Letter to Sunday Star Times by Tax Justice spokesperson Grant Brookes.

While campaigning for GST off food in 2008, a NZ Herald reporter interrogated me about the “impossible” administrative difficulties it entailed. He was unmoved by the fact that 27 out of 30 OECD countries had exemptions for tax on food at the time.

I was reminded of that interview when I read “Few details in Mana tax plan” in last weekend’s Sunday Star Times. Your article quoted an economist, uncritically, dismissing the Mana Party’s Hone Heke Tax as one “that no individual country can introduce on its own, as it is easy to shift financial transactions from jurisdiction to jurisdiction”.

It failed to mention existing Financial Transactions Taxes like the UK Stamp Duty, or the continent-wide FTT proposed by the European Commission.

The recent IMF Working Paper, “Taxing Financial Transactions: An Assessment of Administrative Feasibility” describes many successful single-country schemes, and practical measures for tackling transactions shifted elsewhere.

This year I presented a petition to Parliament on behalf of the Tax Justice Campaign (www.nogstonfood.org). Signed by 40,000 New Zealanders, it called for GST off food and financial speculation taxes.

So Mana’s policy is both feasible and popular.

I’m growing tired of business journalists, blinded by economic theories, who echo excuses for why nothing can be done to tax the super-rich.

Reality presents no such insurmountable barrier. I expected more from the Sunday Star Times.

Grant Brookes
Tax Justice Campaign

Here is the Sunday Star Times article that Grant Brookes’ letter responds to:

Few details in Mana tax plan

by Rob Stock
13 November 2011

Mana is the only parliamentary political party tapping into international campaigns by pressure groups and some economists for the global taxation of financial transactions.

But the party’s pledge to replace the $15 billion goods and services tax (GST) with a tax on financial speculation is uncosted and based on observing the lobbying for a so-called Robin Hood tax in Europe and the United States.

There are many economic policy pledges from major and minor parties causing controversy and debate, notably Labour’s tax-the-rich income tax plan and National’s asset-sales promise. But while most of the economic pledges would be deliverable by politicians holding the reins of power – and are backed up with analysis – economist Roger Bowden says Mana’s policy is only deliverable if the entire world decides to do the same.

It is a decision that will be taken in the highest offices of the G20, not in New Zealand, unless we want to see a flight of capital from the country.

The Mana Party has set out its stall as representing New Zealand’s poor, whether unemployed, under-employed or stuck in low-paid employment. It has presented policies to win support from voters who would like to see social inequalities reduced and the relative tax burden shift from the poor to the rich.

That includes making the first $27,000 of income earned tax-free and introducing a Labour-like pledge to introduce higher taxes for the rich. But it also involves a pledge to tax financial speculators.

Mana Party activist John Minto said there is no detail to the party’s pledge to significantly increase the tax take by “introducing a tax on financial speculation, called the Hone Heke tax (chopping down GST and income tax), which will be designed using examples of similar taxes introduced overseas. Initially it will be used to replace the annual $15b collected by GST”.

The Sunday Star-Times contacted party leader Hone Harawira, but for policy detail was referred to Minto, who said given the level of financial speculation on the New Zealand dollar, the party believed the $15b target was quite modest.

Minto said currency speculators were the party’s prime target, in part because the party believes they had helped drive up the value and volatility of the Kiwi dollar which was not good for exporters and workers in New Zealand. Taxing speculation would reduce the level of that speculation and that would provide a win-win situation for the economy as the dollar fell in value, Minto said.

But Minto could not provide any detail on how the tax would be imposed or which kinds of transactions would be taxed.

“We haven’t set rates or exactly what would be covered,” he said. “There have been some good and some bad experiences overseas. There are a whole lot of different forms.

“We are not getting involved in figures,” Minto said. Mana picked the idea up from overseas where there are calls for worldwide financial transaction taxes.

“I would say Mana would actively be campaigning for this no matter how far we are from government,” Minto said.

While financial transaction taxes were possible and some, including emininent economists, see them as desirable, it is a form of tax that no individual country can introduce on its own as it is easy to shift financial transactions from jurisdiction to jurisdiction, Bowden said.

“Everybody has to agree at the same time,” he said, adding that currently, the idea looked like “a dead duck” as places like the US and UK are not in favour.

Bowden recalled the introduction of a transactions tax in one Australian state around 20 years ago which was quietly repealed when there was a flight of capital to other states.

He warned that financial transaction taxes are always ultimately passed on as extra costs to individuals, whether they be shareholders or bank customers, or if hedging contracts on currency are taxed, to exporting firms and even the likes of KiwiSaver funds.

“The banks will always pass [extra cost] on,” Bowden said.