New Zealand’s tax system is generally well-regarded. In part that is because of our focus on a broad base, low rate approach to personal and corporate taxation, and in part it is because our system is relatively easy to comply with as a consequence.

While businesses can offset some of their expenses against their tax liabilities, and individuals can claim rebates for certain types of expenditures (such as charitable donations) to reduce their tax bills, as is customary tax practice in most countries, the opportunities for doing so have been reduced considerably over the last 30 years in a further effort to simplify the system. This has been despite the constant and continuing pressure on successive governments for tax breaks to encourage this or other business or community activity.

The concept of minimising tax labilities is not new. For example, tall, windowless buildings are common in certain parts of old Dublin as a reminder of the way people in the 18^th century sought to thwart the dreaded Window Tax, and the infamous Hearth Tax dealt to the fireplaces in many of the stately homes of England in the same period. Even the greatest tax revolt of all – the Boston Tea Party – was about minimising tax obligations and ensuring that where they were imposed, the taxpayers had effective opportunity for redress, hence the slogan, “No taxation without representation.” Taxing incomes is relatively new – New Zealand’s first Income Tax Act was passed in 1913, and it was not until after World War II that income tax became universal in the United States.

However, there are now clear signs that the comparative simplicity and transparency of the New Zealand tax system, under which we have basked for so long, may not be the advantage we once thought it was. Recent events like the global revelations about the tax paid by certain multinationals who are everywhere when it comes to their operations, but seemingly nowhere when it comes to their tax liabilities, and the release of the Panama Papers make it clear that New Zealand’s tax system with its emphasis on self-assessment, is being used in a way that was never intended to shelter various forms of international income. For the first time, we are having to confront the label of “tax haven”, and it is uncomfortable.

Now, the solutions to these issues are not easy, nor limited to any one country, and it would be the height of idiocy to believe that New Zealand can simply draw up its ramparts, and all the problems will go away. In a global environment, with capital flows occurring in the twinkling of an eye, it is just not that simple, and any politician who suggests otherwise is simply a liar. Any lasting solution has to be an international one, which it is why it is important we continue to work alongside the OECD and like-minded countries to achieve a viable outcome.

But that is not to say we are without steps we could take internally now, to complement the international discussions. We are justifiably proud of our network of Double Tax Agreements and Tax Information Exchange Agreements built up in the main since 2005, which give us the opportunity to share and obtain information with and from a range of countries to reduce opportunities for tax evasion. Maybe we need to apply the same disclosure principles within the New Zealand tax system, to give our tax authorities better information about who is investing money here and why, to ensure that all the relevant local tax laws are complied with fully. Our self-assessment system has generally worked well as far as local taxpayers go, but we may be a little naïve in assuming that large, foreign investors seeking a tax bolt-hole will be just as genuine in playing by our existing rules.

Tax is essentially the price we pay to belong to civil society. Implicit is the assumption that we pay our share, according to our means. In return, the state provides certain key services from which we all benefit: health, education and welfare services; public security and national defence, for example. Any perception that some are not paying their share, or worse, are actively subverting the system to their advantage, which may have nothing to do with New Zealand, other than we are a convenient shelter for income, starts to tear at that implicit national contract.

I still believe in the basis of our broad base, low rate tax system, with its relatively easy levels of compliance. Our challenge now is to ensure that in a rapidly changing set of international circumstances our ability to enforce our tax rules and ensure compliance; gather all the tax revenue properly due; and, ensure everyone pays their fair share, is not compromised. The Panama Papers’ disclosures are a sobering and timely wake-up call in that regard.            

  

  

 

 

 

 

This week I have been attending the United Nations General Assembly Special Session on Drugs (UNGASS), the first such meeting since 1998, and the first major international review of drug policy since 1998.

A great deal has changed in that time. The advent of more than 600 new psychoactive substances alone is evidence of that. So it is little surprise that more and more countries have come to recognise the failings of the "War on Drugs" which has merely seen the power of the international drug cartels increase and the suffering of innocent victims mount. The Outcome Document from UNGASS effectively buries the "War on Drugs" in favour of a greater focus on harm reduction and treating drugs as a public health issue. But, thanks to the intervention of Russia, and death penalty states like Singapore, Pakistan, Iran, Indonesia and Saudi Arabia, it does not go as far as it might have, and therefore, as I said in my statement to the General Assembly (see www.beehive.govt.nz for details) lacks a certain boldness.

None of this should be taken to mean that international attitudes to drug misuse are softening, rather they are simply becoming more realistic. Unlike the view in 1998, no-one, not even the death penalty states, seriously believes that drug problems can be eliminated, or the international drug industry closed down. While drugs remain unacceptable and dangerous, the issue is how effectively to deal with the consequences. Simply perpetuating a system that sees the international drug syndicates become more powerful and more victims suffer unreasonable punishments for their addiction is as crazy as it is wrong. The system has to change.

In New Zealand, we are well placed by world standards. Our opioid substitution programme has been in place for almost 40 years, and our ground-breaking needle exchange programme is nearly 30 years old. Many other countries are still struggling to make progress in both these regards. Our psychoactive substances legislation, passed in 2013, and constantly panned by simply ignorant and lazy commentators incapable of understanding it, has spared us the worst of this problem. The National Drug Policy we released last year is widely hailed as forward-thinking. In particular the steps we are taking this year to review our elderly rules regarding drug paraphernalia, and the consideration to be given over the next couple of years to the balance between minor offending and criminal sentencing is applauded. So too is the recognition that these steps are likely to lead to a full review of our 1975 Misuse of Drugs Act. And our approach to making medicinal cannabis products available to those who genuinely need them, in an environment where popular noise and sentiment far outweighs hard scientific evidence as to safety and efficacy, is seen as pragmatic and sensible.

Many who are disappointed with the Outcome Document are already looking ahead to the next major review in 2019 to make real progress. While there is little doubt that reform is needed, bold reform is not reckless reform. We need sound reform based on steady, evidence based, balanced progress that can be sustained. Through our commitment to compassion, proportion and innovation as the core principles on future drug policy should be founded, New Zealand is well placed to make a constructive contribution to the international debate, alongside like-minded countries, and will continue to do so.L

The decision to make District Health Boards, not local councils, responsible for fluoridation is an obvious one, and seems to have been well received.

Currently, just over half our population, about 2.4 million people, live in areas where the water supply is fluoridated. Shifting the responsibility to District Health Boards, and assuming all agree to fluoridate the water supply in their areas, will add up to another 1.4 million people to the numbers of those receiving fluoridated water.

The fluoride debate has been controversial for years, with no government until now prepared to advance it. At the same time, over all those years, the oral health of young New Zealanders, in particular, has steadily declined. A big capital investment in new oral health centres and mobile clinics over the last decade has started to redress the balance somewhat, but there is still a long way to go.

Although the fluoride debate has been controversial and the opposition vocal in some quarters, public opinion has been consistently, albeit narrowly, supportive of fluoridation. In recent years, efforts by anti-fluoride campaigners to force local polls have been persistent, and this has forced some councils into awkward situations. The recent example of the Whakatane District Council voting narrowly to end fluoridation at one meeting, and then voting narrowly to overturn that decision and retain the status quo at its next meeting, and the about-face of the Hamilton City Council before and after the last local government elections have been quite unedifying.

Local Government New Zealand rightly points out that local authorities are being placed in an impossible situation, especially since their only real involvement is to own the pipes through which fluoridated water is reticulated. But there are realistically only two alternatives to the current situation, assuming of course the national preference is to retain fluoridation. One option would be for central government to simply mandate that all water supplies are to be fluoridated forthwith, but this would be remarkably heavy-handed, and would shut out any capacity for people to have their say. The second alternative, and the one settled upon, is to shift the responsibility for deciding whether or not an area is to be fluoridated to the local District Health Board.

There are 20 District Health Boards across New Zealand, which immediately reduces the potential for inconsistent outcomes, given that there are a far greater number of local councils. Also, oral health (and fluoridation) is primarily a public health issue, and District Health Boards have the statutory responsibility for the promotion of the public health in their areas. So it is logical that they take responsibility for fluoridation policies.

However, it would be wrong to see fluoridation as a panacea for the oral health of New Zealanders. It is certainly an important step, but by no means the only one. It needs to be accompanied by other measures such as good oral health education for children, the promotion of healthy drinks like water, and encouraging good health generally.

The fluoridation decision nevertheless marks an important step forward in the campaign for better oral health for all New Zealanders. It will have a beneficial impact and is arguably the single most important move to be taken to secure good oral health for current and future generations.

         

   

  

 

 

 

 

7 April 2016

1978 was a most extraordinary year.

It was the year when in just over a month there were three Popes. Also, it was the year the racist white regime in Rhodesia finally agreed to African majority rule in the new nation of Zimbabwe. Jim Jones gave new impetus to the dangers posed by religious cults with the ghastly mass suicide of his followers at Jonestown. And the unions in Britain embarked upon the process of industrial disruption, forever remembered as the winter of discontent, that led to the rise of Margaret Thatcher.

Things were no less remarkable in New Zealand. At 15 years, Meda McKenzie became the youngest person to swim Cook Strait. The Muldoon Government first unveiled its brutal streak, to be used more persistently a few years later in suppressing anti Springbok Tour protests in 1981, by using the Army and the Police to end forcefully the occupation of Bastion Point. Social Credit’s Bruce Beetham upset the political establishment by winning the Rangitikei by-election. The disastrous “Think Big” projects were unveiled, and New Zealand beat England in a cricket test for the first time. Air New Zealand was merged with the utilitarian state domestic carrier NAC to become the monopoly national airline (although many would argue that as far as the domestic service is concerned, NAC’s neo-Stalinist approach to customer service has prevailed.)

1978 was also the first year our birth rate fell, even though our population was only about 70% of today’s figure. But here is the rub. Of the children born in 1978, one in four now has a criminal conviction. For men, that figure climbs to one in three. Half of Maori and Pasifika born in 1978 have a criminal conviction. Well over half the offending that led to those convictions occurred when they were in their late teens and early twenties, and most criminal careers were quite short-lived.

Similar figures could probably be found for other years, but the message is stark. How is it that so many of our young New Zealanders have gone off the rails, and what can be done to prevent that? It is little consolation that many appear to have returned to relatively productive lives after their early twenties.

Obviously, family circumstances have a large part to play here, and the significance of family violence leading to severe dysfunction cannot be under-estimated. While the causes of family violence are complex, there is no doubt from all the evidence amassed by Police, social services and health agencies that the impact is profound, and more importantly, that building strong and resilient families and communities, and focusing policy to that end, is at the core of resolving it. Investing in early identification of at risk families and children is far better than spending large amounts of money picking up the shattered pieces later on.

Family-centred policies along these lines have always been at the heart of UnitedFuture’s focus for this reason. While, sadly, no child can choose the circumstances of its upbringing, every child nevertheless has the right to expect the love and affection of both its parents. Nurturing children and strengthening viable families must be at the centre of all our policymaking.

Many of the babies born in 1978 are the parents of today, and their grim experiences in their late teenage years and beyond clearly challenge all of us to ensure the mechanisms and supports are in place to ensure their children do not suffer the same fate.

          

  

 

 

 

 

31 March 2016

I have had one or two fractious media interviews of late on aspects of New Zealand’s drug policy. I am not especially proud of that, because my normal demeanour is much more considered and self-disciplined. My plea in mitigation is that my contrariness has been a reflection of my frustration that, for various reasons, the points I was seeking to make have been misunderstood.

I was reminded of all this again this week, when, following a Morning Report interview on the same subject, the media suddenly seemed convinced I had undergone some remarkable conversion and was now advocating a bold, new approach to drug policy, completely out of character with what many of them had long imagined erroneously and in some cases maliciously to be my views, and for which many had pilloried me for years.

Only a few journalists were astute enough to recall that my now apparently radical new calls for drug policy to be based on the principles of compassion, innovation and proportion were in fact a repetition of what I had been saying consistently for some time, most notably, but by no means exclusively, at the United Nations Conventions on Narcotic Drugs meeting in Vienna this time last year. Some even recalled accurately that these same principles underpinned the National Drug Policy I released on behalf of the government last August.

I was simply too stunned by the media volte-face to be grumpy. Indeed, I was literally gobsmacked as to why my message of steady, considered reform that they in their ignorance had sneered at and ridiculed for so long had suddenly become mainstream. It said a lot to me about how shallow so many of they are.

The reason for this turnaround is, I suggest, that drug policy has many levels to it, and it is thus inherently more complex and nuanced than many of them can or want to understand. For some, drug policy is no more than a loud and selfish focus on being able to get their drug of choice when they want it, no matter the consequences or accepted legal norms. For others, drug policy is more specific – access to products that may have a medicinal benefit, for example. Still others see drug policy as no more than cannabis policy.

However, sensible drug policy is multi-faceted, and pays no heed to the extremes. It is about controlling the manufacture and distribution of dangerous substances, and the criminals behind the trade, so it has obvious legal connections; but it is also about the innocent victims and those who suffer from the misuse of drugs, requiring an effective and strong health focus. Above all, sensible drug policy is about a prudent and balanced response. It should address the supply and distribution issues through the law, as well as ensuring good health services are available to assist those suffering from the misuse of drugs. That is the compassion prong.

But sensible drug policy is also about having an appropriate focus. The steps we take to deal with those who manufacture and distribute drugs illegally will be quite different from those we promote to deal with those affected by them. At the same time, we cannot cause more problems than we resolve. That is the proportion prong.

And because this is a dynamic and changing environment, we will also need to be flexible and open to new ways of dealing with emerging problems, like for instance our approach to the psychoactive substances issue. That is the innovation prong.

The war on drugs has been an abject failure. Its rhetoric and approach belonged to a bygone era. Focusing New Zealand’s drug policy on a health centred approach places us firmly in the international mainstream of contemporary drug policy. The recharting of our course in recent years has been as deliberate as it has been subtle. It is no accident, but a conscious recognition of both the deficiencies in previous policy and what is achievable and sustainable in the current political social and political environment. I have purposely ignored the extremists, and I make no apology for that.

Next month I will lead New Zealand’s delegation to the United Nations General Assembly Special Session on drugs in New York. I will be promoting our National Drug Policy there, and expecting to be well-received, as we work with like-minded countries to produce sensible outcomes for the future. I will be proud, not grumpy nor irascible, to see the values of compassion, innovation, and proportion at the forefront of our deliberations.     

 

 
 

 

 

 

 

23 March 2016

Congratulations to Dame Patsy Reddy on her appointment as New Zealand’s next Governor-General. She is another outstanding selection in that now long line of impressive New Zealanders to hold the office, and I have no doubt she will do a superb job and quickly earn the respect of New Zealanders.

However, she should be the last person to occupy the role. It is high time for New Zealand to elect its own Head of State, and for our country to become a republic. We should take the opportunity of the appointment of a new Governor-General to commence the process of public debate, leading up to a public referendum, which if supportive of our becoming a republic, should lead to the installation of our first President, when Dame Patsy’s term comes to an end in September 2021.

The Irish Republic provides the model for New Zealand, with a parliamentary system of government and an elected President as Head of State. The President does not exercise any executive functions and is obliged to act on the advice of his or her Ministers, in pretty much the same way as our Governor-General does now. The difference is of course that Uachtaran na hEireann (President of Ireland) is the supreme Head of State, elected directly by the people, not the representative of a foreign hereditary monarch at the other end of the world, as is our Governor-General.

Opponents of New Zealand’s becoming a republic often erroneously argue that it would mean the end of our Commonwealth ties. That is utter nonsense. 32 of the Commonwealth’s 53 member states are already republics, including major Commonwealth players like India, South Africa and Singapore, amongst a host of others. So there would be no reason at all for New Zealand, upon becoming a republic, to have to reconsider its Commonwealth membership in any shape or form, and nor should it.

As a way forward, a group of leading but informed New Zealanders (often not the same thing!) should be gathered together to begin the process of public discussion about how a New Zealand republic could be structured, including issues such as how that relates to the Treaty of Waitangi. That process should be long-term – running for about three years – and culminating in a binding referendum in mid 2020 on whether New Zealanders wished our country to become a republic. In the event of a positive result, the establishment of the republic would then be timed to coincide with the end of Dame Patsy’s term in late 2021.

I make these comments with no disrespect to Dame Patsy, nor the current and past Governors-General, nor to the high office to which they have all been appointed. So long as the office of Governor-General remains, both it and the person holding the role deserve the respect and loyalty of all citizens. But the appointment of a new Governor-General does establish a finite period. That provides a chance to think afresh about our future constitutional structure. I have long believed New Zealanders are ready for that discussion and that we should therefore give them that opportunity. The appointment of a new Governor-General does just that.          

 

 

 

 

17 March 2016

In recent days, I have been thinking of Pete Seeger’s plaintive line, “When will they ever learn?” from his classic anti-war song, “Where have all the flowers gone?” Not in the context of war and peace I hasten to add, but with regard to the future of the dairy industry.

There has been a consistent strand in our economic history, as a part of our quest for security since the 1960s, of putting almost all our economic eggs in one basket and pursuing the industry of the day to the point of virtual extinction, because of the short term gains it has been perceived to offer. First, there was the Chatham Islands crayfish boom where many dollars were risked and fishermen’s lives lost as the crayfish stocks were plundered because of the attraction of export markets to the delicacy of New Zealand crayfish tails.

After the crayfish boom was exhausted, and some fortunes made and others lost, we moved on to deer, with the same boom to bust enthusiasm. High-fenced deer fences quickly dotted the rural landscape, as we discovered and exploited the potential of cervana and deer velvet. When that boom petered out, goats became the new industry to be in, followed over the years by alpacas and llamas, kiwifruit, orange roughy and now, the dairy industry. The common thread has been the commodity base and the opportunity for quick dollars, so long as the world craves the particular product on offer. And when world tastes change, we always seem to get caught high and dry.

The dairy boom has been the most dramatic of all, building on the solid international reputation for quality production and innovation of the old Dairy Board, now carried on by Fonterra. And, in its wake, there has been an astonishing rate of dairy conversions across the land, in pursuit of the “white gold.” Orchards, sheep farms, and pastoral lands have all been converted at a rapid rate, with, as we are now realising, the attendant despoliation and damage to our waterways. In a country as pristine as ours, it is intolerable that we have become so obeisant to the dairy industry that we talk of a wading water standard as a goal, when we used to pride ourselves on having freshwaters which you could not only swim in, but also drink from as well.

While the dairy sector was booming we seemed to turn a blind eye to the degradation of our waterways because the returns to dairy farmers, and by extension the economy as a whole, were so good (and dare I say it the greed so palpable).

But now the day or reckoning seems nigh. International dairy prices have fallen, and each fortnightly auction price brings little solace to increasingly anxious and debt-burdened farmers. Some may be forced off their land altogether with all the attendant personal and other consequences. Although the Government and the banks are talking staunchly at present, some form of relief seems inevitable, probably through Work and Income and possibly Inland Revenue. As each day passes, Pete Seeger’s haunting warning will assume more and more relevance. The question will then be, this time, are we prepared to heed it?