I DREAM OF JEANNIE: WHY CAPITAL GAINS TAX DID NOT WORK IN AUSTRALIA

Thakur Ranjit Singh

While dosing off for a catnap, I dreamt a Jeannie-  THE CAPITAL GAINS TAX.

In the dream, I was in the final Leaders’ debate between Bill English and Jacinda Ardern. And a major issue emerging out in the election 2017 is tax in general and Capital Gains Tax (CGT) in particular. 

Mike Hosking is the moderator, and his right leaning is very subtle. He has asked a difficult “Sudden Death” question towards end of the debate, and needs a do or die response.

Sir John Key, former Prime Minister of New Zealand who did nothing to arrest spiralling house prices and speculations. Through his neglect in housing governance, real estate values have skyrocketed, and new generation's dream of owning a home is out of reach. And he was able to sell his Parnell mansion at reportedly $20m dollars to a Chinese buyer.. I wonder what do you call a leader (or a former one) who gains out of his neglect?

Mike Hosking: Jacinda Ardern, we come to the final segment of this final debate. Your voters need the answer. Labour wishes to introduce CGT in New Zealand. Why should it make a difference here when it failed to arrest house price rise in Australia. The capital gains tax was introduced in Australia in September 1985 by the Labour government of Bob Hawke, over 3 decades ago. Then, the median Sydney house price was just A$92,000 ($102,000), compared with A$1.1 million in 2016. Please tell us, if it did not work there, how it will make a difference here.

Jacinda Ardern: Since you have asked this complex question, I hope you will listen to my explanation without interruption.

Mike: Agreed, and hope Bill English will also maintain his silence, as his government maintained inaction in this matter. (Love you, Mike)

Jacinda: Thanks. Now listen. Before you jump to the conclusion that CGT is ineffective in limiting property prices, you need to know the reasons why it failed in Australia.

The first reason is that it was never intended to limit house price growth. In Australia, the CGT was intended to raise money for the Government and to ensure that those people who were lucky enough to have investable assets paid tax on those gains, in the same way others pay tax on their wages.

Since the aim was to maximise revenue, GST was applied to any investments, be they houses, other property, shares, bonds, works of art, or whatever. Thus, the intention in Australia was NOT to shift investment away from housing to other areas. To illustrate, Australia example is shooting with a scatter-gun, M16, for wide tax coverage. Labour Party’s policy here can be likened to a sniper gun, with telescopic lens, homing on, (excuse the pun) addressing booming house prices and property speculations.

Our CGT will target housing. Investors here will now think twice before rushing headlong into housing. Australians did not target housing, hence it did not deter people from house investment. That is why their form of CGT failed to address booming house prices.

To make matters worse, when Liberal Government of John Howard came into power in 1999, they reduced CGT by half and removed inflation adjustment provision. My tax advisory team would learn from pitfalls of Australia. This was one of many generous financial benefits Howard handed to his core constituency of middle class voters. The result is many of those voters' adult children now can't afford their own homes. That is exactly what National Government did here, by not doing anything to arrest the situation. And my generation is paying the price for a lackadaisical attitude of National Government for the last 9 years. For the sake of new generation, we need a change.

FIJI PUNDIT, yours truly, Thakur, had a dream- he dreamt a Jeannie (Genie) which in the current election is CGT. He dreamt of the final leader's debate where moderator, Mike Hosking cornered Jacinda Ardern on why Capital Gains Tax failed to arrest house prices in Australia. And Jacinda gave a very informed response. 

Subsequent to an enquiry, the Reserve Bank of Australia explained how the capital gains tax interacted with other tax concessions for property to actually encourage investors to buy up houses. One of such incentives is negative gearing. We have already announced we will scrap it.

Mike Hosking: Perhaps you will explain to your voters what this monster, “negative gearing” is.

Jacinda: This is where losses made on investments can be deducted from taxable income derived from other sources. Negative gearing and the lowered CGT discount combined together to encourage Australian investors to invest in residential property which was having the effect of pushing up house prices and lowering rates of home ownership. Same as our situation.

These tax perks encourage investors to make a loss and to focus not on rental returns but on capital gains. They are able to get refund on their high salaries or other income by claiming house interest and other losses on the house, while gaining handsomely on capital gain of the house.

Apart from Australia only two other OECD nations allow full tax deductibility on this negative gearing - New Zealand and Japan. 

It is ironical, we invest money to make money. Under the system in NZ, people invest to lose money, but gain twice - through tax deduction and capital gain. 

As a result, many residential investment properties are designed to make a loss to take advantage of the tax deduction.

We have learnt from Australia experience. We will introduce CGT, and also remove negative gearing that fuelled higher price rises in Australia.

As the next Prime Minister, I will put a stop to this and allow my generation to once again fulfil the dream of owning a house in Auckland…….”

And my alarm went off, and I woke up. We hope New Zealand voters also wake up-especially the new generation millennials. 

Hope somebody can brief Jacinda Ardern about my dream, as I believe Mike Hosking will ask this question in the final leaders debate. I am sure Labour management has more qualified people than my dream, to brief Jacinda on this subject. I can rely on my Te Atatu MP, Phil Twyford to do this- Let's do this , Phil!

[Thakur Ranjit Singh is a political observer, a media commentator and journalist. He runs his blog, FIJI PUNDIT, and lives in Auckland]

$18 Cabbage: Mother of Misinformation and Ignorance

Thakur Ranjit Singh

Disinformation and misinformation on Labour Party’s water policy shows why it is so urgent for New Zealand’s education system to strengthen its third “r”, arithmetic in particular, and maths in general.

It appears many political leaders, journalists and media commentators are very grossly misinformed, without ability to differentiate between a litre (just one litre) and cubic metre (1,000 litres) of water.

When Labour Government comes in power in a month’s time, it should have special Arithmetic classes for journalist and some elderly political leaders, to ensure they do not make a laughing stock of themselves. As a first lesson, they need to know the difference between a litre and a cubic metre of water. 

Extremely nonsensical misinformation propagated by some ignorant politicians priced a cabbage at $18 each. And at Labour's proposed taxation price, this giant cabbage must require few swimming pools of water to grow. (1.8 million litres). This is ignorance at best, and sheer stupidity at worst.

A litre of milk uses some 960 litres of water to produce. At Labour's proposed tax of 1 cent per cubic metre (1,000 litres of water) this will cost less than a cent per litre. So what is the issues here? Where do they get their figures from?

No wonder, National Government should have invested in maths teachers, so politicians and general public can grasp simple arithmetic. And Beehive need to have maths classes for Parliamentarians, so that people like Winston Peters, and Minister for Primary Industries, Nathan Guy get better informed and enlightened on intelligent water debate and modes of measuring volume.

Nathan Guy made a spectacle of himself when he could not differentiate and distinguish between a litre and a cubit metre of water. This Guy said it took 900 litres of water to make a bottle of wine, and a 10c per litre charge would add $75 to a bottle's price. Where did he get his figure from? He does not even appear to have facts as a Minster to credibly debate an issue.

Labour’s environment spokesperson MP David Parker corrected Guy, and pointed out that Labour would charge by the cubic metre and not by litre. Hence, a tax of 1 cent per cubic metre would therefore lift the cost of a 750ml bottle of sauvignon Blanc by less than 1 cent.

Those politicians, radio talk back journalists and misinformed DJs at radio stations not comprehending simple maths need to distinguish water measures between a litre and cubit metre. Under farms taxation, you pay only one cent for 5 x 44 gallons (204 litres) drums of water (1,000 lit). For a cabbage to cost $18 each, it needs to take 8, 800 of 44 gallon drums or 1,800,000 litres (you talking million litres) of water to grow. That can fill a few swimming pools.

Any irrigation irrigates thousands of plants, and at Labour's proposed rates, it would not even amount to a cent per each plant.

Water spokesperson for Labour Party, David parker said that Labour Party was proposing charging 1 or 2 cents for each 1000 litres farmers use - but the details are yet to be hammered out with those involved. He said erroneous claims that such levies would equate to $50,000 a farm are rubbish.

"It would be about $100m across the whole of the country for a year," he told Q+A .
Perhaps Winston Peters can tell us which thirsty cabbage would need a few swimming pools of water to grow.

Labour’s environment spokesperson, David Parker said that NZ First's cabbage example was "amusing" and at a million litres of irrigation, it would indeed make one extremely watery cabbage.

[Thakur Ranjit Singh is a political observer and media commentator and journalist. He runs his blog, FIJI PUNDIT, and lives in Auckland]

ANDREW LITTLE'S HAIL MARY PASS: AND JACINDA ARDERN SPRINTS TO A HISTORIC POLITCAL TOUCHDOWN

Thakur Ranjit Singh.

Those familiar with American Football would know that a Hail Mary pass is a very long forward pass made in desperation, towards end of the game. Here, all receivers run straight towards the end zone and the quarterback will make a long pass that is often "up for grabs".

And the Labour team’s Captain and quarterback, Andrew Little has admirably made that pass and Jacinda Ardern has grabbed the ball in a desperate run for political touchdown, with Kelvin Davis in the flanks. Can they do this? 

Ladies and Gentlemen, presenting the next Prime Minister of New Zealand, JACINDA ARDERN

For somebody who served “apprenticeship” under Helen Clark, Jacinda Ardern appears to have very ably displayed elements of the former Prime Minister’s mettle within very short time of assuming leadership. She embraced the position very confidently with her command performance in the first press broadcast within hours of taking up the office.

She repeated her admirable performance as an able leader, with a combination of empathy for common people, compassion and force - within four days of taking up the helm of a sinking ship.

Lizzie Marvelly, writing in NZ Herald summed it well:

“New Zealand was delivered a Prime Minister-in-waiting… Jacinda Ardern... the uncontested leader of the Labour Party, stepping into shoes that realistically haven’t been adequately filled since they were worn by the formidable Right Honourable Helen Clark.”

And I repeat my Facebook observation - Ardern is a resurrection of Helen Clark. She is lovable, and can also be ruthless when needed. And she displayed those qualities admirably by her decision not to have Materia Turei in her cabinet.

Political Editor of NZ Herald, Audrey Young, observed rightly:

“It was case of smiling assassin –sacking her first minister before she even had the chance to be a minister. It had echoes of both Helen Clark and John Key.” 

The Hail Mary Pass: The former Labour Leader, former captain and quarterback of Labour Team, Andrew Little, made the desperate Hail Mary Pass to Jacinda Ardern, who is GALLOPING FOR A POLITICAL TOUCHDOWN.

Motherhood has become international news here. What is also noticeable about Ardern is that as a former journalist student from Waikato University, she has the understanding and appreciation of halo effect certain mainstream male journalists possess. With that false sense of conceit, they have a habit of bullying, interrupting and humiliating politicians. They certainly have no such chance with Ardern who can trim down journalists who think they are Little Gods.  One journalist rightfully quipped that Ardern grabbed the opportunity to metaphorically club a few media cavemen over their stone-age views on working women and pregnancy. 

If these Kiwi journalist had done their research, they would have found out that almost three decades ago, in 1990, Prime Minister of a very conservative Pakistan, Benazir Bhutto had a baby while in office. That was 27 years ago. Some “cavemen” journalists need refresher course in research and probing journalism.

In the first weekend as the leader, she dominated both- TV 3’s “The Nation” and TVNZ’S “Q+A” and showed her advanced media skills. Unlike Winston Peters who has a habit of ridiculing and shooting the messengers, Ardern is more civilised and humane. The observation was that she possess an ability to rattle them respectfully, and pass on her message.

Labour for the past many years suffered from lack of penetration of their messages. Ardern is a fresh breeze. Positivity, vision for NZ, working for all with integrity, firmness, fairness, equality for all… These were themes that resonated in all mainstream media from this lass with roots in rural Murupara (in Bay of Plenty, 65 km from Rotorua) and Morrinsville, Waikato. Hence, her empathy for the down-trodden - a leader with a heart, not necessarily a rock!

The winning team of Leaders - Jacinda Ardern and Deputy, Kelvin Davis, ready for political touchdown and the winning score on the elction day.

A political party is best judged by how smooth the transition of its leadership is. Labour, since departure of Helen Clark, has been in disarray - until Jacindamania. It was the cleanest and unanimous transfer in history, not borne in any scandal or for selfish reason. In fact it was rooted in a huge sacrifice of Andrew Little (FIJI PUNDIT will have an article on this sacrifice). 

Not many would pass a chance to be Prime Minister. This transition even eclipsed the one between Key and English where challenges (read Collins, Coleman) were suppressed by the departing smiling assassin. No such thing here - a very smooth transition – with a resounding applause which drowned the past bloody battles of Labour leadership.

The youth and media look of Labour needs to be celebrated-and enhanced. Stuart Nash, Michael Wood, and incoming hopefuls of Tamati Coffey and Priyanca Radhakrishnan, among others, helped by Willie Jackson and old hands from the Labour team, including Phil Twyford, David Parker, and Grant Robertson, among others, comprise a challenging team. Their strengths are in media, communications and they project diversity. Labour needs to rectify its deficient communication cell – and colour it to reflect modern NZ.

Part of the winning Labour Team, led by new Labour Leader, Jacinda Ardern.

A word of advice and caution. Jacinda Ardern has to maintain herself, and cleanse (read sack) those in Labour Office who have been responsible for a wanting support to the past leaders. She needs to get a new team, especially those who can communicate. They need diverse support service that reflects the demographic make -up of the country, unlike a very white NZ mainstream media. 

David Cunliffe and Andrew Little failed to listen to this advice at their peril. Had Little done this, there would never have been the intern controversy (read Matt McCarten). I am hopeful Ardern will have her media radars on, be herself and have a support office that can serve the leader effectively-and efficiently, for a change.

And yes, Murupara means to “wipe off mud”. And that they will do as they march into Government after election.

Hail Mary…it is a winning touchdown…Let’s DO this.

[About the Author: Thakur Ranjit Singh is a media commentator and a political observer. He runs his blog, FIJI PUNDIT, and lives in Auckland, New Zealand.]