The problem with most things is money (part two)

Man of Errors

Associate Education Minister John Banks wrongfully withheld information about how proposed charter schools would be funded, the Ombudsman has found.


Associate Education Minister John Banks has defended a proposed law change that would exempt charter schools from scrutiny under the Official Information Act, saying they will be more accountable than other schools.


This is not a post about charter schools.  It’s a post about wealth and democracy.

To me the interesting thing about the two articles I have quoted from at the top of this is post is the recurring theme of secrecy.  The wealthy always want it.  In their private lives they have as much right to privacy as you or I.  Secrecy on the other hand, when it comes  to the public world, usually spells trouble for democracy and fairness.


When I was writing about the closing of the freezing works at Patea I found that these works were owned by someone called Lord Vestey.  The Vestey empire turns out to be huge, and long-standing, and not particularly well-regarded in England for its contribution to the tax pool.  In 1980, for example, the Vesteys’ Dewhurst chain of butchers in Britain was found to have paid a tax rate of 0.0004%.  They paid ten pounds tax on a 2.3 million dollar profit.  It’s not so long after this that they were closing Patea because it was too expensive to keep on.  Edmund Vestey said, in 1980, in response to the story about the ten pounds of tax: “Let’s face it, nobody pays more tax than they have to.  We’re all tax dodgers, aren’t we?”

The Vestey’s tax avoidance has been carrying on for a century, and it forms the opening chapter of Nicholas Shaxson’s book about offshore banking and tax havens called Treasure Islands.  For someone with little interest in economics it was an eye-opening book to read.

In October 2010 a Bloomberg reporter explained how Google Inc. cut its taxes by $3.1 billion in the previous three years through transfer pricing games… ending up with an overseas tax rate of 2.4 percent.  Microsoft’s tax bill has been falling sharply, for similar reasons.

Without  giving a long list of examples, the book boils down to secrecy and manipulation.  Tax havens offer secrecy, and so do trusts.

Intrigued, I went to the library looking for any books that might have a New Zealand focus.  Aside from The Paradise Conspiracy, which I refuse to read on the grounds it was written by Ian Wishart, there wasn’t much.  There was an American guide to tax havens around the world (the Cook Islands are New Zealand’s local), and the services they offer, and a book called Pay Zero Taxes! written for the New Zealand market by Peter Sibbald.  The American guide and the New Zealand book had similar things to say about government: it’s bad and it should get its grubby hands off our money!

If paying less tax makes you feel uncomfortable or troubles your social conscience, it shouldn’t – after all, any money saved can be donated to charity (don’t forget to claim the rebate though).  As a patriotic and socially conscious New Zealander, I’m proud to be paying taxes and helping our country grow, develop and strive towards an ideal of providing a place in the sun for all New Zealanders.  The only thing is, I could be just as proud for half the money.  I’m sure you would feel the same way!

The book details income splitting, trusts, deductions – all the things you hear about when a wealthy MP missteps and gets caught out.  Bill English experienced this with his accommodation a few years back, Rodney Hide with his travel.

The chapter on how to claim deductions tells you all you need to know about who this book is written for.  Is it a book written for all New Zealanders?  Not really.  It outlines how to claim deductions for sport (“if for example your hobby is sailing” – yeah, right), meals (over business is ok), goodwill entertainment to oil the wheels of business (golf, anyone?), your spouse (hire them, and take them everywhere as an employee!), your gym fees (is it on company premises?  Sweet as!), your art collection (sometimes),  travel (almost always), drycleaning, lifestyle blocks… the list goes on, and on.  Who is this describing?  Not an average New Zealander.  Gym, golf, yachts, overseas travel, business lunches, drycleaning – it’s describing someone who is already well off, and wants to pay less tax.  A business man, in short.  And yes, I think it is describing a man, and not a woman.

I’m sure that John Banks, John Key and Peter Sibbald think that they are describing “Mum and Dad” New Zealanders all the time, but I think it would be fair to say that they are not.  They are describing, on the whole, well-educated, well-off people from the majority ethnic group, who have some extra money, and are comfortable in the milieu of finance, and trusts, and income splitting and tax deductions.  People who are “smart” with their money.

I am not smart with my money.  I never understood the tax cut argument that National ran in opposition.  I don’t want a tax cut.  I want the government to take in taxes and use them to maintain good social services and help people who need help.  I like parks and libraries and swimming pools (which come to me though rates), and I like hospitals and schools and law and order too.  I’m not interested in reducing any of that so that I can have more money to get a golf club membership.  I am also interested in businesses paying all the tax they are supposed to as a return on the benefits they receive from functioning in a well-ordered society.  There is also no reason for publicly funded charter schools to be exempt from the Official Information Act, or to have their outside funding kept secret.  No reason except that it is bad for business.  Secrecy on the other hand is bad for democracy.


It’s a good test of  where a government’s stance on democracy lies.  Whose privacy will they permit to be breached?  Whose right to criticise will be curbed?  Individual privacy in the case of law reforms around the GCSB, or business privacy in the case of charter schools?  Protestors against off-shore drilling, or tougher legislation to protect Petrobras?

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