Consensus Politics and When Does Tax Avoidance Become Evasion?

By   /   May 2, 2013  /   11 Comments

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“In New Zealand, we have very few guiding philosophies that create societal expectations around how we live and operate. One fundamental expectation is that you pay your fair share; no more, no less… But what really pisses me off is when I see some of our most successful go to great (legal) lengths to avoid not only not paying their fair share, but not paying anything at all.!”

Beehive Removals. Image courtesy of Scoop Media, by Lyndon Hood.

Beehive Removals. Image courtesy of Scoop Media, by Lyndon Hood.

Consensus ≠ compromise – A friend of mine complained to me a while ago that he had paid $2m in tax the previous year and asked how this was fair. Knowing roughly his net worth, I replied that he was significantly privileged to be one of the very few who had the ability and the means to choose where they live in the world. He could move to any tax haven anywhere around the globe and have a very good life, but for whatever reason, he had chosen to live in New Zealand. After the forth beer he threatened to move to Dubai, but that was two years ago and his kids are still enjoying a first class NZ state education.

In New Zealand, we have very few guiding philosophies that create societal expectations around how we live and operate. One fundamental expectation, however, is that you pay your fair share; no more, no less. How successful you are will determine the exact amount of that share, but whatever the sum, a ‘fair share’ is not supposed to be onerous, or unduly penalize the successful or dissuade the wealthy. And I don’t believe it does. But what really pisses me off is when I see some of our most successful go to great (legal) lengths to avoid not only not paying their fair share, but not paying anything at all.! At least my grumpy friend actually pays tax.

As Labour’s Revenue Spokesman last term, I did a lot of research and work around the Capital Gains Tax initiative. The result was a paper justifying the introduction of such a tax. The interesting thing is that I actually started with the premise that we didn’t need a CGT, but simply needed to tighten up current tax law. I soon realized my initial premise was flawed and that a CGT is vital to any efficient and fair tax regime.

Phil Goff realised this too. I have been told by a very reliable source that Bill English privately believes we need a CGT, and that a number of backbench Nat MPs were advised to keep quiet on this policy in case they wanted to introduce a CGT themselves in a post-Key future.

So Phil did what was right – and very courageous: he approached John Key and said that Labour would promise to work with his government in a bipartisan way in developing a CGT. Key said no. In my view, one of the greatest missed opportunities of Key’s lackluster tenure.

So what’s the point of this story? Well, I believe that consensus politics on key issues, where ideological barriers shouldn’t prevent dialogue, is the way of the future. Occasionally, this does happen on big ticket items, but not often enough. And I also believe there are many more such issues that a bipartisan approach should be taken than are immediately obvious. There is no ideology around a CGT; just politics. All-but-one tax expert, the vast majority of economists and all economic commentators actually supported Labour’s policy; and these aren’t gentle men and women who have the date for the Labour conference inked in their diaries.!

Labels such as ‘left’ and ‘right’ are of no consequence. I have been called ‘left’ by those on the right and ‘right’ by those on the left, and yet there is no sharp picket fence I sit on when it comes to developing and promoting policies that will drive sustainable economic growth, create jobs, lift children out of poverty or put more money in the back pockets of good hard working kiwis. Of course there are massive differences between Labour and this government, and I am not suggesting for a moment, Labour try and become ‘National lite’, but there are people in places of influence who have ideas that need to see the light of day. And heaven help me – they do not wear red underwear to bed, but they are Kiwis who simply want what’s best for our wonderful, but fading, country.

My brief experience is that they will talk to anyone who will listen. And if an MP isn‘t smart enough to distill good advice, ideas and concepts from bad, then perhaps a more appropriate job awaits them outside of parliament.

The bottom line is that I am an idealist, a social democrat, a Kiwi, but also an arch pragmatist. Personally, I don’t care who you voted for in 2002; if you can show me an idea that fits my personal philosophy around equality of opportunity, I am more than happy to work it up into a policy that will either drive sustainable economic growth, lift children out of poverty, create jobs and/or put more money into the back pockets of hard working Kiwis, because to me, making a real difference is what politics is about.

Editor’s Note: This is Stuart Nash’s first article with The Daily Blog.

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11 Comments

  1. Pete George says:

    Some inteersting points. I agree with the need for more pragmatic cross party policy development.

    “One fundamental expectation, however, is that you pay your fair share; no more, no less. ”

    That’s idealistic. In real life there’s always been an attitude of tax avoidance, from the top of the business ladder to the mates rates, home jobs, under the counter, fiddling personal costs as business expenses, dealing in stolen and illegal goods and more recently trading on the Internet.

    It’s a very common inclination to avoid paying what Government deems to be your fair share.

    “drive sustainable economic growth, lift children out of poverty, create jobs and/or put more money into the back pockets of hard working Kiwis”

    Not a strong close using well worn political cliches that don’t really say anything about yourself.

    • Stuart Nash says:

      I always find it interesting when i write about “alleviating child poverty, creating jobs, sustainable economic growth and money in the back pockets of good hard working kiwis”, and am told that I am simply reciting ‘well worn political cliches’ or simply toeing the party line.

      It may well be the party line, but that’s why I am a member of the Labour party. I fundamentally believe that it is the government’s role to come up with policies that alleviate poverty, create opportunity while achieving sustainable economic growth.

      But I don’t just recite party lines; I endeavour to write policies to ensure that the type of change I so desperately want to see can actually be achieved. In fact last term, as Revenue spokesman, I was the only MP to write a substantive paper on tax – including, but certainly not limited to, the justification for the capital gains tax (our researchers – led by the exceptionally capable David Choat and Kate Challis – wrote a number of supplementary papers fleshing out a whole raft of ideas, concepts and plans and added significant value, and BERL were commissioned to test all our assumptions, so I certainly don’t claim to have done all the work), and I also wrote papers on Forestry and economic development.

      My point is that it is one thing talking the talk, but another walking the walk, and I like to think my shoes are becoming well worn.

  2. Draco T Bastard says:

    There is no ideology around a CGT; just politics.

    Actually, there is – the ideology of free-market capitalism.

    I have been called ‘left’ by those on the right and ‘right’ by those on the left, and yet there is no sharp picket fence I sit on when it comes to developing and promoting policies that will drive sustainable economic growth,

    No, you’re firmly entrenched in capitalism and the unsustainable growth paradigm and poverty that comes with it – and so is Labour.

    …but there are people in places of influence who have ideas that need to see the light of day.

    And we’ve been listening to them for the last few centuries – it’s not helping. The people we really need to, listen to is everybody else.

    The bottom line is that I am an idealist, a social democrat, a Kiwi, but also an arch pragmatist.

    Nope, because capitalism isn’t social, ideal or practical.

    • TheContrarian says:

      capitalism =/= right-wing, Draco.

      • Draco T Bastard says:

        Yeah, actually, it does.

        • TheContrarian says:

          According to….?

          • Draco T Bastard says:

            According to itself, its focus on privatisation and individualism.

          • TheContrarian says:

            You are talking about neo-liberalism, not capitalism Draco.

            All neo-liberalists are capitalists but not all capitalists are neo-liberalists.

            Capitalism =/= right wing

          • TheContrarian says:

            BTW – there is nothing wrong with individualism. As long as one realises you are a individual in a society and that you must work together, as individuals, to further greater goals as a whole.

  3. Groucho Marxist says:

    For many years it was accepted that the pay rates increased exponentially rather than in a linear manner to compensate for the increase in tax rates. With high tax rates the wage increase would only bring in about 40 cents in the dollar at the top end.

    When the top tax rate was nearly halved the high earners were only half satisfied and started looking at their gross income as if it should all be in their pocket.

    Now with an 80 year low in tax they are still moaning about how much they don’t get rather than being pleased by how much more they do get.

    No bleeding from my heart for the trust protected types who only declare $17,000 p.a. for tax purposes. Some well known wealthy families among them.

    ” The world’s got enough for everyone’s need,
    but there isn’t enough for one man’s greed”

    from “Material Possession” by the Parameters. Written by Tony Kneipp in 1983.

  4. 100% Pure NZ says:

    Maybe the Honourable Mr Bill English MP might consider commencing any new taxation policy by firstly focusing on spurious Trust structures created to solicit public funds into the Members of Parliament personally owned real estate holdings?

    Or, is the above mentioned Public Servant still utilising one of the favourite defence strategies of the Nazi Party at the Nuremberg Trials of “selective amnesia” – this condition appears to afflict numerous affiliates, in both the National and Act parties.



Authorised by Martyn Bradbury, The Editor, TheDailyBlog, 5 Victoria St East/Queen St, CBD, Auckland, New Zealand.