ANZ New Zealand’s half-year net profit dropped 4% from last year’s record high after losses from hedging and insurance policy revaluations. The bank’s operating income rose and operating expenses fell.
Net profit after tax for the six months to March 31 dropped $35 million to $929 million from $964 million in the same period of the previous year.
Operating income rose $168 million, or 8%, to $2.280 billion with net interest income up $54 million, or 3%, to $1.626 billion. Operating expenses fell $7 million, or 1%, to $735 million.
ANZ NZ recorded a loss of $104 million on economic and revenue hedges used to manage interest rate and foreign exchange risk versus a profit of $13 million in the equivalent period of its previous financial year. It also booked an $81 million loss on revaluation of insurance policies versus a $10 million profit.
During the March half-year ANZ NZ made a $59 million gain from the sale of OnePath Life, and a $39 million gain from selling its stake in Paymark.
More to come.
TODAYS BULLION PRICING:
as at 11:00am, May 1, 2019
|Product||Customer buys||Last Friday||previous month||Last Year|
|1 oz Gold Kiwi coin||$1,999.47||$1,335.05||$1,999.77||$1,985.24||1,946.44|
|1 oz Silver Fern coin|
|Spot Gold / oz||$1,915.42||$1,279.50||$1,915.79||$1,901.99||$1,864.62|
|Spot Silver / oz||$22.41||$14.99||$22.29||$22.45||$23.18|
|Spot Platinum / oz||$1,326.87||$886.00||$1,332.83||$1,249.57||$1,273.72|
|The following are Sell prices:|
|Gold scap 24ct / gram reference||$56.75||
If the capital gains tax were a horse, Jacinda Ardern’s announcement earlier this month was the final nobbling of an equine that, despite praise from some quarters, never quite got out of the starting gate. Its demise has prompted much wailing from the young, the property-less and frankly anyone who thinks that those making a fortune from rising house values should pay something back into the communal pot. But it also leaves the field open once more for a race between wealth tax ideas – each of them with its own jockey, form, and political odds.
Before we survey that field, though, it’s worth remembering why the contest exists in the first place. People possess material resources – income and wealth, in other words – in various forms. Tax is levied on those resources because people become wealthy partly by relying on collective services, such as driving on public roads, being educated in state schools, and using the public health system, and they have to contribute to the upkeep of those services. An individual’s success also typically owes something to luck, and in a fair society the fortunate compensate the not-so-fortunate through the tax and benefit system.
In New Zealand, we tax income (and consumption, through GST). But we don’t generally tax wealth. We don’t tax most of the increases in wealth – the much-discussed ‘capital gains’ – that people make by selling assets, nor do we levy wealth received in the form of gifts and inheritances. We also don’t tax wealth directly (except to a very minimal extent through local council rates). Yet just like income all these resources are generated by relying on collective resources and luck. This is why every other developed country taxes them in some form or another, and why we should as well.
So how best to do that? If it were a thoroughbred horse a proposed wealth tax should shine on many levels. Ideally it would be easy to collect, fair, and politically feasible.
Even if no wealth tax is perfect, some ideas score more highly than others. Below we run our practised eye over the field, arranged from shortest to longest odds.
This rule currently stipulates that anyone who sells a house (excluding the family home) within five years of buying it has to pay tax on that transaction. Extending this rule, informally known as Mr Bright-Line, to 10 years would be the simplest way to bring more capital gains into the tax net. Its incremental nature and ability to target widely disliked property speculators makes it a relatively palatable option. But it is unlikely to raise much revenue or significantly address wealth inequality.
Jockey: Bill English, originally; current rider unclear
Each year everyone pays a levy of, say, 1% of the value of their assets (once any debts have been accounted for). Such a tax, set low so as to be politically acceptable, has been used at one point or another by many developed countries, although currently just three deploy it. Requiring people to value their assets every year creates both administrative hassles and opportunities for creative accounting. There are also tricky questions as to who pays and at what rate, because levying a tax on all wealth would be political suicide in New Zealand. But an exemption of $500,000 per person would exclude most households (and, helpfully, family homes). And to get a greater contribution from those who can afford it the rate could increase up the scale, so that fortunes over $5 million paid 2%, those over $10 million 5%, and so on. However exemptions would reduce the revenue raised, and varying the rates would create extra complexity.
Jockey: Suave French economist Thomas Piketty
Odds: Approximately 1,000,000-1, if designed to catch all wealth, but much lower if aimed only at a few
Comprehensive capital income tax (CCIT)
Under this proposal your wealth is valued annually, and it is assumed that you are generating an income from it equivalent to 6% of its value (because that’s what a canny economist would do). You are then taxed at a flat rate of 30% of that notional income. Got that? No, nor has anyone else – except for the likes of Gareth Morgan, its former chief proponent, for whom the public’s failure to embrace it was no doubt another data point in his theory that other people aren’t as bright as he is. Regardless, it is conceptually elegant and would encourage people to either use their assets profitably or sell them to someone who can. However it has a flat tax element, in that those with the most income pay a larger amount of tax but don’t pay a larger proportion of their income in tax – unlike our current system of income tax rates which rise from 10.5% to 33%. And a tax on all family homes remains a hard sell.
Jockey: With Morgan’s withdrawal from public life the whip passes to TOP leader Geoff Simmons
Risk-free rate of return method tax (RFRM)
As currently proposed, this is essentially a tax on the value of housing (once any mortgage debt is deducted), including both investment properties and family homes of a certain size. It gets its name from the idea that housing should be able to generate the same amount of income as a ‘risk-free’ investment like a term deposit. So, as with Gareth Morgan’s CCIT, it assumes that housing generates a certain annual return and taxes that notional return at the individual’s relevant tax rate. Houses worth less than, say, $1 million could be exempt. ‘A CCIT for rich houses’ would be a catchy name (‘catchy’ being a relative term in the tax world). From a political point of view it would avoid bun fights with business groups and farmers, and could be designed so as to exempt many or most households. But it would leave large amounts of wealth untouched while remaining a hard policy to explain to voters.
Jockey: Tax expert and child poverty campaigner Susan St John
Does what it says on the tin. The advantage of taxing land is that it is the one kind of wealth that can’t be moved, and therefore hidden. It also renders irrelevant the argument that taxing things discourages effort, since you can’t produce more land anyway. So a land tax would generate a relatively high level of revenue for the effort taken to collect it. However one major political hurdle is Māori land. Māori quite reasonably argue it should be exempt, given they have already lost 98% of what they originally owned, but such an exemption would be highly unpopular. A land tax would also leave most assets untouched. And it has little political support.
Jockey: The ghost of Henry George
Lifetime gifts tax
Although used in New Zealand until 1993 estate and inheritance taxes have recently fallen out of favour, possibly because taxing people for dying sounds a bit odd. A better way to frame the issue might be to tax the recipients of inheritances and gifts, because no one can be said to ‘deserve’ such rewards, and the tax revenue could be used to compensate the less fortunate. Under a lifetime gifts tax people could accumulate gifts (from friends, relatives and others) up to a certain threshold, say $200,000, without paying tax, but would pay tax on all further gifts. Such a tax could not, by definition, discourage effort. It would balance the desire to help out relatives with the need to ensure fairness across society. But pragmatically it would either rely on people declaring such gifts or require very careful policing. On the political front there is barely a murmur of interest in it.
Jockey: The noted economist Sir Anthony Atkinson (deceased)
Capital gains tax
Now of theoretical interest only. For political reasons the Tax Working Group’s version would have exempted the family home, but New Zealand could have copied other countries that have a CGT including the family home above a certain value, both increasing the revenue raised and enhancing its fairness. Taxing only future sales would in any case have failed to capture the tens of billions of dollars that Baby Boomers have banked in rising house values in recent decades. The official OECD line is that a capital gains tax plus an inheritance tax is probably the best way to tax wealth. But good luck getting both of those introduced in New Zealand at the same time.
Jockey: Michael Cullen, unfortunately
*This article first ran on The Spinoff here and is used with permission. Max Rashbrooke is an author, academic and journalist.