Politics 🗳️ NZ Politics

[wizard of Tauranga]

This article shouldn't be behind nzherald's paywall...


OPINION: The Public Purse is a fortnightly Herald column focused on the public sector and how taxpayer money is spent

Finance Minister Grant Robertson is on the defending, for the sake of his Government’s future, and indeed the history books, his spending record.

There’s little doubt that he brought the country with him in the early days of massive pandemic borrowing and spending. But histories seek turning points, and the last $5 billion with which Robertson topped up the fund for fighting may be one.

First, Robertson’s view. All is chaos when we enter the story: in early 2022 he didn’t know what new Omicron-battling measures would cost and there was a credible risk that they would outstrip the $2b remaining in the Covid Response and Recovery Fund (CRRF). So he added $5b to this envelope of funding, supposed to indicate what the Government was comfortable spending to fight Covid-19 and all of it factored into the Treasury’s fiscal picture, including long-term debt.

The Finance Minister has told the Herald many times that the CRRF was for response and recovery. He says this always included immediate response measures, such as in the health system, and other programmes that supported businesses, households and the wider economy

He doesn’t accept that the top-up was an undisciplined and cynical way of lifting Government spending on all and sundry. Neither does he accept that roughly half of this $5b (all of it debt) was almost immediately spent on non-Covid priorities.

“As I’ve said previously, once the CRRF was closed in Budget 2022, the remaining funding was reprioritised, which is not an unusual occurrence. This was done in the context of the needs of the time and the Government’s fiscal position,” he said last week.

“By the time of Budget 2022″, Robertson emphasised, chaos had resolved to “sufficient certainty around Omicron and Covid costs to allow the CRRF to be closed...”

There is, however, another version of these events; it spans exactly 69 days.

On February 1 the Cabinet tipped an additional $5b into the CRRF and it took exactly 41 days for it to raid that kitty to pay for other things. It may go down as record speed for saying one thing and then doing quite another.

On March 14, the Cabinet agreed to an immediate three-month temporary reduction to fuel excise and road user charges (the foregone tax would starve the Land Transport Fund so money was needed to keep it whole).

The hefty $350 million cost was not something Robertson wanted to lever inside the allowance he’d already set for new spending in his upcoming Budget, which was heavily oversubscribed, documents show. So the Cabinet agreed the cost would be paid from the CRRF, or as the record shows: the CRRF would be reduced by the same amount to “offset the negative fiscal impact”.

The impetus for this spending was not Omicron, but the Government’s dimming popularity. By early 2022 New Zealanders’ chief concern was no longer Covid, but inflation and the upward-spiralling cost of living. Bank and consumer surveys repeated this finding. And critically, by early March, polling showed National had surged ahead of Labour for the first time since the pandemic began. At roughly the same time Robertson and Revenue Minister David Parker also asked officials to quickly produce a plan for another expensive idea: a “cost of living payment”, or, more precisely, three such payments. (They didn’t meet the criteria for CRRF funding either; we’ll return to this later.

On March 25, just 52 days after $5b was added to the CRRF, a joint Treasury and IRD report tackled options and preliminary costs for the cost of living payments, all of which easily topped half a billion dollars. The report noted: “If this policy is to be progressed a funding source will need to be identified. One way to deliver this payment without increasing inflationary pressures would be to fund it from the existing Budget 2022 allowance and reprioritising away from other initiatives.

So the Treasury didn’t have the CRRF in mind as a funding source. On the contrary, it warned darkly (like the chorus in some ancient Greek tragedy) that any such scheme should be subject to the discipline of the ordinary course Budget process, where Government priorities are weighed against one another and constrained by a cap.

At this point, it is useful to remember that the system whereby the Finance Minister fixes an allowance for net new operating spending well in advance of the Budget provides a measure of restraint. It is possible for the Minister to raise this allowance, but if he does so, especially late in the Budget process, he looks profligate, and moreover he risks his ability to actually hold the line on his colleagues’ spending requests which invariably outstrip available money.

What to do? On April 11, just 69 days after popping that extra $5b in the CRRF, the Cabinet took a series of quick succession decisions: it closed the CRRF and “reprioritised” the $3.2b that remained.

It agreed to spend more than $800m on cost of living payments (a total of $350 per person earning income up to $70,000 a year). This decision also came on April 11. As did the decision to extend the March fuel tax cut by two months, at a further cost of $235m. Both plans were charged against the now-closed CRRF.

In addition, the Cabinet agreed to use a further $1b of the reprioritised CRRF funds to, “offset investments funded from the Budget 2022 operating allowance.

Robertson says it is not unusual to treat such unused funding this way; after all, the operating allowance is a net number that always takes account of any savings or reprioritisation of expenditure that has already been budgeted for. Others, including former deputy chief economic advisor to the Treasury, Tony Burton, say it is an “abuse of process” to treat the unused remains of an emergency contingency as “underspend”

The Covid Response and Recovery Fund was used for fuel tax relief.

None of the spending – not the $350m for the March fuel tax relief agreed before the CRRF’s closure or the $2.35b redirected immediately thereafter – met the CRRF eligibility criteria Robertson agreed with the Treasury in August 2021.

“The future scope of the CRRF should be more focused on managing the immediate costs of resurgences and the public health response” the relevant document noted. To eliminate doubt, officials listed four examples of qualifying programmes: the wage subsidy scheme, the resurgence support payment, the short-term absence payment and the leave support scheme.” Robertson signed off on these tightened terms.

For clarity, $1.2b from the CRRF’s remains after closure were also set aside for immediate Covid-related health costs arising between budgets ($386m of this was unspent and offset general costs in Budget 2023).

But why pick through the details of the Covid fund’s last $5b now? Indeed, we cannot even describe it as the last of the Covid spending since billions are still being paid out on the Covid response, spread into “out years” and are otherwise deemed “underspends” and “reallocations” and used to plump spending elsewhere – Budget 2023, for example, and to “offset” between-Budget spending on Government priorities, like the further $1.5b that went on fuel tax reductions in the 22/23 fiscal year.

The short answer is that microcosms matter in writing history. It is through their detail that we understand the people who walk our political stage and, as Herodotus might say, that we come to know their deeds.

This falls under corruption! Raiding taxpayers money under false pretences to increase your polling is nothing but self serving, gross misconduct. In the real world of accountability and law and order this would be a dismissible offence, if not criminal!!

Fraudulent? Where have I hear that around Robertson before?

But only a few in the media care as our standards and expectations slip to 3rd world levels… well done to this journalist for investigative journalism and an actual understanding of the facts and figures.

 

[juju]

So national has come out with their beneficiary policy, which is very similar to the one of acts. Thank god finally this is being addressed. I’ve had friends who were recent graduates of a uni, wealthy parents that jumped on the benefit simply because they couldn’t be fucked working - it’s a joke. If you want free money, there’s loopholes you should have to jump through. Obviously there’s situations where you’re a drug addict or sick, and you’re unable to work, but we’ve seen a jump in those on the benefit when people were crying out for workers in unskilled jobs (farming, fruit picking, hospitality, retail etc). This can’t happen. And those who are working, are wasting tax payer dollars on those who simply can’t be bothered working. There needs to be safety net in nz but this is just pure laziness & needs to be stopped. It’s a win win imo, improves the economy & can hopefully light a fire in those who can start working & find purpose in their lives again. And let’s be honest, if we could all not work & get paid well wouldn’t that be amazing, but that’s not how the world works so tough bikkies & get on with it.

I'm ok with scrutiny on benefits as long as other issues like Tax Evasion are pursued with equal vigour.
That doest happen though and it just strikes as hypocrisy by right wing parties.

 

[jonesy101]

I mean, she would seem crazy when she was 10 years mentally ahead of her peers. I would have been an ignorant stupid kid at high school next to her.

I went to school with a current cabinet minister and knew them from about the age of 11. I would never have picked them as the type to get into politics as they weren't really the class debater. They were bright, but not super nerdy.

 

[miket12]

I'm ok with scrutiny on benefits as long as other issues like Tax Evasion are pursued with equal vigour.
That doest happen though and it just strikes as hypocrisy by right wing parties.

Starting with individuals, companies and trusts moving assets and money overseas to avoid paying tax on them.

Then moving on to our quasi CPT where it's easy to avoid because it's all about the purchaser's intentions about when they brought an asset and whether or not it was brought with the purpose of selling for a profit. Just getting an account to write a letter saying it wasn't the intention of making a capital gain shouldn't be enough for the IRD not to seek tax on the gain.

 

[wizard of Tauranga]

I'm ok with scrutiny on benefits as long as other issues like Tax Evasion are pursued with equal vigour.
That doest happen though and it just strikes as hypocrisy by right wing parties.

As a tax payer I support more scrutiny of those that have contributed nothing to the tax base and only take from it than those that pay a heap of tax and legally minimise tax. The tax ‘evasion’ argument is really around what percentage they pay.

And I don’t support reinventing ‘income’ and saying a capital gain is an income to say the rich pay a lower tax rate.


(In no way do I support fraud or deliberate evasion)

 

[Warriorsfan92]

I'm ok with scrutiny on benefits as long as other issues like Tax Evasion are pursued with equal vigour.
That doest happen though and it just strikes as hypocrisy by right wing parties.

I’m not opposed to that either, I don’t think anyone would be. Unfortunately the system is set up for this & the wealthy will always find ways to store wealth. I don’t come from wealth, so I understand the pain.

 

[John Nick]

I’m not opposed to that either, I don’t think anyone would be. Unfortunately the system is set up for this & the wealthy will always find ways to store wealth. I don’t come from wealth, so I understand the pain.

I was on about this exact subject just a few weeks ago.
As usual the devil is in the detail

 

[juju]

As a tax payer I support more scrutiny of those that have contributed nothing to the tax base and only take from it than those that pay a heap of tax and legally minimise tax. The tax ‘evasion’ argument is really around what percentage they pay.

And I don’t support reinventing ‘income’ and saying a capital gain is an income to say the rich pay a lower tax rate.


(In no way do I support fraud or deliberate evasion)

Notice the way Seymour can't even confront the topic at all. Therein lies the hypocrisy...
It's easy to bash beneficiaries during an election cycle - but there are other bigger issues not being confronted.

I say all this as a tax payer who just got a hefty / painful bill recently.

 

[defensivebomb]

I'm ok with scrutiny on benefits as long as other issues like Tax Evasion are pursued with equal vigour.​

That doest happen though and it just strikes as hypocrisy by right wing parties.

OK I've gone slightly down a rabbit hole with this one, but I don't think it is quite a clear case of right vs left.

Tax evasion in NZ gets a range of estimated values and thrown around a fair bit. The SFO one of the only reliable sources of information, and they estimate the annual tax evasion values based on the percentage and value of incidents in other jurisdications, and apply it to NZ's expenditure. So it is always a rough number, but probably reasonably accurate in the absence of anything else.

I had a read of the SFO's report. The SFO compares the below samples of proven fraud with their estimate based on the UK & Australian percentages, and conclude that there is a lot of unreported fraud.

Inland revenue

• $959 million recovered through investigations yielding a ROI $8.75 per dollar spent.
  • Fraud within this only yielded $0.09 in 19/20 (it was $2.75 the year before).
• A program based on information sharing with the ministry of Development yielded 0 referrals for suspected fraud within benefits and students datasets.
• Program to monitor Goods and Services Tax (GST) returns yielded;
  • $106.8 million from 3,432 GST returns.
• Small business Cashflow Loan Scheme yielded;
  • 4,097 declined applications worth a total of $67.67 million.
  • This was a 43% decline rate from those reviewed.

Ministry of Social Development

• Specialist fraud investigators conducted 5,234 cases relating to benefit overpayment;
• 57.1% of these investigations resulted in a change of entitlement.

Serious Fraud Office

• The NZ SFO successfully prosecuted 6 cases returning $210 million NZD

So I don't necessarily think it is left vs right. There are teams and structures in place to hunt down fraud / tax evasion but it is a massive beast to tackle, with varying degrees of success (e.g. the IRD's fluctuating investigations ROI).

I think the main distinction between right and left is the emotive messaging of "cracking down". In reality, I think both sides of the fence try to stem leakage

But yeah - agree with your point around equal vigour. I think also, when it comes to white collar crime, it is generally SMEs, given most businesses in NZ are of that size

And there is clearly a gaping hole of legal tax avoidance by large multinationals. But that's another issue entirely

 

[Rick O’Shay]

As a tax payer I support more scrutiny of those that have contributed nothing to the tax base and only take from it than those that pay a heap of tax and legally minimise tax. The tax ‘evasion’ argument is really around what percentage they pay.

And I don’t support reinventing ‘income’ and saying a capital gain is an income to say the rich pay a lower tax rate.


(In no way do I support fraud or deliberate evasion)

The difference is the interpretation. Tax evasion is illegal and you can spend a few years in jail if convicted.
Tax avoidance is perfectly legal and only requires an understanding of the tax laws in NZ. Donations as an example are and can be used by anyone to reduce tax due to the deductibility rules.
God help you if you take a punt on an avoidance scheme and IRD come up with a negative ruling on it. Can cost you a lot of money in back tax. No one looks forward to an IRD audit.

Have a younger brother who is a tax inspector for IRD although I think they have some fancy new name for them now. Some of the stories he tells over a few jars are mind boggling.

 

[marv.]

I mean, she would seem crazy when she was 10 years mentally ahead of her peers. I would have been an ignorant stupid kid at high

I mean, she would seem crazy when she was 10 years mentally ahead of her peers. I would have been an ignorant stupid kid at high school next to her.

yo!
just to be clear, my post was about her being a good sport, not about her being batshit crazy.
she has what used to be called asperger’s syndrome, (now ASD) high functioning too, so yes! generally speaking, very intelligent.

not unlike our own andrew webster i’m sure.



i just wanted to make sure i wasn’t coming across like i was ragging on her for being weird.

 

[juju]

The difference is the interpretation. Tax evasion is illegal and you can spend a few years in jail if convicted.
Tax avoidance is perfectly legal and only requires an understanding of the tax laws in NZ. Donations as an example are and can be used by anyone to reduce tax due to the deductibility rules.
God help you if you take a punt on an avoidance scheme and IRD come up with a negative ruling on it. Can cost you a lot of money in back tax. No one looks forward to an IRD audit.

Have a younger brother who is a tax inspector for IRD although I think they have some fancy new name for them now. Some of the stories he tells over a few jars are mind boggling.

Tax avoidance is just as morally wrong as benefit fraud.

Unfortunately being moral doesn't really get you rich...

 

[defensivebomb]

Tax avoidance is just as morally wrong as benefit fraud.

Unfortunately being moral doesn't really get you rich...

eh?

Tax avoidance is just structuring your affairs to minimise your tax. Like making donations in your own name, and being able to claim back tax on it. Or deciding to set up a business as a company / sole trader / partnership / trust. It should actually be called tax optimisation. It is structuring your affairs within the rules

Absolutely nothing morally nor legally wrong with it.

 

[juju]

eh?

Tax avoidance is just structuring your affairs to minimise your tax. Like making donations in your own name, and being able to claim back tax on it. Or deciding to set up a business as a company / sole trader / partnership / trust. It should actually be called tax optimisation. It is structuring your affairs within the rules

Absolutely nothing morally nor legally wrong with it.

It's gaming the system to contribute less to society.
Are poor people able to "optimise" their affairs to avoid paying more tax?

It's totally not right to kick down on beneficiaries when much more money is to lost tax evasion.
& It's totally hypocritical white collar crime doesn't have the same stigma.

 

[wizard of Tauranga]

Tax avoidance is just as morally wrong as benefit fraud.

Unfortunately being moral doesn't really get you rich...

Morally those on benefits should ALL work as much as able on community projects to repay the community that is supporting them. And pass drug and alcohol tests. And prioritise their kids schooling and meals or lose their benefit.

Do we go legal or moral? And who decides what the morals are?

 

[Rick O’Shay]

It's gaming the system to contribute less to society.
Are poor people able to "optimise" their affairs to avoid paying more tax?

It's totally not right to kick down on beneficiaries when much more money is to lost tax evasion.
& It's totally hypocritical white collar crime doesn't have the same stigma.

In this country mate you get more jail time for fraud than murder

 

[juju]

In this country mate you get more jail time for fraud than murder

Really? Do you have literally one case that can demonstrate that.

 

[juju]

Morally those on benefits should ALL work as much as able on community projects to repay the community that is supporting them. And pass drug and alcohol tests. And prioritise their kids schooling and meals or lose their benefit.

Do we go legal or moral? And who decides what the morals are?

Even sickness benefits or DPB...

I don't disagree with the job seeker benefit.

 

[wizard of Tauranga]

Even sickness benefits or DPB...

I don't disagree with the job seeker benefit.

Morally those on benefits should ALL work as much as able on community projects to repay the community that is supporting them.

 

[John Nick]

So actually what Luxon is doing is making beneficiaries reapply every 6 months instead of 12 months.
Is that actually new policy or just tinkering around the edges