Oh DEAR!! How sad...

...never mind.

Amongst all of the bad news stories over the past few months for local investors comes this little piece –

The country's top 1000 property speculators are being targeted in an Inland Revenue crackdown on unpaid taxes.
As part of the campaign, IRD staff are visiting real estate agents with warnings that sales and purchase information would have to be disclosed if requested.

In this year's budget, the IRD got an extra $14.6 million to target tax evasion in the property market.

A Wellington real estate firm, which declined to be named, said it was dismayed that a recent IRD visit warned of possible sales and purchase auditing.

"At the end of the day it shows they can come in here and do anything," an agent said.
IRD assurance group manager Martin Scott said its visits to real estate offices included a presentation on the obligations involved in property transactions.

The 1000 people identified with extremely high numbers of property transactions would be contacted to see if they would make "voluntary disclosures" about their tax returns.

"Some people have a belief you don't have to pay taxes on housing profits but depending on the purchaser's intent it could be taxable."

He declined to say how IRD identified property profiteers but said it used audit powers that required "third parties" such as real estate agents to disclose information about their clients.

"Yes, we do have powers to request information but at this stage these visits [to agents] are more about where we are going and what to expect from us. We would give them [agents] scenarios on what we would consider taxable and what we wouldn't."

By making voluntary disclosures people could limit or avoid penalties, Scott said.
"We are not trying to trap people. We are working to ensure that people have the information they need to do the right thing."

It is not as if the action was being taken without warning. The start came from the last Budget, with some $14 million being set aside for the purpose. It is not as if there has been any retrospective law change; the tax law being used has been largely unchanged since I did the tax law part of my professional qualifications in 1980.

Interesting too that the real estate boys are crying “Foul!”. I suspect that a good number of them will be among the people who will be getting “please explain” letters from IRD. The “invasion of privacy” argument is a total crock. All of the property transactions are a matter of public record through LINZ. It would not be difficult (or expensive) for IRD to tap into that source of information.

Essentially, the tax law distinguishes between trading as a business (which is subject to the tax laws) and the level of “trading” that a person might undertake in the normal course of living. There have been similar “attacks” from time to time in the past. First to come to mind is the people who were trading in motor vehicles; the guys who might buy a car from the local car fair in Paeroa and then sell at a profit the following weekend in Auckland. Good business, but that is what it is. It is not a hobby.

What the IRD is saying, what the law has always said, is that trading through perhaps four or five properties in a year and living in none of them is not necessarily a hobby or incidental transactions. There might even be no “intent” (as Rodney describes it). The fact that there has been both volume of trading and profit made is sufficient for IRD to get interested.

So Rodney Hide is quite wrong when he says, "The IRD has come up with new and novel ideas that have just tipped people over.” Rodney, there are a lot of people out there who have made assumptions, listened to advice with their confirmation bias at full volume, or in the saddest cases been given plain wrong advice. Some of those people might even be the mates who are getting in your ear.

UPDATE -

And just to add to their woes...

A mini-boom is about to hit the property market, giving buyers a chance to bag bargains and make money as the market corrects.

That's the advice from Martin Evans, president of the New Zealand Property Investors Federation.

And, according to test-cricketer-turned-mortgage-broker Adam Parore, more deals are likely to come on to the market as homeowners, who have enjoyed low fixed rates for years, have to contend with the current high interest rates.

The Herald on Sunday's search of Trade Me's property website found dozens of properties already going below valuation.

Evans said: "The values have dropped and people are becoming more realistic. The cycle has gone over the top and is on its way back down again."

Interpretation -

Now that the market has topped, I want out and I want to sell to you so that you cop the loss instead of me.

The China syndrome...

In cruising around the various "news" berths that I check on a regular basis I dropped in on the mates at aldaily.

Among the more recent offerings is this from Slavoj Zizek, a quite interesting essay on the history and future of the "China Capitalism". He presents an interesting view of the history of China's economy, rationalising the command economy with the Europe of the early Industrial Revolution, the birth of the economics of Marx and Engels, and the rationale behind the Cultural Revolution.

Modern-day China is not an oriental-despotic distortion of capitalism, but rather the repetition of capitalism’s development in Europe itself. In the early modern era, most European states were far from democratic. And if they were democratic (as was the case of the Netherlands during the 17th century), it was only a democracy of the propertied liberal elite, not of the workers. Conditions for capitalism were created and sustained by a brutal state dictatorship, very much like today’s China. The state legalized violent expropriations of the common people, which turned them proletarian. The state then disciplined them, teaching them to conform to their new ancilliary role.

The features we identify today with liberal democracy and freedom (trade unions, universal vote, freedom of the press, etc.) are far from natural fruits of capitalism. The lower classes won them by waging long, difficult struggles throughout the 19th century. Recall the list of demands that Karl Marx and Friedrich Engels made in the conclusion of The Communist Manifesto. With the exception of the abolition of private property, most of them—such as a progressive income tax, free public education and abolishing child labor—are today widely accepted in “bourgeois” democracies, and all were gained as the result of popular struggles.

I might add to that the final stages of that popular revolution, one often overlooked, and not (to my knowledge) one promoted by the MArx/Engels collective. It was a revolution that first started to fruit in New Zealand, although the flowers had bloomed in Britain long before. That revolution was, of course, the emancipation of women; the granting of full participatory rights to a good half of the population that had previously been ignored.

However, it is the Chinese economy that has centre stage here.

It was primarily this statement that pricked my fancy -

Those who see this [the revival of the Marxist ideal] as a threat to capitalist liberalization totally miss the point.

As do most, if not all of those who have commented (one at considerable length) poking the borax at Zizek for "getting it all totally wrong".

As Zizek concludes -

That is what is so unsettling about today’s China: Its authoritarian capitalism may not be merely a remainder of our past but a portent of our future.

He is not alone. Businessweek has similar thoughts -

Without question, China's business class has come a long way since the Deng era. Although the hybrid firms were a big break from socialism, authorities were more willing to shower favors like cheap loans and land on companies in which the state had a stake. That largesse often prevented companies from becoming truly competitive--and fed enormous waste.

Government-owned companies that all but monopolized business a decade ago make up only 47% of the economy today. Meanwhile, the private sector--not counting farms and the operations of foreign investors--accounts for as much as 40%, according to the China Economic Quarterly, an independent journal. In Shanghai, the number of private enterprises exceeds 111,000, according to the Shanghai Private Enterprise Assn.

If those numbers are accurate, then the private sector is making enormous strides--especially since government companies still monopolize such key industries as banking, telecom services, and wholesaling. One factor boosting these numbers is that many companies have ceased to disguise their truly private nature. Until recently, many ''foreign joint ventures'' were controlled by domestic entrepreneurs through Hong Kong shells. Other entrepreneurs felt they had to register their companies as collectives just so local clients would do business with them. ''Now I have thrown away my 'red cap,''' says Zhou Fusheng, founder of $1.2 million signmaker Shanghai Dasheng Industry & Trade Co., who termed his company a ''collective'' in its early years. ''I'm not afraid to be a private businessman anymore.'' Also, a wave of privatizations by cash-hungry provincial and municipal governments has placed thousands of factories and service companies in private hands.

BEST HOPE. The implications for China, where the claim that the state is the core of the economy remains embedded in Communist Party dogma, are earthshaking. Not only does raw capitalism raise new questions about the legitimacy of the party's monopoly--it also underscores the desperation the leadership now faces over the economy. Simply put, President Jiang Zemin, Premier Zhu Rongji, and others recognize that the private sector offers the best hope as an engine of growth. As state firms shed workers and shut plants, new businesses are urgently needed to generate millions of new jobs.

and later -

In many advanced economies, social tensions find some release in democratic elections that allow the aggrieved to oust unpopular or corrupt leaders. China has so far steadfastly avoided that approach. It is instead struggling to find other ways to keep its vast bureaucracy and increasingly unruly businesses in line.

Few people think these trends pose an imminent threat to the Communist Party's hold on power. ... More immediately, there are economic costs that result from the disjunctures, and these could imperil the continued progress of China's economic reforms.

Concluding that -

China's leaders in the past three decades have engineered one of the most remarkable economic transformations in human history. And yet today the country faces tests borne of that progress that are in some ways trickier than those it has already overcome. A nation that started out railing against capitalism now embodies many of its most extreme elements. Like other industrializing economies, it must find ways to guide national ambitions, so they don't ultimately undercut the national interest.

The strength of the China economic miracle lies with the strength of its leadership. Is that something unique?

Hardly -

PRESIDENT George W. Bush has rolled out multiple measures aimed at preventing borrowers with sub-prime adjustable-rate mortgages from entering foreclosure, but he also blasted Congress for not doing more to help.

"There is no perfect solution," he said. "The home owners deserve our help. The steps I've outlined today are a sensible response to a serious challenge."
...
Speaking at the White House, Mr Bush said a rise in foreclosures would have a "negative" impact on the economy.

"Yet one reason for confidence is that the downturn in housing comes against the backdrop of solid fundamentals in other areas, including low inflation, a healthy job market, record-high exports," he said. But with close to 2 million sub-prime ARMs scheduled to reset higher by the end of 2009, Mr Bush said initiatives were needed to address such a broad potential problem.
...
Other legislative initiatives included expanding the ability of state and local governments to issue tax-exempt bonds to help borrowers refinance.

And he called on the Senate to pass legislation to reform oversight of government-sponsored enterprises Fannie Mae and Freddie Mac.

He said legislation passed earlier this year by the House to reform supervision of the companies was a "good start".

"These institutions provide liquidity in the mortgage market that benefits millions of home owners, and it is vital that they operate safely and operate soundly," Mr Bush said.

... and so on.

The connection? Well I obviously do not believe that Bush has power of directive over the remainder of the US government. That is simply not so. But there is a strong political voice, and one which is entirely capable of turning to a majority opposition and saying -

"Well, we suggested the solution, you ignored it, so the responsibility is yours. Not that you care..."

On turning sixty years...

In some ways it is familiar. Today is little different from yesterday. The memory of a year back has dimmed a little but regular visitors will know that there is a far greater glow to today than then. The memory of twenty years back is focussed on great events, the milestones and achievements of a close and loving family. Even more so are the memories of fifty years ago those that had the greatest impacts.

I can recall -

At the age of eight being ticked off for hitting a tennis ball - quite accurately too - with both hands on the racquet, and for playing what was effectively forehand on both sides. I would never become a keen tennis player, but not for that reason.

At the age of four, standing with my brother and the old man, peering into the cold and damp of an Auckland fog searching for Rangitoto light. Then we went downstairs for breakfast. We were on the Tofua, on one of her first voyages coming back from Tonga.

and so it goes on...

Trying to play tennis at the age of 35, and getting extremely upset at my inability to hit the ball before it went past me rather than after...

Going down to the wharves in Auckland on my own, to see Tofua leave for the last time bound sadly for the scrap yards...

We celebrated this non-earth-shattering event on Saturday evening. We had friends, rellies; from ancient cousins to five month old granddaughter; from Whangamata to next door they came.

That, more than anything else, was the most enjoyable part. The people with whom I was able to share this little commemoration.

NZ has TERRORISTS!!! - 8

It is not often that I would turn to Nicky Hager as a source for comment and analysis. Not, you understand, because of any major mistrust that I might have in his credibility or truthfulness but simply because his politik and mine are somewhat distant.

I make the exception this time because he has expressed on this occasion much of my continuing misgivings about the “Urewera police raids”, and has also added much from his direct observation and consideration of the available evidence.

Hager starts with the description of events two years ago when a person purchased a pistol holster over the internet. Seriously paranoid police in the "intelligence unit" prepared an affidavit which included what can only be described as "speculative charges" that the man intended to overthrow the government of NZ.

Yeah, right?

OK so the police have used this legal technique before, not necessarily in relation to the Suppression of Terrorism Act (SOTA). Isn't that comforting!

I can just imagine the kind of conversations that might emanate from the Ureweras. When we lived in Te Whaiti it was peaceful, and there was no problem in "intercepting" the private calls of others on the party line. Our line was 4, our call was "U" (ditditdah in Morse) and there were probably another 5 or 6 households on that line at least. Stories abound of the local who keeps up with the affairs of others by quietly raising his/her receiver and listening in.

One only has to listen in the local pub in a place like Opo, or Ruatoki, or Murupara to get a good guage on political feeling in the district. In the regional strongholds of Rangatiratanga and the even more "extreme" Maori political movements the discussion of "war" is not common, but can be heard from the more fuelled of the bar's clientele. Generally it centres on past grievance. In Taranaki it would be strongest about the time that the anniversary of Parihaka is observed. Up north, Ruapekapeka and similar actions figure fairly strongly in the feelings of the locals still.

The point here is though that all of these were more than three or four generations ago. Ruatoki, and its surrounding district, has just last year celebrated the centenary of the police action against Rua Kenana (who was in fact a Christian prophet, much in the same vein as David Koresh). As a result of that action, the government of the day drew a line in the ground and confiscated all of the tribe's land and resources north and west of that line. The fact that the army lined up at that point in the Ruatoki road at the start of Operation Eight is more than symbolic. Sorry, did I say "army"? It should have been "armed constabulary", for that is surely what they were.

And, returning to Hager's article, the whole of that action was authorised, based upon, speculative interpretations of very selective pieces of "evidence". I have no reason to doubt Hager's description of the process; the accumulation of all of the evidence that has "worked" to obtain further authority to take the action another step toward conclusion. If an application for another step fails, then that affidavit dies. Successful, and the next affidavit is built upon that foundation. Hager's point, and he makes it quite persuasively, is that the core of the continuing process is in fact speculative. It is driven by predetermined objectives. It is fuelled by a desire held at the highest levels in our Police force to achieve what are so close to political objectives that the cross-over is almost palpable. [Note that I am adding to Hager's report here, not directly reporting.]

Hager uses the example of "quasi military training camps" to illustrate how this works. ""quasi military training camps"? How much different it would be if they were described in the same kind of glowing terms as some of the Outward Bound courses? Or The Sir Edmund Hillary OTC courses. None of these provide any weapons training but there are some who might see that as a disadvantage to those courses as well. Certainly that is something that I would like to see, and apart from the basic training provided by the army there seems to be quite a gap here in terms of the formal teaching of weapon use, weapon care and the practical use of weapons in the field. However, it now seems probable that any such training course would very soon draw the attention of every copper between Cape Reinga and Bluff, with regular and increasing surveillance affidavits being presented to the Courts.

I have a strong feeling that Hager has another of his books in the mill. Like "Straw Men" and "Corngate", I have little doubt that the political fallout will be considerable. Even if there is no political connection (and I have zero evidence that there is, except for what Sgt Colon would describe as "that feeling in my waters") there will be very serious and justified questions on oversight, responsibility to know and manage, and the level of reporting involved.

No, there should not be the slightest hint of political interference in the operation of our police. Nor, under any circumstances, should the police be seen to be attempting to achieve political objectives. It works like this -

Should there be a person or group in the Ureweras who want some level of independance or even a Tuhoe nation, that belief does not of itself constitute a basis for "terrorism" any more than a secular nation is atheistic or the Exclusive Bretheran should achieve some vague objective of a nation under God. If there is some stupid hothead talking about "taking out" a high personage whether it is the Auntie Helen, or the Jonkey, or even the Shrub himself then the police know enough to keep a quiet eye on both the personage and the hothead.

Having law as vague, and as threatening as SOTA, makes the American's perceived threats to their general freedoms from the Patriot Act look as dangerous as fur-lined handcuffs from the local sex shop. That the police have the power to manipulate truth and objectivity as seriously as they seem to have done (I am basing this on Hager's statement that he has read the affidavit) is only the get-go. That it can take up to two years before the police are required to present their evidence before a Court is an indictment on our Justice system. That it requires our news media to run the gauntlet line of contempt of Court threats and lengthy legal actions of their own to place fact before the public is a strong illustration of the contempt held for the right of the public to know.

That brings in another facet, one examined by Mediawatch this morning. There was similar discussion in the print media this past week or so but a search under "+official+information" turns up nothing in Herald, stuff or Listener. I am sure that I did not imagine the article, with illustrations of the appearance of documents that have been censored under the exclusions of "privacy" and "commercial sensitivity". One instance had one sentence that was legible in the full A4 page. Take a listen to the Mediawatch programme. The relevant bit is at the beginning and makes for fairly chilling reading.

Yes, we can safely conclude that NZ has terrorists. Whether they occupy remote communities in the Ureweras or the halls of power in Wellington is a moot point.

From my point of view, those in Wellington strike far greater fear in my heart than those from Ruatoki;

- if the latter ever did exist.

I think I need go buy me a gun.

Oh, why did I not quote directly from Hager's article? Go read it for yourself.