Let’s talk about tax (expenditures).

Now these were hinted at in Monday’s post on Mr Woodhouse and  behind the deathless Treasuryspeak of the term is something all good citizens should know about.

Government expenditure comes about through something delightfully known as Votes. Not Budgets or Accounts but Votes on the equally delightful notion that Parliament determines spending. Not the government, or the Minister of Finance or even the PM himself  – but Parliament. Of course that completely overlooks prosaic notions of  Confidence and Supply agreements with support parties – and this is totes supply  – but work with me.

Each department has a vote and they are combined in an Appropriation bill that is introduced after a Budget is read. Parliament debates it by the government side telling everyone how fabulous John Key is and the opposition telling us how much better everything was last time they were in charge and/or they would do it better.

Sometimes the actual expenditure is discussed but that is not compulsory. Then after third reading there is a vote and – who would have thought – those in favour have greater numbers than those opposed.  And so Parliament approves the expenditure and isn’t democracy wonderful.

As an aside at Treasury all these votes/ dept budgets are monitored by delightful young people called vote analysts. It is a job they pass through on to their way to better things which has included being the opposition spokesman for Dunedin and interrogating Todd McClay.

Anyway that is how it is supposed to be done although the interrogating Todd McClay is optional. There is though another sneakier way of the government spending money and that is through the tax system.

Now the received wisdom is that this is a BAD THING and this is very much one case where your correspondent agrees with the grown ups.

The way it is done is through giving specific groups concession directly in the Tax Act. So instead of collecting tax and the paying say one legged men a parrot allowance which would go through the annual appropriation bill a government could exempt the income of one legged men.

To the one legged man and his political supporters this is awesome. It will have to go through a tax bill once but even then it would be combined with another million other thing so may not really get much notice. The legislative equivalent of there only being one front page.

After that no nasty Parliamentary scrutiny; no department arguing with delightful vote analysts; and no transparency of the government’s largesse by the wider community. What’s not to love!

Lot’s really for everyone with two legs and no political support. So as always Treasury being the Guardian Angels that they are publish a tax expenditure statement with the Budget documents.

And so what are our sneaky expenditures?

There are what you would expect – tax exemption for Charities, donor rebate for Charities and Working for Families tax credits paid out through the tax system. 

But there are also things you wouldn’t expect – and TES 2015 was quite notorious – exempting accommodation allowances to defence force personnel, ministers of religion, and Canterbury rebuild workers. Longstanding expenditures include the income equalisation scheme for farmers and accelerated depreciation for bloodstock. And do not get me started on the upfront deductibility of all forestry expenditure – including capital expenditure.

I am sure in other countries it is much worse but it is far from clear to your correspondent what makes these government expenditures so special that they should bypass Parliament every year.

But at least dear readers they are called out every year. And I would encourage you to look at them every year and ask questions. Because Parliament can’t.

Namaste