Talking of Tax/Healthcare/Student loans

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Forums › Finance and wealth management › Talking of Tax/Healthcare/Student loans - COME ON GOOGLE!

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#1567533 7-Jun-2016 22:24

sir1963:

joker97: Why is our tax so high?

Because roads, healthcare, education, etc etc etc etc cost money.

Also because people want to be so spread out in NZ, any attempt at getting a greater density to support more services in a more efficiant way is shot down by the NIMBYs - look at all the recent auckland planning problems with grey haired busybodies in the meetings jeering younger people etc.

They want to live in a detached house, with good access to a hospital and roads and free public transport and it's the taxpayers that are having to pay to support those decisions that the non productive but still able to vote portion of the population want.

Richard rich.ms

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#1567535 7-Jun-2016 22:27

richms:
sir1963:

joker97: Why is our tax so high?

Because roads, healthcare, education, etc etc etc etc cost money.

Also because people want to be so spread out in NZ, any attempt at getting a greater density to support more services in a more efficiant way is shot down by the NIMBYs - look at all the recent auckland planning problems with grey haired busybodies in the meetings jeering younger people etc.

They want to live in a detached house, with good access to a hospital and roads and free public transport and it's the taxpayers that are having to pay to support those decisions that the non productive but still able to vote portion of the population want.

Who of course paid taxes for how many years ?

Here is a crazy notion, lets give peace a chance.

Geektastic

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#1567539 7-Jun-2016 22:50

nunz:

DaveB:

mentalinc:

Did you pay tax in the purchase?

Or are you asking them to increase the price 15%

I probably paid (minimal) tax in Ireland (for use of a service over here).

And yes, GST @15% based on purchases from this country is fair, but I have since recalled that this is coming in soon.

I just hope that, in time, the Govt will reign in these multi-national companies that avoid paying tax in their countries of operation. Don't you?

I had an enlightening discussion with customs today on imports.

Intellectual property = NO customs and excise or tax.
software = intellectual property = no charge
Anything delivered via the internet = intellectual property. = no charge

That means we are in the weird situation where a physical book valued at say $1000 will be charged $150 in GST plus $40-$80 in other customs fees but the same book delivered as an e-book gets charged nothing.

If software is sent to NZ on a CD, USB pendrive, harddrive etc and the docket makes no distinction between the IP and the medium it is on, then the whole price is chargeable but if the medium and the nominal work to package it, ship it, create it is charged / itemised separately to the software then you only pay fees and GST on the medium not the software.

So again, $5000 of say Adobe software

downloaded is free
charged all together as $5000 on the customs docket, delivered on DVD, costs $450 GST plus customs charges
Charged as $30 for the packaging, delivery, DVD media etc and the rest is IP / software then doesn't attract a cent of charge at customs as it is under the $60 charge limit.
But - hypocracy climbs in (old meaning of the term) a Stradivarius violin for example, valued at $100,000 is in reality a collection of $200 in wood and wire, and the rest is IP / intrinsic value. But - you cannot separate the IP / value from the physical item. You will be pinged for $15 000 in GST plus customs charges etc.

Similarly the book referenced above- the books IP and its medium are tied together physically so customs hits you for the lot.

Legislation is really really behind the times when it comes to this stuff.

Last thought:

If an overseas client buys $1000 off me, I charge them $1000 and charge NZers $1150 (incl)

If I bought the item back from the over seas client for $1000 the Govt would charge me $150 in GST so it would cost me more to buy my own stuff back from overseas. No wonder raw producers who ship overseas for secondary production and then bring it back in have bleedingly high costs. If the Govt flat taxed GST on all purchases including overseas, we would do a lot better in the tax take.

So, how can they charge GST on downloading music from iTunes if the servers are not in NZ? Music is IP and no physical media if you download....

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#1567549 7-Jun-2016 23:30

Geektastic:

So, how can they charge GST on downloading music from iTunes if the servers are not in NZ? Music is IP and no physical media if you download....

Because their company is registered in New Zealand as a NZ registered company, so they have to charge GST. Makes no difference where the servers are. I mean they could be using a CDN, and the data stored in servers all over the world. Although I recall when i purchased some software online from Apple, the invoice I got charged GST, but it showed I was billed by their Australian registered company (ending in PTY) on the invoice. Found out they charged me Australian GST, and it should have been exempt, but not sure why their Oz company billed me instead of their NZ one. They did refund me back the GST in that case. I think Apple NZ is all operated out of Oz anyway.

JimmyH

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#1567571 8-Jun-2016 00:00

nunz:

however, a company profits from assets and devaluing them

Not quite. I can't think of any company that profits from deliberatley ruining the value of its assets

Example. I buy a vehicle ( 10k) and straight line depreciate it at 21% per year. That's 2100 per year tax credits. After 4 years i have received $8400 of tax benefit from the depreciation. The vehicle is worth $1600 on the books. If i sell the vehicle from my company to company B, I am still on the hook for the difference in depreciation claimed and the actual transfer price of the vehicle. I still have to account for the $1600 of book value left to the IRD.

Firstly, your math is off. If you have a vehicle worth $10,000 and depreciate it at 21% then your tax benefit is $693 not $2100 (assuming you pay tax at 33%). Secondly, this isn't something magical or money for nothing. Businesses pay company tax on profits (ie revenue - costs). Depreciation is the cost of running down an asset, such as wear and tear on the car you refer to, and is a real costs that is legitimately deducted from revenue to determine taxable profit. The IRD will argue quite hard if they think you are claiming depreciation you can't substantiate, which is why they have default "fair" rates for most assets. Thirdly, there is also a wash up at the end, if you sell the car for more than its depreciated book value then there will be a tax claw-back on the over-claimed depreciation.

Similarly big companies cannot transfer assets they make tax claims on and use as tax right offs without dealing with the IRD. You are not allowed to make assets disappear.

They essentially can't claim write-offs at all if they merely transfer assets between related companies. They have to either sell or otherwise dispose of them (eg dump them as worthless). And IRD will get pretty grumpy if they think that your claimed disposals were rigged and not at fair market value. Trust me, the last thing you want is a grumpy IRD on your case

BUT -if you sell your profit to the parent company as a 'franchise fee' or similar, you dont pay tax on the profit, you dont pay GST and you've shipped it all overseas. Putting a flat GST rate on everything would remove that option, as to make money you have to spend money and taxing the spending, that's good for the IRD.

Ummm... you have to pay GST on your revenue. Just because you are paying a franchise fee to an overseas parent does nothing to reduce your GST liability. GST pretty much *is* a flat rate on everything (very limited exceptions) and has been since it was introduced, which is why it is such a good tax.

Milk companies for instance - Owned by overseas, getting milk from farms owned by over seas and worked by overseas workers. Begger all for NZ in that but we keep sayings its good for the country. However rack up your GST, and everything you buy brings money into the NZ coffers, drop income tax and who cares how much they make ... its all in the GST.

What? I'm pretty sure that most farms aren't owned "by over seas". I'm very sure than anyone working on those farms, whether immigrant or NZ born, is paid and pays PAYE etc in NZ.

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#1567575 8-Jun-2016 00:56

joker97: Why is our tax so high?

No one has the balls to means test superannuation just like every other welfare payment in NZ is

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#1567577 8-Jun-2016 01:38

nathan:
joker97: Why is our tax so high?

No one has the balls to means test superannuation just like every other welfare payment in NZ is

The media is conditioning the public for this to happen. But the fact is that we can afford it if we improve our productivity and earning from the rest of the world. Unfortunately NZs productivity per person is poor compared to much of the world, and we now have a big debt bomb, due to inflated house prices.

nathan

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#1567578 8-Jun-2016 03:27

mattwnz:

nathan:
joker97: Why is our tax so high?

No one has the balls to means test superannuation just like every other welfare payment in NZ is

The media is conditioning the public for this to happen. But the fact is that we can afford it if we improve our productivity and earning from the rest of the world. Unfortunately NZs productivity per person is poor compared to much of the world, and we now have a big debt bomb, due to inflated house prices.

so the way I read that is we can't afford it. There is a big IF after your FACT statement.

Anyway, giving welfare payments to retired people who don't need the money seems crazy to me. The sooner someone has the balls to introduce this the better. Retirees are set to double then triple over this century.

nunz

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#1568571 9-Jun-2016 11:48

UHD:

mattwnz:

UHD:

I think an international corporation has the right to arrange its affairs in such a way as to minimise their tax burden within the law. This is the same as any of us shopping around to minimise the cost of a new smart phone or groceries.

Comparing Tax and shopping for a commodity like a phone, are two totally different things. NZers can't shop around for the best tax deal. You have to pay the IRD your tax, you can't say, well tax in Ireland is lower, so I will pay Irelands tax rate instead, because it is cheaper. Not only that but Ireland get the benefit of the money they get from the tax paid, and not NZ inc. I always think of the tax I pay, as my contribution to NZ inc, to keep it running. It is like insurance too, incase you need a helping hand by the sate for health or other needs. If everyone paid their fair share of tax, we wouldn't have the need for charities, life saving drugs would be funded, and education would likely all be funded, without the need to get a loan. Unfortunately a lot of NZs economy is now being funded by cheap debt, to overseas countries.

Thinking laterally, the analogy works perfectly. Different grocery stores are the different countries, and the consumer is the international corporation. In this case, Google (originally a US corporation) has been able to arrange its affairs (shop around, so to speak) so that it benefits from Ireland's legal structures in the same way a shopper is able to benefit from a product offered at a lower price from a competing store.

If New Zealand wanted the tax dollars from multinational corporations (a contribution to NZ Inc. as you put it), it could very easily lower its company tax rate and make New Zealand more attractive but that is a far more complicated matter that our leaders do not currently believe would benefit New Zealand. Companies operating in New Zealand do pay taxes on their profits as any other company here does. No laws are broken, it is just that their affairs are arranged in such a way that the international corporation isn't unfairly burdened by tax that it might have to pay twice in many countries.

I can see you're moralising the issue and may accept you have a partial point there but if that is the sole problem then it is the responsibility of law makers and what the democracy wants. Write to your MP.

Ditch all income / profit tax, increase GST - reduce cost of compliance, increases tax take on overseas visitors, gets all monies at the source it is spent (especially good for overseas companies) and cant be diddled so easily as any monies spent in the process of making a profit will be tax collected by the supplier.

The only people who dip out are accountants and the like - they would have to step up to the plate and provide beneficial services like advice and proactive support improving profitability rather than being a parasitic cost (sorry to all accountants out there) incurred at the behest of the tax man (or woman).

It's not quite that easy but:

Last years total tax take was 59 000 million (59 billion)

GSt accounted for 25% of that (15 billion)

Company tax 11B

Personal tax 32B

Double GST and Ditch personal and company tax. The increase in actual tax paid by companies will help make up the deficit, and the 4% minimum drop in personal tax ( 19% personal dropped to 15% extra GST) will allow us to ditch Tax credits, working for families etc.

It's also worth noting FBT was only 0.5b of the tax take, and for the complaince costs it causes - kill it.

nunz

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#1568572 9-Jun-2016 11:51

mattwnz:

Geektastic:

So, how can they charge GST on downloading music from iTunes if the servers are not in NZ? Music is IP and no physical media if you download....

Because their company is registered in New Zealand as a NZ registered company, so they have to charge GST. Makes no difference where the servers are. I mean they could be using a CDN, and the data stored in servers all over the world. Although I recall when i purchased some software online from Apple, the invoice I got charged GST, but it showed I was billed by their Australian registered company (ending in PTY) on the invoice. Found out they charged me Australian GST, and it should have been exempt, but not sure why their Oz company billed me instead of their NZ one. They did refund me back the GST in that case. I think Apple NZ is all operated out of Oz anyway.

ironically they might have to charge GST but they wont have to pay GST (electronic goods downloaded from overseas = no GST) - improves tax take for the Govt as no legitimate GST rebate for purchase of source goods.

MikeB4

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#1568574 9-Jun-2016 12:00

nathan:
joker97: Why is our tax so high?

No one has the balls to means test superannuation just like every other welfare payment in NZ is

Superannuation is not a Welfare Benefit.

Here is a crazy notion, lets give peace a chance.

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#1568600 9-Jun-2016 12:27

MikeB4: Superannuation is not a Welfare Benefit.

What is it then? It's a government transfer payment just like any other form of 'welfare benefit'

Twitter: ajobbins

nunz

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#1568621 9-Jun-2016 12:41

JimmyH:

nunz:

however, a company profits from assets and devaluing them

Not quite. I can't think of any company that profits from deliberatley ruining the value of its assets

Example. I buy a vehicle ( 10k) and straight line depreciate it at 21% per year. That's 2100 per year tax credits. After 4 years i have received $8400 of tax benefit from the depreciation. The vehicle is worth $1600 on the books. If i sell the vehicle from my company to company B, I am still on the hook for the difference in depreciation claimed and the actual transfer price of the vehicle. I still have to account for the $1600 of book value left to the IRD.

Firstly, your math is off. If you have a vehicle worth $10,000 and depreciate it at 21% then your tax benefit is $693 not $2100 (assuming you pay tax at 33%). Secondly, this isn't something magical or money for nothing. Businesses pay company tax on profits (ie revenue - costs). Depreciation is the cost of running down an asset, such as wear and tear on the car you refer to, and is a real costs that is legitimately deducted from revenue to determine taxable profit. The IRD will argue quite hard if they think you are claiming depreciation you can't substantiate, which is why they have default "fair" rates for most assets. Thirdly, there is also a wash up at the end, if you sell the car for more than its depreciated book value then there will be a tax claw-back on the over-claimed depreciation.

Similarly big companies cannot transfer assets they make tax claims on and use as tax right offs without dealing with the IRD. You are not allowed to make assets disappear.

They essentially can't claim write-offs at all if they merely transfer assets between related companies. They have to either sell or otherwise dispose of them (eg dump them as worthless). And IRD will get pretty grumpy if they think that your claimed disposals were rigged and not at fair market value. Trust me, the last thing you want is a grumpy IRD on your case

BUT -if you sell your profit to the parent company as a 'franchise fee' or similar, you dont pay tax on the profit, you dont pay GST and you've shipped it all overseas. Putting a flat GST rate on everything would remove that option, as to make money you have to spend money and taxing the spending, that's good for the IRD.

Ummm... you have to pay GST on your revenue. Just because you are paying a franchise fee to an overseas parent does nothing to reduce your GST liability. GST pretty much *is* a flat rate on everything (very limited exceptions) and has been since it was introduced, which is why it is such a good tax.

Milk companies for instance - Owned by overseas, getting milk from farms owned by over seas and worked by overseas workers. Begger all for NZ in that but we keep sayings its good for the country. However rack up your GST, and everything you buy brings money into the NZ coffers, drop income tax and who cares how much they make ... its all in the GST.

What? I'm pretty sure that most farms aren't owned "by over seas". I'm very sure than anyone working on those farms, whether immigrant or NZ born, is paid and pays PAYE etc in NZ.

> Not quite. I can't think of any company that profits from deliberatley ruining the value of its assets

As I said in my post - I know it is not profit, but it is an advantage and reduces tax liability. No depreciation would change my tax bill significantly.

> over seas farms - see how many are owned by Synlait or under contract to Synlait as an example. The milk companies determine how much milk you can produce and if you produce too much, you have to dump it. They determine a raft of requirements that control the market. After that is done check out their turn over vs actual profiit then see how much money is being paid in finance to overseas financial institutions etc and you iwll realise lots of that money is ont staying in NZ>

MikeB4

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#1568625 9-Jun-2016 12:45

ajobbins:
MikeB4: Superannuation is not a Welfare Benefit.

What is it then? It's a government transfer payment just like any other form of 'welfare benefit'

Its a retirement payment in return for contributions.

Here is a crazy notion, lets give peace a chance.

nunz

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#1568643 9-Jun-2016 13:01

MikeB4:
ajobbins:

MikeB4: Superannuation is not a Welfare Benefit.

What is it then? It's a government transfer payment just like any other form of 'welfare benefit'

Its a retirement payment in return for contributions.

While I agree with MikeB - it also has a welfare component under the old system (pre kiwisaver) as you were not limited to your contributions. if you contributed 100k over the course of a working life, and between inflation and longevity, you get paid out 200k - that surely is a hybrid benefit / savings plan. A bit of both. Just coz your contribution was exceeded doesn't stop payments.

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