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Insights 27: 27 July 2018
Latest interview: Sam Warburton discusses the Auckland fuel tax on Radio New Zealand
Localism op-ed: Dr Oliver Hartwich on New Zealand's path to localism
Latest opinion: Martine Udahemuka writes for on incentivising vocational training

Low tax fantasy
Dr Bryce Wilkinson | Senior Fellow |
This Sunday Bridget Williams Books is holding a panel discussion on the infantile proposition that tax is love. Really? Who fantasises about paying more tax?

Unlike love, tax is force. In 1993, Charles Adams, a US tax lawyer qualified in history and philosophy, published a history of taxation, for good and evil, across civilisations.

As he observed, the essence of a tax is taking money, property, or services by government without paying for it.

Love does not feature in this history, episodes of violent rapacity do.

Evil readily emerges when those in power seek to tax without the general uncoerced consent of those being taxed.

His nuanced conclusion was: “how we tax and spend determines, to a great extent, whether we are prosperous or poor, free or enslaved, and most important, good or evil”.

In short, take great care, particularly about consent.

The title for the panel discussion was inspired by a pre-election article by economist Shamubeel Eaqub. He proposed that tax is love.

At best, a nice thought. Free speech in action.

But what took my eye was his repeated assertion that New Zealanders are not highly taxed.

Really!? General government tax revenues in the year ended March 2017 represented NZ$49,250 per household. This would be the highest figure in New Zealand’s history, inflation adjusted.

Eaqub mainly compared New Zealand with most of the world’s highest-taxed countries – European and Scandinavian countries.

This is akin to comparing myself to 12-year olds, and declaring myself to be tall.

The Heritage Foundation, a US think tank, has compiled ratios of general government tax revenue to GDP for 180 countries. New Zealand’s 32.8% ratio is far above the 180-country median of 23.5%.

On its statistics, 94% of world’s population live in countries with lower tax ratios than New Zealand’s.

If we restrict the comparison to countries with at least 2 million people and GDP per capita of at least US$15,000, only 18 of 62 countries have a higher tax ratio than New Zealand. They comprised Botswana and 17 European/Scandinavian countries.

The population-weighted average country ratio was 23.6% of GDP. Eight-nine percent of the 3.5 billion people in these prosperous 62 countries live in countries with a lower tax ratio than New Zealand.

If tax is love, how many households volunteer more than the required love when paying IRD? I understand that IRD collects the numbers. Think zero.

Our open world is under threat
Philippe Legrain | Commentator |
New Zealand has blazed a trail in many areas – not least in opening up its economy to the rest of the world. In the 1980s reforming Labour governments axed the thicket of protectionist tariffs and subsidies that penalised consumers and cossetted – but ultimately held back – Kiwi farmers.

By throwing open the economy to global competition and foreign investment, they started a trend for what is now known as globalisation: the huge – and hugely enriching – expansion of international exchange of goods, services, people, money and data that has brought the world ever closer together in recent decades. Until now?

Until recently, many people thought – wrongly – that globalisation was a technological inevitability. After all, the internet can’t be uninvented. But it can be restricted: witness the Great Firewall of China. And new regulatory moves in Europe and America could gum up data flows more generally.

The biggest threat to our (mostly) open world comes from the revival of nationalism, notably in the United States. In the name of putting “America First”, President Donald Trump seems intent on starting a global trade war, clamping down on foreign investment and building a border wall with Mexico. More broadly, he wants to sabotage the international rules and institutions that underpin open markets – notably the World Trade Organisation, where I once worked as special adviser to its then Director-General, former New Zealand prime minister Mike Moore.

The big danger, then, is that the world is about to repeat the mistakes of the Great Depression of the 1930s, when a protectionist spiral destroyed an earlier era of globalisation. Or less dramatically, that globalisation will be throttled by a thousand small restrictions.

The good news is that for now most countries seem intent on keeping markets open. While Trump pulled the US out of the Trans-Pacific Partnership (TPP), a free-trade deal with New Zealand and ten other Pacific countries, the remaining 11 are going ahead with the agreement without the US.

A broader Asian deal championed by China, the Regional Comprehensive Economic Partnership, has new momentum. And the European Union is pressing on with trade deals with a host of countries, including Australia and New Zealand.

But there is no room for complacency. Nationalism is on the rise in many countries. Winston Peters is not Donald Trump, but it is still troubling that the acting prime minister of this country hails from a party called New Zealand First.

Come to my upcoming talks in Auckland and Wellington – or watch them online – to debate what we need to do to keep our world open.

Not so youthful rebellion
Ben Craven | Project Coordinator |
Back in 1986 the Beastie Boys released what would become one of their most well-known songs.

While (You Gotta) Fight for Your Right (To Party!) captured the imagination of young people, parents, politicians and society at large began hand-wringing about all the partying, drunken antics and teenage rebellion.

Fast forward to 2018 and it’s not the youthful Millennials fighting for their right to party… it’s their grandparents.

Yes, lawn bowl enthusiasts are up in arms after police in the Wellington region decided to oppose attempts by bowling clubs to have their alcohol licences renewed.

MPs from across the political spectrum have come out of the woodwork to oppose this latest move by the police, denouncing their “interpretation” of the law, and hoping to figure out a solution that will not require yet another law change.

It’s not the first time this legislative beast has reared its ugly head.

Earlier this month a woman at a Northcote supermarket was stopped from buying alcohol.

Her crime? Being at the shop with her 15-year-old son and 10-year-old daughter.

While some people were quick to blame the supermarket, upon closer inspection the Sale and Supply of Alcohol Act 2012 was the culprit.

Under the Act, sellers have to be able to ascertain whom might end up drinking the alcohol or face a fine.

Forget the fact that it’s perfectly legal to give your teenager a discretionary beer, or sup a glass of wine over a meal.

This pernicious piece of legislation all but prevents parents from purchasing alcohol while accompanied by their teenage dependants, and now it’s pitting poor pensioners against the police.

The Act was passed in 2012 by both major parties at a time when being tough on young people drinking was all the rage.

But when your tough on binge drinking piece of legislation ends up targeting single mums doing the messages and pensioners having a wee tipple after a successful bowls tournament, then something has gone horribly wrong.

Thanks to poor legislating by our politicians we are now in a situation where we need to once again fight for our right to party, or at least for our right to buy a bevvy or two.

This time it won’t be a motley mob of non-voting young people that the politicians will need to contend with, but something altogether more scary.

Peeved off pensioners.

On The Record
All Things Considered
  • Graphic of the week: How people interpret probability through words.
  • How Mises explained the fall of Rome.
  • The question of who owns the moon is about to get very complex.
  • Is the US 4th Amendment now dead in the age of the internet?
  • Venezuela's inflation rate may hit 1 million percent this year, IMF forecasts.
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