Tax Changes – boring but important.
Filed under: Cost of living, Economics, General Budgeting, Property Investing
In fact so boring and dull, I’ve been putting off writing about it for weeks. But I figured I really ought to get it done, because it could make quite a difference to whether emigrating here is affordable for you or not.
Kiwi’s generally think they have really high tax levels. Coming from the UK, I have always thought they are wonderfully cheap, and its one of the reasons I have always thought you could do financially well here.
So, I’ve already written about the taxes that should be going down – basically the top income tax rate. The finance minister has now “suggested” that the top tax rate will drop from 38% to 33%. That in itself will make a huge difference for many skilled migrants, even if it isn’t going down to the 30% that the Tax Working Group wanted. Company tax looks likely to go down from 33% to 30% – good if you are thinking of running a business, but won’t do anything to fix the fact that people supposedly use companies to hide income for tax purposes.
So the question remains – what’s going up?
Because make no mistake – these are not tax cuts. These are tax cuts equalled by tax increases. For every 1% drop in Income Tax, there has to be a 1% increase elsewhere. Whether people think its fair tends to depend entirely on whether they are paying or saving.
GST
The main increase is likely to be GST – up from 12.5% to 15%. Which basically means you get to keep more of what you earn, but pay more of it out when you spend. So depending on your spending habits, and ability to save money, you may in the end come out better off. At least this is a tax you have some control of. While your fixed expenses are – well – fixed, and they will go up – you can determine how much tax you pay on your non.-essentials by budgeting and shopping around.
Closing a Working For Families Loophole
There’s also talk of making sure that property investors can’t use their tax losses to lower their income and get access to Working For Families benefits. I’m personally a fan of that. Although we lower our income by claiming tax losses, as far as we are concerned we still earn $150,000 – we just plough a lot of it into our investments. So it actually wouldn’t occur to us that we were eligible for WFF (if we had kids).
Property Investor Taxes
Most of the tax hit that Property Investors were going to get look like they have gone. We are still going to take a hit somewhere – but not as much as the people in the Tax Working group (all of whom work in the Share Investment field) would have liked. Which means that a lot less people are about to be bankrupted. It looks like the main rise will be that you wont be able to claim depreciation on the building. It could make investing a property harder for lower earners, but we wont know for definite.
And so far – that’s about it.
Like most things – a report from a bunch of academics and vested interests comes out (at huge cost to taxpayers) which says a load of “academically sophisticated” ideas about reducing tax (I hope they took their own sandwiches to their meetings!). But when you boil it down to what might actually work – you aren’t really left with a whole lot.
We won’t know for definite until the budget in May, at which time everyone can work out whether they win or lose.
For us, while we are highly likely to lose a fair amount in any property tax changes – we also make a fair amount by our income tax going down. The GST will cost quite a bit on our fixed expenses – which is a pain because I’ve just reduced our fixed outgoings by a huge amount lately – and it will make me feel a bit deflated for a while.
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What can Evony teach you about how money works?
We’re fond of games, and personally we learnt a lot about property & money from playing things like Cashflow, Hybrid Property Game & of course Monopoly.
So to continue our series in things to learn about money from unlikely games you just wouldn’t expect, we are proud to introduce; Nine things Evony can teach you about Economic theory, tax & the art of war.
For anyone who doesn’t know what Evony is, it’s an online real time game, similar to Civilisation. You build up a city with infrastructure, have to defend it from other (real) players, go and invade valleys for resources, or other cities for plunder. The game keeps going in real time even when you’re alseep. So you need to hope you have enough defense to see off any attacks while you sleep.
It’s very addictive. (And while it may well have the tag line “Free Forever” it can be bloody expensive if you want to buy Game Coins.)
In the game you get gold: from taxation, plunder or selling resources to other players that you ‘harvest’ from the land.
Resources you can harvest are;
- food, needed to feed your army, and workers;
- lumber, needed for building & weapons;
- stone, more building;
- iron, yet more building and some other weapons.
You can buy & sell these resources from other players through a marketplace if you wish.
So, what can Evony teach you about money?
1. Gambling & The Wheel of fortune.
Each day you get a free spin on the wheel of fortune, where you stand a chance of winning a random item which is useful to you in the game. Annoyingly the main screen keeps popping up all the really useful things you just wish you could get your hands on, that ‘other’ players have won on the wheel. Only they are the exception, not the norm. Unless you are a guy called DeMontfort, in which case you are an exceedingly lucky git!
So just like with the real lottery, you keep hearing about all the great thing other people have won. Except when you play, you only win crap. Having used my daily spin for a couple of weeks now, I’ve yet to win anything really useful. Mostly I’ve won resources, which I was building anyhow.
A bit like a free ticket for next weeks lottery.
2. Taxation
You need Tax revenue to pay for Academic research, buy resources in the marketplace, and pay the salary of your hero’s. Two things define how much tax revenue you get, your total population and your taxation percentage. The higher your taxation level, the less popular you are, and the lower your overall population, hence a reduced tax take.
Low tax(naturally) gives you low tax income. High tax (also) gives you low tax income.
Why governments need to spend millions on “working groups” to tell them this I have no idea. They should play Evony and save the money for really important stuff. Like expenses claims.
There is a balance between population and taxation levels, which is around 50% tax. Not that we’d like the Tax Working Group to suggest this to NZ govt., and just look at the starting exodus of people from the UK because of impending 50% tax rates. Tweaking your tax rate for optimum income isn’t necessarily the best policy if you want to grow your city.
Unfortunately in the game, a 50% tax rate means that you have to invest a huge amount of time & resources building housing for people, and only 50% of it is occupied. Lower your tax and more of your housing stock is occupied, and you have more people available to work in the fields or join the army.
So just like real life, low personal income tax attracts people to your city, who then work in productive functions. As a Govt. you then have to balance your spending so you don’t run out of money before you’ve built that shiny new Town Hall.
3. Plundering – a great historical tradition going back millenia. Today we call it war.
If you can’t, or don’t want to, harvest the resources you need from your own lands and build a sustainable economic base for your city then you can always steal it off of someone else.
Only you need an army to do that.
So you need some ‘basis’ things like; resources, buildings, academic research, idle population and a hero before you can do that.
Plus you’ll need defenses once you nick the stuff, so the other player can’t nick it back.
If you’re lazy with either attack or defense, you’ll lose the fight, your soldiers all die, and you have to replace them. Back to needing to harvest resources again.
4.It’s all about budgeting!
The game is all a big balancing act, which we more commonly call budgeting. If you have low taxation, then you need to plunder for gold. If you don’t invest in your own infrastructure (resources), then you need to plunder for the resources you need to build. And of course the bigger you want to build things, the more plundering you need to do. The more plundering you do, the further away you have to travel to do it, until in the end you invade a city because it’s building a catapult which could reach your city within 45 minutes.
All of which can be minimised by budgeting well, spreading the investment of your resources back into making more resources, building more housing, or increasing infrastructure. All the time keeping people happy.
5. Hero’s – today we call them leaders, less politely we’d call them politicians.
In a very odd parallel here, you recruit your hero from an inn.
Where they hang out until someone gives them a job.
Only then, they demand a feasting hall be built in their honour, and they hang out there while you pay them a salary for, well, feasting.
The more hero’s you have, the bigger your feasting hall needs to be. Which takes time, gold, resources etc.
I don’t need to say much more on that do I? 
6. Hero’s – part 2.
- In order to enhance the speed at which your people build things, you need a good mayor with high political acumen.
- In order to enhance the speed at which your academics under take research, you need a highly intelligent hero.
- In order to train your armies quicker and win more battles you need a hero with high military skill. Ideally you should have two of these, one to head off and fight a battle, while the other stays at home training more armies.
Typically these three attributes are not found in one person, and ideally you actually need four hero’s to make your city run well. For example if you demote your mayor, so you can send him off to battle, then the population slows down their working speed – i.e. while you leader is off fighting a war in another country productivity goes down.
Amazing how well this matches real life through the centuries eh? Of course if you want to fight lots, either for plunder or conquest, you’ll need more military leaders. Which require a bigger feasting hall, larger inn’s and higher salaries. And if you want to ‘entertain’ a foreign ‘dignitary’, we call them leaders who have been taken hostage in a fight, you need a bigger feasting hall! (yet again)
Basically, provide your politicians heroes with lots of perks, particularly alcohol, and they will love you and do what you want them to.
7. The Marketplace: commodity trading is a great way to make money.
The marketplace allows you to buy and sell the four basic resources with other players. Prices fluctuate a lot, even during a day. However, just like a real economy & stock market you can place an order for a quantity of food at the price you’re willing to pay, and wait for a seller to come along and accept that offer. Just like real stocks, you can see the highest prices people want to buy stuff at, and the lowest prices people are willing to sell at. A very active market has a small, or non-existent difference. A slow market for resources not in demand will have a big difference.
So just like the real economy, you have a price at which sellers are willing to accept for their item (let’s call it a house), and a price buyers are willing to pay for that same item, and eventually there has to be a compromise in price by one party for the sale to happen. And just like the real economy, you have lots of people selling food, so the price is low, and as a buyer you can ’shop around’, i.e. wait, until a seller comes along who is willing to meet your (low) price.
8. Academic research.
Part of the game requires you to research scientific advances to help you progress in the game. i.e. build things quicker, get a better defense, attack or movement speed to your armies. So just like the real world, where academics need research grants from Govt., here you have to pay gold & food for those academics to figure out how to make a faster wheel. And just like the real world, with a highly intelligent academic honoured in your feasting hall, academic research progresses faster. Academic research is one of those thing to invest in early, so when you’re trying to build a really big something, it only takes a day or two instead of weeks (real time!)
9. Alliances
Alliances are very important. A good alliance will come to your aid when you are being attacked by sending troops to help defend your city, or other troops to attack the city of the person attacking you. A really good alliance will also make donations of resources when you need them, to help you build your city or army. They’re also there to give sage advice. So whether it’s friends, neighbours, work colleagues, fellow countrymen, other countries you know well, or countries you can’t even spell – joining an alliance and working together means you all benefit.
Bake a bigger pie.
Failing that, your alliance may plunder the pie’s of other alliances, but teamwork always gets you more pies in the long run than playing fighting alone.
An interesting Immigration report – part 2
Filed under: Hubby's Views, Life in New Zealand, NZIS & Immigration issues
I blogged last week about the two immigration reports that were published side by side.
The first one was fascinating.
I’ve now read through the second one, Migration Trends & Outlook.
It was nowhere near as interesting as the first. Which is strange.
This second report is the one produced annually, is the major report that the first one uses as a basis, it has more content, more statistics & should be able to discuss trends better – and yet it does not. If anything the ‘trends’ part of the title is highly deceptive, as there is very little analysis or discussion of trends. Let alone any extrapolation of those trends in to the future. So the ‘outlook’ part of the report is also fibbing.
So we’re left with a report on Migration.
Which about fits, since it’s a mainly dry analysis of the statistical facts, with few conclusions drawn. And a lot of repetition. Apart from the odd self-congratulatory back slapping about what a good job INZ is doing. Which is repeated a few times just in case you didn’t get the message the first time round.
So what interesting information can we gleen from this report?
1. The Foreward tells us that 60% of the growth in the working age population from 2001-2006 has been from inward migration.
Which is then set against actual population growth in NZ. Natural population growth (births) is seen as the main driver, although that number is only an estimated figure put at 28,000-35,000 per year – compared with net migration of some 4,500 in recent years. Put a different way around, the spikes in NZ population growth are due to net inward migration, and most of those people (not unsurprisingly) are of working age.
2. The first major piece of spin we come across is in the section on how the impact of the global economic slowdown has been felt on migration to NZ.
In a very ‘we’re better than anyone else in the world‘ manner, it’s pointed out that every other country in the world has had to take action at a policy level to stop the flow of migrants into their country. But since INZ are so good at their job, and the NZ policies work so well, NZ hasn’t had to do that. It’s all labour market driven, and with more Kiwi’s competing for jobs, fewer migrants get those jobs.
Which is exaclty what happens in other countries, you don’t give temporary work visa’s to migrants to do jobs, since the locals are getting those jobs.
Then three pages later they actually say that NZ did make policy changes;
Taking some occupations off of the skills shortage list. Just like the UK, USA, Ireland & others.
They then forget to mention that they [INZ] have made it more difficult to renew temporary permits, just like other countries.
Although it could of course be argued that INZ refusing to renew a permit and people being forced to leave isn’t limiting the possibility to renew a permit, it’s just stopping it dead.
So beyond the spin, INZ is doing a job just as effective as any other country.
Which then leads us neatly into another interesting finding about the number of temporary vs permanent visa’s INZ has been issuing.
3. While some of the numbers vary in the report, and I’ve not quite got my head around why that is, the vast majority of people who were granted residency in the last couple of years previously held another type of temporary permit, such as Student or Work. What this means is that less people currently outside of NZ are being granted residency before they get here. On the latest numbers, look at figure 5.2, 81% of all successful residency applications are lodged within NZ.
Back when we applied you could only get residency with a job offer in hand, and then they relaxed the rules a little, so people got residency without job offers. While that still may be happening, INZ appear to be giving out more temporary visa’s to people, who are then told to come to NZ, try their luck and get a job..
Very Dangerous for the migrant in our opinion!
Because of course if you can’t find something, then tough, and you have to head back to your home country. INZ wrap this up in a nice little bow by saying they are allowing immigrants the ‘opportunity’ to labour market test their skills. i.e. your problem, your risk, that’ll be a temporary visa fee thanks, and another permanent visa fee if you are lucky enough to get a job.
And by the way, aren’t out policies great because they minimise effort required by Govt. to respond to changes.
4. There’s a lot more family members coming in from China. With China being the largest source of Parent/Sibling sponsorship & uncapped family (partners of Kiwi’s) applications. With the high number of Chinese students studying in NZ, I feel the only surprise is that it’s taken this long to notice that a lot of them were bringing their family over. After all, it’s a (relatively) quick and risk free method of migrating the family out of China. Study here for a few years, work part time, you’ve then got a degree & NZ work experience, get your permanent residency and sponsor the family in a few years time. Mum & Dad don’t need skills, or lots of money to invest in a business to get them over here, and the youngling has had a great experience leanring to live away from home in another culture.
All round good for them, and well done on making immigration policies work for them.
5. There’s finally another admission that the main interest with foreign students studying in NZ is the income NZ derives from them. Education, when classed as an export (same as tourism is classed as an export) is now one of NZ’s top five export industries. (Dairy is joint first with Tourism, with Meat & Mineral fuel exports being 3rd & 4th respectively).
Which would explain why anyone can give advice to a foreign student, you don’t have to be a licensed Immigration Adviser to do that - it’s ALWAYS about the money.
6. Figure 3.5 on p25 makes for some interesting study.
Arrivals (i.e. returns) of Kiwi’s to NZ has stayed approx the same, in a 10k band.
Arrivals of non-Kiwi’s has trippled in the same time.
Departures of Kiwi’s has fluctuated a lot, however remains consistently higher than arrivals(returns).
Departures of non-Kiwi’s has remained relatively flat, and it’s only in the last few years that the number has increased, to the point where it’s almost as much as Kiwi’s returning to NZ.
All four numbers taken together give you the view of net migration.
So if you step back from the hullabloo about the percentrage of migrants who don’t stay in NZ, and look at the raw numbers, there’s still a much greater number of Kiwi’s “buggering off” from NZ than non-Kiwi’s. More detail on the source countries for those migrants who are absent is included in Appendix D of the report, and makes for some interesting reading again.
7. By the numbers, China has the highest absent number of 14,868 (25%), while the UK is 2nd with 14,650 (only 16%). By the numbers, that accounts for a third of all the absent migrants. It would be interesting to see what would happen to the NZ economy, job market etc. if all those from the UK or China who were entitled to be here actually returned.
8. table 3.4 provides a year by year view of those absent from NZ. I’m sure I saw a nice chart of this somewhere, but can’t find it now, so we’ll stick with showing you the table.
This shows, the longer you’ve been in NZ, the higher the chance that you’ll leave next year. It is worth noting that those who have come here via a family category, are much more likely to be here in a few years time. Although the numbers don’t say whether the numbers of family sponsored people staying has a link to the original sponsors also staying, it would make sense. I just don’t have the linked numbers to prove it.
9. Figure 6.5 is also curious, more for the information about ‘other’ which is absent.
We look at the settlement regions of migrants to NZ. Auckland accounts for about 44%, with the rest of the country getting the remaining 56%. However, if you add up the numbers, you find that after the top five regions, there’s another 17% of migrants unaccounted for – which would make ‘other’ the 2nd largest settlement region for migrants in NZ. While we don’t have a clear citation for where this graphic comes from, you could probably find out through one of the Longtitudinal studies that StatsNZ carries out. I’ll have a dig around and see what I can find.
So there you go, a slightly less interesting report from Immigration. Chock full of numbers. If only INZ treated all their clients like this, it would be a much more friendly and personable dept. Oh, wait a minute, silly me, they do. We’re all just statistics.
Well I never: An interesting Immigration report
Filed under: Getting to New Zealand, Hubby's Views, Life in New Zealand, NZIS & Immigration issues
So fair play, reading through the two reports from Dept. of Labour has actually been interesting. Well written, with conclusions and recommendations, not just dry statistical facts.
Something interesting from INZ/DoL for a change. Whatever next, Winston Peter’s as Immigration Minister? - Well stranger things have happened!
Seriously, the two reports;
International Migration Outlook & Migration Trends & Outlook sound similar – and to be honest there really isnt much difference (but hey – its waste some extra tax money writing 2 reports instead of one.)
Both are well written, and for a change have dozens of citations. So you can actually check where they are getting some of their facts from, and that they aren’t lying through their teeth. I was pleasantly surprised to find most of the cited reports are publicly available too. So you can read & draw your own conclusions.
Anyhow, interesting things/facts/observations from the IMO;
23% of NZ’s resident population as of June 2009 were not born here – and that number has been going up. Here’s a table showing where that 23% came from;
If you look at the ‘working age population’ that 23% turns into 25%.
This means that more migrants are staying in NZ longer, it’s now only 24 leavers for every 100 new migrants during the 2001-2006 period. Which, as we’ve mentioned earlier, is actually showing more loyalty to their new home than the 40%-ish of Kiwi’s who leave.
The employment numbers are a little worrying;
Unemployment rates for immigrants are about 3% above the national average. Perhaps not surprising with plenty of migrants coming in as Skilled Migrants or on Work To Residence without job offers.
New migrants are paid $10k-$15k less than their previously resident Kiwi colleagues.For performing comparable work
And it ‘only’ takes 15 years for that gap to close! 
15 years! OMG, you gotta be kidding? Come to NZ, take a huge pay cut, and if you’re lucky, you’ll earn the same as your colleague in a mere 15 years. humpfhh.
Still this may have something to do with another finding. That there was no evidence from another Dept. of Labour report that migrants were choosing to settle in an area which had higher than national average salaries, or lower than national average unemployment. i.e. new migrants weren’t actually picking the geographical area’s with fewer people having the in demand skills. hmm, perhaps we were just a little strange that way. We came to Wellington because the pay is better and its where the demand is – mostly because its where the government is. Most migrants still gravitate to Auckland, where the wages are lower and house prices are higher. Take note!
Wowing an potential employer at interview is going to do you a lot better than hoping that ‘averages’ will mean you get a better salary. Clearly some of this report points to studies showing that isn’t the case and you’ll get less than the average of your new Kiwi colleagues.
Time to brush up the interview skills.
Of course if you bring kids over with you when you migrate, then they don’t have to work to close that 15 year gap. The study showed that 18 year olds entering the work place faced no discrimination over salary whether they were Kiwi born & bred, or had arrived the day before their 18th birthday. So that’s reassuring.
There is also a (brief) section on the economic impacts of immigration. Only based on one study mind you. Basically, immigrants are good for the economy. In ‘productive’ terms;
- Migrants bring cash which they spend (really?! – you don’t say),
- Pay more in taxes to Govt. than they draw in benefits (shock horror, migrants aren’t here to sponge off the state!)
- Migrants reduce production costs (read as: are forced to accept lower wages)
- Improve the competitiveness of NZ goods & Services, which helps exports. (same as above really)
So I’m not so sure that this study really does justice to the ‘immigrant’ contribution to the NZ economy. I wonder if they actually asked migrants what their ‘contribution’ was?
Tax Working Group – Why?
Filed under: Economics, For the numpties amongst us, Future Finances, General Budgeting, Investing in general, Jobs & Work, Property Investing
(Other than whacking “rich pricks” over the head with a big stick for being greedy of course.)
Well, for a start – the National Government claims it doesn’t actually want to increase overall tax. And if you believe that – I’m the tooth fairy.
What they want to do is move away from taxing income, to taxing capital – or wealth. For the purposes of this – you need to understand that Wealth is not about how much you earn – it’s about how much you own. So if you have scrimped and saved and accumulated assets that are worth money – they want to tax you on it. Because as previously discussed, it’s not fair that you scrimped and saved to accumulate wealth.
And if Income Tax is too high – it discourages people from getting better jobs and earning more money because they will lose too much of it in tax. And that of course means they have less money to spend. And economies don’t grow if people don’t spend.
The other main goal is to “align the tax rates”. This is because at the moment, the top rate of personal tax is 38%, whereas tax on trusts is 33% and tax on companies is 30%. Which means that taxpayers who would normally be charged 38% can “hide” their income in trusts and companies to reduce their tax.
So dropping the top tax rate to 30% should stop us having to do this.
To see why in theory they need to do this – you need to look at what happened when Michael “I hate rich people, even though I earned a whopping $276,000 a year plus tax-free expenses” Cullen, introduced the 39% income tax bracket.
What this shows is that the year after the tax was introduced, there was a huge spike in the number of people paying tax on 60k a year income, because they used measures to legally reduce their incomes down to that level.
So in trying to tax “rich” people – they kinda failed.
Now – the new government wants to make it “fairer” and stop that happening. Unfortunately there is every chance this too will fail – because in general – the richer people are, the more they can move and are prepared to make choices about where they live and what taxes they will pay. And there’s always loopholes.
Like us for example – who moved from the UK to get away from 51% tax on our income and new and more colourful taxes being imposed left right and centre.
So in general terms, lowering the top tax bracket is a good thing. I just can’t get my head round why taxing people who have invested is a good thing to replace it with. It’s kind of a big incentive not to be financially stable and able to support yourself in retirement.
Personally – in the perfect word in which I am the benevolent dictator for life – I would insist that Governments have to stick to strict budgets, have to stop throwing money away, and treat the money they take in taxes with some respect, and the taxpayers as something other than a constant deep well of extra funds every time they fail to stick to their budgets. Like setting an $11 million budget to refurbish the Supreme Court building and then spending $81 million instead because taxpayers won’t complain.
Which is like budgeting to retile your bathroom, and deciding instead to knock your 3 bed house down and build a 70 bedroom mansion instead, and demanding the overspend from your boss.
The thing about this is that if we as the people overspend each month – we cannot in fact go to our bosses and demand that they pay us more. But the government can do that with tax – because if you don’t pay it – they can send you to jail.
So while the “why” may be sensible and in some ways a good thing – it’s kinda fixing the wrong problem. We don’t need to give them any more taxes – they need to stop wasting the money they already screw out of us.
Please bear in mind that the Tax Working Group changes are recomendations – and may not happen.
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Tax isn’t fair – deal with it.
Filed under: Economics, For the numpties amongst us, Future Finances, Investing in general, Property Investing
Over the next year or so, there could be some huge changes to the way you will be taxed in New Zealand. There are a lot of strange assumptions, which are driving the recommended changes. A bunch of “experts” and academics called the “Tax Working Group” have come up with recommendations. However, here I thought it worth going back to one of the basic assumptions – A fair tax.
The headline at the moment is that property investors don’t pay tax, and in fact rort the system by getting tax refunds. This is because if you make any losses in your rental properties (and most of us do because rents in New Zealand are kept artificially low) then you can offset these against your income from a job and therefore pay less Income tax.It is blatantly ignored that you can do this with any business.Property investors (like us) are thought of as greedy “rich pricks” (a term coined by the typically potty-mouthed ex-finance minister Michael Cullen).
Of course, we personally are considered even more evil and greedy because Hubby has a well-paid job. It escapes most people that we worked our arses off to get qualified in order to earn that money. It’s not fair!
So – why do people think it’s unfair that we use a system to allow us to pay less tax?
Because most people have been conned into thinking that Tax is inevitable. Like death. Only it isn’t.
The fact is you do not have to be in anyway rich to legally cut your taxes. You just have to be smart. You also need to get your head round the fact that paying money you earn to someone else is not actually fair, and that the richer you are – the more you pay – is even less fair.
Let’s put it this way:
- If someone comes into your house and steals your TV – you go to the police and make a report. You make a claim against your insurance and get the money back to replace the TV.
- You don’t for one minute consider it fair that someone has come into your home and taken something that they may not be able to afford, and therefore have a right to steal it from you, because it’s not fair that you had the money to buy it and they didn’t.
- And yet – the government takes say 30% of the money you earn, and gives it to someone else. And you think this is OK because it’s called tax.
Here is something else to think about:
- While there is no “tax-free limit” to earnings for low income people the way there is in the UK, the bottom 40% of households pay no income tax because they get benefits to compensate.
- Yet the top 10% of earners in New Zealand pay 42% of the total income tax take.
- If you take out the 40% of people that effectively pay no tax because they get refunds distributed from higher tax payers, we are then responsible for a whopping 76% of the income tax take.
And yet we are the greedy ones for not wanting to pay so much of what we work our butts off to earn. Hell alone knows how much we would collectively pay if we didn’t have a way of offsetting tax.
It’s also worth noting that the HUGE tax benefit that property investors fleece off the government in Tax Refunds accounts for just 1.6% of the entire tax take.
Yep – we are about to get nailed to a cross then burned alive for a whopping 1.6% of the total tax budget – which will then be given to other people. I personally don’t think any of this is going to make that 40% who want our blood any richer.
But I could be wrong.
Over the next week or so we will be going over the recommendations (and they are just that – recommendations) and highlighting what they mean – good and bad.
If you want to see a good and funny illustration of why “tax cuts for the rich” are so wrongly maligned – have a look at this blog post: How tax cuts work.
And for some interesting facts about just how many evil greedy property investors there are in New Zealand – read Are Kiwis really obsessed with property?
And for a light hearted look at just what we personally think of the Inland Revenue (in any country) – take a look at Inland revenue Humour.
Immigration reports x2
Filed under: Getting to New Zealand, Hubby's Views, Life in New Zealand, NZIS & Immigration issues
The Dept of Labor have actually come out with two reports on migration, as a contribution to some OECD studies.
It’s possibly sad that I’m working my way through both of them at the moment. At 62 & 125 pages I should at least get some sleep, even if it takes longer to finish reading them.
My first question will be what’s the difference between;
International Migration Outlook
&
Migration Trends & Outlook
‘cos I sure can’t tell the difference first off. Still, why publish one paper using a set of research when you can publish two? It’s at least efficient if the reports have completely different purposes.
So I shall work my way through the reports. There’s some fascinating info buried in the tables and numbers already.
Still, it’s an excuse to swan off to the beach and read the paperwork in some sun
What’s the effect of the global financial mess?
Having some spare time in the house with the slightly crappy weather, I’ve been watching some of the TED talks that have been sat on the iPod waiting patiently for me.
One in particular was from John Gerzema, talking about the ‘post crisis consumer‘. Beyond some of the academic/economic waffle, and the ‘America is the world perspective’ it did contain some interesting observations.
First off is the (US) savings rate over the last 70 odd years from 1935 to 2005 (sorry the graphics are a little fuzzy), giving us confirmation that it’s in the last few years that average households have negative savings – i.e. no savings and money oweing on credit, while since the 1950’s it’s been in the 5-10% band
The blip in the early 1940’s is of course the war. But only because there was nothing to buy, rather than a patriotic drive to save money into war bonds as there was in the UK. It is interesting though, even when there were almost no consumer goods to buy, savings rates only averaged 20-25%.
Anyhow, while these numbers are now four years old it begs the question – ‘What are people doing now?’. Well the (startling) observation is that people are paying off debt. Because they don’t want to be beholden to the banks as much anymore. Which is good news. And more people are using debit cards to access money in their bank accounts, rather than using credit cards and borrowing the money. Again good news.
Of course, neither the banks or the credit card companies are happy with this – since they don’t get to bleed us all dry with interest rates and charges. But still, they’re not hurting yet and it’s early days in the whole economic recovery thing.
More interesting was the information about how people are dealing with the stress. While it doesn’t say what the sample population was here (Wall St executives still in jobs, as opposed to homeless families in some Detroit ghetto), and the percentages are more than 100%, so people are obviously doing a number of things, it does make interesting reading;
5% of people are dealing with the stress by buying more stuff. This is taken as a good sign, as we’re getting more savvy about what we buy, and we aint’ buying any old crap the marketing people want us to buy.
Still, draw your own conclusions. Good news for Nintendo, where people are playing video games and exercising (Wii), possibly with their family. Really good news for ISP’s and TV broadcasters.
How shall we pay it back? By having a plan!
Filed under: Cost of living, Economics, For the numpties amongst us, Future Finances, General Budgeting, Hubby's Views
I was working on an event about CFO’s the other month, and needed some humour to illustrate advice you don’t want from current or former Financial Chiefs. With much joy, I found this;
And the following interview conducted by the BBC, of a UK Govt minister talking about how the UK Govt. is going to pay back the 606Bn UKP debt it’s due to rack up in the next couple of years. As I can’t find the link anymore you’re have to forgive the slight paraphrasing. The interview really did go something like this;
BBC Interviewer -- How will you pay it back?
MP -- by having a plan!
BBC -- and what’s the plan?
MP -- The plan is to pay it back!
BBC- Yes, and what is the plan?
MP -- The plan involves passing legislation saying that we’re going to do this, it’ll have targets!
BBC -- Yes, and we have targets for everything including NHS waiting lists, University education etc. and none of them have been met.
MP -- No they haven’t, and that’s because of the 18 years of Conservative Govt ruining the economy, but this is different.
BBC -- How?
MP -- Because we’re the Govt, we say we’re going to do it and we have a plan.
BBC -- Yes, with respect minister, having a piece of legislation doesn’t tell any of us how you are going to find 606Bn pounds over the next four years (assuming you win the election), to pay back this debt. How can you possibly pay back this much money without making savage cuts to public spending?
MP -- Well, it’s quite simple -- we have a plan. To pass legislation. Which will have targets. And we wont need to cut any public spending, because public spending is what will drive the economic growth to bring us out of recession.
BBC -- So lets be clear, you’re not going to cut spending, you’re not going to raise taxes significantly, where is the money going to come from?
MP -- As I said, it’s really quite simple, we’re going to have a plan.
BBC -- And the plan.. -- oh forget it.
The financial crisis explained
Filed under: Banks, For the numpties amongst us, Hubby's Views
As explained by a ‘banker’ -- thanks to The Now Show (18/12 again);
“In laymans terms it works like this; if you get yourself into financial difficulty, say you fail to manage your own finances properly and are incompetent enough to get yourself into enormous debt, with absolutely no hope of paying it back -- the bank takes your money.
If on the other hand your bank fails to manage it’s finances properly, is incompetent enough to get itself into enormous debt with absolutely no hope of paying it back -- the bank takes your money.
It’s really very simple”
Which also reminds me of The Two John’s, explaining the financial crisis {watch with some irony for the Google ad’s for GE Money, Kiwibank etc.. -- hmm, someone didn’t think about what to exclude from the key words};
