Red Alert

Archive for the ‘Revenue’ Category

$1.5 billion – for what?

Posted by on May 18th, 2013

Earlier this month Cabinet gave Revenue Minister Peter Dunne and the IRD $1 billion of your money to buy a new computer – and another $500 million just in case the Minister burned through your first billion too quickly.

The announcement was astonishingly vague.

Almost immediately we in the Labour Party located an independent review of the computer plan. In a document released to me under the Official Information Act we learned how KPMG reported:

We do not believe the timeline presented… is achievable. A programme of this complexity, where scoping and articulation of long-list options, a robust options assessment (critical for Treasury support) and the programme’s design (i.e. ordering of tranches and projects) have not yet occurred.

Now that John Key and Bill English have bought down their Blackjack Budget we can see KPMG were too diplomatic.

Here’s how the official Budget Economic and Fiscal Update (BEFU) 2013 (p64) defines the project:

Revenue – Transformation and Technology Renewal (Changed)

The Government is exploring options that will fundamentally change the way IRD manages its processes and data. Any changes could have material costs to implement (with capital and operating implications) and/or impact tax revenue collections. The Government is currently considering a programme business case and is yet to finalise the scope of the programme.

Unbelievable.

The National Government have committed $1.5 billion of your dollars to a project which hasn’t been fully considered and which isn’t even properly scoped. For $1.5 billion you could have two thousand experienced nurses providing essential care in our hospitals for 12 whole years!

Ordinary people in New Zealand are doing it hard. Ordinary people are worried about the lack of jobs, and how to put food on the table for their kids.

Too many ordinary people can’t dream of having a new computer in 2013. But Peter Dunne gets $1.5 billion for his, and he doesn’t even know which one he wants.

Or maybe the Minister with the casting vote in the shabby casino deal will blow the lot on ‘scope defining’ exercises. Either way it’s ordinary families who will foot the bill under National.

David Cunliffe is Labour’s Revenue Spokesperson.


What’s half a billion between the Government’s friends?

Posted by on May 8th, 2013

Half a billion dollars. $500 million dollars. It’s an almost unimaginable amount of money to an ordinary person.

Half a billion is almost a third of Police’s annual budget. It’s more than DOC’s entire funding.

It’s a year’s wages for 4,150 experienced nurses and 4,150 experienced secondary school teachers as well.

It’s $113 for every man, woman and child in New Zealand.

And it’s the amount National promised Peter Dunne last week for potential overruns in his “upgrade” of IRD’s computer system.

Yes, you read that correctly. I’m not talking about the known project costs – National has committed $1 billion for those.

The extra half a billion is just in case Mr Dunne blows through the first billion without getting the job done. It’s a shadowy “slush fund” equal to half the basic worked-out cost of the project.

And let’s be frank – the Revenue Minister’s reputation for basic maths hasn’t been strong of late. This year Dunne’s had to back down on reckless new taxes on car parks and iPads and laptops and cellphones, because Labour proved he hadn’t done his sums.

But what do the experts think? Well accountants KPMG reviewed Mr Dunne’s project at the end of last year and there appear to be real issues with the way it has been set up.

Here’s what KPMG said:

“We do not believe the timeline presented… is achievable. A programme of this complexity, where scoping and articulation of long-list options, a robust options assessment (critical for Treasury support) and the programme’s design (i.e. ordering of tranches and projects) have not yet occurred.”

Now Labour does agree the IRD’s FIRST mainframe is not fit for the internet age. IRD started as a revenue collecting department, but now it has responsibilities in KiwiSaver, child support and student loans.

But surely a project of this magnitude needs to be planned better than “give or take half a billion”? Especially after this Government’s total botch-up with Novopay.

It all beggars belief really, just as National and Peter Dunne will beggar New Zealand until they’re given the boot at the next election.


Op-ed: We all must pay tax – including multinationals

Posted by on April 12th, 2013

This op-ed was originally published in the New Zealand Herald.

On May 14 Australia’s Budget will introduce new requirements providing more transparency of tax arrangements by giant multinationals like Apple and Google. It’s a fair bet that just two days later, our Government’s Budget won’t.

Australia has chosen to front-foot an important global economic challenge while, once again, our Government sits on the sidelines.

The new Australian regulations will ensure companies with annual revenue above A$100 million ($122.5 million) will have their tax details published by the Government in a bid to ensure that all pay, and are seen to pay, their fair share.

The issue is sharpest for online sales, where it is possible to allocate costs and shift profits and tax liabilities across borders to low tax jurisdictions.

“As a matter of principle, taxpayers, whether they’re companies or individuals, should pay their proper rate of tax.” Most fair-minded Kiwis would agree with that statement by Australian Prime Minister Julia Gillard.

On April 2 the Herald’s editorial railed that “point-scoring outbursts will not solve [this] tax conundrum”.

I couldn’t agree more. Reasoned and considered debate on this complex issue is required. But that must not be an excuse for inaction. This is not a populist issue – it is an issue for a 21st century tax system and one that multiple jurisdictions and international bodies are grappling with, including the OECD and the Group of 20 industrialised nations.

Enduring solutions will require both a global response and a clear sense of what we expect of our tax system in New Zealand. But global co-operation is no excuse for local indifference, impotence or resignation.

Recent months have shown that we have a Revenue Minister who is more interested in tinkering around the edges.

Peter Dunne wants to tax New Zealanders’ use of iPads and iPhones but shies away from taxing Apple itself.

The Herald asked this writer if it seemed fair that in New Zealand Apple paid only $2.5 million in tax on $571 million in turnover. Of course tax is paid on profit, not revenue – and Apple NZ apparently made only $5.5 million in profit and paid 31 per cent tax on that. Fair enough?

Oddly, Apple shares have climbed 73 per cent from US$404.30 to $700.09 ($471,00 to 815.85) over the tax year to September 2012. Its global profits climbed from US$25.922 billion to $41.733 billion, or from 23.94 per cent to 26.66 per cent of sales revenue during that time. So why was its New Zealand arm so apparently unprofitable at less than 1 per cent of sales revenue, relative to Apple’s global operations?

New Zealand Inc’s inability to answer that question is exactly why the Australian Government will soon move to require transparency of tax arrangements for large firms. I would hope that as good corporate citizens New Zealand-based multinationals would welcome similar transparency here.

Let me put on record that Labour is not proposing new taxes in this area – we are researching and consulting on a widely recognised challenge: how to protect the tax base, improve transparency and reduce legal avoidance of existing tax obligations by global companies operating within New Zealand.

Globalisation is a fact, not a philosophy. The issue for all New Zealanders is how we deal with it.

Do we lay ourselves blindly open to the chill winds of international markets and simply take the tax affairs of multinationals on trust? Do we say it’s all too hard and bury our little heads in the Antipodean sand like the current Revenue Minister? Or do we learn to play a high-value global game like winners – including insisting that global businesses operating in New Zealand transparently pay a fair and equitable share of tax?

The answer matters because if multinationals avoid paying the taxes that are due, Kiwi mums and dads will be forced to pay more for their early childhood education, school “donations” and higher fees for taking their kids to the doctor. Or we will be told the services we need are no longer available because we, as a country, can’t afford them any more.

We are increasingly paying a high price for growing inequality. We have a right-wing Government moving to “targeted” social funding because even it is not blind to the inexcusable, ghastly truth that 270,000 Kiwi children live in poverty.

But that, once again, will be at the expense of working and middle New Zealanders facing more intrusive, penny pinching local taxes – from car parks to phones to Christchurch rebuild accommodation. These are the result of the Government balancing their books at the expense of yours – while waving the proverbial wet bus ticket at multinational tax avoidance.

Our tax system must be fair to all – and that includes multinationals paying their fair share. Because in the end somebody has to pay.

David Cunliffe is Labour’s Revenue Spokesperson.


Holding on (and on and on and on…)

Posted by on April 10th, 2013

After four long years it’s obvious the National-United Future Government has no plan to turn around New Zealand’s economic decline or fix the unfair tax system.

The common theme of the Government’s legislative programme is it’s all tiny, tinkering, distracting little changes which ignore the big issues.

This year MPs have had interminable debates about petty new taxes on car parks and iPads and cellphones and laptops – with the sole result being that Revenue Minister and United Future leader Peter Dunne has had to back down on all of them, after Labour demonstrated how the minister hadn’t done his sums.

So if Mr Dunne isn’t doing his job of crafting workable tax laws, then surely he must be very busy overseeing his IRD department? Um, no, he’s not.

I reckon Kiwis who’ve tried to phone the taxman this week will be absolutely pulling their hair out.

A few weeks ago Peter Dunne assured me the IRD was adequately staffed to deal with the poorly-communicated 1 April tax changes. Well the Revenue Minister’s credibility today is as shot as the economy.

Try phoning IRD for yourself. It won’t take long, because they’re not even bothering to put people in a call queue – they just play a message saying they’re too busy and then they hang up on you.

(Now, if you really do want to torture yourself like that, please make sure you’re sufficiently wealthy and of a generation inclined to have a landline rental, because the IRD won’t accept 0800 calls from cellphones. With wait times stretching on and on, many people would need more call credit to phone the cellphone-acceptable number than they’d owe in tax).

If, however, you’re not a glutton for frustration you could try writing a letter to the IRD… but you might never get a reply.

Because now the Peter Dunne has admitted his department have no performance indicators for responding to postal transactions. Not one! None!

They might chuck your letter in the bin unopened for all the Revenue Minister cares.

Last year Dunne slashed IRD staff by 7% and this year he’s fluffed around in his cushy ministerial limo creating endless tiny, tinkering new taxes which he didn’t even bother to cost, all while the 1 April changes were looming.

And now the chickens have come home to roost.

But, as usual with this Government, it’s ordinary Kiwis who will pay the price in time and worry (and cellphone credit) for ministers’ incompetence – and they’ll pay an even bigger price if they mix up their tax obligations, no matter how many times they’ve tried to phone the IRD and no matter how many letters they’ve written.

Filed under: Revenue, Tax

Tax pain time

Posted by on March 26th, 2013

Next week thousands upon thousands of New Zealanders will wake up to a cut in their take-home pay because of policy decisions by the National/United Future government.

From 1 April 2013 the minimum KiwiSaver contribution is increasing from 2% to 3%, while the Student Loan compulsory repayment jumps a whopping 20% to 12 cents in every dollar earned over the repayment threshold.

Now Labour stands for a gradual move to universal, employment-based KiwiSaver contributions over time, because that will grow the economy and secure savers in retirement.

But with unemployment today at record levels, and with so many families only just getting by, it’s crucial that changes which hit people in the pocket are well-signalled and well-understood before they take effect.

Complex communications around tax changes need to be relevant. Some Kiwis watch the 6pm news; others will see billboards on the daily commute; and web-savvy students might expect important information to be pushed to them through social media.

Ultimately the obligation for quality communications falls squarely to Revenue Minister and United Future leader Peter Dunne.

But over and over again I’ve heard that many Kiwis have no idea how next week they’ll have less cash-in-hand to feed the kids and pay the mortgage.

That’s not good enough from Mr Dunne. That’s not good enough from the National/United Future Government.

Now too many Kiwi taxpayers find a phone call to the IRD an exercise in frustration.

But you can bet there’ll be lots of calls on pay day next week.

Too often people who phone the IRD contact line get put in a long, long queue (last time I tried I waited 45 minutes).

Even worse, callers are sometimes flatly told by a machine “We’re too busy – call back later” then disconnected. This is just not good enough. It is the taxpayer who is liable if issues are not resolved. Any Government has a duty to facilitate good compliance.

Therefore it’s a bit of a worry that IRD had its staffing slashed by 6% last year.

Who is going to answer all the calls?

And with the external communications so lacklustre, how can we be confident that Peter Dunne has ensured IRD’s own staff know what’s going on?

Fortunately (for the first time in quite a long while) Mr Dunne has pinned his colours to the mast.

I asked Dunne Parliamentary Written Question 1401 (2013), and here’s what the Revenue Minister has assured the public:

Portfolio: Revenue
Minister: Hon Peter Dunne
Question: Is he confident that the Inland Revenue Department is adequately staffed to manage any requests from businesses related to the change in minimum KiwiSaver contributions?

Answer Text: Yes.

Next week we shall see whether Peter Dunne’s word is more credible than his department’s communications.


United Future’s awful week

Posted by on March 19th, 2013

Poor Peter Dunne. He’s having one heck of an awful week.

The sad thing is the United Future leader used to be quite diligent back when his party had a confidence and supply agreement with the 2005-2008 Labour-Progressive Government.

But Labour were diligent to Mr Dunne too. We respected United Future and we were careful to consult with their leadership on revenue matters and keep lines of communication open.

Perhaps, though, in the four years since as John Key’s Revenue Minister, Peter Dunne might have become too comfortable in his cushy leather-seated limo.

Mr Dunne has royally stuffed up with his attempt to ram through uncosted and unfair new taxes on car parks and iPads and cell phones and laptops, and goodness knows what else which hasn’t come to public light yet.

The mobile phone tax is a 1980s idea completely out of touch with New Zealand families in the twenty first century. What about the benefits of flexible work, especially for working mums? What about New Zealand-led companies working across multiple time zones (or the generation of Kiwi parents who have to phone Australia to talk to their kids)? How about encouraging the bright young Kiwis who’ve stayed here to be web warriors and build a high-value knowledge economy!

But let’s set aside for a moment the merits of the new taxes.

(Although, for the record, the car park tax made zero financial sense, would not have grown jobs or the economy or reduced crime, and had nothing whatsoever to do with a plan for better public transport.)

The really shocking back-story to this tax debacle has been the total contempt which Prime Minister John Key has shown for Peter Dunne and the United Future Party.

Twice in two days Mr Key has publicly put the kibosh Mr Dunne’s new taxes by speaking directly to journalists. Each time Mr Dunne has carried on, seemingly oblivious to how he’d just been thrown under the bus by National’s leader.

Today, in the seeming back down on the iPad and cell phone tax, John Key announced “there is virtually no chance of it going ahead” only minutes before he walked into Question Time.

That left Mr Dunne to struggle on under questioning, seemingly oblivious to how his IRD officials were wasting time and taxpayer money finalising another new tax which was already dead as a dodo.

Now Peter Dunne might have grown tired and reckless as Revenue Minister – and I will continue to highlight how on behalf of New Zealanders.

But, ironically, the reality is John Key relies on Peter Dunne to prop up his fraying Government.

That’s precisely why there is a formal confidence and supply agreement between the National and United Future parties.

Crucially the agreement demands confidentiality and collective responsibility. Well, United Future members can see there’s been none of that from the Prime Minister this week.

So, with the new taxes ‘dodo’, United Future’s membership need to ask why they’re being used to prop up the National Government. Because it’s clear that National have nothing but contempt for them and their leader.


The no credibility car park tax

Posted by on March 15th, 2013

 

FBT Action Group bumber sticker

New Zealand desperately needs a fairer tax system.

Labour stands for a capital gains tax because wage earners carry the can for wealthy property investors who too often pay almost no tax at all.

We support progressive tax rates because it’s wrong for the poorest in our society to subsidise big tax cuts for the richest.

Opposition to the National/United Future Government’s new car park tax unites unions and business because its administration will cost more than the tax will collect. That’s just crazy.

And those administration costs will disproportionally hit the poor, because it’s vulnerable female cleaners working at night for minimum wage who’ll lose their safe parking (not the bigwigs).

Labour stands firmly for better public transport in Auckland. But the car park tax simply isn’t intended to deliver that.

Any theoretical revenues from the new tax are earmarked to be chucked down the deficit hole.

That’s because the National/United Future Government have staked their entire economic credibility on two measures: reducing taxes and returning the Crown’s books to surplus.

Well they’ve completely failed on the tax reduction front. John Key and Peter Dunne have introduced more new taxes than any Government since Rob Muldoon. As well as the car park tax we’ve had the paperboy and papergirl tax, the increase in GST, higher prescription charges for the elderly, pickpocketed tertiary students, and cuts to services all over the show. Last week they even announced a rapacious tax on Christchurch rebuild workers’ accommodation!

With regards to returning the books to surplus, well we’ve had 4 years of John Key’s deficits. And the only thing New Zealand has to show for forced austerity are these new taxes which make zero financial sense.

So the National and United Future parties aren’t just scraping the bottom of their own credibility barrel – they’ve dug right through and they’re on their way to Greece.

It’s time for this Government to come clean and acknowledge their trickle-down dogmas don’t work in the real world.

It’s time for a plan to make New Zealand’s tax system fairer so we can see sustainable growth in jobs and the wider economy.

And a very simple start would be dropping this costly and absurd new car park tax.

Motivated by the pressure from their traditional backers and funders, I won’t be surprised if National concede on the car park tax pretty soon. If so, expect to see Tory ministers abrogate collective responsibility as they desperately try to shift blame onto United Future and Peter Dunne for this debacle.


Tell us it’s Dunne and dusted now Peter

Posted by on March 13th, 2013

United Future leader and Revenue Minister Peter Dunne’s belated recognition that he holds a casting vote in John Key and Steven Joyce’s shonkey SkyCity convention centre deal is welcome.

The question remains, however, whether Dunne will use his veto to stop the sale of our country’s laws to a casino.

Because he most certainly should.

By Dunne’s own admission the National Government “did play very fast and loose at times” during the rotten tender.

The Deputy Auditor-General was more clear – the deal was “unfair” and managed so the “SkyCity proposal was always going to be the most attractive”.

Last week Dunne (finally) appeared to lay down a challenge to the National Government which he otherwise supports:

There is a time-bomb warning to the government here. Support for the cut through approach will wither if it is seen to be a standard proxy for bending the rules or doing special deals to achieve the desired outcome. While the government is not immediately vulnerable on this issue, the clock has started ticking.

And it is worth remembering the adage, the ends do not justify the means.

Well National has responded to Dunne’s challenge.

I asked Steven Joyce written Parliamentary question [1307 (2013)]:

Does he regret any of his actions as Minister for Economic Development related to the Government’s decision to negotiate with SkyCity Entertainment Group Ltd for an international convention centre; if he does, which actions?

And Joyce has (finally) responded with one word:

No.

This is just about the only time I can recall the Economic Development Minister giving a straight answer to any question. But what an answer it is.

With one word Joyce has confirmed he’s learned nothing from the Deputy Auditor-General’s scathing criticism. He’s thumbed his nose at fair and proper process, at accountability to the people of this country, and at their hard-earned (but fast fading) reputation for having the lowest level of Government corruption in the world. Joyce has effectively confirmed that so long as he’s a Minister he’ll trade New Zealand’s laws if he sniffs a special deal for the big end of town.

So there you have it Peter Dunne. National do think the ends justify the means. The time-bomb has exploded.

And you – and only you – can put a stop to this madness.

The question the whole country wants to know is whether you will. So do it today Mr Dunne.


Dunne and dusted?

Posted by on February 26th, 2013

There is a fundamental difference between the rows and rows of casino pokie machines at SkyCity and the single machine down the local.

Pub pokies are required to return all profits and 37% of revenue to the community, by funding programmes like sports clubs and cancer research.

SkyCity’s machines, meanwhile, return only 0.8% of revenue and a pathetic 2.5% of profits. Talk about the House winning!

As John Key has attempted to squirm away from the scathing Deputy Auditor-General’s report into his trade-the-law convention centre deal, he’s taken to waffling about a “sinking lid” (or overall cap) on pokie numbers in wider Auckland. Now a sinking lid might potentially be a useful idea. But let’s be clear – it’s Council policy, not necessarily the country’s law.

The way Mr Key’s shonkey casino deal is shaping up, the big end of town’s lid will go up. Meanwhile the rent on the non-casino gaming sector will go down, and with it the Crown revenue.

That’s because the PM’s plan isn’t just for a convention palace. It’s about allowing hundreds more casino pokies which don’t distribute their revenue and profits to the community, and fewer pub pokies that do.

The Māori Party are probably opposed to the key polices of the pokie deal. John Banks will probably do anything John Key tells him to do.

So, ironically, the solution to this shambles (and revenue hole) seems to lie in the sole vote of Revenue Minister Peter Dunne.

The immediate question, then, is whether Dunne will pull the plug on the whole fetid casino convention centre deal. Or whether he won’t.

And the really key question is how many Kiwi kids will never learn to swim if the SkyCity deal goes ahead – and what will be the effect on the country’s deficit.

Rewriting history

Having been slammed for its “unfair” casino deal, National’s spinmeisters are rewriting history. Again.

Let’s set the record straight.

In 2001 Judith Collins was chair of the Casino Control Authority. Her authority used powers delegated under the Casino Control Act 1990 to approve a $37 million expansion at SkyCity’s Auckland casino – with new gaming tables and pokies and all the social misery they cause.

So Labour abolished the Authority. We chucked the 1990 law out.

Labour bought in new legislation to control the growth of gambling, prevent and minimise the harm caused by gambling, ensure the money from gambling benefited the community, and ensure the system was fair with limited opportunities for dishonesty.

Today John Key’s National government are trying to do the exact opposite. They’re set to change the law to allow more pokies for the big casino in central Auckland.

There couldn’t be a more fundamental difference.

National’s proxies who are pushing the revisionist spin in the blogosphere are being played for suckers.