Introducing Mortgage Payment Deductibility

Now, ordinarily, I am not in favour of encouraging an increase in the demand side equation of the housing market, but I’ve been pondering what would happen if we introduced mortgage payment deductions for home owners. This is similar, in concept, to what the US offers (and what the UK used to offer – I don’t know NZ’s history in this area). The basic arrangement would be that the interest component of your mortgage would be deductible from income tax (so if you paid $5,000 per annum in interest on your home loan, you’d be able to deduct that as an expense against your income tax liability).

Now, in order for this not to advantage rental property owners, the effect would need to be limited in two specific ways: you’d need to limit the deduction to only a mortgage over your current ‘home’ (the property you maintain your physical presence at) and you’d need to limit it to the loan taken out at the time of purchase (if you allow top up loans to be counted, you may end up partially subsidising consumption, renovations, etc.).

What would be the effect of this be? You’d get a deduction on your income tax (possibly one which could be applied directly through your bank – a reverse of your RWT rate, in effect) and this would reduce the burden of a new mortgage on first time buyers (and going forward). This isn’t a fool-proof plan, but if the state is going to ‘encourage’ home loans, with a specific target of new buyers, wouldn’t it be best to simplify this, not be directly involved (beyond offering the tax credits), and in a way which doesn’t complicate matters?

I am not particularly inclined to increase demand incentives at this point (as I think most of our problems stem from the limitations in the supply side), but I often wonder how much thought actually goes into our tax system (beyond finding ever new and innovative ways to tax us).

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After the Common Market

So the UK has voted to leave the EU* and will now have to negotiate what a ‘Brexit’ will look like. That’s a daunting task (in domestic, European, and international terms) and one which is going to consume a considerable amount of resources (Bastiat would point out this is no free lunch and all the work involved is self-imposed, rather than specifically being for the enhancement of the country – so a lot of work just to keep things consistent). However, as a ‘Leaver’, I think there are some fundamental points that need to be outlined.

Isolated View

One of the staggering features of the campaign was the extremely isolated view portrayed by the Remain campaign. Europe, apparently, is the centre of the universe and not being ‘in’ is the equivalent to economic death. The ‘free movement of people’ means European Union people and nobody else. An isolationist bloc, which ignores so much of the rest of the world (and often imposes trade and economic policies which are designed to hinder other areas), is apparently ‘free trade’ and ‘free movement’ and plenty of good people got wrapped up in that.

What’s worse, Remain supporters often portrayed anyone who isn’t ‘pro-Europe’ as being a xenophobic, economically illiterate, ‘Little Englander’. The fact that an isolationist view was being taken by Remain (isolated within the EU) wasn’t even seen as ironic (in fact, any such suggestion incurred yet more wroth at the ignorance of Leavers). The world outside of Europe was ignored, in terms of how Britain would be involved in it, beyond a few statements from the US, a few other ‘world leaders’, and so forth about how remaining was ‘important’.

Negativity

The sheer negativity, on both sides, was impressive. Oddly, subjective assessments were presented as definitive arguments. Lots of economists didn’t believe ‘Brexit’ would be good for the economy. The long-term economic consequences of leaving were discounted in favour of immediate impact (a what is seen, versus what can be foreseen problem). Endless unpleasantness, name-calling, and so forth came out of the Remain camp (which is a great way to alienate people who are, otherwise, willing to listen). While the Leave camp was focused on how bad the EU was, it often seemed as if the Remain camp was focused on how bad the Leave camp was. Thus, the debate had a nastiness to it that didn’t leave me, at least, with any sense of positivity.

To the ‘Remainers’

When I was a young man I read a copy of ‘After the Common Market’ (written by an ex-chairman of the Board of Trade, who was old Labour). The book looked at the negatives of the EEC and the likely problems it would mean for Britain (as it said, a small free trading nation). The arguments then are very similar now. Yes, Europe will continue to make up an important trading partner, but it will no longer be something which is going towards ever closer social and economic ‘integration’. Britain will be free to trade with whoever it wishes, to set standards of its own again (and see if anyone wants to follow them), and to be, simply put, British again. It has more in common with Canada, Australia, and New Zealand than it does with France, Germany, and Spain. That doesn’t mean it should return to isolationism, but it can move forward now as a free state (free to choose, on its own, what it does and with whom). At this rate, they might even get me back at some point.

* I should note, as a dual national of the UK and NZ, and having been resident in the UK in the past 15 years, I was eligible to vote and did (voted Leave).

Spark’s CEO gets a basic economics fail

The Herald (I know, I got roped in) has an article from Spark’s CEO. Forgetting my broader opinions about the subject matter, this statement really got up my nose:

‘And not only that, cause New Zealanders to pay more tax to make up the difference required to fund our schools, hospitals and welfare.’

Sorry, but that is a basic fail. If you increase their tax, we’ll end up paying for it, one way or another. There is no free lunch. If they’re making a 30% margin at the moment, they’re hardly likely to just go, ‘Oh, heck, we’ll just take 21.6%’, let alone now charging GST on top of that. We are a microcosm and they’ll just charge us more for the services, either through higher prices or +GST.

Our ‘Little New Zealand’ mentality, as an import from England, is a major fail and what’s being advocated here. We should be utilising our position to encourage more business here, including through improving our tax system, not trying to rope foreigners into complying with our tax laws for the sake of ‘fairness’.

And, in the end, if we wanted them to pay more tax, we’d simply change our tax laws. Enforcing it would be nigh on impossible, and would probably result in a withdrawal of services from our market (or loss of future services), but it’s doable. So stop complaining about how little tax foreigners pay and accept that the GST and income tax nets just don’t work so well online (and we should be looking at alternative tax methods to deal with base erosion).

Refuting the Economics of Star Trek

So a good friend of mine (my roommate at university) recently posted on Facebook about the supposed economics of Star Trek. The basis of this is notionally that money has been eliminated and sufficient material comfort is available that we no longer have ‘want’. Thus, we end up with endless amounts of sanctimony (on television), while humans look down on people who are less evolved and not as morally superior as we have become. However, at the same time, this was later lampooned (to varying degrees) on Deep Space Nine, as the inherent contradictions were show (‘What does “we work to better ourselves” actually mean?’, ‘It means we don’t need money!,’ ‘Then you obviously don’t need any of mine’). The simple premise, as I’ve just stated, is that with the advent of technology which eliminates certain aspects of material depravity (in terms of there is endless food and basic comforts). As a consequence, man is now free to pursue all his own interests, without the need to worry about the basics of life (and by basics, we are understood to mean a living standard superior to modern Western countries).

Now, setting the stage for such a fantasy world, let us look at some of the simpler problems.

Buildings & Land

Who allocates or decides on the quantity of buildings and land which are to be available to whom, when, and why? If I want a flat in London, a flat in New York, and a farm in New Zealand, who is to decide whether I can or can’t have them? The counterargument that, with space travel, near infinite amounts of space make land become irrelevant are simply foolish: someone will always want a certain piece of land more than another. The fact that land at the outskirts of Auckland is cheap does not mean the price of all land in Auckland is cheap. Providing more land will certainly reduce the total value of land, but the relative value will remain constant (if someone wants a piece of land in the inner city twice as much as on the outskirts, than a price equivalent to 2x is sensible). No mechanism is catered for this is the Star Trek universe.

Transport

One of the key features of space transport is that it tends to be bulk / large scale. How often, beyond capitalist species, do we see individuals with their own starships? How do they even procure these in the future? What if I decide I enjoy flying, who decides that I can or cannot do so? What if I want to do long-distance travel? Who determines that’s ‘acceptable’ or not? In our world, I purchase a car, a yacht, or an aeroplane based on my available funds and skills. In this future, we’ve just glossed over that. The military are the only people who seem to have access to reasonably unlimited hardware and even they don’t have anything resembling the degree of transport which we are accustomed to now (everyone doesn’t have their own, personal, shuttle). So how transport actually works is simply ignored in favour of plots in which everyone is, literally, stuck on the same boat.

Services

How human initiated services are supposed to be achieved is never specified. Why do doctors do their jobs? Why do they even train to be doctors? Because it merely ‘benefits humanity’? You can imagine such naïve people flying around space buying ever bridge someone has to sell them along the way. But in all serious terms, robotics are advancing sufficiently fast that a lot of services will simply be eliminated, and whatever else isn’t possible will be handled through holographic means (something which Star Trek did cater for). However, whatever remains for people to do, we will no longer have a means to recompense them, and that creates a real problem. Why would anyone work if they were not required to? Why would they do what others even wanted? (For instance, we might still need computer programmers, but why should I do any of the tasks which others want of me? – I can just program along as I see fit).

Conclusions

So we are left with a set of basic economic problems which cannot, as yet, be overcome. Money exists because, as a means of transaction, is allows us to place values on things that we may want, and while reducing the cost of some things to zero (or near zero) will certainly cause some economic change, it will have no effect on the means of value assignment itself. I have ignored resource extraction here, but it’s another valid area. The simple reality is that Star Trek, for better or worse, is a television show, and was written by nominal ‘Progressives’ (at different points in time, thus different perspectives as to what the future of economics will look like). What’s fascinating is that people spend so much time trying to convince themselves that reasonably straightforward fantasies are, actually, deeper in meaning and explain to us more about the world than we really see (regardless of how silly that really is).

The Joys of a New Labour Government

So the earlier announcement around ‘plain packaging’ is the final straw for me. The once ‘National Party’ will now be New Labour from now on. They can claim to be free markets, but their decisions and thinking have been fundamentally nanny-statist and bureaucratic (and the word ‘free’ next to markets seems to have taken the same turn as with trade). The constant battle cry seems to be ‘let’s see if we can make the government work’, which doesn’t mean they look at structural changes, but instead that they take the existing apparatus of state and continue to development it (but with a ‘blue bent’). I simply cannot support that. We’ve lampooned NZ First in the past for living in the 1980s, for Labour living in the 1970s, but I am not really seeing where the difference is anymore. The solution is constantly to erode personal choice and to create ‘solutions’ to problems which are well outside of the role of the state (I should note I don’t smoke, nor find it very nice when people smoke around me, but that doesn’t mean we should be banning a company from legally displaying anything but plain sodding text).

This is an extremely dangerous development, as we are now going down the thin end of the wedge. When Coke and cheese can’t have anything but plain packaging, and you’ll need to ask for them out-of-sight, we’ll go, ‘That’s just stupid’. Well, this is just stupid (who actually buys fags on the basis of how pretty the colours are?). So a pox on them, I guess they don’t need my vote anymore (as they’re getting lots of new Labour voters to join them).

The Cost of Public Transport

So someone on the Rodney District Facebook page today put up a petition about ‘North Shore Rail’ (1). I’d never actually seen this before (every previous reference I thought was a joke). Apparently, what we need to do is take the money proposed for the second crossing between North Shore and Auckland CBD and use it to build a railway system on the North Shore (ripping up the busway in the process) and connected to the CBD (a rail bridge…yay). Now, having questioned what the actual capex and opex were, and pointing out that we remain a car driving nation, I was told that that’s 1960s thinking and that we need to move on (at great public expense, but we won’t quantify that). Now, I am not a proponent of ‘public transport’, as I believe that if something is a good idea, it should be self-sufficient (thus, we don’t call Air New Zealand public transport, as it’s private – so if someone wants to set up a bus or train company, that’s fantastic, but I don’t see why this should involve the council or state). Then there is the fact that railways are a 19th Century solution…but I digress. So let’s look at some of this logically (rather than the emotions often shown around ‘public transport’):

Simple Disruption of Replacing the Busway

The first, and simplest problem, is that the existing busway is in actual use and there will be disruptions if you decommission it. Buses go down that route already and while you’re ripping it up, they won’t. That isn’t a light disruption if the supposed 40% people volumes are pushed onto the existing motorway. Equally, the current system is more flexible (buses can come on from a variety of starting points, rather than just Albany, as is currently proposed). Equally, if railway was put in between Auckland CBD and Albany, you’d end up with people who currently have a single journey from Orewa, Silverdale, and Whangaparaoa now needing to take a bus down to Albany, then switch, and take a train to the CBD. The ‘future extension’ may go to Orewa, but that still shafts a lot of people in Whangaparaoa. Every time you add a switch, it adds cost and complexity to the system (and means people lose their seats, potentially get wet and cold, etc.). So this sort of thing really needs to be factored into any planning.

Cost of the Existing Busway Wasted

We’ve already stumped up $290m to build the busway. Granted, you don’t have to rebuy the land, but the point is: a huge amount of capital cost was already put into the existing route and that will now be wasted (in fact, you’ll have to pay to rip it up, first). I have a real problem with completing a major project in 2009 and then saying, in 2016, we should tear it down and build something new (is that how little regard people have for the public expense?).

Using AT Rates, the Cost-Benefit Doesn’t Add Up

Even Council’s own financial statements for 2015 (2) say that they require, on average, 27c per kilometre (fares only representing 47% of the cost, the rest is subsidies). So a 30km journey between Orewa and the CBD is going to have a, minimum, $8.10 subsidy (each way). I would imagine that the marginal subsidy cost for trains is a wee bit higher than buses (which don’t require capital maintenance on the roads to be factored in). So let’s say we get another 10,000 people to take this journey to work, every day of the week. That’s another $38.8m of subsidy required, and probably significantly more (on top of the $6bn that’s been spent just to get the network built to Albany). The existing users will also cost us more, as they’re going from a lower cost transport option to a more expensive one. I am failing to see why we want this to be brought about.

Conclusion

These aren’t ‘small’ problems. The proposal is to waste vast amounts of existing investment, replace it with a more expensive option, disrupt the bus network that is already in place, and then add significant operating costs. I know that I am not supposed to take this serious, but a friend of mine at work made a similar argument last week (and he’s usually a reasonably right-wing person). My problem is that people have started talking about public transport as if it’s some kind of panacea, without ever looking at the details (or the cost!). Hence, we should consider building railways to Orewa, when (even forgetting the billions required) it will land us with significant operating costs and it will cause further disruptions to existing transport options (again, you knock out the busway, any bus service is going down the motorway with the rest of us). I have a real problem with this kind of muddled thinking and wish we’d ban councils from doing this sort of thing (endless public subsidies, all justified by emotional ‘it’s the right thing to do’ rubbish). Personally, I think this is just a means to keep people from thinking about how silly the busway is in the first place, as now we’re forced to justify it.

Some Thoughts Around Infrastructure Bonds

Now that people have gotten around to the idea of increasing land supply (through removing the rural urban boundary) I’d like to look at how financing all the additional infrastructure is going to play out. The latest idea, as has been floated about, is for local authorities to issue infrastructure bonds, rather than charging upfront development levies (‘contributions’). Thus, instead of the householder borrowing an extra $100,000 (‘upfront’) to contribute to the cost of infrastructure (roads, parks, water, etc.) the council will be responsible for issuing a bond (nominally for the same value) which will be funded through a targeted rate on the relevant properties. In theory, this should reduce variability between lending conditions and result in a cheaper overall borrowing cost.

In principle, I have nothing against targeted rates and this particular form of finance (the council is the socialised provider of infrastructure, so it’s legitimate to discuss how this is going to be paid for). However, there are a number of caveats which will need to be resolved prior to this financing mechanism being taken more seriously:

  • Bond Duration – New Zealand has a very short-dated bond market. Bonds are issued, whether by companies, the government, or councils, on maturities of 3 – 10 years. If bonds are issued for longer than this period, they tend to have rate re-set points along the way. Having a re-set point means that the targeted rates won’t be fixed (which could have negative downstream consequences). Equally, if you don’t compel the council to set a repayment date it could accumulate vast debts, which is already becoming a problem with councils in NZ.
  • Rate Duration – You’ll need very specific protections for the ratepayers. Targeted rates, where they are linked to an infrastructure bond, need to be transparent and limited. Where a bond has been issued for, say, 30-years, the targeted rate should expire after 30-years (with a full repayment of the loan principal). This is akin to requiring that the bonds are structured like home loans. Like with the bond duration issue, I think having explicit limits (and mandating bond repayment) is the only way to stop certain problems arising from creative council officers and councillors.
  • Bond Limitations – The council should not be able to fudge things and infrastructure bonds should be ring-fenced so that the funds cannot be used for anything else. There will need to be very specific definitions put in place, as infrastructure could be used to justify all sorts of ‘additions’ beyond core purposes (why shouldn’t new homeowners, for instance, be paying ‘their fair share’ of the rail loop?).
  • Cost Variations – The management of costs, and the need for associated transparency, becomes increasingly importance under this funding model. If the council budgets $20m and ends up only using $15m, what do they have to do with the difference? (slushy machine, anyone?) Equally, if the project is set to cost $20m and comes in at $50m, who is responsible for the difference? This is quite critical, particularly given how poorly some local authorities have been around infrastructure projects in the past (is that Kaipara I hear calling?).

I am particularly concerned around how we’d introduce the bonds in the first place. One of the reasons we don’t have long-term bonds in this country is that there is no structural demand-side to the equation. In the UK (until recently) there was a large annuities market (through government fiat – you had to buy an annuity with at least part of your private pension) and large pension schemes (which required, as with annuities, the matching of long-term assets and liabilities). New Zealand has no equivalent structural demand for long-dated bonds and there is no political appetite, as I can see it, to introduce more government measures in this space (much to Chris Coon’s frustration in the past).

Equally, a good point was raised around offering tax incentives (for instance, similar treatment to US municipal bonds – although we lack the need to differentiate between what income tax is involved). I am very reluctant to consider this option, as it’s distortionary, and a tax break is just another cost anyway (if the State is offering a bond at 6%, but gives you a tax free return, then you might as well just say it’s an 8% bond, in substance – although the 2% extra is paid for by the Crown, rather than the council). So it might ‘kick-start’ the market, but only because you’re paying over the odds (in which case, easier to just offer a higher yield upfront).

On balance, I think infrastructure bonds are better than development contributions, and can be made to be far less discretionary (thus limiting councils in their capacity to use the funds for whatever other political purposes they fancy). Targeted rates mean that clearly defined stakeholders will want to know what their contributions are being used for, and how the cost is being managed (in the long-term), rather than just being an upfront tax that nobody really notices. However, as noted above, there are a lot of ‘pesky details’ that need to be resolved prior to declaring it a ‘good idea’. I look forward, if Labour and the Government really are up to this, to a balanced and sensible discussion (and, hopefully, subsequent developments).

Land Affordability & Interest Rates

As was being discussed on Kiwiblog the other day (Germany releases land to keep housing affordable), the German solution to keeping housing costs low has, for a number of years, been to keep land available for building (among some significant other things, which I am not discounting). This contrasts to the policy positions taken in New Zealand and the UK, where land restrictions are quite significant and property prices have skyrocketed for a number of years now (even when the economic fundamentals look utterly bonkers). This does not mean Germany is a veritable paradise, but it does mean that housing prices don’t tend to suffer the same unsustainable spikes as New Zealand does (and it’s not like we’ve run out of land…) nor do they suffer the same booms and busts in the housing market. Conversely, as was noted by Robo63, low interest rates have also played a part (heavily linked to central banks trying to cover up the failures of progressive government fiscal failures). So let’s examine both topics (land supply and interest rates).

The land supply argument is very simple: if you restrict land use, you end up with reduced supply. This further adds additional compliance costs, and the restrictions inevitably leads to insufficient land being available (compared with the natural equilibrium that would have been achieved). The outcome is further compounded by the problem of ‘landbanking’, which is where you’ve achieved government grace (they’ve said you may develop your land), but you can then just sit on the property and watch its value rise (as insufficient land continues to push up your nominal value), rather than actually develop. This mess has been created, primarily, because people have surrendered their right to develop their land on the basis that there must be ‘some control’ (as mayoral aspirant Phil Goff has said very recently). Beyond that, in surrendering our rights, the central government decided it was a great idea to give such an important task (the economic development of land) to the most competent and qualified people in New Zealand…local government officials and councillors. As can be imagined, it’s worked swimmingly since then onwards. Since the RMA was passed, what has been the compounded rate of house price decreases, again?

The second component is interest rates, thanks to operating monetarist policies (I am not getting conspiracy theorist here, just talking about central banks trying to ‘manage’ interest rates). Instead of banks, lenders, borrowers, etc. setting interest rates purely based on market mechanisms, the State has taken a lot of this role upon itself (hence people watching the OCR so closely). The effect has been that successive governments have been able to operate terrible fiscal policies, which can be covered up (for a time) by lower interest rates. The Government has increased your taxes, successively, for how many years? How much has been borrowee at enviably low interest rates? Don’t worry about it, your house ‘value’ has doubled, and you can now borrow at 4.99% for 5-years. You don’t need to save for that car you want, you can just borrow and pay it back later (something I’ve just done recently – so I am not without sin here). This allows the NZ economy to ‘continue along’, irrespective of whether we’ve faced a continued squeeze or not (although, as I said, it cannot last forever). The Government can continue to pretend things are fine, irrespective of a continued fiscal expansion, and can even announce no ‘tax cuts’ this term of Parliament (and it won’t have the same dent such a policy once would have, as if things get bad, the Reserve Bank can just cut interest rates a wee bit more). Thus, the State can continue creating large economic imbalances and it can be plastered over (for now).

Now, this doesn’t mean that central banks have no part to play in our economy, but the same as the supply side has been fundamentally buggered through limiting land supply, so has the demand side been buggered through perpetually low interest rates (although, I am aware, NZ rates were very high in the earlier part of the 2000s). Without interest rates being a mechanism to wash-over poor fiscal policies (which we call ‘good’ policies because alternative parties have even worse ones), we’d actually have to face the music much earlier. In the meantime, we can continue to screw the poor (and particularly the young) as we keep their taxes higher than they need to be, while also making it nearly impossible to own a house (‘Don’t worry, interest rates are low, you just need to now save a $200,000 deposit and then the bank will give you a loan…’).

So there should be some fun times ahead, should anyone ever attempt to unravel the mess (or it comes to a screeching halt). The biggest problem, as I see it, is that the bigger the property ‘boom’, the harder it is to put in place any remedies (as wiping out 400k of nominal equity off my house is going to sting, and even that will yield reasonably unaffordable housing).

Who to vote for

Well, now I really am in a quandry around who to vote for at the next election. I remain, as always, wanting a centre-right government, but I am not sure that National being so dominant is healthy (the accusations of Labourlite are not entirely groundless and the policy platform has been a home this term).

Now, as a liberal, I am left wondering who I’ll be voting for at the next election (granted we are only mid-term here). I can only see 3 options at this stage (bar the founding of a real liberal party in NZ): National, ACT, and NZ First (I honestly never thought I’d say that).

National is in a problematic position for me in that they are now fully committed to a racist/separatist agenda, in line with the Maori Party, and they are dithering in the leadership space. The flag referendum was a patent waste of money and time and they aren’t doing much in the actual economic space (changing provisional tax is good, but there are plenty of real changes that need to be made in ‘resource management’ and the broader tax system).

ACT has been doing very well under Seymour, but remains a one man show (who are their new rising stars?), focus on some geeky areas of policy, and aren’t really offering to push National to the right (even if just in select areas). Equally, they still haven’t apologised to their voting base for previous mistakes, like the creation of Auckland Council. So they have some potential, but as yet they haven’t swung my opinion.

NZ First is the real stand out and the one with the most potential. Peters has actually made some sense in the past few weeks and, what’s worse, he’s shown a willingness to work with old does (coffee, Brash?) That doesn’t mean I trust him, as he’s a cunning fox, and the usual unwillingness to rule out a Labour coalition is a problem. However, they have a joker up their sleeve in that if they can get Jones back into politics, they’ll have someone who Waitakere Man, or Orewa Man (me) can vote for. That may not be a massive swell (white, heterosexual, man in the 30-50 range may not be the largest demographic), but we do tend to vote and would prefer a real bloke to someone who’s faffing about.

So it will be interesting to see where we end up, closer to election night.

 

 

Goodbye to Provisional Tax (Kinda…)

So the Government has announced* they’ll be reforming the provisional tax regime (among other things, such as changes to the penalty interest regime). There is no explicit removal of provisional tax, which remains, but you do get a new accounting option, which has a different payment option. This will be good news for a lot of people and should simplify a lot of tax compliance. It isn’t a ‘game changer’ or a ‘strategic vision’, but it will actually improve an area which causes a lot of headaches for a lot of people.

To be clear, as there has been some confusion expressed in this area, the change introduces a new accounting option (for calculating provisional tax)  called the Accounting Income Method (AIM). This will allow, in effect, you to calculate and pay your tax liability on a regular basis (bi-monthly), using your online accounts (so you’ll need cloud accounting of some sort), rather than the current 3-instalments per annum. The AIM will be available to anyone (not just companies, as some have claimed) with a turnover below $5m p.a. The proposal also makes it possible for companies to pay provisional tax, as agents, for shareholder-employees.

So it should make it easier for smaller businesses to comply with tax and make cash-flow management easier. There are other changes which look promising too (changing the Withholding Tax rules, and making them flexible, will be great for anyone who’s ever administered PAYE – well, at least, some of us). Again, it won’t hit everyone, and a lot of people will probably misunderstand the changes (‘why am I not getting a tax cut?’ and ‘this is just for rich pricks’), but the changes proposed will actually improve the tax system (even if only at an administrative level).

This doesn’t change my overall opinion, that National remains very limited in its scope to actually improve the tax system (we retain far too many, often complex, regimes – including things like FIF, which I find absolutely daft) and remains prone to political game-playing (hence the GST on internet goods and services, which so far hasn’t produced a workable model, as I see it). But I’ll take any improvement that does come along and the current political alternatives aren’t going to do any better of a job (they’ll just increase complexity and, probably, rates).