TAX – THE THREE LETTER WORD THAT’S WORSE THAN A FOUR LETTER ONE

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Death and taxes… the only certainties in life. You can thank Benjamin F for that pearl of wisdom.

Duty, levy, tariff… however it is described, seeing a section of your income carved off your weekly pay is often tough to take for some and can be the final straw come election time for others, particularly when the public sees two candidates for PM that aren’t really much chop. One issue can be a dominant differential.

Tax cut promises will come because, much like what we’ve seen in America with Trumpmania, NZ has a swag of people that are struggling and don’t answer polls… often they don’t even have a phone. Middle America has some resemblance in Middle Earth. However even precious tax cut offerings are unlikely to change a government.

But I’ve always believed taxes are a problem solver. We, as a society, need something then there’s a tax to pay for it.

And when you think about it topically and follow mainstream media closely, the first raft of articles that hit the presses are all about a problem, the ‘what’, then quickly comes the ‘why’ it’s occurred and finally, often in a last ditch to get the most exposure from the story, comes the more fleeting ‘how’ to fix it. Ninety percent of Kiwis are googling cute cats, though, by this stage.

A perfect example of this in the engineering industry is the huge number of immigrants coming into New Zealand. Everyone has been talking about it for years… and finally this over-PC country of ours has come to a realisation that you aren’t in fact racist to bring up the topic, though perhaps that revelation has come too late and been far too much of the focus because of the voices of the few. Those immigrants, fine people many are too, have placed immense pressure on infrastructure and public service costs… all part of a New Zealand that’s ‘growth’ is far better described as isolated overpopulation.

And now, faced with a real problem, you have well-respected – and definitely not racist – tax experts such as Mark Keating providing the ‘how’ and saying that government needs to impose a flat levy on immigrants to help cover the strain placed on the aforementioned.

Mr Keating is a senior lecturer in tax law at the University of Auckland Business School and his idea is just one of many to cope with a $100 billion worth of service and infrastructure pressure that population bloat will create over the next 10 years.

Mr Keating’s response is one that we are seeing all around the world – when there is a problem, you cocoon. Much akin to wrapping oneself in the fetal position, I say the words without contempt for them. Fixing a problem by becoming insular is a trend we will see more of and barriers to entry will be more prominent before being allowed to enter the growing closed circles and pockets of trust.

Brexit. Trump closing borders to some. Problems. Answers; become insular. Globalisation is a word that was on every lip some two decades ago. It’s very much entrenched now, and so are the problems needed to be overcome that came with it.

And it’s here that some of our very top manufacturers in New Zealand within the engineering industry believe we have a problem, or may have a problem, with our number one trading partner – Australia.

Now this is something I don’t subscribe to, but they are worried that a struggling Aussie economy will result in some sort of tax for Kiwi exporters In order to give our cousins across the ditch a step up in their own market. Sort of like if we want to enter their circle of trust then there’s a premium that needs to be paid.

And yes, although these people don’t want to go on record they are indeed worried and for good reason because from a manufacturing point of view taxes in trade can mean the end of business.

It’s hard enough to manufacture in New Zealand as it is, often without a raft of local resources and needing to import a whole lot of stuff before you even get started, with isolation playing parts on the way in and the way out.

But, as a manufacturer, imagine paying a duty on top of that of say 15%… end of days. The certainty here would be taxes equals death to many.

Now this may be your typical acorn on the head sort of stuff, but with deals all up in the air free-trade must be of top priority to our little ol’ country. Just a year ago we had confidence in the Trans-Tasman Pacific partnership…. now all our eyes turn to Japan in anticipation.

New Zealand exports were 28% of GDP in 2016, some $70.9 billion. Australia is our number one market at about $13 billion.

It’s easy to see how some within the sector could fear the worst around every corner if other countries tie up free trade deals without us. Even local corners.

Benjamin Franklin probably couldn’t have envisaged the world we live in today, but if he could he may have added copious and complex trade talks to his famous quote.

– Greg Robertson, publisher

 

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