The Dim-Post

May 7, 2016

Ah ha!

Filed under: Uncategorized — danylmc @ 4:27 pm

A couple of days ago someone asked me how, exactly, New Zealand’s foreign trust regime allowed its clients to avoid paying tax in their home country. And I had to admit that I had absolutely no idea. But there’s a meandering article in the Australian Financial Review that touches on that very subject:

In 2013 Mossack Fonseca had been on a marketing drive, cutting its prices to build up its New Zealand office.

“Chase the money,” head office in Panama urged its New Zealand staff.

Mossack Fonseca offered two New Zealand products to its overseas clients: an NZ foreign trust, and a Look Through Company (LTC).

As long as the trust and the LTC had no income in New Zealand and had no New Zealand beneficiaries, then they paid no New Zealand tax.

But there was another advantage because technically the LTC was taxed, it’s just that the tax rate was set at zero.

One French investor who moved his holding company from Luxembourg to a New Zealand LTC knew he would pay no tax.

But New Zealand has a double-tax treaty with France, which meant that he could repatriate the profit to France where it was not taxable because it had already been “taxed” in New Zealand.

Usual disclaimer. I know absolutely nothing about foreign trusts, or tax law. Maybe there’s a totally reasonable explanation for this. But a tax rate set at zero percent sounds like a law that has been specifically designed to enable tax avoidance for offshore trusts. Does it play some other role? What’s the rationale? And when did that specific part of the law come into effect?

May 5, 2016

Best books about Australian politics

Filed under: Uncategorized — danylmc @ 9:02 am

Re-enabling comments for this post because I want answers, dammit: what are the best books about Australian politics?

May 4, 2016

Exit Weldon pursued by a bear

Filed under: Uncategorized — danylmc @ 11:08 am

Ha-Joon Chang uses the term ‘Private Sector Bureaucrat’ to describe executives like Mark Weldon. Who is obviously a smart guy. He did graduate work at Columbia, worked for McKinsey, was successful at the NZX. But he’s not an inventor or an engineer or industrialist or innovator; he hasn’t created his own company. He runs organisations other people have built, delivering products or services other people thought up – just like senior civil servants do in the public sector. And that isn’t to denigrate civil servants or executives in public companies;  running big, complex organisations in either the public or private sector is hard!

!But there’s this weird culture around executives in the private sector. It’s not enough for them to think of themselves as very senior bureaucrats. Bureaucrats suck! So they’re thought leaders! Wealth creators! Visionaries! And, sure, a tiny number of them are; guys like Rod Drury and can accurately be described in those terms. But mostly they’re Weldons. Smart people who can manage organisations but have never had a visionary thought in their lives, which is why his plan for TV3 consisted of sacking all the expensive news staff and focusing on celebrity gossip and reality TV. Any random person you picked off the street could have come up with the exact same idea, and if they’d executed it with less destructive hubris than Weldon it could have worked. The executive as visionary wealth creator is a mentality that leads to guys like Weldon running around their companies firing everyone and destroying shareholder value because in their eyes, they are the value.

Housing and heightening the contradictions

Filed under: Uncategorized — danylmc @ 8:44 am

There have been a few pieces talking about the politics behind the housing bubble, like this by Jesse Mulligan at The Spinoff. And it’s true that there’s a strong political driver: younger people who don’t own houses don’t vote very much, and older voters who do own houses do, so of course the policy settings favour the latter.

Also, I don’t think the property bubble of the last sixteen years is reversible; even if the dreaded land tax were introduced and reduced prices by 17% that would really just take Auckland prices back a few months. Unless there’s something fraudulent/crazy happening on the demand side (like the financialisation of mortgages and mortgage derivatives in the US in the 2000s) the best that can happen to prices is a plateau with a large proportion of younger people locked out in perpetuity.

What are the long term consequences of this? There’s a phrase in Marxist-Leninism: ‘heighten the contradictions’, which encourages socialists to maximise the flaws inherent in capitalism (in simpler terms: make life worse for the workers) to hasten the revolution. Left-wing parties in democratic societies tend not to do this. But there’s a related idea on the right which I’ve always thought of as the opposite of heightening the contradictions. ‘The ownership society’. It’s most closely associated with Thatcher and George W Bush but the basic idea has been taken up by most right-wing governments in the last fifty years: expanding home ownership and share market investment to the middle classes. Align their interests with those of organised capital. Make capitalism work for them. Lessen the contradiction.

That’s gotten abandoned somewhere along the way, with the majority of younger people locked out of the housing market to maximise the wealth of older investors. Who capitalism ‘works for’ is now largely a generational thing. Which is, presumably, why an aging socialist is doing so well in the US democratic primaries, and why Millennials in general are so much more left-wing than Gen Xers.

This isn’t a problem for Key since he doesn’t seem to have any ideological commitment to capitalism, or any other ideology than doing whatever is most advantageous to him in the immediate short term. But the heightened contradictions for subsequent generations is an interesting challenge for National, and maybe something for the left to feel optimistic about as Key floats towards a seemingly inevitable fourth term in government.

May 3, 2016

Flawed but workable

Filed under: Uncategorized — danylmc @ 2:43 pm

Mike Hosking is in the Herald advocating for a National Party policy; also the sun is in the sky. Anyway, I liked this bit:

This is hopefully where another of the Government’s ideas will come into force in the ensuing years. Super teachers and super principals is a stroke of genus.

‘Stroke of genus’ would be such a great name for Hosk’s memoir.

April 29, 2016


Filed under: Uncategorized — danylmc @ 6:48 am

I’ve disabled comments on the site for a while. Which is a shame, because they’re one of my favourite things about the blog. But they were just getting too stupid. I’ll turn them back on in a while and hopefully the break will have reset things a bit.

April 28, 2016

The cost of doing bidness

Filed under: Uncategorized — danylmc @ 8:02 pm

Via Matt Nippert at the Herald:

John Key’s personal lawyer cited a conversation with the Prime Minister when lobbying a Minister about a potential crackdown on the lucrative foreign trust industry.

Ken Whitney, the executive director of boutique trust specialist Antipodes, wrote to then-Minister for Revenue Todd McClay on December 3, 2014, over concerns Inland Revenue were sizing up the sector.

“We are concerned that there appears to be a sudden change of view by the IRD in respect of their previous support for the industry. I have spoken to the Prime Minister about this and he advised that the Government has no plans to change the status of the foreign trust regime,” Mr Whitney wrote in an email.

“The PM asked me to contact you to arrange a meeting at your convenience with a small group of industry leaders who are keen to engage to explain how the regime works and the benefits to NZ of an industry which has been painstakingly built up over the last 25 years or so.”

New Zealand’s trust regime recently made international headlines with the leak of the Panama Papers revealing the abuse of trust structures internationally by those seeking to launder money or avoiding tax.

If Key was a normal Minister there would be intense pressure on the PM to stand him down. Obviously he’s not, so we’ll go through a period of National loyalists and beltway types doing exaggerated eyerolling. ‘Of course the Prime Minister’s personal lawyer is a lobbyist for the offshore trust industry and used his influence to protect his highly unethical industry that provides no benefit to New Zealand. What’s wrong with that? That’s how politics works, dummies. Duh!’

Which, okay, that is how politics works here nowadays, but it doesn’t have to be, and voters have options for venting their displeasure. The story was broken by the Greens but the most likely beneficiary is going to be New Zealand First. Peters’ whole brand is ‘Winston will keep them honest.’ National believes there aren’t any consequences to their actions because Labour is dying, but all of this glib, corrupt buffoonery are locking them into a fourth term trying to run the country with Winston Peters.

Chart of the day, kids are too busy watching plasma TVs over Skype to make charts edition

Filed under: Uncategorized — danylmc @ 2:23 pm

The housing market is going insaner than usual, and every time this happens there’s a flurry of stories about how kids today can still get on the property market if they do it tough and give up on the lattes.

There are almost always problematic gaps in these stories: something about young people who have advanced degrees but no student loans, or who saved their entire salary for a deposit, sans rent and food but ‘did it all themselves’ don’t seem quite right to me. But the broader point is that having a tiny number of individuals making extraordinary sacrifices to enter the housing market is still a huge departure from historical norms. Previously most people bought houses, because most people could. But prices are currently at an historical high relative to incomes. The fact that young people buying houses in Auckland is such a singular event that it is newsworthy is a signifier of the problem in of itself.

There’s no continuous data series that lets you track house prices back to the 60s, so here’s two merged together: average individual incomes and then median household incomes. Houses are twice as expensive relative to income as they were in the early 1980s. Couples on two incomes find it harder to service a mortgage than single income earners did then! (And don’t get me started on the high interest rates in the 80s, that were part of an inflationary cycle that reduced the value of those mortgages dramatically, while my mortgage is still there after four years of the Reserve Bank undershooting its inflation bound.) 



April 27, 2016

Thanks guys

Filed under: Uncategorized — danylmc @ 2:26 pm

Via The Herald:

The Government is considering a land tax on offshore purchases of residential property.

Prime Minister John Key said the tax could be introduced if new data showed offshore buyers were pushing up New Zealand’s house prices. It would be the most effective response because it could be adjusted for conditions, he said.

The tax would capture New Zealanders living overseas, though expats could possibly get an exemption for three years.

A tax working group recommended a land tax in 2009, but it was not adopted at the time. The working group wanted the tax to apply to all property owners, not just offshore buyers. It estimated that a 1 per cent tax on the value of land would lead to an immediate fall in land value of 17 per cent, making housing more affordable.

A land tax huh? Very 19th century. It sometimes feels to me like Key and English realise they’ve done a pretty shitty job at modernising our economy so they’ve set up freebie policies for the subsequent left-wing government. There’s the capital gains tax on property sales within two years, which can be kicked up to ten years, and now it looks like there will be a land tax for foreign owners, which can easily be adapted to a land tax on undeveloped properties in urban areas (land banks), or even single owner occupier properties in suburbs like, say, Remuera, to encourage the development of apartment buildings.

April 26, 2016


Filed under: Uncategorized — danylmc @ 8:52 am

Yesterday we walked the new track along the hilltop between Pukerua Bay and Paekakariki. It’s really beautiful: easily one of the best walks in the Wellington region. It’s also harder than most of the other popular Wellington tracks. Someone died just ahead of us on the trail, and several miserable-looking people walking the opposite direction from us stopped us to demand if there were any more uphill bits to come. There were a number of crying kids sitting on stairs half-way up cliff-sides being hectored by exasperated parents. (On the other end of the spectrum, some god-like looking shirtless dude ran past us and he wasn’t even breathing hard or sweating.)

It took us two hours, and I am moderately unfit. There are loads of good picnic spots. As we came out at about 4PM a group of people were just entering to do the walk as the sun went down, which would be awesome, although you wouldn’t want to get stuck up there when it got dark.

« Previous PageNext Page »

The Rubric Theme. Blog at


Get every new post delivered to your Inbox.

Join 493 other followers