It is unauthored but I must congratulate NZPIF on their stunning article this morning. I read yesterday in the Herald Gareth Morgans attack on property investors and couldn’t believe the lack of facts and deliberate error in his comments and quotes.

So this morning NZPIF responded in stunning irony and clever writing.

Gareths drivel is available here if you missed it LINK

NZPIF’s fabulous response is below

Morgan cannot avoid the facts

Obviously being up-front and pragmatic is an admirable trait within the Morgan household.  Gareth Morgan is quite right to acknowledge that rental property is being discriminated against by the Tax Working Group and his son, Trade-Me founder Sam Morgan, is extremely honest in fronting up and saying that people in his position do not pay tax.

Faced with the fact that rental property is taxed in exactly the same way as other investments and businesses, Gareth Morgan had no option really but agree.  But good on him for doing so, as others with the same vested interest are not so willing to state this publically.  Morgan is quite right that suggestions for disallowing depreciation claims for rental property and ring fencing losses (currently available to all business’ and investments) would be a “ham-fisted policy response” if adopted in this years budget.

We cannot forget that Morgan is a Fund Manager himself, and therefore does view things from this point of view.  That is possibly why there were still a few errors in his otherwise excellent article published in today’s Herald.

Morgan repeated the claim that the rental sector is worth $200b and that there is “a $500m annual loss of taxable income for the whole sector”.  These claims are the cornerstone of increasing the taxation of rental property and both statements are quite untrue.

Rental property made a loss of $500m in 2008, however the following graph from the Tax Working Groups own report, provided by Inland Revenue Department data, shows that losses were made in only two of the past 28 years.  Not the “year after year the (rental property) industry makes tax losses” claimed by Mr Morgan.

Auckland University have also questioned his claim that the value of rental property in New Zealand is anything like $200b.  When the effect of borrowings is considered, the actual amount invested in NZ rental property is likely to be less than $40b.  This is considerably less than the amount of money invested in the NZ Stock Exchange and considerably less than that invested in Morgan’s Managed Funds industry.

Morgan says that there is a “national past-time of exploiting the rental property tax dodge”, implying that every man and his dog are investing in rental property.  However the number of people who actual own rental property in NZ is only around 200,000.  This is a large minority compared to the 1.3 million who are participating in Kiwi Saver and therefore investing in Morgan’s Managed Funds industry.

If you want to see an industry that has favoured Government status, then it is the fund management sector, not rental property.  Fund Managers are actually allowed to make un-taxed profits on share trading, something unavailable to private share traders or property traders.  Apart from Kiwisaver, what other industry uses direct tax payer funds to encourage investment and increase the earnings of investment providers?  Is there any other industry that legally forces employers to contribute to their employees investments?

At a time when thousands of people, mainly the elderly, have lost their life savings by following the advice of the financial services industry, it is incredible that they are pointing the finger at rental property providers as the cause of all New Zealand’s problems.

While Gareth Morgan has some of his facts wrong, he is right that rental property does not have a tax advantage, is being discriminated against and that proposed rental property tax changes are wrong.  He is also to be commended for rallying attention around the rorts of the Managed Funds industry.

Morgan, his son and other business people should be applauded for their contribution to our economy.  We need industry to grow as a nation.  However it takes many different industries to ensure that an economy performs well.  Good housing is a significant component of a well functioning economy.

The rental property sector is not saying we do not need to encourage industries such as exporters. We are saying that discriminating rental property through increasing taxes in the hope that funds move into managed funds is not the way to do it.

Absolutely top shelf  guys.  Keep up the good work

Stay Inspired and Stay Safe ~ Dean Letfus

There is a rather strange poll being run by Bill English HERE asking us to vote on whether we support the tax changes to property.  (PLEASE GO AND VOTE).

But the reason I say it’s weird is that I can’t figure out why he would do it.

Firstly it is going to be vested interest groups like ours that drive traffic to the site voting against the changes and he would have known that from the get go. The poll is increasingly not in support of the tax changes which is to be expected.

Secondly it is also a given that he will take no notice of the poll.  It is on his site but not promoted until the likes of Property Talk and myself tell others about it, so there is obviously no genuine intention to discover the opinion of the people.

So my conclusion is that the budget is going to be quite punitive and by having this on his site but deliberately not promoting it Bill will be able to say: “Well we asked New Zealanders what they thought and there was little response at all.  If people felt so strongly about it why didn’t they vote?”

I don’t know, am I overly cynical?

What do you think?? Why would a cabinet minister run a poll about ill formed and unpopular tax changes and then not advertise the fact or make any effort to genuinely canvas public opinion.

Maybe I’m overthinking this but it just doesn’t make sense to me.  What do you reckon??

Stay Inspired and Stay Safe ~ Dean Letfus

PS: Looking for sustainable fast cashflow without buying another property??

Well then join Shaun Stenning and I next week in

Auckland, Wellington and Christchurch!!

and we’ll show you how to get it!!

BOOK NOW.

(You’ll love the guarantee)

Check it out HERE

I think these lyrics were penned for the Vietnam war but I can’t help but think of it at ANZAC time.  This year has been marred by the tragic helicopter accident so will be burned into our memories more than many perhaps for those of us born post war.

Rather than comment on the rights/wrongs/good/bad of war, because it is a very complex and emotive subject, I was thinking as I drove past the closed shops on Sunday that this remembrance is important as it brings a dignity and acknowledgement of what so few did to preserve the freedom of so many.

My father was a child in Europe during the second world war so he saw a different war to the ANZAC’s.  He lost his father, his home and ultimately his country and I think spent most of his life trying to forget what he had witnessed as a 9 year old.

So to see so many young and old gathering together to remember just how important the actions of our soldiers have been, without any shame or guilt, is a wonderful thing.

We are wired for ritual and remembrance in our DNA and I can think of few higher callings to maintain than to celebrate our achievement and sacrifice at Gallipoli and subsequent conflicts and attacks on our freedom.

Stay Inspired and Stay Safe ~ Dean Letfus

I remember a few years ago hearing a very successful businessman comment on his move from Australasia to the USA.  He said that one of the main reasons for the move was he tired of being attacked for being successful.

“If I Drive my Ferrari down the street in New Zealand or Australia I get called a w*nker.

If I drive my Lambo in LA people come up to me at lights with a thumbs up and “Nice Car man”.

I can of course relate directly to this as I sold my Spyder partly for exactly this reason myself, but as I grow as a person I do get sicker and sadder at the way we carry on.

I have noticed that as I achieve more in my life there are increasing numbers of petty “little” people who seek to make themselves feel better by saying things about me.  I feel very sorry for them as they almost universally contribute nothing positive but seem to exist to rage against the imaginary issues in their heads.

I’ve even stopped reading articles with my name in them because I am so stunned by the drivel I read when I do look .

My take on this generally is well publicised through my blogs for many years EXAMPLE, but I came across this excellent article today and thought it worth sharing with you as it helps explain just how much damage these people do to our economy.

From http://www.silverlinings.co.nz/

“NZTE just released some interesting research that shows our number 8 wire, she’ll be right attitude is holding us back.

We are the second most entrepreneurial country in the world, but drop to 26th when it comes to high growth businesses.

In other words we are great at coming up with ideas but not so great at following through. Researcher Tony Smale suggests Kiwis’ do-it-yourself mentality makes us reluctant to rely upon others for success – including experts who could do it better. The infamous tall poppy syndrome also means we tend to underperform or hide our successes, do not like feedback, and hate to fail.

Only one in 10,000 businesses uses venture capital and the rest tend to borrow money from family and friends and take out a mortgage on the family home, making them even more risk-averse. This means we miss out on the powerful lessons of trial and error.

Two thoughts spring to my mind when I read this research:

1) Is it the tall poppy syndrome that stops us from seeking help to achieve high growth and exponential success, or could pride also be a factor in all of this? Does our pride and a false sense of having to be able to do everything on our own stop us from asking for help?

2) Does this pride also contribute to our fear of failure?

I tend to think it’s both. I genuinely think this country has too many people who are jealous of those who succeed. It’s as if they think some people just got lucky. In my mind Tall poppy syndrome is a symptom of low self-esteem where people resort to criticizing others to make themselves feel better.

I don’t think there’s much doubt that this jealousy from others limits many people’s aspirations. At the same time though, we can’t go through life blaming our culture or other people’s attitudes for how we act. It’s my responsibility to ask for help if I need it and if it is my pride that holds me back from doing so, then I need to learn humility.

My identity shouldn’t be so tied up in what people think of me that I’d rather not try something than to try something and be seen as a failure if things don’t go so well

We have a lot of maturing to do as a culture, but ultimately culture just reflects the attitudes of individuals, so we can all make a positive impact by considering our own attitudes and responses. I think the research backs up the need for Kiwis to be more open to asking for help and less scared of failure or making mistakes.  Humility would help in both cases.”

Great advice and accurate observation.

So remember the next time you hear some nasty lies about yourself,  say to yourself:  “Wow, I must be doing something right, even the nobodies are attacking me now”

Stay Inspired and Stay Safe ~ Dean Letfus

The Ethical Investor

Get me free weekly Newsletter HERE