Cheap living and avoiding tax in NZ

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The NZ tax system greatly relies on indirect taxes. There are a number of things you can do in order to reduce costs:

1. Buy your clothes overseas - particularly if you are an expat who spends casual time in NZ

2. Grow your own fruit and vegetables and trade the balance with neighbours. NZ has good rainfall and soils, so its very easy to grow food and flowers. You can also save money by composting the household vegetable matter for your garden fertiliser.

3. Catch your own fish, shoot your own deer, pig or rabbit. You need a licence and the approval of landowners, but it makes more sense than paying $25-40/kg for fish in the store.

4. Ride a bike rather than drive a car. NZ petrol taxes are very high at 58c a litre. Fortunately you don't really need to use a car very often, there is nothing to do in most towns. A car makes sense in NZ though because of unreliable weather. It rains a lot.

5. Retain your offshore passive income - as an immigrant for 4 years before you have to pay tax on it. This is a particularly lucrative strategy if the NZ dollar is weak against your home currency.

6. Insulate your body, not the home: Where warm clothes rather than pay high gas and electricity prices space heating homes with poor insulation. Better to just wear a very warm jacket. NZ has the highest energy prices in the world. It is a particular sham considering it has the lowest generating cost for electricity in the world. Failing that consider using an open fire as the wood is cheaper than paying $1/day for gas connection, on top of the $1/day you already pay for electricity, whether you are living there or on holidays, 1 person or 10. This is clearly an incentive to share your home.

7. Buy most products online from TradeMe, online specialist stores in NZ or abroad; whether second hand or new. Local stores have limited range and there is a lack of competition.

8. Buy an existing house rather than building: Old houses in NZ are far cheaper to buy than building a new one. Labour is overpriced and the industry is over-regulated, and unfair pricing terms for house builders and renovators means you will pay too much for materials. Its a scam that results in builders pocketing a profit on building materials through the major warehouse chains, and you subsidising their 3-day working week lifestyle.

9. Online entertainment makes more sense than buying your music and movies from a store. The same can be said for reading materials.

10. Outside activities can be expensive, but this need not be the case. Anything which you can do in a social setting is preferred. My philosophy group costs me just $2/week, Toastmasters $70/year, tennis $70 per 6 months. Fishing is $100 for a year licence I think, and walking in the local gardens and at the beach is free.

It is apparent that the same path to tax reduction is the same path to reducing your carbon footprint. Should you be concerned about either? Only if you are grasping for money or air. But some people take pride in their ability to survive independently. The reality however is that labour specialisation is not a 'sin', but rather a very productive and meaningful way for people to relate to each other. Trade is based on the mutual respect of each others contribution. i.e. Value for value. Compare that with the grudging annual tradition of exchanging unwanted Xmas presents, or the passing off of presents you don't want, or the resentment felt by some having to race through crowded shops to please indifferent souls. Is it all worth it? No. Just do what is natural and you will be far happier. An economy structured on the basis of some arbitrary government policy is destined to make you unhappy.

Check out how much tax New Zealanders pay on petrol - 58c in the litre - that's about one-third of the final retail cost.

None of these suggestions is going to greatly contribute to the NZ economy. I would however argue that any (and every) country that considers you a slave to the interests of those who need you, ought to treat you with more respect. The unconditional extortion of wealth from those who possess it is surely the reason why social values are in their current state. Such is the nature of altruism. Unconditional value judgements = non-accountability.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Rural life in Australia and NZ

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I very much enjoy living in NZ. By many measures living in Australia is a far more pleasurable experience, and perhaps the fact that net migration favours Australia is perhaps evidence enough of that.....nevertheless I am currently living in NZ. The question is why?

Each person is different - they each have their own personal context. The things I most appreciate about NZ was:

1. Cheap housing - it was an opportunity to buy very cheap housing at a time when the USD was very low (0.53-0.55) against the NZD. Its now 0.73, so it was a good financial decision.

2. Climate - NZ climate is fairly similar since its an elongated island, however it gets colder as you go south of course. If you are coming from Chicago or the UK, it will be a pleasant change. For most Australians or anyone coming from a tropical climate, winter might be intolerably cold. I find it bearable from Sept to April, however most people stay indoors I guess in winter. It is also very wet. In Wanganui it rains a lot, and its often very windy. The good news is that it tends to rain overnight, which is rather peaceful if you have an uninsulated roof, and 0.5mil houses in NZ don't have insulation. The winds are fresh, which makes them refreshing if you are well-clothed. I constantly hear that Wanganui has the mildest climate anywhere. This is a statistically deceptive piece of inflation. It is because clouds accumulate over the land at night keeping the place relatively warm overnight. The mildness is a result of cloudiness. A feature people might not applaud during the day. In Sydney, I do not miss the sun. In Wanganui, I am lucky if I see the sun for days. In the last 2 weeks I have seen about 5 hours of sun and received about 1500mm of rain. Based on two years living here, that is not unusual. We did have an usually dry and sunny Spring last year. Winter was particularly wet with gail winds.

Australia has of course greater climatic variability and balance. Tasmania's climate is similar, but Sydney is mild 9 months a year, with a pleasant rainfall of 1200mm. Other areas tend to be drier.

3. People: People vary of course but I find people generally very friendly. There is a high crime rate, so I find people only relate through groups or group activities. I have joined Toastmasters and a philosophy group in town, and enjoy those. I think NZ still retains those small-town values that it always has. I think even rural towns in Australia have lost that warmth....unless they are very small, dying towns, in which you are probably less inclined to live.

4. Activities & nature: NZ does have splendid natural settings. I find the problem however is that it is inconveniently divided by an expensive ferry shuttle, and the low road density, and the under-provisioning for use of those natural features is a problem. They are many trails in Australia all over the country. In NZ, there are very few, and they are poorly marked. Australia is beautiful too of course in a very different way, but the distances make seeing everything an obstacle. Sydney and Melbourne are well positioned to enjoy a lot, but its all spread out. For NZ, unfortunately the more temperate climate is on the North Island (Bay of Plenty & Napier), but the splendid mountains are on the South Island.

5. Income and cost of living: Australia and NZ have fairly similar costs of living. The recent increase in GST in NZ, probably gives Australia a 15% advantage. But Australia has a 30% advantage on pay rates, so clearly wins by this measure. Australia offers a wider diversity of job opportunities too, which means you are more likely to get the job you are trained for, and thus more likely to get the salary you are 'worth'.

If I make this article purely about comparing rural living in Australia and NZ, then one has to acknowledge that you will pay a lot more to live near a major city in Australia. In NZ, you can get a $60-80K house within a few 100kms of a major city, in Australia its 5-6 hours. This is because these city people like their lifestyle farms, so you have to get out of commuting distance. i.e. Land releases are restricted severely because your job as a tax slave in Australia is to keep the economy pumping along. Restricted land releases artificially keep land prices high. Why? The greater land prices are, the harder you have to work to pay it off....or live in the distant rural areas.

For me, living in NZ has been a very desirable experience. I do intend to live here for a few years, at least until I can become a dual citizen, and then I will make a reassessment. I will I think always have a house here, and perhaps I will commute between Australia and NZ. But I find Japan very special as well, and I have family in the Philippines.

Oh! I don't believe it. The rain has stopped! The clouds have parted, and its time to leave. :)

I must say the opportunity to experience a new country was part of the appeal of NZ. I'm not disappointed, however Australia overall does offer a more desirable experience. I do however have a lot of frustration with the way the country is governed, so I choose not to live there for now. Australia must have the unfairest tax system in the world, a punitive government, and unprincipled politicians who make unilateral decisions to impose or change taxes at a moments notice. You cannot plan for anything. I have seen criminals show greater empathy and respect for people's rights...if we ever had them.

Oh! Too late...after editing...the sun has disappeared.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Maoris to lose rights to seabed and more...

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NZ Maoris are fighting to retain their rights to the seabed. You might have thought this silly. How possibly could the Maoris have the rights to the seabed. Well, I agree. There is no practical way that Maoris could have rights which would deny access for white NZ'ers. The problem however is that there are greater issues involved, and the Maori Party is quickly digging itself into a hole, where they will be slaves (like British 'subjects') to the govt. In fact they are already appeasing government, but very soon they will be surrendering their moral agency or legitimacy to a court system which will not interpret the law in their favour.

The National Party wants them to cede control of the sebed in exchange for the opportunity to negotiate individual claims on a case by case basis. The Maoris after decades of failed negotiations are desperate for a win. Its showing, because they are about to be sold a lemon. The govt realises that if they can sell this agreement to Maori, they would have side-stepped the implications. Why? There are several strategic advantages for the govt:

1. They will not have to deal with the issue

2. The courts will decide the outcomes

3. People will not know the merits of specific cases, so any public sympathy will be muted.

This is a dangerous agreement for Maori, but also for all NZ'ers. Why? The best prospect that white NZ'ers have for getting rights is if Maoris are recognised as having them. After all, if a minority are recognised as having rights, pretty soon NZ whites will want them as well.

The Maori Party is self-serving, like all politicians. Their credibility they think rests on getting an agreement. the reality is that they will win a battle, but cede the war. That is bad for everyone. So what can we expect from this agreement. Well, Maoris will retain certain allocation rights for fishing, but they will lose control of important mineral districts like the titanomagnetite beach sands stretching from Wanganui to Huntley, on the North Island.

Maori Party MP Te Ururoa Flavell said the bill was the best the party could negotiate in the circumstances and it was possible there would be "another time for our people to come back and have another go in the future".

There is no chance in hell of that happening. This is a sell-out. The best chance Maoris have is through the courts. They ought not be seeking a parliamentary outcome. The party is happy to repeal the Foreshore and Seabed Act 2004 and restoring the right for iwi to go to court to seek customary title through the courts or in negotiations with the Government. They have six years to make any claims. Good luck with that.

Maori Party MP Hone Harawira is the only one objecting to aspects of the new regime. The problem is that he is opposing issues he cannot reasonably expect. There needs to be a single objective act governing all people. They ought to be fighting for common rights, not Maori ownership. What is the difference - Maori tyranny is just as worrying as a govt one.

The Labour Party is playing the same game of course, arguing that "the party does not wish to play politics on the matter". Surprisingly it is the Green Party woh are opposing it. Co-leader Metiria Turei said "it did not address the fundamental injustice of Maori losing ownership rights". Who would have thought that a collectivist organisation like the Greens would be advocating rights. Well, of course its not an objective concept of rights, its the subjective type which enslaves. It just so happens on this occasion, they are supporting Maori because they have a legitimate gripe with the govt. Rest assured they will be throwing wealthy people under a bus on another day for some poverty stricken soul, neglecting human nature in the process....appealing to some court term emotive need, rather than policies which actually fix problems.

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Author: Andrew Sheldon

Resource Rent Tax Applied Critical Thinking |

www.SheldonThinks.com

Wanganui local government election debate

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I have had the opportunity to get to know some of the candidates for mayor in the lead-up to the Wanganui District Council elections. First of all, whilst I am passionate about ideas, I cannot say I really have much interest in the day-to-day politicking. Having attended one candidates election meeting, and the debate between the top 6 (of 12) candidates, I am really only interested in the process for local elections, as well as the issues which are impacting on Wanganui. I have only been in Wanganui for 2 years, so this was an opportunity to learn more.

I must say the meeting in the Wanganui Memorial Hall was more comic than anything else. How may election campaigns have a self-proclaimed ignoramus who thinks he can learn it on the job, and a boy-wonder (21yo) transvestite. What one realises about politics is that there is a lot of self-promotion. Being a mayor or councillor is a means to get business profile through politics. For this reason, it just might make more sense to reduce the number of councillors from 12 part-time members to 6 full-time members. Why? This would discourage the practice of using politics for business purposes, as well as attracting committed public servants, as well as a higher quality of candidate. Wanganui is a small place. If a 21yo kid is a serious contender then we need to raise the standard.

People will say that kids need representation. True enough, but at 21yo, you have spent more time with a dummy in your mouth than as an independent human being. That is not to say this guy is not smarter than 50% of the population. He is very smart and funny. But lets wait until he has at least learned a few life lessons. He displayed little understanding of economics. Sadly, neither did any of the other candidates.

Phillipa Hogan-Rice (?) opened with by far the best speech, but she really lost it for the impromptu questions. She spent most of the time talking about her sporting career, and how being a parent would make her a better mayor. She even said she was tough because she had to fight her brothers. This is no playground leadership issue. Again...low standards. She was even shown up by the 'smart kid'. Her sole solid position was her initial presentation and her position on EnergyDirect. I would have voted for her if she endured, but she really did lose credibility in the end. She actually undersold her skills on committees as a prior councillor. I think she lost her confidence under attack by 'boy wonder'.

Annette Main actually had a poor initial presentation. The problem was it was generic and boring. She did however recover in the impromptu questionnaire, and clearly has the most skill as a speaker, and the best leadership skills. She has abodes in Wanganui City and rural Wanganui, she owns a business, she manages the city market, and has a lot of connections in the City. She has a lot of committee and regional government experience. She did not really faulter. She did not have the personality of any of the other candidates, but that might come with more confidence, and I see it as less important. The most important issue is economic management, and as 'boy wonder' noted, Philippa is 'off-track' promoting an expensive velodrome which will 'maybe' used by 50 new residents. Life prospective Olympians have much money to invest in Wanganui. Starved for cash, and such facilities will attract people for just a week a year. Silly idea. The 'boy wonder' had a good suggestion - an ice rink. Though I have no info on such facilities. It would be far cheaper to build. So 'boy wonder' is a smart kid.

Dot McKinnon is the other serious contender by virtue of her position as Deputy Mayor. The problem with her is that she is boring and inept. She has been a patsy for outgoing Michael Law. She has little understanding of the issues, when as Deputy Mayor, she ought to be the strongest of the speakers. She was saying 'training' was the key to increasing employment growth in Wanganui. Actually training will actually reduce the population because it will encourage skilled people to leave for higher incomes and opportunities elsewhere. Job creation or demand is the critical issue, so increasing services, and increasing promotion of this great city is the key. i.e. It is about attracting foreigners and city people with money. The lifestylers like authors and early retirees are the key, including those internet savvy business operators from abroad who can earn USDs. Training = emigration to Australia or Auckland. She lack of market realism reminds me of those annoying bureaucrats. She reminds me of Kevin Rudd. Uninspiring!

In conclusion, I am worried that Annette Main is a 'soft' humanist, however I think she is the most promising person, with a lot of capable people behind her.

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Author: Andrew Sheldon

Resource Rent Tax Applied Critical Thinking |

www.SheldonThinks.com

Natural disaster risk in NZ - volcanoes and earthquakes

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Want to know the risks and latest natural disaster news in New Zealand. Perhaps the best website to visit is the one maintained by GeoNet.

There is a range of information you can obtain from this site. Perhaps the most important is:

1. The location of the most recent earthquakes - the pattern might give you a sense of the risk you are taking buying a house. The risk does not need to preclude buying a house, but simply managing the risk on a local scale, i.e. Avoiding sandy, low-lying flats subject to liquefaction, river plains subject to fault-induced flooding, cliff lines subject to collapse. You would want to make sure you are covered for earthquake damage if you are just about to buy a house in a 'quake-vulnerable' area.

2. The location of historical earthquakes - to give you an idea of what is possible.

3. List of earthquakes in your area - you can get a details picture of the earthquakes in the area you define, over the time period you define.

4. The characteristics of NZ quakes - this page will give you a basic overview of the nature of NZ earthquakes.

Volcanic eruption risk

There are also hazards posed by volcanic eruptions in NZ, so you will want to be aware of the risks posed by these. Eruptions can happen as frequently as every 10 years, or more typically every 300-400 years. Some volcanoes like Mauna Loa in Hawaii erupt every year and the eruption can continue for months. The only active volcanoes in NZ extend from Mt Ruepehu to White Island on the North Island. The volcanoes occur in the Taupo Volcanic Zone, which extends into the Bay of Plenty. For more information, refer to the following sources

1. List of NZ's active volcanoes. This page provides a geographic reference as well as information on the current level of volcanic activity. i.e. There is an alert level for different levels of activity. You can also correlate the level of localised earthquakes which often relate to movement of subterranean molten rock. i.e. Often an escalation of such activity is a precursor to a volcanic eruption.

2. The risks posed by volcanoes: Volcanic eruptions can eject water, rock and ask into the atmosphere, which can fall on nearby and distant regions. Most of the ash will fall down-wind on the days of the active emissions. The force and point of ejection will also matter. Some eruptions occur from a side vent, often due to a collapse of the volcano. e.g. Mt St Helens in the USA. The eruption of lava is less common, but a real risk. The greatest risk comes from volcaniclastic and lahar mudflows, as ash mixes with snow melt and the rainfall caused by ash clouds raising water droplet nucleation rates in the atmosphere, which encourages rainfall, flooding and mud-sponsors damage to settlement in river valleys. The ash cloud does not simply go up, but blows out from the flanks of the volcano in the direction of the eruption, and of course is influenced by the wind direction.

Tsunamis in NZ

I would be less concerned by tsunamis in NZ. The greatest risks are on the north and southern extremities of the archipelago, as well as the Pacific 'east' coast. The risk on the west coast is far low. There are tsunami warning stations in NZ. For more information refer to GeoNet. The risk posed is of course on the lowest-lying coastlines.

Rock falls

Earthquakes, high rainfall, frost-thaw and volcanic eruptions can cause rock falls or land slides. Be careful to avoid driving past such hazards in such times of active earthquakes. Rocks are more inclined to dislodge at night due to contraction. Rock falls which block rivers can also cause flooding, however the prospect of this is less of a threat.

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Author: Andrew Sheldon

Resource Rent Tax Applied Critical Thinking |

www.SheldonThinks.com

Should you immigrate to Australia or NZ?

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Someone used our Gtalk chat feature to ask me if they should move to Australia or NZ. This is never a simple question, and of course it depends on your personal context.

My experience to answer this question comes from living in NZ two years and Australia 30 years. My response is that:

New Zealand is best if you are a retiree looking for a place to live out the last remnants of your life. Some people from the UK are particularly keen on this option because they live in the UK in summer, and NZ in summer. Regardless, NZ is appealing because it has good services, idyllic lifestyle, favorable tax laws for expatriates (4yrs tax free on passive offshore income), similar climate and low currency. Houses here are cheap, most particularly if its only a summer house. If you are buying a house as a permanent residence, make sure you get one which is insulated, as many are not. I personally like the old Federation homes, and they withstand the earthquakes better.....particularly those on concrete or wooden piles as they have been stress release. Avoid houses built on sand as the sand suffers liquefaction during any earthquake, so your house sinks into it. e.g. Christchurch being a case in point. Having said that, NZ is far less vulnerable than Japan. The population of NZ is fairly static, but it grows nominally in the major cities.

Australia I thinks more sense if you are looking for a warmer climate, you are looking for work, and you want to introduce family to a more progressive society. The appeal of Australia is that the average income is 30% higher than NZ, and the job skills level is probably higher there, and you are more likely to get a job.

If you are an immigrant in Asia, you will experience less discrimination in Australia, and I think still less so in the cities. It is still rare to see Asians in professional services, and where they are, it tends to be in banking & accounting. So those glass ceilings are still there.

Be careful going to some forums for opinions because people are inclined to mislead. I was thrown out of a NZ forum for suggesting Australia was better in a number of respects. The reason of course is that those people want you to share the 'pain' of living in NZ. But that I don't mean to imply that NZ is a bad place to live, I mean to say that for salary earners its worse, and hard to justify. I frankly prefer the NZ lifestyle if you like the country town life. If you like cities then I'd probably live in Tokyo or Sydney, as I have done before. If I wanted to live on a beach, it would be in Port Macquarie, Port Stephens or Stockton (Newcastle), NSW, Australia.

The population of Australia is growing 1-2%, with most of those people going to the major cities, so the cities are probably growing in population by 4%. The government has long restricted property zoning so property prices are set to stay high....so you will be a slave to an expensive house, but in the long term it will appreciate. The country is well-endowed with minerals and energy, which makes for easy money for a nation of just 21mil, so its an idyllic place to raise a family, knowing mining royalties will underwrite the welfare state. Mind you, such benefits tend to undermine personal motivation.

NZ is wetter and greener, Australia is generally dry with endless blue skies. Australia has 42,000 white sand beaches, most of them uninhabited. NZ probably has 50 white sand beaches, and its mostly too cold to swim at the black ones. NZ has wonderful gardens, Australia for beaches. Australian facilities are better developed, i.e. parks, bush walks, etc. NZ is not so developed. Hardly any roads and aside from your standard tourist 'extreme sports' and town clubs, there is very little to do.

Having said that, there is plenty of cricket, rugby, tennis clubs, etc. I even found a philosophy group in my town, but its all foreign immigrants....no NZ'ers.

Hope that helps. Might think of more to say. Australia for the money. NZ for dying. :) Or a dislike of Australians.

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Author: Andrew Sheldon

Resource Rent Tax Applied Critical Thinking |

www.SheldonThinks.com

NZ Privatisation - on whose terms?

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Surprise surprise! NZ's self-proclaimed 'leading' investment banker is an advocate of privatisation. In this latest article he wants to see the National Party prepare state owned enterprises for sale. The government has said they will only do this in their 2nd term.

I personally have no privatisation of state assets. In fact I am so keen on privatisation that I would like to see the police force, post offices, even judicial services privatised. I see no reason why we shouldn't privatise everything....oh, except one! The problem is that the people overseeing the process have no personal credibility when it comes to moral values.

I have yet to see a privatisation program which was structured in the interests of the public, who purportedly own these assets. It was all about the major stakeholders, namely:

1. The government

2. The investment bankers

3. The lawyers

4. The brokers

5. The foreign buyers

The taxpayer really comes a slim last with consideration. They will certainly get the long term benefits that arise from greater market dynamism, but even the competitive advantages are often slim. Here is why? Naturally competitive markets are a rich tapestry of competing interests, i.e. There will be some corporations who integrate gas and electricity, others who might vertically integrate coal mining and power generation, and still others who might combine power and retailing, even engineering consulting, or operations overseas. When we have investment bankers organising asset sales, they go:

1. Every corporation gets a gas generator, a hydro generator, or maybe they decide instead,

2. Every corporation specialises in a certain 'species' of generating plant, whether gas, coal or wind.

The implication is that all companies look at the same, so there is very little basis for 'price differentiation', or they asset holders become specialised, so the least advantageous, say coal-fired power generators are cross-subsidised by the others.

The reason why this is important is that it determines the quality of your privatisation outcome. If there is no basis for price differentiation, you get a lot or collusion among the parties with any competition being cheap rhetoric. If the assets are sold as specialised packages, then you get stratified asset operating costs, which results in one more expensive producer being carried by the others. i.e. In NZ, 75% of generating plant operates at near-zero cost, whilst 15% are expensive gas-fired plants. These gas-fired plants set the price at the margin. Prices can drop off-peak only so low as to knock the gas-fired producers out of the market.

The implication of this is:

1. Investment bankers get paid more for delivering the outcome which is good for government - higher asset prices so they can get pay for what they want to pay. In the process they leave taxpayers with a market structure which results in high prices, low competition, or high collusion.

2. The government gets to pay off debt, gets to distance itself from the industry. i.e. It can blames executives for their high prices, knowing it can do nothing to intervene.

3. Foreigners often get cheap assets because there is a shortage of buyers for such assets. Often these markets are risky, because they are still quasi-government owned, and they are still developmental in terms of market maturity.

It might simply be easier and better for the government to corporatise these assets, then say to the directors that they can have 5% of any profits they can deliver over their previous profit. Or to say that the company who exceeds their counterparts, gets 10% of any profit advantage. Of course you would have to start with a level playing field, and you would have to strip out the effect of fuel cost variability. It might just be a more favourable precursor to privatisation. It would allow the government to sell efficiently run assets, as opposed to bureaucratic sloths.

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Author: Andrew Sheldon

Resource Rent Tax Applied Critical Thinking |

www.SheldonThinks.com