Just as new data is released showing that foreign buyers are a much more significant part of the overheated housing market than previously thought.
Combined with the internet shopping tax, this shows we could teach US President Donald Trump a thing or two. In less than half the time he’s spent talking about building a wall and draining a swamp, we’ve built a sort of semi-permeable hedge around our assets and put new valves in our tax reservoir to stop leakage. What’s more, we’re 100% cage-free with respect to children (and supermarket eggs by 2025).
Multinationals nick an estimated $1.4 billion a year from our revenue via inter-country profit switcheroos. And as in numerous other developed countries, foreign investors, chiefly cashed-up Chinese who lack well-developed domestic investment options, have pumped up our property market. The latter is a mixed blessing, as who doesn’t want what – in this country at least – is usually their chief asset to skyrocket in value? But the perennially overheated housing market has become a political tar baby. No one but the most vengefully redistributive politician wants to drive property prices down aggressively, but the long-term consequences of home ownership being the preserve of the rich is politically untenable.
There has long been a doughty coalition of deniers who, despite years of reports and statistics in the Financial Times, Economist and the like about what China’s new rich are doing with their dosh, have insisted: it isn’t happening here.
This week, new data emerged from the ASB Bank showing that foreign buyers are a much more significant part of the overheated housing market than had previously been established; that is, between 11% and 20% rather than the piffling 3.3% nationally – and 7.3% in the Auckland market, ground zero for our property frenzy – previously reported by Statistics New Zealand.
Lies, damned lies, and …
Talk about awkward. The previous Government regarded this as die-in-a-ditch territory, and cried racism over anyone proposing restrictions on foreign buyers. It was heavily invested in maintaining flash economic growth figures, which population growth and frenetic house flipping pumped up no end.
Labour in Opposition assisted the politics of this magnificently with its ill-judged “Chinese-sounding names” audit of Auckland buyers. This clumsy tactic offended incomers and citizens alike, and further emboldened the Government to dilute proposals to measure the number and effect of foreign buyers.
If the deniers are happy to dismiss the ASB economist’s survey showing the impact is way more than 3%, then good luck to them quarrelling with Statistics NZ: its data records a figure of 19% for inner-city Auckland.
Still, the foreign-buyers legislation has hit a bollard in its proposed exemption to help Northland iwi Te Uri O Hau progress a luxury development with one group of Johnny Foreigners, which was predicated on selling property to another. The iwi’s predicament goes back 30-odd years, its treaty settlement kitty first imperilled by the Rodney District Council’s unexpected blocking of an earlier development proposal. Now it faces collapse through this foreign buyers’ ban.
Economic Development Minister David Parker had a bout of make-it-go-away-itis, and tried to hustle an exemption through in the legislation. Alas for him, it’s illegal to give a select group special rights in quite this way. He’s faced questions of favouritism. Regulation or a private member’s bill could yet rescue the unlucky iwi, but would invite a queue of others whose plans have been similarly blocked. Awkwardness is definitely an equal-opportunity political affliction. At least this gives the Nats something to crow about now the xenophobia motif has lost its lustre.
Going for Google
As for the Google tax, no one’s making a shopping list for the $1.4 billion in newly collected tax on multinationals’ profits yet. Inland Revenue expects to collect just $200 million.
International tax rivals quantum mechanics in its potential permutations. As members of global financial hand-holding groups such as the OECD and the G20, we’ve long toiled to inaugurate inter-country data sharing and allied measures to discourage tax evasion and money laundering. It’s still a work in progress.
It’s harder than ever to shelter money, even in traditional tax havens, without resorting to criminality. But there’s a way to go, especially considering how many countries still lack reliable legal systems. This Google tax legislation is a lone, early chirp in the dawn chorus of global tax fairness. We won’t see Russian oligarchs slinking down Queen St or Lambton Quay with their hands up quite yet.
And given it’s primarily US internet giants being tax-targeted by countries like ours, it can’t be long before Trump gets the pip. If the US starts rationing its co-operation, all our efforts could yet be frustrated.
In that vein, our internet shopping tax has also copped a bollard to the undercarriage. It’s supposed to bite next year on high-turnover traders, chiefly the 20 biggies thought to make up two-thirds of our foreign online purchases. It’s expected to net $57 million the first year – again, somewhat shy of the $1.6 billion of GST we’re probably missing, but better than a poke in the eye. However, Amazon has balked at Australia’s similar crackdown, boding ill for ours. Rather than programme an Aussie GST function into its global sales system, it’s stopping shipping to Australia when the regime kicks in. Australian shoppers will have to content themselves with the (much inferior) inventory of Amazon Australia. Given Amazon’s dominant market share here, that rather guts our project, too.
But these are opening salvos. The tech giants are beginning to show signs of sensitivity to ethical and social issues. Consumer backlash can mobilise quickly. Tax evasion, privacy breaches and data theft are becoming the new tobacco of the corporate world. The tech giants’ biggest profit centres are the same countries holding hands to thwart tax evasion. What if they linked up to regulate tech monopolies? That seems a naive goal today – but so did the rout of tax havens 20 years ago.
Still, whenever it’s said that nothing’s certain except death and taxes, it pays to remember there’s a cunning accountant or some dude on the dark web who says different.
This article was first published in the July 7, 2018 issue of the New Zealand Listener.