fact, voting as they do time after time for the same party.

No, our target is the voter who has an open mind, who cares beyond their own self-interest, for whom fairness is a core value, and who is prepared to invest if called upon for a fairer and more prosperous New Zealand.

Voting statistics would suggest that these folk make up less than 40% of voters, they are by definition the only ones relevant to an election outcome.

 

Image by Steven Depolo