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APR 10

Tax Reform




There is a great thread on Interest.co.nz, it starts here:

http://www.interest.co.nz/ratesblog/index.php/2010/03/31/90-seconds-at-9am-us-confidence-up-greek-bond-failure-irish-bank-shock-nab-to-buy-axa-austnz/#comment-68509

 

Lower broader taxes require a capital gains tax. Absent capital gains taxes our farmers have really farmed capital gains and potentially stuffed us all – reference a comment in another thread recently.

 

http://www.interest.co.nz/ratesblog/index.php/2010/03/25/have-your-say-should-may-wang-be-allowed-to-spend-nz1-5-bln-on-dairy-farms/comment-page-5/#comment-68061

 

The hot years of the ponzie scheme saw huge money flow into assets, drove up the currency and drove down the returns to the traded sector. We lost stuff offshore, we invited third world conditions into our economic zone and continued to sell, whenever possible stuff that can’t move to offshore interests.

 

To the point where New Zealand is now close to or in negative equity if assets were represented at their current market value.

 

I can see the tension between “planned” and “free” – neither is optimum. The world is complex, the more sophisticated the market response the more complex are the choice. There is not a single developed economy that does have policies that seek at one end direct and at the other influence what an economy does. In a complex world it is impossible to pick winners, but it is possible to incentivise behaviour that results in growth. Furthermore few advocate doing in New Zealand what can be done cheaper elsewhere.

 

But we need to be careful about the assessment of “cheaper elsewhere” is it today’s price? What about tomorrows price, what about carbon differences, what exchange rate is used, what interest rates. One thing is pretty sure once we lose some capability or other it is likely gone for good and thee cost of access is likely to increase.

 

Think about what happens when we squeeze the margins of our tradeable sector, the thing that goes is investment and development for the future. Go to the MAF website look at the returns on millions in assets and I doubt you will sleep tonight.


http://www.maf.govt.nz/mafnet/rural-nz/statistics-and-forecasts/farm-monitoring/2006/sheep-and-beef/sheepbeef16.htm

 

Some think my position on tax is vindictive, attacking property owners. Not so, I own several properties and several businesses, my position is, I assert, based on objective analysis and experience.

 

However bent the system the rules are the rules and good luck to any who can make a buck under the rules. It’s yours you made it you keep it or spend it - your call. Maybe spare a thiught for those left holding the candle as the marking to market proceeds - we have a long, long way to go yet.

 

Regardless, the rules need to change, that much is manifest, the lower and broader is pretty much obvious to all - it needs to be done. It will be done at some point, that much is inevitable it is just a matter of time. Why you ask, simple; what we have now is not sustainable.

 

It is a shame that we have to get so deep into the hole to start digging out but such is life.
 


tags: tax, capital gains, farms
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