Author Archive: Andrea Black

Taking the Michael

By Andrea Black on | 2 Comments

Let’s talk about tax.

Or more particularly let’s talk about the current Minister of Revenue Hon Michael Woodhouse.


There were lots of cool things I got to do when I was at the Treasury. My particular fave though was getting to coordinate the legislation that went through on Budget Night under urgency. I probs didn’t have to be there the whole time but through a combination of excessive diligence and deep love of the atmosphere in the House I was.

Urgency can go to 10pm on a Thursday and midnight on a Friday. So you can imagine it can get pretty surreal at times. And pretty much the only people who are there the whole time are the respective chief whips – or is that chieves whip – and an overly conscientious Treasury legislation coordinator. Although the formers and the latter NEVER interact.

It was in my first year of doing this gig that I noticed the Government Chief Whip Michael Woodhouse. There was just something about him that I liked. Whether it was the way he said: New Zealand National Party – twelve thousand million, Maori Party three, Act 1, United Future 1; or the way he seemed to be part of the National Party team while also not being part of some of the rougher baracking; I couldn’t say. Regardless the man impressed me.

Fast forward to him joining the Cabinet and becoming Hon Mike. He was Minister in charge of the changes to workplace safety. Now your correspondent with her left leaning tendencies was not best pleased with the final outcome but in her view Hon Mike took one for the team. Let me explain.

The original Bill was one that was widely consulted on and had agreeement of Business and the CTU. That would not have happened without Hon Mike’s ministerial sanction and support. Cabinet as well but a Minister has to take a paper to Cabinet and that would have been MW or a predecessor.

As an aside this would have been a great piece of work to have been an official on – at the beginning anyway. A chance to make the world a better place and a form of redeemption after Pike River. Although I understand that the Forestry death toll was also uppermost in the heads of those involved in this work. Regardless at times like this there is nothing better than being a Public Servant.

As a further aside I really do hope there were some juniors on this work. As watching how this piece of work turned from a ‘hands across the water’ bipartisan love fest into a partisan bureaucrat’s nightmare would seriously season a junior official and be the stuff of a Treasury senior analyst interview. Either that or send them screaming into the waiting arms of the private sector. And as I tell my children, and anyone who will listen, good experiences are not always pleasant ones.

But back to the topic and enter backbench revolt stage left. Hon Mike and his officials were then scrambling to make the best of a bad job. And it wasn’t pretty – worm and lavender farmers but not dairy farmers – geez.  Big ups to Sue Moroney for spotting that – shows an attention to detail that politicans are often not big on. But here’s the thing  – in all the resulting fallout all of it landed on Mr Woodhouse. Not the PM, not the Cabinet, not the National Party – all on Hon Mike. I was so impressed.

For his sterling work on this he was then ‘rewarded’ with the Revenue portfolio. Since Michael Cullen handed it on, it has been a pretty junior Ministerial position – often outside Cabinet. This continues to surprise me as it can be one of the harder gigs. For everyone else, they have to make decisions on giving stuff to people or not giving stuff to people. The MoR has to make decisions on taking people’s stuff off them in the first place. And none of them go quietly.

So how is the boy going?

  1. Took some of the crap on foreign trusts. Tick. Didn’t manage to shield the PM this time – but geez there are limits to anyone’s powers on that one.
  2. Commissioned and got the Shewan report through Cabinet. Tick.
  3. Got the changes to the non-resident withholding rules which make foreign capital pay tax on interest income in a way they haven’t done in decades – through Cabinet and into a bill. Tick.
  4. Plans to extend the scope of withholding taxes generally. Tick.
  5. When proposed to give away money – it was at least intelligent. Tick.
  6. Plans to do other base maintenance – On verra.

Now some could argue this stuff should have happened years ago. And maybe it could but Hon Mike wasn’t in charge then. So for an interim ranking I’ll give him the same ranking I always got at the Treasury as a Principal Advisor  -‘meets expectations’. Because like the Treasury my expectations are always very high.

For the final review and ranking we will have the benefit of the  2017 tax expenditure statement which will show just how good a gatekeeper he is. More that statement on Friday.

Namaste

Posted in: Random people | Tagged: , , ,

Zen and the art of tax compliance

By Andrea Black on

Let’s talk about tax (and yoga).

Now dear readers you may not realise but next to my family and friends there is nothing I love more than yoga. Well except maybe learning French, films, travel and … anyway you get the idea so work with me. And as this is a tax blog I thought I really should combine the two very early on.

A few years ago when I was both a runner and a Treasury  official I was using yoga as a form of physical and mental carbon offset. One Sunday I was queuing up in a very calm mindful way to swipe my card. I was noticing my breathing and feeling very at one with the universe.

Ahead of me the yoga teacher for the class was checking us in. Now it seems to be a yoga studio thing for the teacher to do the pre class admin. I am coming around to this. On one level it is nice to be greeted by the teacher but at times it does seem like a lot for them to cope with. I guess that is part of why they are so special.

So here I am in the queue noticing but not really engaging with my surroundings as I was going internal. Until the teacher says to the person in front of me ‘here is your receipt as you’ll need it for your tax’.

Bong!! My left-brained self returned. What was that about? When I was a gym member no one ever said that. What is this ‘need it for your tax’ thing ?

Now dear readers who are also tax geeks  you know where I am going with this. But a key piece of contextual information for non-yogis is that the yoga community is about the nicest kindest most peaceful  community I have ever come across. They are definitely bottom of the triangle people. 

For yogis who are not tax geeks I need also to provide some contextual information. In the tax system pretty much all forms of income are taxable: your yoga teaching; events you run for profit and your day job. Now that won’t be a surprise to anyone. The more difficult part is what you can claim as expenses. So it really does depend on whether or not you need that receipt for your tax.

Before I go on what I offer is my best advice which is wholly up to you whether you accept it. In the same way you tell me – from a place of your knowledge; experience ; and concern for my joint health – that I should micro bend my hyperextended joints and I don’t. I too offer this from a place of my knowledge; experience and concern that  you could get to interact with my former colleagues outside your classes. Whether you follow it is completely up to you.

In the tax system, if you are not an employee,  expenses related to the earning of that income are deductible if they are:

  1. Directly connected to the earning of the income or connected to the cost of running a business and
  2. not private or domestic expenses.

An example. I went back to work in 2000 as a junior official watching the winter of discontent when my boys were 5 and 2. I used pretty much all my post tax income to pay for a nanny without whom I could not go to work . But NONE  – and I repeat NONE – of those costs were deductible as they were considered private or domestic expenses. Yes tax friends there is also the employment limitation but just let it flow – this is a yoga post after all.

Now all yogis know how life changing yoga is and not just for your joints so all yoga inherently has a private and domestic element to it. But then so does any occupation that has a personal or social benefit to it.

And here ‘occupation’ is key. If yoga teaching is ‘what you do’ then by definition you will have a dedicated home practice and so any classes you take or courses you go on will be personal development for your teaching and not your core personal practice. Therefore fully deductible for tax.

But part-time yoga teachers this is not you. If you have a day job and just teach a couple of classes a week, this does not mean that Wanderlust; that advanced training in Bali and your studio subscription is necessarily tax deductible. It will be tax deductible to the extent it isn’t a private expense. 

Now sorting that out that deductible/non-deductible line in practice would be a total headfxxk. So I would suggest following the approach in Inland Revenue’s guidance on holiday houses before the Mixed Use Asset rules came in and claiming expenses up to the level of income earned from yoga teaching. There is no technical analysis on this point – strangely for the Office of the Chief Tax Counsel as they are all about the technical analysis – but to me they have applied the private limitation but not spelt that out as it is a headfxxk even for them.

So parttime yoga teachers – if it is personal development you can claim up to what you earn.

Oh and that other yoga special – Karma Cleaning. Barter is in the tax system. For the studio they are substituting taxable income for deductible cleaning costs so they net off. But for the cleaner it is taxable income paying for a non-deductible yoga class. So stick the value of each yoga class on your PTS and we’ll all be sweet.

Namaste

 

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Posted in: Private and Domestic | Tagged: , , , ,

Who is the fairest of us all?

By Andrea Black on | 2 Comments

Let’s talk about tax (and fairness).


Fairness (or equity) and her sister Efficiency are two of the touchstones for tax policy. There is also a younger sister Simplicity but she tends to get left at home the second anything gets contentious or revenue is at risk. For Jane Austen readers think Margaret in any Sense and Sensibility adaptations.

For years Fairness was only paid lip service to and Efficiency was the queen. But now with news of multinational non-tax paying and the fallout from the GFC, Fairness is getting profile. At this point having got in a Margaret reference I was  wanting to make a Kate and Pippa reference or even a Kim and Khloe one. But neither of them really work as an analogy so I won’t.

Now as pleased as my inner left leaning tax geek is about Fairness/Pippa/Khloe getting the attention now, unlike Efficiency, Fairness means different things to different people.

I am sure dear readers that a number of you have either raised children or are still in the trenches.  I am sure also dear readers that while you always try to be fair; quickly you find fair is a relative concept.

You spend more time with the child who finds reading difficult. Now that is fair to you because that child has difficulties your other children don’t have. Strangely the other children may not see it that way.

They may not see the learning difficulty. Even if they do their view may be that is just how the cookie has crumbled and as your child they have an equal right to your time. Anything other than equality is simply unprincipled favouritism.

With tax the equivalent arguments run like this:

To the left what is fair is those who have the most should pay the most. And the more you have the more you should proportionately pay. This is also known as vertical equity and is the basis of the personal progressive tax scale; lower incomes pay a lower proportion of their income in tax than higher incomes.

To the right what is fair is that everyone pays the same or at least everyone pays the same proportion of their income.

The former which was taught to me in ECON 101 – in the same year I voted for the NZ Party – is a flat or poll tax. It is the economically most efficient tax as it doesn’t distort decision making at all kinda like a negative universal basic income. It is also arguably very fair as every person pays exactly the same amount of tax. And what could be fairer than that?

It is however HIGHLY regressive meaning it hits the poor far worse than the rich as potentially it could take all their income. But it is the same as the child without the learning issues wanting the same amount of time from a parent as the one with the learning difficulties.

Your correspondent has memories of her farewell party  in 1990 before going to London. Actually lots of memories as her darling friend R was making her drinks. But on the telly there were riots in Trafalgar Square as Margaret Thatcher was bringing in a poll tax. And that was only to replace rates.

So perhaps for this reason or just genuine human decency I have never heard the right in New Zealand proposing taxation being the same amount per person. But if fairness is the touchstone a poll tax could be considered fair as well as highly efficient.

Normally the right advocates flat (or flatter) tax rates. They tend to invoke the other sister Efficiency when doing so but there are also fairness arguments to support their position.

The main one is that it is fair that everyone contributes the same proportion of their income to society. And the left doesn’t need to stress as those who earn more will by definition always pay more in absolute terms.

Right. So what is a future lefty government to do that wants more fairness of the tax system. [I know you’ll want to reach for raising the top tax rate because – sigh – that increases vertical equity. But tax rate alignment does matter and if you want to do this you’ll need to do a bunch of other tail chasing stuff too. A future post I feel. And yes I will talk about multi-nationals at some point.]

As a good former bureaucrat I am all about the solutions. The key to improving the tax system is a combination of an examination of the application of horizontal equity – is income of different sources taxed the same way – combined with some old fashioned integrity measures aka closing some loopholes. Most of which will involve refinements of income classification, deductions and timing. But there is no silver bullet. 

Should give you an opportunity to also throw around Andrew Little’s quote about the average Auckland house earning more than the average Auckland worker. I do enjoy that one. Whether you get re-elected is beyond my ken as every hole in the base has a highly motivated constituency for whom equality feels like oppression. Imputed rents anyone?

Will also need to watch out that you don’t give away the farm. Coz a tax base is built on asymmetries and nothing feels less fair than being on the wrong side of an asymmetry.

But if this talk of fairness is code for raising substantially more revenue then in that case you need higher rates across the board not just on high income earners; a different base or to stop adjusting thresholds for inflation. Treasury has already done that work in the 2013 Long Term Fiscal Forecast which is worth a read. None of that should be too hard to package as fair as even a riot inducing poll tax can be packaged as fair.

I am on a yoga course this  week so it seemed appropriate that the Friday post be on tax and yoga. But I will return to this topic when I have the energy. I will also think about who Labour should put on their working group.

Namaste.

 

 

 

 

Posted in: Equity | Tagged: , ,

Do you know who I am?

By Andrea Black on

Nah figured you wouldn’t.

And as a former insider that is totes what success looks like. But as of Wednesday night I was released from the Public Service. Was also released from the associated income but haven’t fully processed that yet. Upshot is I can now be a little more visible.

But where are my manners.

My name is Andrea Black. I am a mother of two pretty much grown up sons; yogini; and international tax specialist. Also a major francophile and film buff.

And I am having a gap year.

They weren’t a thing when I was young but as I have always been a late adopter – first smart phone was only last year –  so figured now was my time. I have been told at my age they are called a ‘sabbatical’  but that sounds far too establishment. So I am sticking with gap year.

Between when I was the right age for a gap year and now I have become more left wing. Or progressive as I prefer the term. My first ever vote at the 1984 snap election was for the NZ Party followed by solid Labour voting in the 80’s. This included voting Labour in Fendalton in 1987 when Phillip Burdon almost lost his seat. Through to ACT at the turn of the century until they became super weird.

The GFC changed everything for me.

I saw the awful period I lived through 1987 to mid nineties returning and potentially now hitting my children too. THAT WAS NOT THE DEAL!!! The shit we went through over that period – as a young accountant I lost my job twice without redundancy – was not supposed to repeat. It was supposed to be a one off clean up with rising per capita incomes thereafter. I don’t remember beggars on the street being part of the discussion.

I have now become much more attuned to the structural power imbalances in society and the role of the State in lessening them. Like I say I am a bit slow. But I am here now.

Anyway that was all largely narcissistic irrelevance as this is going to be a tax blog. There might be other random stuff as I have been inside for a long time. But mostly tax.

I have been a tax insider since 2000. Starting as a junior analyst at IRD policy and watching the Winter of Discontent, I moved through to a specialist position in the field.

More recently I did 4 budgets at the Treasury and have just finished another year in the field at IRD. I have been the tax equivalent of Forrest Gump over that period although at times I was directly involved.

That is all I am going to say. So yes I could be writing about things I worked on but the base material will be public and the opinions wholly my own.

Ok now Corporate Legal breathe out. I know my legal obligations and they will fully honoured. Nothing secret or confidential will be disclosed here. Any further concerns you dear people may have they are nothing a good yin class, a breathing exercise and/or a spot of meditation won’t fix. Truly it will be fine. There are limits to my interest in the criminal justice system.

Coz what I am wanting to do is make tax accessible. For years I have been fan girling on Lee Sheppard and Mrs Moneypenny and am now looking to ‘steal their looks’.

In case either of these lovely ladies think I may owe them a royalty. I cite Stephen Colbert. My position is that I am merely emulating them and definitely not imitating them. The consequence  that the former doesn’t involve a royalty and the latter does plays no part in the analysis.

In the event I am wrong please be aware that 5% of zero is still zero.

So dear readers starting Monday. Let’s talk about tax!

Monday will be what does fairness look like in tax? Aka an open letter to the Left and those concerned about this stuff.

I’ll leave you with the Colbert analysis I will cite in any Sheppard v Black law suit. Key reference is at about 2 mins. Serious home baking to anyone though who can get a feed from Lee to me.

 

Namaste

 

 

 

 

 

 

 

 

 

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