Revenue Minister Peter Dunne announced the government would abolish gift duty from October 11 next year, in a move that could save the private sector NZ$70 million a year in compliance costs.
Dunne said gift duty only brought in NZ$1.5 million a year for the government, and that other existing legislation would cover concerns that a removal of gift duty would lead to tax avoidance.
The move was welcomed by Federated Farmers, who said the move would help smooth farm succession.
Grant Thornton tax partner Geordie Hooft said the government collected less than NZ$2 million per annum from gift duty.
“Very few people actually pay gift duty,” Hooft said.
“Government figures show that of the 225,000 gift duty statements received by Inland Revenue each year, only 0.4 percent result in a liability for payment, and that is often simply as a result of a timing mistake.”
A typical method of circumventing gift duty was for assets to be “sold” (typically to a trust) in return for an interest-free loan back, Hooft said. "That debt is then progressively forgiven within the current NZ$27,000 per annum exemption. That exemption level has been in place since 1984."
Hooft said the repeal of gift duty would have flow-on effects for other areas, including creditor protection, tax avoidance and the provision of social assistance, including rest home subsidies.
“The Government’s Regulatory Impact Statement indicates either that there are already sufficient measures in place to deal with those matters or that the consequences are relatively insignificant compared to the estimated cost savings.
"It is inappropriate to maintain a tax regime simply for the purpose of addressing these non-tax issues,” he said.
Meanwhile, Dunne later rubbished talk from Labour Party leader Phil Goff that it was a mistake to scrap gift Duty.
Goff had said the abolition allowed the very wealthiest New Zealanders to structure their affairs by transferring income and assets into trusts and to their children to reduce their tax liability, reports Brian Fallow in the NZ Herald.
"It just shows potentially how valuable this free lunch will be for the wealthiest Kiwis," Goff said.
Dunne hit back, saying: “If he (Goff) honestly thinks it is a mistake to scrap a tax that brings in just NZ$1.5 million a year and costs people and businesses NZ$70 million a year in compliance costs then he needs to tell New Zealanders: yes or no, will Labour bring gift duty back and at what level?”
“If he won’t walk his talk and reinstate gift duty, then this is yet another ‘axe the tax’ fraud being perpetrated on New Zealanders.
“Mr Goff huffed and puffed for months about not increasing GST to 15 percent; he ran a campaign, worked out his slogans and one-liners, and then let the whole thing slide, quietly admitting that Labour won’t change a thing.
“This looks suspiciously like he is playing the same game again,” he said.
“At some point, Mr Goff needs to decide that New Zealanders deserve more than cheap-shot, commit to nothing Opposition grandstanding.”
Dunne said Goff’s claim that abolishing gift duty would open the way for tax avoidance and structuring were particularly concerning.
“This is very clearly wrong. Existing legislation covers these concerns and will continue to guard against such behaviour.
“It is worrying if Mr Goff does not have sufficient grasp of the mechanisms already in place to understand that,” he said.
See the full initial statement here from Peter Dunne:
Minister of Revenue Peter Dunne today confirmed the Government's intention to abolish gift duty, saying the decision would be welcomed by taxpayers generally as the rules were resulting in a high level of compliance costs and were no longer raising any significant revenue.
"Earlier this year I announced the Government's intention to remove gift duty if concerns regarding creditor protection and social assistance targeting could be addressed," said Mr Dunne. "Since my announcement there has been considerable work done by officials across government to assess the concerns. This work has revealed that the protection that gift duty offers in the areas of income tax, creditors and social assistance has only ever been incidental and very limited."
"Furthermore, the limited protection that gift duty offers does not outweigh the significant compliance costs, estimated at approximately $70 million per year that gift duty imposes on the private sector." "There is a broad range of other existing legislation that will provide adequate protection to mitigate the identified risks following the abolition of gift duty. Government agencies will monitor the impact of the changes and a post-implementation review will ensure there are no unintended effects," said Mr Dunne.
The abolition of gift duty will be included in legislation to be introduced in November 2010 and will be effective from 1 October 2011.
Here is Federated Farmers' statement welcoming the move.
Federated Farmers is applauding the Government’s decision to abolish the arcane gift duty tax. The decision will help ‘save our farms’ by smoothing farm succession.
"News the Revenue Minister, the Hon Peter Dunne, intends to abolish Gift Duty is the best I’ve heard in very a long while," says Philip York, Federated Farmers economics and commerce spokesperson. “Abolishing Gift Duty has been one of the longest held policy objectives of Federated Farmers.
“It’s been something like a 42 year slog for us against this envy tax. While Government deserves a bouquet for this, so to do all of our staff and elected members who over decades, have kept the pressure on.
“Because it can take decades to gift a farm from parents to their children, farm succession, rather than land prices, is a major factor if we are to farm for generations. “Yet Gift Duty itself is one example of poor regulation we’d avoid if we had a Regulatory Responsibility Bill in place.
“After the costs of administering it were deducted, Gift Duty only brought in around $750,000 a year. But it made taxpayers spend $70 million a year on lawyers and accountants to get around it, as long as time was on their side.
“On the topic of ‘saving our farms’, the Kiwi dollar’s appreciation against the greenback is of concern. We’re simply not seeing the high returns overseas translate into farm incomes, despite the ANZ Commodity Price Index lifting 3.5 percent in October.
“Yet any intervention in the Kiwi or radically changing policies just because of the current US economy is madness.
Pegging the dollar would slaughter our exporters with hedge positions.
“We ought to get some relief against the Australian dollar at least, if the Reserve Bank of Australia tomorrow increases its cash rate to 4.75 percent.
“The only long term recipe for our economy is for politicians to fundamentally get the need for economic reform. It’s long overdue and urgent as our economic performance shows.
“Our warning alarms went off with the UK’s ‘uninsulated’ June quarter growth being four times that of New Zealand’s ‘insulated’ June quarter result.
“We’ve got to stop pussy footing around the fact Government is too big with our economy now running on ‘Government time’.
“We need a root and branch review of all Government spending. “The Conservative-Liberal Government in the United Kingdom has done just that and won public respect for brutal honesty. If we’re to develop a lean and efficient economy we need the same and we need it now,” Mr York concluded.
(Updates with Goff comments, Dunne comments on Goff, Grant Thornton comments)
18 Comments
wonderful news. is this really for real? if so can not think of a better thing to have happened in a long time.
Are there hooks attached, or can we now unbundle our assets to our children, our trusts, and our other favourite giftees.
Perhaps we will now also have more time, the best gift, to spend with our loved ones... as we do not need to waste our time earning enough to pay our way into gifting programmes.
i am so happy it scares me... but think i just felt something metallic tasting, like a big shiny hook.
President of Property
Looks good, doesn't, abolishing gift duties. Until you read the 27 pages of anciliary legal provisions that will have to be drafted alongside the repeal, all of which include losing freedoms and privacy that we once held but will not anymore. For example trusts, quoting:
" 118. The removal of gift duty and its associated compliance costs could be expected to lead to more instances of gifting to trusts, which may in turn lead to an increase in the number of trusts established in New Zealand. There are broad concerns across government and the private sector regarding the uses of trusts and their lack of regulation. These concerns go well beyond the scope of the gift duty project.
119. The Law Commission is currently undertaking a review of trust law in New Zealand and is expected to release an issues paper shortly. Officials have met with the Law Commission to discuss concerns and will continue to follow the Commission’s progress. The review will broadly consider the various uses of trusts where legal ownership of property is transferred to a trust but control and enjoyment of that property is retained. New forms of regulation such as a central trust register and the compulsory filing of annual trust accounts are among the ideas that have been raised for reform. Such reforms would help deal with information concerns that may arise as a result of the repeal of gift duty. The Law Commission’s work is ongoing and may continue for some time."
So they ditch a tax that was earning them nothing, and replace it with draconian centralised police state legislation that takes away our privacy and freedoms more, and all your assets in Trust on public display. Civlisation is a movement toward privacy, whereas the path to the new Gulags we have in store and the police state is the taking away of privacy, thus we are well into the age of the new barbarism. Orwell's 1984 is full born in New Zealand circa 2010 and the West proper.
Big old suffocating Nanny State can only exist and thrive at the expense of our freedoms and privacy as they die under her fetid reeking armpit. Why are we letting this succession of dreadful politicians do this to us? (Answer: because we are sheeple, because there is so much new law none of us can get our heads around it: this is how tyranny and evil work now, and it's every bit as effective as the gun.)
This is the prelude to something more sinister for you all...A Capital Gains Tax.
How many western countries have no gift duty,estate duty,inheritance taxes,stamp duty or land tax ?
As for Rest Home Subsidies,why is there nothing on the WINZ website to tell you that if you go into care and your spouse is still alive,they will only now allow you one $27,000 gift per annum.
Under the 2005 amendments,in a situation such as this,they will claw back 50% of the gifts made by a couple over their whole lifetime.
So don't hold your breath on this matter all going one way.
In regard to gifting directly to family members,the fact that mum and dad may have held off on this has been advantageous in a number of situations I have observed over the years,as it has enabled them to still hold some rope.
Look at the recent moves by Government...elimination of the QC/LAQC regime,The changes to eligibility for Family Support/Student Allowances/CS Cards/No depreciation on buildings.
So watch this space.
Yo Steven, my old doomsayer.
You might want to read the below essay by freedom lover, unashamed laissez-faire advocate, Professor George Reisman. The worlds resources are not ending, just the imagination of men, and gulag advocates such as yourself; looks like you're sitting on that compost toilet for nothing:
http://georgereismansblog.blogspot.com/2010/10/natural-resources-and-environment.html
Quoting the ending:
With man and his life as the standard of value, the environment is improved when it is filled with houses, farms, factories, and roads, all of which serve directly or indirectly to make his life easier. When nature in and of itself is seen as valuable, then the environment is harmed whenever man creates any of these things or does anything whatever that changes the existing state of nature, for he is then destroying alleged intrinsic values.
A final inference that may be drawn is that a leading problem of our time is not environmental pollution but philosophical corruption. It is this that underlies the belief that improvement precisely in the external material conditions of human life is somehow environmentally harmful.
Never forget, through everything Steven says, he believes the Amish lifestyle is a good example to be followed. Be very afraid.
The Professor is a YAI Yet another idiot. Why would I wish to read an essay by a stark raving loony? oh wait i could do with a good laugh.....
Yep a raving loony.....
He misses the point to extract minerals requires energy....and cheap energy....so here he is a "professor" who appears to have no clue about the real wolrd or how it operates....
"Their supply has increased and can continue to increase for an indefinite time."
"Its intellectual foundations are Ayn Rand's philosophy" his intelectiual foundations are that of a cretin. and Oh another Alan Greenspan....who also didnt get how economies work.....
Depending on your defination of "good" and yet again out of context with what I actually said.
I didnt say the Amish lifestyle is a good example per se, but a good example of a lifestlye that will probably be sustainable with the minimal energy available in the future....and I think I said they didnt seem unhappy with their lot. ie you dont need lots of silly plastic toys and ipods and cars and big houses to be happy....though for some I am sure that is the case.. Just remember when you are dead and buried 6ft under you wont be able to play that i-pod or drive that car....or sit naked in front of the countless tvs in your mansion.....
I think many ppl have forgotten the important things in life; food, shelter, warmth...everything else is a luxury based on cheap energy of which we dont have a lot left.
regards
"May I start with a bromide: a resource which is finite is not inexhaustible. If you think that over, it should not be a revelation. That was a bromide… "
Some five years ago in Italy I concluded a talk by saying that like the inhabitants of Pompeii, who ignored the neighboring volcano, Vesuvius, until it detonated, the world ignores the possibility of peak oil at its peril."
"First, we remain heavily dependent on super-giant and giant oilfields discovered in the 50s and 60s of the last century… I might add, of the last millennium. Only rarely in recent decades have discoveries equaled production. Mostly, it’s been one barrel discovered for every three barrels produced."
"Next, given projected decline curves running from 4 to 6 percent, and the projected increase in demand during the next quarter century, we shall require the new capacity equivalence of five Saudi Arabias.
Even the International Energy Agency, which previously had been sanguine, now suggests that we can no longer increase production of conventional oil in the course of this decade."
Dr. James Schlesinger
Former Secretary of Defense, Secretary of Energy and CIA Director.
The problem I have with Libertarians is they are a fringe, fragmented political movement that are in search of an economics model that supports their world view which they can then try and dump on everyone else. It will be a long search as there isnt one, as your Professor George Reisman so ably demonstrates by his inflexibity or ability to see anything that does not support his belief. So in his eyes forget other Professors of engineering, geology or science....these guys by his view are incompetent...the fact he cant actually put up anyone who has answers is of course not important to him......
regards
Oh and what's actually wrong with using a composting toilet? (not that I ever have I shall add).
Its just an alternative....I actually wonder when you look at the cost of a composting toilet and then at the cost of conventional toilet, its piping and the treatment plant that is seems such a bad idea in terms of $....ALso wouldnt be libertarian in nature? ie self sufficient no reliance on anyone else no rates to pay for a sewerage system? Use it yourself, no paying for someone down the road with 12 kids on the DBP?
regards
Steven is correct.
It is all going to hit the fan in due course and when it does I would not like to be living in or near a major population area.
The more remote your location the more chance you will have of survival.
Tribeless belongs to a party somewhere to the right of Act which believes in the right to do whatever you please in the name of individual freedom.
Money doesn't talk it swears.
Personally Im not so sure being away from population is that great an idea....major population such as London and indeed the UK, yes thats just one huge disaster area....NZ though is of a scale that the local village complex could well survive and prosper....I suppose no one knows how rough it will get....
By this I mean there is short term survival and there is long term survival of a society and being in one probably gives an individual the best chances to live the longest. So you need numbers, I think its about 5k population, small towns.....farming.....If the Amish can do it so can others....this is where tribeless will simply become extinct....co-operation and sharing are survival techniques he doesnt seem to think are important......
In terms of how rough, well I think NZ will do better than most. Principally because we have considerable renewable energy sources that are a high % of our base load and we have quite a bit of engineering capability so its likely they will carry on for many years....So trams seem to be making a come back, maybe the new term is light rail....lots of nice roads to pop rails onto....
Horses will make a come back.....
We then produce more food than we eat....it will go organic and naturally irrigated (ie rain) so that output will drop, but it will still be enough for 4 million.....We have lots of wood, so shelter is covered....the threat is from outside arriving and overloading us.
regards
Good on you Steven. Tribeless, like PB, will drown still worrying about the colour of the deckchairs.
I'm not sure about the remote thing - I suspect the village is about the best practical size for a community, post oil. There is some safety/strength in numbers, and a range of skills, while familiarity/recognition would spur loyalty.
It's interesting that Mark, like Hugh, immediately mistakes a prediction for a wish.
Maybe they're wired like my old Sinclair ZX80.
Composting loos arent too bad - we went that way for 23 years. No great hardship. Nowadays we got too many trees, and enough water.....
"It's interesting that Mark, like Hugh, immediately mistakes a prediction for a wish."
Indeed......I dont wish this, though I do wish for less damage to the planet....but what I am looking at is I think probable at least in terms we cant keep on growing and within a decade have to start a decline....and for me the first step in making sure a bad event does not occur or is not really bad is to recognise it could occur and mitigate against it.
"Malthus thought that the dangers of population growth would preclude endless progress towards a utopian society: "The power of population is indefinitely greater than the power in the earth to produce subsistence for man".
Yet Hugh etc see this as "evil", and accuse me of being evil....To me all Malthus is saying is he doubts that we can grow for ever....Indeed why is a huge population utopian?....right now I think we are pretty close to that max population, if we drop off the oil plateau in 2012 then oops I dont see us getting past 7billion....if its 2018 well thats more...its not 12billion though, and I dont think its even 9.....
<shrug>
regards
well no bright spark has mentioned bright sparks - it's all oil, oil, oil. There is bound to be a way to produce energy required - just ask the conspiracy theorists. What this has to do with gift duty is only important if I come up with the idea and gift the quazillions of gold bars or whatever are being traded to my giftees without paying gift duty (will still be houses traded too, so maybe I could supply the villages and hamlets at a size to suit all the various Rambo requirements)
As a side note, if the sh1t does hit the fan, your ventilation system in your outdoor self composting toilet is not located in the ceiling or your book is upside down...
"It just shows potentially how valuable this free lunch will be for the wealthiest Kiwis," Goff said
Which just shows potentially how valuable this could be for the thieving socialists!
Don't you worry fellow peasants, labour will always be there to make sure you don't keep any wealth you might save no matter how long it has taken you. They will take it and hand it out to more deserving voters...the ones who vote Labour.
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