Phil "Seat Warmer" Goff Defines Avoidance

"GOOD INCOMES"

Phil "Seat Warmer" Goff's most unexceptional State of the Union(s) address defined a few things for us about the current Labour Party that Mangrove Nash fell into the trap of yesterday.

We know what the Labour Party want to concentrate on daily, thanks to The Stranded and its superior bigger brother Red Alert.

Today The Stranded had a go at "articulating" Labour's position on tax "dodgers" from the speech "The Many, Not the Few". Sadly Seat Warmer's speech writers made a rather large blunder in whipping up the new frenzy against the "few". The bastardisation of the use of the terms "avoid" and "evade" in the context of talking about tax. It was all very "Pay the" Bill English and sloppy.

Seat Warmer tried to redefine bludgers to include not the welfare bludgers, or net beneficiaries but to include those who by his definition in Planet Labour, do not pay their "fair share" of taxes to fund Labour's excessive spending promises come election time. "The Many" in New Zealand however don't actually pay a lot of tax, and "The Few" are paying for them. Remember the Tax Working Group has just reported that a staggering 10% of taxpayers are now paying 76% of net tax.

This distortion explains more than anything I have read from an ACT Board candidate over the last week, as to why ACT struggles in the polls. A low-tax, small government Party that discourages welfare bludging, such as ACT starts with a potential voting population of just 24% of the whole country. We haven't got a show in campaigning on lower taxes when some 76% of the population who could vote for us either don't or hardly bloody pay any.

Seat Warmer's speech highlights included:

The use of the phrase "hard working Kiwis".

Which replaces last week's Seat Warmer office blunder of using "ordinary New Zealander". But isn't a CEO who works 65 hours a week hard-working? A banker? A lawyer? A stockbroker? An analyst? A doctor? A specialist?

No, to be "hard working" according to Seat Warmer you seem to have to be working 40 hours a week but be in a skanky low paying job with absolutely no career prospects. Camp Miserable. That's what he is meaning. Anyone earning a decent amount of money is deemed to be taking it from someone cleaning a toilet or on a minimum wage. That's the State of the Union(s). The classic Labour sell.

Envy.

People who take from New Zealand but don’t give back are bludgers, wherever they live and whatever their bank balance.....

If you are going to keep a running account of the taxes in and taxpayer spending out of each New Zealander it is going to be an interesting exercise and I can guarantee now that expatriates and exiles will come out streets ahead of the hundreds of thousands of real bludgers in New Zealand who are welfare and net beneficiaries. In other words - New Zealand would be better off if these net beneficiaries actually did leave the country as it is costing the country more now to keep them than the country is getting in return.

If you measure people as Seat Warmer has in this part of the speech, as those who "take from New Zealand but don’t give back whatever their bank balance....." , you will be hard pressed to argue that welfare beneficiaries and net beneficiaries (tax less welfare transfers) are not the classic definition of bludgers.

New Zealand expatriates (the smart pricks) and exiles (the rich pricks) don't of course send money home to relatives, store it in New Zealand banks and earn interest which is taxed, invest in property without tax benefits as they have nothing to offset it against so don't use credits (sarcasm). And when they come home to visit instead of spending their annual leave cruising the Med, they don't pay GST, petrol and alcohol tax, contribute to hotels, rental car companies and hospitality driving the tourism industry further? An in doing so this costs New Zealand NOTHING as the expatriate has their own health insurance so won't be using public health services or in fact any taxpayer funded services while home.

Some of them move to live as tax exiles, avoiding their responsibility to the country that gave them an education and a start in life

As for avoiding responsibility? How many of these exiles (rich pricks) were privately educated in the first place? Then paying more than their fair share of taxes in the years they worked in New Zealand for themselves and their families. A few didn't even go to University and barely finished High School. How many of these exiles took risks and created job opportunities on a factory floor for Labour's own "hard working" voters? The same exiles who can come back for almost half the year and in doing so SPEND MORE MONEY in New Zealand. It is a very poor argument to say that education and a start in life haven't already been paid back and then some in the tax paid by these exiles.

All New Zealanders need to share the benefit of tax changes - not just the privileged few at the top. Loopholes that allow high income earners to avoid tax have to be closed. Too many people on good incomes avoid and evade paying taxes. It’s not right that some top earners pay a lower percentage of their income in tax than those on the average wage.

I believe Seat Warmer has just redefined the IRD's "avoidance" language for them and here is why I believe this.

He's referring in the first instance to the top 100 "rich pricks" who the IRD surveyed in New Zealand don't pay the top tax rate of 38 cents. Of course they don't as they use company and trust structures. All perfectly legal and justifiable as you don't get that rich working for other people and having PAYE deducted.

But Seat Warmer isn't just talking about the top 100 here. He is talking about those on "good incomes". He's targetting the proposed TWG tax changes - the reduction in the top personal rate from 38 cents.

What are these loopholes precisely that Seat Warmer is referring to? New Zealand has fairly comprehensive rules for taxing personal income which includes taxing from a worldwide source for a New Zealand resident and in many cases even unrealised gains. Most of those top 100 "rich pricks" will be receiving advice from a final four tax accounting firm (PwC, KPMG, EY, Deloitte). These firms do not diddle individual tax returns for their largest clients and are notoriously conservative, as are those top 100 as they all know the IRD will be auditing them all over and over. They will be neither committing tax avoidance or evasion if receiving advice on their personal tax returns from these sorts of outfits. As almost all will be.

Seat Warmer isn't just referring in context to that top 100 but also to those on "good incomes". Less wealthy self-employed people and consultants use companies in New Zealand as well as family trusts. According to Seat Warmer this is avoiding tax. Under the laws of New Zealand, structuring your affairs this way to pay less tax because there are three effective choices of tax rate at 38 cents, 33 cents and 30 cents is not tax avoidance punishable by law. But according to Seat Warmer, if you have a "good income" and will not vote Labour, it is.

This from a Party that actually CUT the corporate tax rate from 33 to 30 cents making it even more desirable to shift income from the ambit of personal taxation to corporate taxation. At the time 39 cents in the dollar vs the proposed 30 cents.

So apart from not returning your tax forms to the IRD and ignoring any assessment to pay taxes, I don't see any other group that Seat Warmer can be referring to but those in New Zealand who have a company or trust instead of paying PAYE on personal tax rates. Most businessmen or women operate company or trust structures, but few would bother with a rental property, favouring to tip their profits back into their business.

Good Incomes?

Gomango in the comments has then helpfully provided a list of Labour MP's with trusts and thrown in Helen Clark for good measure. All these MP's are on "good incomes".

Rick Barker
Barker Family Trust
Upton Family Trust

Brendon Burns
BP and PL Burns Family Trust
PL and BP Burns Family Trust

Steve Chadwick
Gonzo Family Trust

Charles Chauvel
Kittery Trust
Pepperrell Trust
Victory Trust

Helen Clark
Burke Trust
FG Clark Family Trust

Clayton Cosgrove
Eagle Bay Family Trust
September Trust (blind trust)

David Cunliffe
Bozzie Family Trust

Kelvin Davis
Davis Family Trust

Parekura Horomia
Panikau A2
Mangatuna 3, 4, 5, 7 and 8
Mangaheia 1B3Y and 2G1
Tokomaru K4A and K4B1 – trustee
Tuatini Maori Township section 1 block vi lot 2
Rosaleen Aorangi Smith Whanau Trust

Raymond Huo
Chesterfields Trust (family trust)

Shane Jones
Te Puna o Te Anaru Trust
Castlerigg Trust

Annette King
King-Lind Family Trust

Nanaia Mahuta
Mahuta Whānau Trust

Stuart Nash
Nash Family Trust

David Parker
Karitane Trust
Sue Wootton Family Trust
FD Parker Children’s Trust
Tarras Trust

Lynne Pillay
The Pillay Trust

Mita Ririnui
Ririnui-Calhoun Family Trust
Te Aomihi Anne Ririnui-Horne Family Trust
Riripiti Timi Waati Lands Trust
Te Arawa Lakes Trust
Ngati Awa Māori Trust Board
Pukeroa Oruawhata Lands Trust

Ross Robertson
The Robertson Family Trust

It's too much work to list Labour MP's with real property.

Labour spin doctors argue that these MP's are not voting to cut taxes on their trusts, or for higher earners so have clean hands. Or that they have set trusts up for reasons other than lower tax (funny I've been trying to tell them that for years this is a legitimate use of a trust). That's not the point. They are structuring and have done for many years, using these techniques to pay less tax than they would have if returning all the income at the top personal tax rate. They have continually returned to the IRD less income than they would have if they paid the top personal rate.

According to Seat Warmer Goff, all these MP's are those he talks of when stating "the privileged few at the top. Loopholes that allow high income earners to avoid tax have to be closed. Too many people on good incomes avoid and evade paying taxes. It’s not right that some top earners pay a lower percentage of their income in tax than those on the average wage".

These Labour MP's are all taxed on their MP salaries at the top tax rate of 38 cents in the dollar, they are however according to Seat Warmer, using loopholes (legitimate tax structuring) just like the top 100 "rich pricks" in New Zealand to avoid paying 38 cents in the dollar on other income.

Seat Warmer has defined in this speech all trusts and company structures from an individual as avoidance. Yet Parliament intended for companies, trusts and individuals to be taxed at different rates. So how can any action to set up a company or trust even if for tax reasons be one of tax avoidance?

Seat Warmer will have to either equalise the rates, or the IRD will be a hell of a lot busier under his regime. He has mis-used the word "avoid" in this speech relating to tax. Avoidance is defined in NZ law and not legitimate behaviour.

When you realise however that only 10% of taxpayers are paying 76% of the tax, and your Party is on the centre-left, I guess it was a good speech appealing to your bludging supporters and their envy of your "rich prick" opponent.