Marsden is Here

Early voting has started, so I'm running out of time to make my triennial pre-election post.

( cut for those who are not interested )

From the interviews I have read in the mainstream media my feeling is that many of the actual anti-mandate protesters are struggling with a shift in world view. Small business owners, nurses, teachers, .. professionals who up to now have been used to feeling that they are in control of their lives and secure in the knowledge that the system operates to their benefit. Suddenly that control has been rudely taken away, because of something which probably doesn't feel particularly real to them.[1]

At a personal level, that has to feel really unfair and hurtful. And it is, in the way life often is. I sympathise in that I really don't know how I would cope if my job or ability to work was suddenly taken away. It's not comfortable to think about. But it is always a possibility at the back of my mind, so I like to think I am as prepared as I can be, because I know our social support systems while not perhaps currently actively hostile to those who need or want to change or withdraw from employed life for whatever reason are not actually particularly supportive.

( continues )

Around the world the pandemic has highlighted inequity. Inequity is fuel to the fire of those feeling disenfranchised and angry, and to professional shit-stirrers. In New Zealand we're actually in a good position to address that, especially right now with a somehow well-performing economy while so many of the politically vital middle class / small business actually have to look at the uncomfortable reality that "that could be me". The solutions lie not in how we treat and respect /workers/ but in how we treat and respect those who /for whatever reason/ are not currently able to work.

( footnotes )

I communicate with the pollsters by e-survey, especially since auto-dialers put me offering my phone completely. One particular company often starts with the question "What do you see as the biggest issue facing NZ today.", or something similar. This week it was beefed up a bit and led to an extended series of thoughts which I posted on FB (as being the most convenient format at the time) but am repeating here as a less ephemeral record.

The question:
What are the main social problems in New Zealand that the Government and community as a whole need to address?
My initial answer:

Inequity and poverty:
With our GDP per capita there should be no excuse for not being able to provide everyone with the basics of a warm, dry, private space to call their own and sufficient to eat; as a matter of right with no need to jump through any hoops to prove they are entitled to it.
Address this issue and a great number of other issues which stem from or are exacerbated by it will also recede.

Half an hour or so later I also wrote the following (edited a bit for clarity):
---
Ongoing thought about why our current social welfare system doesn't work very well wrt eg housing and food.

It consists of (reluctantly) giving people money and then leaving them to be able to procure the required services from "the market". But they're not dealing with /one/ market they are dealing with /many/ markets - accommodation, food, electricity ... - /each of which/
- has the goal of acquiring as much of that money as possible /without concern/ for the balance of the customers' needs
- and prices accordingly.

The result of course is that there is not and probably will never be "enough" money - see also for example how private rent increases have tracked the accommodation supplement.

The supply industries also benefit in their pricing strategy from individuals being given the money to spend rather than the services being purchased in bulk by a central authority with the clout to negotiate and keep the prices down.

For this reason I'm not opposed to government purchasing services from private providers; I /am/ opposed to the private providers being selected on the basis of lowest cost or metrics such as how fast they can get people off their books (churn). The correct metric has to be based on standard of care.

That would unfortunately require the government to care about the well-being of it's /entire/ constituency, not just those who voted for the "ruling" party or contributed to its coffers. :/
---

Back to now and a couple of other thoughts

Dealing with poverty is not a problem which can be solved by a single approach.
- Giving people money (or some form of equivalent discretionary resource) directly so they can target their own needs in their own situation is one part of the solution and has been shown to work well for getting people back on their feet. But as a sole or primary approach it risks capture as described above; where funds meant to help people into a position to better their lives end up straight in the (mostly metaphorical these days) pockets of "service" providers.
- /But/ poverty is relative and targeting the affordability of common - even "basic" goods and services is another piece of the puzzle. Not in an ad-hoc manner (eg taxes on/off fresh/processed foods - this has been a regulatory nightmare wherever it has been tried, save it for genuine luxury goods) but in a whole-of-market approach like Pharmac.
Bulk demand can shift the costs down but this is not something those already struggling with their living situation are in a position to organise. In a democratic/capitalist welfare society this should be a function of government.

One government department I think could make more of an impact here (if they were permitted) is Housing New Zealand; right now they are limited by having to use their own housing stock (which they have been forced to run down and sell down over the past decade); but if they were also able to function as a not-for-profit property management company effectively handling maintenance and property standards for those who for example
- have an investment property "retirement plan" but find the details of renting it out more effort than it is worth
- have a social conscience
- will accept a low-end-of-the-market-rent-range return

they might well be able to
- apply downward pressure on rental prices
- fill up some of those homes we hear about sitting empty
- reduce their waiting lists
- provide security for a lot of people who currently have found they can't ever trust they will still have a place to live after the next review
- upgrade some of NZ's abysmal housing stock
- and potentially be in a position to acquire some of those properties to replenish their own stocks when the bubble bursts

Yes the deal would have to be structured so as to appeal to the property owners opening it up to the criticism of being a government handout to that class; but I am reasonably certain it could be made to work for no more than is currently being handed to them indirectly via the accommodation supplement and putting beneficiaries up in motels for a week while simultaneously lumbering them with a paper debt which will, realistically, never be recovered.

Submissions to the Foreign Affairs, Defence and Trade Committee on the Trans-Pacific Partnership Agreement (TPPA) close tomorrow (March 11) barely two months after the treaty was signed and text made available. About 3am on Monday morning my brain decided it was time to write something, but Ithen got distracted by actually reading MFATs National Interest Analysis (NIA) (the better to make an informed submission. It of course paints a far rosier picture of the expected outcomes.

This post has three parts:
1. Useful links
2. The text of my submission (done through the online form)
3. Other rant triggered by reading the NIA (this was going to be rants but I have run out of time :( )

~~~
Online submission form (very limited life expectancy) (you will need to complete the verification at the bottom of the page and then click the "Make an online submission" button below to actually get to the form)
The NIA (pdf)
MFAT TPPA subsite

~~~
I felt it best to make a measured submission just highlighting a few points of concern.

As a member of the public who has been following the no TPPA actions but has also found the time to read the NIA (but not the earlier published fact sheets) I would still like to express some some concerns about the process and implementation of this treaty.

1. I understand that there is always an element of confidentiality required in trade negotiations but the secrecy surrounding this one - and indeed continuing for years after ratification seems to have be unprecedented. Combined with the very short amount of time allowed for public, expert, and opposition party representative examination of the text and consultation I find it difficult to have confidence in the benefit to New Zealand of any legislative changes which may be required.

2. Speaking of benefits it is not at all clear from the NIA /how/ the people of NZ generally benefit from the signing of this treaty. "Economic growth" and a forecast boost to GDP are presented as as self-explanatory benefits without justification; but this would only be the case if the wealth generated flows to those who are less-well off.

As it stands this treaty would appear to deliver the most benefit to
- those who are /already/ established enough to partake in international trade and
- a small minority of future SMEs producing exportable goods/services who manage to become established against the now-increased competition from our trading partners.

In short this treaty seems to offer no great benefit for the majority of NZ citizens and business while exposing them to economic attack by better-resourced established competitors from abroad.

3. Following on from that if the NIA is accurate the ISDS clauses have been well ring-fenced to protect "public-good" issues but it still seems to be a risk that if a local company were to come up with a disruptive technology or process which could challenge established players but would require tweaks to our - or our treaty partners - legislation to implement effectively (a recent examples from the news might be the taxi service Uber) the established players would be able to use the ISDS or the threat thereof to hinder implementation in an anti-competitive fashion.

I am hopeful that the government of the day would have the fortitude to support our business and accept the costs required to set an example which would prevent this happening a second time; if nothing else this would quantify "the actual costs of responding are unknown" (NIA p55)

~~~
Nevertheless as it seems that the implementation of the legislative changes required is a foregone conclusion I

- would strongly support a clause which only brings the changes into /effect/ at the point the treaty comes into force in a form substantively like it's current form, rather than incurring the front-loaded costs and "giving away the farm" the having nothing to negotiate with should other parties decide /not/ to pass it through their respective legislatory procedures in it's current form.

- look forward to the strengthening of NZ's environmental protection, labour protection and transparency legislations to bring them in line with the treaty obligations as explained in the NIA.

~~~
Rant time.

The NIA is very bullish about the amount of consultation carried out

9.2 Public consultation process
The consultation process for TPP has been among the most extensive a New Zealand Government has undertaken for any trade negotiation. Throughout the negotiation process the MFAT, together with other government agencies, has been active in engaging with a wide spectrum of stakeholders on TPP.
...
Throughout the negotiation there were two public calls for submissions. MFAT invited initial public
submissions in October 2008 on entering into negotiations with the US to expand the P4 agreement.
A second invitation for public comment was made in 2011 following the expressions of interest from other countries to join the TPP negotiations (Canada, Japan and Mexico) to better understand the views and interests of New Zealanders with regards to these three economies.
MFAT received 65 responses to the initial invitation for submissions, which expressed a diverse
range of views on the TPP
...
Following the second invitation for public comment in 2011, MFAT received fifteen responses. Thirteen were from business (including business councils) and industry organisations. Two were from other governments - Canada and Mexico.
...
Extensive public outreach and consultation took place throughout the negotiation of TPP, using printed, emailed and website information, supported by extensive briefings, discussions and correspondence with key stakeholders on New Zealand’s negotiating objectives and process.

A primary portal of information on the negotiations was the MFAT website, and dedicated internet column, “TPP Talk”. TPP Talk was regularly updated with the status of negotiations. Both the website and column
encouraged feedback on TPP from the public. In seeking views on TPP, the Government sought to encourage debate on the issues, including links to groups holding a range of views on the MFAT website.
...
Hundreds of meetings took place, including with business groups, iwi, local councils, health sector
representatives, unions, NGOs, Members of Parliament and individuals to seek input on the TPP and
to help ensure a high quality outcome that reflects stakeholders’ interests.
...
In a new initiative that reflected the level of public interest in TPP, MFAT also made provision for
stakeholder engagement with regard to the two TPP negotiating rounds held in New Zealand. With
regard to the round of negotiations held in Auckland in December 2012, the Ministry organised a
stakeholder programme attended by 72 New Zealand participants as well as other stakeholders from overseas.

... and so on.

Strangely I do not recall /any/ of the relevant ministers or officials saying in response to the noTPPA movement and media coverage "Hey, here is where you can go to get more information and to have your say." Apparently the broader public of New Zealand (or other parties) are not considered "stakeholders" in our international treaties.

We know who other treaty partners considered stakeholders from the mega-companies and lobbyists who got to peek at the proceedings and drafts. I wonder who in NZ our government actually considered important enough to be a stakeholder?

I'm going to be generous and assume whoever produced this analysis is so blinkered that they actually believe this number of submissions is a reasonable outcome rather than a failure to communicate.

Moreover I believe that an organisation believing in or proactive about public consultation would have opened another round more recently than five years ago, given the increased public profile of opposition to the matter under consideration.

Backgrounder: I engaged in the comments on this article about student debt at Stuff. Unfortunately comments closed partway through quite a long entry so I'm putting those thoughts here.

Preceding conversation

Matt N texas
Will Matthews, please explain to me why your or any persons student loan is any different, to my business loans ?...I have taken out loans for equipment, equal to or exceeding an "average student debt"...I have assumed all the risk and reward that comes with starting and running a business......no one is proposing to "wipe my loans"......why do you think that a person who borrows to fund higher education, with the intention of earning a higher income, should be subsidized by the taxpayer, as apposed to a business operator, who is also using borrowings to access a higher income ?.........thank you in advance for advocating that I receive the same treatment as a student (sic)

Marsden
Absolutely, the difference is in that taking out a business loan you are (presumably) in a position to immediately begin repaying down that debt and have done the numbers to indicate that the equipment will increase your immediate earning capacity immediately.

In taking out a student loan you are probably looking at at least 3 years before it has any effect on you earnings (in fact as laid out in the article you are looking at a very restricted income and probably taking on higher priority debt in the interim as well) before you can begin repayment, and that is /if/ you can find a position in a field where your degree adds a significant premium to your earnings. It is a massive gamble on an unpredictable future job market, but for many of the students I know (including many who already have previously "sought after" qualifications) the hope and a prayer is simply a better option than continuing to be stuck on the unemployment "benefit" (even with existing qualifications) in the current hostile job market.

Marsden
Additionally as I someone has noted in a more recent comment you would have been able to depreciate the value of that equipment on your books, thus offsetting some of your taxable income. Not possible with education, although perhaps is business owners could do that they would be more encouraged to invest in helping their employees gain relevant qualifications.

Matt N texas
Not really correct....it can take years to get a return on a business investment, and despite a business owners best intentions or efforts, there is no guarantee of success..or an "immediate " return as you seem to think...business income can be as unpredictable as any job....in addition equipment can offen require ongoing costs,repairs etc...purchasing an existing business does mean an instant income stream, as apposed to starting a business from scratch, however business loans have to be paid back starting with the first month after inception regardless of cash generated.
As for depreciation...some depreciation is as low as 2.5% per year. For 30-40 years...hardly a boon to a budding business, and if you're luckily enough to have made a profit, tax will be payable....by contrast students have a great system, they can borrow without having to repay until they start achieving an income...and then it is painlessly repaid via a paycheck deduction to the IRD...simple.
Now the last part of your comments, are impractical, as a general rule businesses are not really required to educate you....as a business owner if I offer to fund an employees study there is NO guarantee that they will stay..my investment is effectively lost..it is preferable to have the employee fund and achieve their own education, and if those qualifications are what I need or desire to operate my business, then I shall offer a salary or wages as negotiated.
It is plain to see you have not operated or owned a business

Marsden comment unposted

Once upon a time businesses were required to educate their employees, else they would have had no skilled staff at all.

This unwillingness to invest in training your own staff which has become endemic; probably dating back to the first days of public education when employers first decided that since the government was going to pay for training their potential employees it was a cost they no longer had to care about. And since the government has stopped paying all, rather than step back up to address the need themselves they now claim exactly as you do that it is up to the employee to shoulder the cost of the training; knowing that they will be able to use the threat of giving the job to someone who will work for less (read "is more desperate") to "negotiate" the wage or salary lower than the skills are fairly worth to the business.

This expectation that the government will pay for training; this determination to only employ people who are already educated - and often who are already experienced - is the reason despite our high unemployment rate and a glut of educated un-and-under-employed so many businesses are are crying out for skilled staff (as often mentioned in this publication and others). By requiring the prospective employees to take the gamble on what qualification might get them a well-enough-paying position after a year or more of study you guarantee that either
- there will be a glut of graduates with the skills you need (good for you because it forces the amount you have to pay for those skills down - but at the same time you constantly risk your employees leaving for a better paying position and having to pay the cost of replacing them)
- OR a shortage either because the public education is not actually providing the specific skills you are looking for or because few decide acquiring those skills are worth the risk of not having a job at the end of it, in which case your business suffers through having to pay highly for those skills or simply finding them unobtainable.

> .as a business owner if I offer to fund an employees study there is NO guarantee that they will stay..my investment is effectively lost.

Not really - you get the benefit of that employee's increasing skill level throughout the period where they are both working for you and gaining their qualification; you get to leverage those skills directly into the specifics your business without the need for any sort of settling in or induction period; even if they do move on you hopefully have the opportunity to have them find a similarly skilled replacement from the cohort they have gone through the qualification with (and who will be able to tap them socially for institutional knowledge about your business again cutting down the amount of time spent coming up to speed).

As returns on investment go up-skilling your employees is almost always going to pay off. Even though as you said at the beginning of your comment:

> it can take years to get a return on a business investment, and despite a business owners best intentions or efforts, there is no guarantee of success

~~~
Snark didn't make it into the final draft about what it says about his experience running a business with the attitude that he can't trust his employees not to leave. Snark didn't even reach the draft about the "painlessness" of losing 12% of your paycheck each month especially if your degree is not earning you a 12% premium on wages.

An acquaintance asked for suggestions on "worthy" investments in the range of a few hundred to a few thousand dollars. My reply became long enough to do double duty as a blog post :)
~~~
Advice no. Opinions and a little experience.

Rule 0. Don't invest (lend) anything you can't afford to lose.

1. A lot depends on what you want to get out of your investment, usually defined as income (periodic dumps of money into your daily account) or growth (it just sits there getting bigger - hopefully).
1a. There's a third approach, since you use the descriptor "worthy", and that is assessing your "return" based not on dollars but on social good. See below.

2. (NZ specific) if you aren't in / making that minimum ~$1050 into Kiwisaver each year, top that up first. The government 50% match is hands-down the best return available.
2a. (aside) as a young person if you are in a 'default', conservative Kiwisaver scheme get yourself moved into a growth scheme ASAP.

3. If you think you will need to free up that money in the short to medium term just put it in a term deposit, (lightly) managed/index fund or maybe Bonus Bonds.
3a. (Bonus Bonds) the anecdotal consensus seems to be that you need ~$5000 in Bonus Bonds before it becomes worth it. Initially I was getting about net 4.8% which is significantly better than current term deposit options, but that has dropped back recently so I may just have had a few lucky months.

4. If you want to go directly into the share market - probably don't unless you have the time to spend schooling yourself on how it works and on the companies you are looking at investing in, and the discipline to stick with an investment strategy during the down periods.
4a. (I have nothing but the family silver (energy company) shares that the National govt was giving away the past couple of years; every few months that has resulted in $30-$60 worth of dividends; past performance is no indicator of future performance etc.)

*Higher risk options*
5. If you can afford to lose the money or are more interested in outcomes than returns the place to look for "worthy" investments right now are the equity crowdfunding sites. Examples of projects I have funds committed to are Carbonscape (a cleantech company with technology capable of converting waste biomass into Green Coke and other valuable products) and Breathe Easy (developing an inhaled medicine for the treatment of Cystic Fibrosis)(both through Snowball Effect) and Powerhouse Wind (developing a single-blade turbine)(through PledgeMe)
5a. These generally require a minimum of ~$1000 per project.
5b. I haven't had the spare funds to personally experiment with this yet (it's on the list), but Harmoney does NZ peer-to-peer lending.

6. There's always the direct option if someone you trust is trying to get a business going. The model I suggest for this is to agree on a total amount to be repaid (capital plus some) and then they repay it at a rate of $x per sale or $% of each sale. That generally means you recover at least some of your money in short order and they can factor the repayments into their prices as an overhead rather than stressing about finding the money to repay you if they have a quiet month.

YMMV, IANAP, etc etc
~~~
@todo as part of the conversation I have become aware of http://smartshares.co.nz/ which I will need to investigate closer next time I am looking into managed funds.

Environment Canterbury is currently seeking submissions on their Long Term Plan for 2015 - 2025. Locals may have found a print version in their mailbox over the past week or two. You can download the document and make submissions online at the Ecan Website

This is my first time being motivated enough to make such a submission. It may be a little wordy but I felt it important to convey a little of my personal perspective and background rather than a relatively context-less set of bullet points (which I couldn't have arrive at without writing all this out anyway).

( long )

Normally the news that a company like energy efficiency and insulation business Right House has gone into liquidation would pass through my radar with just a moment to pause in sadness for those whom have just lost their livelihoods. However this time there is an indirect personal connection - it was a telemarketing call from Right House house and the following obligation-free quote which made me decide that then was the time to start the ball rolling on actually getting grid connected solar installed here.

The first step of course was googling up solar installers in NZ and sending off for more quotes. when it came down to it though two I already had bookmarked gave the best results. A shout out here to CPS Solar (Canterbury based) who provided a lot of useful information and food-for-thought in our conversation. Definitely consider them.

My choice though has gone to Solar City despite the fact they they were the tardiest in replying to my enquiry. I'd like to write a bit about why.

First off is their innovative Solar Care offering. For $0 or $1000 down they will install panels on your house and sell you the electricity generated for a fixed monthly cost for the next 20 years. (You then use or sell excess power into the grid.) This effectively locks in the cost to you of that much power for the next 20 years, and the contract is set so that the cost-per-unit is probably lower than you are being charged now.

Personally I think projects like this are what the major generators should be doing, to conserve hydro and fossil-fuel (ugh) generation for night time and winter use. But of course they don't make money by providing people with cheap power :-/

I was almost sold on this, it works out very well for both the homeowner (who gets rapid access to solar without massive expenditure or worries about insurance, monitoring etc of the panels) and for the company who get regular cashflow (instead of constantly having to chase new installations) and to depreciate the value of the solar panels on their books :). Had I investment properties I would be having Solar Care systems installed ASAP. Any of my home-owning/paying-off friends I strongly recommend taking a look.

However the desire and years of expecting to outright own the installation asserted itself and I was unable to bring myself to deviate that far from the plan. What actually sold me on a fixed install from Solar City installation was not the price but the opportunity to become involved with / contribute to a new initiative they are setting up with the University of Otago to (quoting the flyer)

Conduct a comprehensive study into household and commercial solar energy use, to better inform and guide the nation towards a 100% renewable energy future.

(As a bonus, "Customers will have the opportunity to beta test new technologies in the energy efficiency and solar space." Eh-heh-heh ...)

This will involve a period of monitoring before the installation which is fine because for me "starting the ball rolling" on a project like this means I have a 12-18 month horizon in view for actually affording and completing it. This is something I make clear of my requests for quotes but find a lot of companies have difficulty with - and their pressure (and oft-times effectively bribes) to commit sooner is something which I find distinctly off-putting.

Companies, I am (charitably) sure that you are genuinely interested in making sure your customers get good value for money but if you want my custom please do me the courtesy of understanding that I know and understand my own values, finances and finance options and that I am not undertaking such a large project on the spur of the moment. If I am not the typical customer in this, well that is simply a sad observation on today's society.

Another issue where I have struggled to reach common ground with all the companies I have talked to is my desire to install more generation capacity than is "economically efficient" for me. (The generators don't pay a terrific amount for home-solar production fed into the grid and these tariffs have only been dropping.) The concept that I might have broader, non-economic goals like future-proofing the amount of generation on my roof (nominally economic), or happily working towards overall lower power prices for everyone else by feeding cheap power into the grid and setting an example for wider home generation is completely foreign.

(I've had to temporarily throw in the towel on that one, but the system I am getting is eminently extensible at a later date by the addition of more panels and micro-inverters.)

~~~
Speaking of finance options this entire post / mini-rant was actually triggered by a quote from the Right House article.

But the business had not had the demand for their services, from home insulation to energy advice, that it had hoped for, Fisk said.
"I think that has been influenced by whether people are getting offer subsidies to insulate their houses," Fisk said.
The company failure may seem "counter-intuitive" when there is a housing boom especially in Christchurch and Auckland, he said.
Asked if the government cuts to home insulation subsidies in 2013 had affected Right House, Fisk said he believed it had "some effect".

Now this is a Stuff article so don't assume that quote from the liquidator (probably not yet familiar with the company finances) is entirely in context. It's obviously being played a bit by the reporter and as such I believe it reflects a wider feeling that the only reason people might be interested in getting into solar (and more broadly other technologies) is the money. That's a meme I'd really like to squish out of society's group consciousness because there are so many wider possibilities once you broaden your view from what is purely best for the individual.

[tangent]For example Christchurch (City Council) is currently looking at painful rates rises and having to privatise some of it's utility assets to afford the costs of the earthquake rebuild foisted on us by the national government. But we could build a new asset as a (somewhat seasonal) electricity generator right alongside the rebuild to offset some of that cost if only by generating some of the power required. I think most households and businesses would be happy to have some council-owned panels on their roof in exchange for the promise of lower rates increases (or the offset in lower electricity costs).[/tangent]

It is true that for the majority of homeowners (unlike well-privileged, mortgage-free, no-dependants self) the availability of subsidies will probably have a significant impact on the affordability calculations. (And part of the genius of Solar Care is how it simplifies that calculation.) It is good business for eg. an installer to point out the available options which may make what they are selling more affordable.

[aside]If you have a mortgage with Kiwibank also check out their Sustainable Energy Loan (link not guaranteed to be current).[/aside]

But I don't believe it is broadly good that our consumerist, buy now (worry about paying later) culture tries to rush people into accelerating financial plans that should be taken time over and focuses on the monetary payback value of long-term purchases to the detriment of other values. And just like if your business relies on the government topping up your employees wages because you don't pay them enough to live; if your business relies on pressuring people into making financial decisions for cashflow perhaps you should take a hard look at how sustainable it / its growth path really is. When I look at who I give significant amounts of my actually-earned money to, you better believe I'm taking that into account. Often it is through [your business'] salespeople that I have the most direct experience of that.

[aside]No I'm not a fan of commission sales, why do you ask?[/aside]

~~~
Disclaimer: this has not been any sort of solicited promotion and I have no connection (yet) to any of the mentioned companies except as outlined above. (Haven't even signed and returned the quote.) :p

Maybe take time to ponder not only workers rights, and their erosion over the past few decades.

But also the rights of the "non-worker" in an age where many of the jobs that existed during Samuel Parnell's time and the decades thereafter have been supplanted by technology without technology necessarily creating similar or greater numbers of other jobs in their place.

http://www.nzhistory.net.nz/politics/labour-day

Back in my post on a Universal Base Income I briefly mentioned transactional tax. The more I think about it the more I like the idea of replacing large chunks of our current tax system with a comprehensive transactional tax or set of taxes.

Many of our current taxes can already be framed as transactional taxes with little effort. Our consumption tax GST is effectively a tax on certain transactions. So is income tax especially as it is currently implemented with PAYE. A transactional tax would also capture those capital gains (although would be considered hard on those taking capital losses).

Transactional taxes are usually considered to be a flat (to regressive) tax, but there's no reason one couldn't be implemented progressively based on the value of the transaction. Some people would doubtless find it worthwhile to "game" this - regardless of where the bands were set but they would also still be paying the lower tier (times n) regardless. It is likely that the bands could be set to minimise this.

Collecting transactional taxes in our electronic economy should prove little more difficult (technically) than accounting for that pesky withholding tax (also a transactional tax as it is deducted when interest is paid). Financial institutions will doubtless balk at being put in the position of tax collector but they are the ones who have the transaction records (and they also have the computing power) and the ability to deduct the taxes in the same way as they would deduct an account fee.

(With modern computing I'd expect the tax-accrued to an account to be able to be displayed with every balance request.)

Who pays the tax is another important question to answer: the person sending the money or the person receiving it. I toyed with the idea of halving the rate and having it apply equally to ingoing and outgoing transactions but viewed one the scale of income tax and the ease of PAYE it became obvious that this was not feasible. Having the recipient responsible for paying the tax in that case is a recipe for those with poor financial planning skills to end up with terrible outstanding tax bills and would be a step backwards. Additionally having to somehow tag every transaction into or out of an account as tax-paid / tax-incurring would be additional unwanted complications for every account holder. So it seems to me that such a tax must be implemented as the transaction is *outgoing*.

Some allowance would need to be made for the cash economy - I think this is simply handled by applying the tax to "cash" deposits (it would already apply to withdrawals) and not worrying too much about the intervening time except for transfers above a certain level which should be required to be declared.

Even a comprehensive transactional tax will need exceptions or claim-backs as with GST to prevent it all being loaded on to the consumer. And every-so-often waiving accrued amounts not worth collecting seems reasonable. Although given that a comprehensive transactional tax rate would be much lower than GST (we are hopefully talking fractions of a cent on the dollar) and overall everyone should have more to spend the accruing increases may not make sufficient difference to be worth it in many cases.

Why so low? We are, if you're a cynic, double dipping or taking many nibbles of the cherry.
- get paid? Taxed (paid by your employer).
- withdraw or deposit cash? Taxed (accrued to the account and deducted monthly / at a certain value by the bank - unless they are offering some sort of sweetener whereby they are paying t.tax on the account for you).
- purchase something with cash? Taxed (accrued to the merchant's account when they deposit the money).
- purchase something with EFTPOS, Credit Card or paying a bill by internet banking? Taxed (accrued to your account).
- paying off the credit card or otherwise moving funds between your accounts? Taxed (accrued to the originating account).
- sending money to a friend? Sorry, taxed to you.

I don't see an implementation of this sort of tax being sufficient to bankroll the country, not immediately anyway and Robin Hood tax effects notwithstanding, particularly if we're funding a progressive social welfare system. We would still need a (lower) income tax and we would still certainly want health-related excise taxes - tobacco, alcohol, carbon .... but it could simplify a few things and even if the effect on an individual were fiscally neutral I think the lower income and (preferably abolished) GST would be welcomed.