Monthly Archives: Nov 2018

Capital Gains Tax: Now or never says Sir Michael Cullen

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Sir Michael Cullen, head of the Tax Working Group, has indicated that New Zealand is in a phase where best time to adopt a Capital Gains Tax is now, or we never take it. The comments come as the T.W.G. prepares to release its report into New Zealand’s tax structure and the changes that are recommended nearly a month early.

Dr Cullen was Treasurer of the Helen Clark Government from 1999-2008. During his time the governing Labour Party ran up significant budgetary surpluses. A capital tax was discussed on occasion, but never seriously considered as it would have been likely to give National and A.C.T ammunition for their campaign against higher taxation.

The report that Dr Cullen is preparing for Prime Minister Jacinda Ardern and her Treasurer Grant Robertson also deals on the ins and outs of a Capital Gains Tax. They are part of a Government of the only country in the O.E.C.D. that does not have a capital gains tax.

I personally have no problem with the tax if it means that the country’s high levels of social inequality can be addressed. I note that Australia only collects C.G.T. on realized capital gains, whilst Canada collects tax on 50% of realized capital gains on an individual tax rate. It is different in the United Kingdom where individuals who are residents or normally reside in the U.K. and are on the basic tax rate, pay 18% C.G.T. on profits from residential properties and 10% on gains from other chargeable assets. In the United States individuals and corporations pay on the net total of their capital gains. In Sweden’s case the C.G.T. may be up to 30% of realized capital income depending on the depot type..

Not surprisingly National have attacked and said that any C.G.T. will be disbanded should they win the 2020 election. A.C.T., the one man band of David Seymour, have said the same, with a dogmatic, ideological blindness in much the same way, Greenpeace have a blind dislike of oil and gas.

New Zealand First, who enabled Labour to get into power have thus far not said anything on the ins and outs of the C.G.T. It is possible that they are waiting for the report to be finished so that they can address internal ructions without a media circus taking hold.

What could a C.G.T. look like then?

I do not know whether a single C.G.T. rate that covers all forms of capital would be appropriate or not, or whether a better idea is to append the tax to assets and let the C.P.I. determine whether it increases or decreases.

I certainly believe that secondary properties that are not ones one normally resides in, but owns and may have holidays there should be taxed. As I am not believer of having anyone other than permanent residents and citizens own property, it would restricted to these people.

When would it be implemented?

National is committed to repealing it, as is A.C.T. Introducing one before the election gives them a visible target to aim at. Waiting until after the 2020 General election is therefore probably the most likely outcome.

China and New Zealand

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I have much time for China as a nation. Put aside the geopolitics, the politicians, their territorial ambitions, economic issues, human rights violations and so forth just for a moment. Take off your rose tinted blinkers and you have a nation whose contribution to civilization has been as great as any western power

China has made huge contributions across the course of history to civilization. From being a cradle of civilization 350,000 years ago to having a smorgasbord of ethnicities and dialects, covering one of the largest and most geographically diverse land masses in the world

China discovered gun powder around 1000AD, sometime before the Europeans realized its potential. They invented the first seismograph, which is dragon figure with 8 heads,and each one had a ball with a different weight and density. In an earthquake the strength of the shaking determined which ball would be released. Other notable inventions include the compass, paper and alcohol.

Chinese explorers such as Admiral Zheng He, who commanded expeditionary voyages throughout south and southeast Asia, western Asia and also to parts of eastern Africa. Another explorer Gan Ying may have reached Roman Syria shortly after the death of Christ.

Fast forward to the 21st Century and you have a world super power whose ambitions are as great as they were during their numerous dynasties. In military, economic, social and cultural power you have a nation looking for a suitably large sphere of influence. The difference is that with many fold more people and an established system of nations as opposed to dynasties, the rule of international law as opposed to the whim of the ruling dynasty, achieving that sphere of influence that imperial China might have had in the middle ages is no longer possible, yet the politicians – bent on greatness – try nonetheless.

New Zealand walks a delicate tight rope through the South Pacific. Whilst it is very definitely our sphere of influence, it is one that both the United States and China are keen to exert their own designs on as well.

New Zealand, like other nations, cannot do without Chinese trade. It is worth billions of dollars per annum to New Zealand and an implementation of sanctions because New Zealand upset Beijing over something is a serious matter.

But New Zealand needs to be wary of Chinese Government ambitions. It has stealthily inserted itself into the affairs of nations around the world. The South Pacific has not been spared with a new wharf being funded in Niue, the recent A.P.E.C. meeting in Papua New Guinea. It has been trying to build a naval base in and is propping up the local dictatorships.

Some of China’s actions have been brazen bullying. They have included officials storming into the offices of Papua New Guinea Prime Minister and demanding he make changes to an agreement that had been signed – Police had to be called and threatened to arrest the officials unless they left. Others have been subtle displays of soft power, but with a very definitive edge to them such as building infrastructure that smaller nations cannot afford using Chinese labour and material.

Around the Pacific its influence is spreading. New Zealand has not been an exception, and until today it looked possible that critical communications systems might have Chinese designs. The Huawei telecommunications company has been trying to establish itself as the builder of the 5G and possibly 6G networks, until today’s announcement that Spark had blocked their application. Spark, acting on the advice of the Government Communications Security Bureau, had deemed the the Chinese company to pose an unjust security risk in a time when there are growing concerns about its human rights record, treatment of media and tolerance of dissent.

The future is cloudy. How far will New Zealand go to appease China before it comes to the conclusion that it needs to make a stand for its own good? How far can it go? At some point in the relatively near future, I think New Zealand-Chinese relations might be in for a bit of a reset.

Is China interfering with New Zealand academics?

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Academics at University of Canterbury have urged Prime Minister Jacinda Ardern to speak out against the interference of China or Chinese nationals in the life of an academic who is an expert on their domestic affairs. The alleged interference against Professor Anne Marie Brady came to light after her Magic Weapons report into China’s application of soft power pressure in aspects of New Zealand such as education, media and politics, created ripples last year.

Ms Ardern has instructed intelligence agencies to investigate whether China has targeted Ms Brady. She says that if a report linked China to such activity then she would be prepared to act.

It would not be the first potential case of a foreign power interfering with New Zealand academics who have stumbled on in the course of their work goings on that are sensitive to said power. The tactics used have been similar to what Dr Brady says has happened to her.

To me such strong reactions indicate that the researcher has discovered something that could be criminal or politically embarrassing for a nation.

In 1999 China was accused of trying to make the police arrest protesters near a state banquet that the then Premier Jiang Zemin was due to attend. It is understood that Mr Zemin did not want to see protesters and was prepared to delay his arrival until they were moved/arrested. New Zealand Prime Minister Jenny Shipley was accused of asking the police to move protesters on. In the end the police said that they acted to preemptively to prevent Chinese security officials doing something more serious.

During other visits, Chinese officials have complained about New Zealand M.P.’s namely Rod Donald, Russel Norman and others from the Green Party of Aotearoa New Zealand.

In other incidents, Sajo Oyang, a Korean fishing company with vessels operating out of Lyttelton, is thought to have been behind intimidatory behaviour around investigations into alleged human rights abuses on those vessels. Whilst this does not appear to have involved the South Korean Government, the characteristics of the intimidatory behaviour appear to have been similar to that suffered by Dr Brady. At the time of these occurrences, Indonesian crew on the vessels had left the vessels and sought legal assistance over the human rights abuses they allege to have suffered.

Will New Zealand politicians have the gonads to speak out and say that this is not acceptable behaviour? I would like to think so, but I have my doubts based on past refusals to condemn activity of a bullying nature by other nations – most China. The most likely resistance would come from the Green Party Members of Parliament. The New Zealand First Members of Parliament who were so principled during their time on the Opposition and cross benches appear reluctant to continue standing on it. Labour Members of Parliament might have their hands tied by the neoliberal party it has become and its departure from that of Walter Nash and Peter Fraser.

Tasks for Julie Anne Genter on return to work

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Associate Minister of Transport Julie Anne Genter, who has been on maternity leave after giving birth to her first child, is back at work this week. Whilst she has been away there has been much going on on our roads, some of it good and some of it quite appalling.

As a result there are number of significant issues sitting on her desk:

  1. Action is needed on our soaring road toll, which is the highest in nearly a decade, having levelled with the 2009 total road toll with five weeks still left in the calendar year
  2. Requiring all road vehicles to have headlights that come on automatically – it is compulsory in Canada and was done to reduce the number of collisions caused in poor visibility
  3. A promise was made to invest $300 million into Christchurch transport as part of the rebuild programme following the earthquakes – let us set priorities for that spending and get on with it
  4. Investigate getting bulk material such as petroleum onto suitable railway carriages and reduce the number of large tankers and such vehicles on roads that are not designed for them.

Whilst these are all good things to be tackling some bigger beasts need to be tackled as well. One of them is reforming the New Zealand Transport Authority from one that is heavily road oriented, into one that works for all modes of transport and their users instead of a lucky chosen few. This is essential work to be done because N.Z.T.A. put little emphasis on rail and the merchant marine, which are better able to move large volumes of material, goods or fuel and are not likely to have to stop as frequently to refuel themselves.

Another one is addressing our carbon challenge. With the Government having announced an impending – even if it is some decades away from fully implementing – ban on oil and gas, we need to significantly up the efforts to develop sustainable, carbon neutral alternatives, which is something that is currently not happening.

It might seem strange to be putting so much emphasis on an Associate Minister, but Ms Genter is the true force in the Transport portfolio, and I think it is only a matter of time before she takes it off Minister Phil Twyford. It is important to note that Ms Genter did her postgraduate research in transport planning and has been the Green Party spokesperson for it since she entered Parliament. Mr Twyford has so far been underwhelming in his ministerial portfolio’s and Transport has not been an exception.

So, I welcome Ms Genter back. The time has come to do some serious policy lifting and before the 2020 election I am expecting to see some significant announcements come from the office of Ms Genter including maybe that she has taken over the portfolio.

The doubled sword of Crown Minerals Act change

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It has been presented in the media as a double edged sword. On one hand we have the well publicized statement by Prime Minister Jacinda Ardern with full support of the Green Party that by 2050 oil and gas will be banned in New Zealand. On the other the more pro-development New Zealand First Member of Parliament and Minister for Regional Development Shane Jones is touting a $1 billion hydrogen gas development in Taranaki.

Taranaki in the 1980’s had a very large energy projects underway. These were part of the Robert Muldoon Government’s “Think Big” scheme which called for large industrial projects that would create hundreds of thousands of jobs, boost the New Zealand economy and address significant energy shortages. They included a methanol plant at Waitara and a synthetic fuel plant at nearby Motunui.

Now in 2018, Mr Jones is talking about the possibility of an American consortium developing a multi-billion dollar emissions free plant based on existing technology. 8 Rivers have announced a project in which they build a plant using Allam Cycle technology that they developed in the United States and which is used at a plant in Texas.

Whilst I am interested to see how the technology will be used and what any Government feasibility study will show, I have some concerns on both sides of the fence. Notably:

  1. It might be emissions free technology, but how will the gas be extracted. If it is fracking one can expect significant resistance from the Greens/Greenpeace over potential damage to groundwater, and other parts of the environment – one can also expect resistance purely based on ideology as well
  2. Who would fund it? My parents generation will be wary of anything that looks like another “Think Big” project on the grounds of the parlous financial state that the original ones left New Zealand in
  3. How would the American consortium construct the project and would New Zealand communities nearby receive due benefits for hosting it

Not surprisingly, especially with the Government’s statement on ending oil and gas by 2050, there is excitement among local businesses and Mayors, keen on getting some confidence back into a region heavily reliant on energy projects.

Back in 1979 when the Muldoon Government was pushing for energy independence, New Zealand was probably not ready for such ambitious projects and their costs. Despite worsening Middle East tensions and the rises in the price of oil caused by the fall of the Shah in Iran and the Arab oil shock of 1973 following the Yom Kippur War, compared with the price of petroleum today, it was even then quite low. Our transport system, energy market and infrastructure was not ready for something that then was probably a couple decades ahead of its time.

But 40 years later with concerns about the impact of fossil fuels now widely advertized and concerns about energy dependence in the future justified, this debate rears its head once again. The sword being wield though, depending on which side of the blade strikes you, is another thing all together.