Wednesday, April 9, 2014
Bill's Busted Budget and Tim's Exploding Emissions
The Government's 'Rock Star' economy hit a bum note (or rather a number of them) when Bill English had to admit that, yet again, his targeted surplus in 2015 is under threat. Despite the often trumpeted improving economy, the tax take was well under what was projected. The core tax revenue was $1.14 billion below expectations because assumptions around personal tax and custom duty did not eventuate and lower than predicted corporate tax and source deductions were received.
The Government has stubbornly stuck with their tax cuts to upper income earners, a loss of around $1.2 billion a year. This is despite the revelation that 107 out of our 161 wealthiest (who have assets of over $50 million) claimed to have taxable incomes of less than $70,000 a year. 2012 research discovered that up to $6 billion in unpaid tax was being cheated by tax evaders.
The dairy industry is largely leading New Zealand's supposed economic recovery and now generates about 1/5 of our export income (around $15 billion), however very little tax comes from the sector relative to others. We also have a very buoyant property market with many regions seeing house prices rising over 10% last year. Property investments are now the preferred method in New Zealand for building wealth because most profits are nontaxable.
Property investments and dairy conversions are largely financed by loans from our big four Australian banks and we all know how little tax they pay.
There is obviously a lot of extra untaxed wealth around because New Zealand's luxury car market sales have never been better.
The Government's sale of state assets has not proved to be successful either. While the assets were valued at around $5.2 billion only $4 billion was raised and the sales cost significantly more to promote and manage than budgeted (costing tax payers over $250 million).
Rather than attempting to increase revenue by addressing the huge issue of tax avoidance and evasion Bill English is looking at further restraints in Government spending. There will obviously be more cuts to public services and more state employees will lose their jobs. Further attacks on beneficiaries can be expected too.
Tim Groser came under stiff attack from Russel Norman because of the Ministry of the Environment's latest projections of our green house gas emissions. Our modeled net emissions under the Kyoto protocol will see an increase of around 50% by 2024. Per capita we are now one of the worst polluters in the developed world. It seems that my satirical description of the Government's approach to our obligations to reduce emissions was probably closer to reality than I thought.