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New Zealand already has a capital gains tax – you may not know it | Instant News


Two University of Auckland researchers argue New Zealand already has taxes on its books that can be used to tax property investors. Photo / 123rf

Prime Minister Jacinda Ardern may waive the capital gains tax, but there is already a tax on books that can do the job.

This is according to two University of Auckland researchers, who say that the CB6 section of the Income Tax Act has existed since the 1970s but is not widely known because it is rarely enforced.

However – if given a simple change – it could be turned into an effective capital gains tax that targets the profits investors make when buying and selling homes, Michael Rehm and Yang Yang said in a new research paper.

They argue that the recent skyrocketing house prices have brought the tax debate back into the spotlight.

And instead of considering the new tax, CB6’s section already states that anyone who buys land with the intention of making a profit from resale must pay income tax on those gains, Rehm said.

The government has not enforced this in the past because they think it is too difficult to know the intention of the buyer when making a purchase.

But Rehm said his decade-long analysis of rental housing purchases in Auckland showed nearly all had incurred initial losses and counted on the gains on resale to be considered a wise financial investment.

“This cash flow based stuff is a complete dog,” he said.

“The only rhyme or reason you’re going to invest in property is that you expect to get some sort of payment in the end.”

That means investors can safely be said to be acting as speculators hoping for house prices to rise – and that has broader consequences for society, Rehm said.

Auckland’s average selling price has now jumped to $ 1 million for the first time in October, while national prices have also ballooned to new highs, the Real Estate Institute reported.

This kind of price hike has further transformed housing from where Kiwis seek refuge and raise their families to golden geese treated as egg nests, Rehm said.

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It has two problems.

This helps create a rift in society between the rich, those who own property, and those who don’t, Rehm said.

And that’s funneling billions of dollars of investment from KiwiSaver accounts, stocks and businesses into real estate, where it yields less broad economic benefits, he said.

Politicians across many of the political spectrum have expressed similar concerns over rising prices.

Labor, the Greens and even the Reserve Bank this week suggested broader taxes were needed to help curb rising house prices.

Investors are already taxed like capital gains in the form of what is called a bright line test.

First introduced by the National Government in 2015, it initially required property investors who sold homes within two years of purchase to pay tax on their profits.

In early 2018, the Labor-led Government then extended the bright line test to five years.

Last week, Treasury Secretary Grant Robertson asked the Treasury Department to investigate further extension of the bright line test.

But changing taxation policies is fraught with political risks, given that opposition parties now accuse the Government of canceling its promise not to impose new taxes.

Researchers Michael Rehm and Yang Yang from the University of Auckland's Department of Property.  Photo / Provided
Researchers Michael Rehm and Yang Yang from the University of Auckland’s Department of Property. Photo / Provided

The Minister for Housing and Labor Revenue did not answer questions about whether they would consider investigating or implementing Rehm and Yang’s suggestions.

The Inland Revenue said it conducted a “very similar” study in 2014.

“It was concluded that there is systemic evidence of the turnover rate of residential properties, which is higher than normal,” he said.

“However, identifying possible speculative activity based on analytics and having enough evidence to prove speculative behavior are two different things.”

Rehm admits – even though the CB6 section already exists – enforcing it politically is another matter.

“I am not naive, I know this is a bitter pill that any politician should throw,” he said.

“I’m just trying to show that there’s a solution that’s already in the book.”

Two University of Auckland researchers argue New Zealand already has taxes on its books that can be used to tax property investors.  Photo / 123rf
Two University of Auckland researchers argue New Zealand already has taxes on its books that can be used to tax property investors. Photo / 123rf

He said the enforcement of the CB6 section would be more thorough than the bright line test because there was no time limit and also thought the analysis behind his paper was thorough.

His team used a new method to identify 117,000 rental property purchases in Auckland between 2002 and 2016, he said.

To calculate the profitability of purchasing a lease, his team then weighed the costs involved in running the various properties – such as home loan repayments, property management fees, and maintenance costs – against the rental income.

The results were clear, he said.

Leased property investment almost always goes bad compared to comparable investments when capital gains are excluded, Rehm said.

That means everyone is speculating on expectations the price will go up, he said.

“We beat our chests and said speculation is bad behavior and it needs to stop,” he said.

“But nothing has been done to try to persuade people not to continue speculating.”

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New Zealand’s mysterious ‘silent earthquake’ could help predict future tsunamis | Instant News


New Zealand

What is slow slip? Video / GNS Science

An earthquake that occurs slowly and quietly deep beneath the North Island can be the key to predicting future earthquakes and tsunamis generated by our biggest fault.

A million dollar, three-year project will increase scientists’ understanding of
Earthquakes “slow” along the Hikurangi Subduction Zone.

Scientists believe the subduction zone, which runs along the east coast of the North Island, could produce “megathrust” earthquakes larger than the scale of 8, such as the one that created the tsunamis that devastated Indonesia in 2004 and Japan in 2011.

The worst case scenario of a major Hikurangi event could include thousands of deaths and injuries, and billions of dollars worth of property losses.

But slow-slip earthquakes – where plate boundary faults release slowly buried tension over days to months instead of seconds in a typical earthquake – can help us better gauge threats.

Their discovery 20 years ago has revolutionized seismology and our understanding of fault mechanics.

Even though it happens off the east coast every few years, no one feels it when it happens – and the driving force remains unclear.

The new project, led by GNS Science, is designed to detect subtle physical changes in a fault before a slow-slip earthquake occurs, to uncover the mechanisms that regulate its timing.

“It will clarify if there is an observable physical change in the fault that could allow the development of a more accurate estimate of when the fault might fail, either in a slow earthquake or, possibly, a fast earthquake,” said project leader Dr Laura Wallace.

Tantalizing evidence has emerged in recent years that increased water pressure near the fault exerts great control over New Zealand’s slow-slip earthquakes.

GNS seismologist Dr Emily Warren-Smith said if this build-up affects slip times, then monitoring water accumulation in the fault could allow better forecasts for slow and possibly fast earthquakes in the future.

But it is possible that the change in fluid pressure within the fault may be a symptom of a slow earthquake rather than a direct cause, said Wallace.

Alternatively, there may be other processes such as a steady increase in stress from tectonic plate motion that controls the tempo of a slow slip earthquake.

The project aims to resolve this dichotomy by installing large-scale submarine and land monitoring instruments in the southern Hawke’s Bay and Wairarapa.

It will monitor changes before, during and after the regularly expected recurring slow slip events offshore in this region in the next two years.

This picture illustrates where "slow slip" previous earthquakes occurred under the North Island.  Image Science / GNS
This image depicts where a previous “slow slip” earthquake occurred beneath the North Island. Image Science / GNS

Wallace said the project would establish new ground in seabed geodesy and help put New Zealand at the forefront of global efforts to monitor offshore faults that can produce large earthquakes and tsunamis.

The team departed this weekend aboard the Niwa research vessel Tangaroa to carry out the first set of seabed sensor deployments.

“This project will generate new evidence-based information that will aid significantly in planning and preparedness and make New Zealand safer and more capable of recovering from a major earthquake.”

A separate voyage to the Hikurangi subduction zone – where the Pacific Plate is plunging downward, or “plunging” below the North Island’s east coast – has just finished.

US scientists recently dropped their own specialized equipment onto the ocean floor to visualize subsurface structures, and investigated how fluid is distributed within the sediments.

The Hikurangi subduction zone is where the Pacific tectonic plate sinks into - or dives beneath - the Australian tectonic plate.  Image Science / GNS
The Hikurangi subduction zone is where the Pacific tectonic plate sinks into – or dives beneath – the Australian tectonic plate. Image Science / GNS

Program leader Dr Jess Hillman, from GNS Science, said this will allow scientists to better understand how fluid movement is related to activity in our largest offshore faults and the generation of gases beneath the ocean floor.

Shipping specialist Dr Peter Kannberg, from the Scripps Institution of Oceanography in the US, said earthquakes, the stability of the seabed slopes and the release of seabed gases were all regulated in part by the presence of fluids.

“Our instrumentation can detect where this fluid is on Earth, enabling us to better understand the role of fluids in regulating these natural hazards.”

The new three-year project is supported by a $ 960,000 grant from the Marsden Fund.

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Covid 19 coronavirus: How will the first available vaccine in New Zealand work? | Instant News


BioNTech and Pfizer’s mRNA coronavirus vaccines could be launched in New Zealand early next year, subject to final testing and approval. Photo / Provided

The mRNA coronavirus vaccine, which could arrive in New Zealand as early as next year, subject to final tests and regulations, will be the latest incarnation of the immunological revolution sweeping science. Professor Graham

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Kiwi cruise companies are looking for adventure guides for Antarctic trips | Instant News


Travel

Kiwi lovers and hikers alike can take this opportunity to visit Antarctica. Photo / Provided, K Ovsyanikova

For adventurers and nature lovers, this can be a dream summer job. A New Zealand cruise company is looking for an outdoor expedition leader to join them on a special Kiwi journey on the most distant Sub-Antarctic islands.

After being granted permission to sail New Zealand’s sole season, cruise company Heritage Expeditions is looking for crew and guides to join them from Fiordland to the Auckland Islands this summer.

“We are looking for extraordinary individuals who have a passion for New Zealand, its wildlife and its stories,” said commercial director and expedition leader Aaron Russ.
Applicants will need a sense of adventure and be able to balance multiple responsibilities on Spirit of Enderby’s 50-passenger icebreaker.

“The oceans can be very temperamental – you have to be able to think, and stay on your feet,” explains Aaron. But for those who can afford it, this could be your ticket to one of the most interesting and difficult to reach places on the planet: Antarctica.

Enderby will set sail with a week-long itinerary around Stewart Island and a 13-day trip to the Subantarctic Islands before embarking on a guest expedition to New Zealand’s claim to Antarctica at the Ross Dependency.

Spirit of Enderby has been granted special permission for the New Zealand Antarctic season.  Photo / Awarded, T Bickford
Spirit of Enderby has been granted special permission for the New Zealand Antarctic season. Photo / Awarded, T Bickford

The company says knowledge of the area’s history, flora and fauna would be a plus, but it would be suitable for anyone on research, hospitality or adventure travel who is looking for a challenge.

“We are looking for extraordinary individuals who have a passion for New Zealand, its wildlife and its story,” said Aaron.

“New Zealanders are renowned for providing the next level of service with a smile when under pressure, and this is an excellent opportunity to tap into some of the local talent who may be looking for an exciting career change.”

For more information or to submit an application, the company can be contacted via [email protected]

Last month the Spirit of Enderby also known as Professor Khromov was granted entry to New Zealand. The ice-fortified research ship and its Russian crew were trapped outside New Zealand waters by the country’s shipping ban until it was granted a special exemption for the Kiwi-only season to the Southern Ocean.

Now considering the trip, Aaron says this southern itinerary will appeal to Kiwis who have “their wings cut by Covid”, want to “mark that wish list adventure and explore the furthest reaches of our amazing backyard.”

After a 14-day quarantine period, 22 Russian crew members have started their 29-day voyage to Bluff.

For more New Zealand travel ideas and inspiration, visit newzealand.com

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Turkey, Italy can be game changers with joint efforts | Instant News


Despite the recent disagreements between Turkey and Europe, Turkey’s relationship with Italy has proven to be entrenched and strong.

Even during the Coronavirus outbreak, when most countries adopted a nationalist attitude, diplomatic relations between the two countries developed rapidly.

Last month, Rome hosted two important bilateral meetings. The first meeting was between Turkish Foreign Minister Mevlüt Çavuşoğlu and Italian Foreign Minister Luigi Di Maio and the second was between Turkish Defense Minister Hulusi Akar and his Italian counterpart, Lorenzo Guerini.

In addition, several events and webinars have been organized to further strengthen the relationship. In this context, the goal of increasing the bilateral trade volume to $ 30 billion (TL 253 billion) is one of the main topics on the agenda, signaling the mutual trust between Ankara and Rome.

Currently, the bilateral trade volume is around $ 20 billion, and it is worth mentioning that Turkey posted a positive balance of around $ 600 million in 2019. In general, the trade volume between Turkey and Italy is very stable and balanced.

Italy is Turkey’s second-largest trading partner among EU members, meanwhile it stands among the top five with perfect import symmetry over exports. The essence of their win-win economic strategy covers a wide range of industrial sectors.

Embedded in the same geographic basin, Turkey is Italy’s most important economic partner in the Mediterranean region, in which the two of them have long been involved.

There are more than 1,500 Italian companies operating in Turkey. This shows their confidence in the Turkish market and industry, which is considered strategic in terms of investment.

Due to its advantageous geographical position, Turkey acts as a regional and international economic center for Italy. It is the gateway to markets, like the Middle East and Caucasus, whereas Italy is the gateway to Europe for Turkey.

Turkey is also among the top 10 travel destinations favored by Italians. Tourists from the country increased to 365,000 in 2019 from 208,000 in 2016.

Cooperation that has been established and well established can be further strengthened in the form of partnerships to get more benefits from competitive advantages. The special relationship pivots on a strong sense of solidarity.

Both countries are open economies, so they face the same challenges. Recent local and national lockdowns due to the pandemic and export curbs and cuts demand the need to rethink global value chains (GVCs) to ensure more efficient supply flows.

The recent disruption in the GVC, highlighting serious gaps and weaknesses, has motivated different stakeholders to reconsider their activities and evaluate different geographic areas to diversify their supply networks.

Thanks to various favorable factors such as production, skilled labor, free trade agreements, logistics infrastructure, advanced technology and digitization, Turkey can play a key role as an investment delocalization destination.

From a reciprocal perspective, Italy and Turkey can be game changers with mutual collaboration. In other words, the changing world dynamics paved the way for further collaboration, especially in several key sectors including infrastructure, engineering and aerospace.

It should not be underestimated that only by opening up markets and by avoiding nationalist and protectionist policies can the economy develop.

The solid cooperation between Italy and Turkey looks certain to be destined to develop further in the medium term. The two countries will benefit from the collaboration which will provide new profitable opportunities for the industry and will lead to a competitive advantage.

* Assistant professor at the Turkish Aviation Association University, Ankara

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