Levies as end-runs around the Generic Tax Policy Process

A few years ago, Willie Jackson proposed levying tech platforms to fund news outlets. 

I'd warned that this kind of thing amounts to a dangerous end-run around IRD's generic tax policy process.

Levies can make sense in some contexts. If a producer group agrees to be levied to fund research or marketing that has industry-wide benefits, that's fine. Agreement tests whether those benefitted actually benefit. 

Or if it amounts to a user-charge that can't easily be collected in other ways. It requires a tight link between what's being funded and who's being levied to pay for it.

But Jackson's proposal was nothing like that. There's no link between tech platforms and news outlets that would warrant a levy. 

The levy instead tried to use force to recreate a relationship that had been superseded by technological change. In olden-times, newspapers were the best place for advertisers to reach customers. Google and Facebook became better ways of linking advertisers with eyeballs. Since platforms 'stole' that link, it must be reforged through levies. It's a terrible approach to tax and tech policy. 

Paul Goldsmith was initially enthusiastic about continuing with that approach when he was made Minister, but it's since been shelved. 

Now Goldsmith's back with a new levy proposal. This time, Disney and Netflix will be levied to fund NZ content creation. 

Same problem as last time. There is no link that justifies a levy here. 

NZ taxpayers subsidise local content creation; it gets broadcast on by anyone willing to pay for the rights to distribute it. It's a generally decent approach because what gets created still faces a market test. NZ content creators are perfectly free to license to Netflix or Disney or anyone else who's willing to pay, and those outlets will be willing to pay if they expect the additional offerings to get or keep subscribers they otherwise would have missed. It's fine.

Irene Gardiner, president of NZ Screen Producer's Guild Spada, has views:

“The big international streaming companies operate here without any regulation. They don’t pay company tax here, they use our broadband infrastructure that the taxpayers paid for, and they have no requirement to commission any local content or contribute to the New Zealand screen sector in any way.

“We’ve been lobbying the Government for some form of legislation in this area for over two years.”

Gardiner worries that after legislation was introduced in Australia last year, New Zealand is getting “left behind” – particularly amid the “devastating” impact of streaming services and Big Tech on local media.

“If any of the big streaming companies, Netflix or Apple or Amazon, had taken a genuine interest in commissioning in New Zealand and done some significant commissions in the long time that they’ve been operating, I think we’d feel differently. 

“But the reality is that they haven’t, and so if they’re not going to do it voluntarily then here we are.”

Households pay for broadband. Their broadband subscriptions help cover the cost of the broadband network. They can choose to stream whatever over that fibre, including Netflix or Disney or Amazon or whatever else. 

If Kiwi subscribers put value on seeing NZ content on any of those platforms, those platforms would have incentive to offer it. As it stands a lot of NZ content is only available on really crappy NZ services where you can't pay to avoid ads. If Kiwi viewers hate ads more than they like seeing NZ content, then they won't watch there. You could maybe make a case that international streaming platforms, by offering a far better product, wind up meaning declining viewship for stuff only available on TVNZ+ - but that would be a case for TVNZ+ to start offering a no-ads subscription version. 

And presumably any platform seeing potential gain in it could outbid TVNZ+ or whoever else for the streaming rights. If they aren't, then the benefits they see in increased global subscriptions aren't worth the cost - even though the product's creation and consequent cost was likely heavily subsidised through existing content subsidy schemes. 

If there were a principled tax-policy basis for taxing international digital platforms, that case should be evaluated through IRD's generic tax policy process. 

This levy-based approach will prove increasingly tempting to a government that does not want to reduce spending to meet its tax revenue, doesn't want to increase taxes transparently, and wants to provide services through other funding mechanisms. 

Coming up with new tied levies is a way of short-circuiting all of that. "It's not a tax, it's a levy" to keep the Taxpayers Union from yelling at them (probably won't work) but also to keep it away from IRD analysis on whether the proposed tax is coherent with the rest of tax policy. 

Appropriation first, policy afterwards

The government has not yet announced what it wants to do in the online child-protection space. There's a member's bill endorsed by Luxon that tries to follow Australia's social media age limits. But the education select committee wound up with much broader recommendations and Stanford's tasked with responding to them. 

What that'll all turn into is anybody's guess. Australian age-gating for social media? Ofcom-style 'let's make everyone do an ID check to look at darn near anything on the internet while sending angry demand letters to American platforms that don't want to comply with UK regs'? Something else?

Whatever it is, the government seems to figure the regulatory regime will cost $8.5 million per year when it's up and running.

The budget includes this new initiative, which gets $6m in the first year rising to $8.5m in each of the last two forecast years: "This initiative provides funding to develop policy and possible regulatory options to improve children’s online safety, subject to future policy and funding decisions."

None of that makes sense if it's an appropriation for developing policy and possible regulation. It's too much money, and it rises over time rather than declining in the out-years when the policy development work is largely done.

And if you look into the Vote Internal Affairs categorisation, well, the thing's classed as regulatory services - not as policy and related services. 

It's far more plausibly an operational allocation for running a new regulatory regime.

One that, as yet, not only has no supporting legislation, but also no hint of what it's meant to be doing. 

My column in Newsroom this week, now ungated, goes through it.

All of this is pretty dumb.

Nobody has yet figured out a way of age-gating social media or potentially sensitive stuff online that doesn't suck. 

New Zealand is unlikely to be the first place to find a way of doing this that doesn't suck. 

The potential harms are real, but often overstated and highly heterogenous. 

There are existing controls that parents can use to gate access for their kids. Some of those controls are undermined by school accounts that parents cannot control. 

The government could be very helpful in providing resource to schools to help parents understand the tools that are available to them, and in helping schools to not undermine their families' choices by setting school accounts whose controls don't mirror those set by parents (or otherwise provide circumvention options on time limits or app limits by logging into the school account on their device or on a school-provided device). 

Anything beyond that, and just enforcing existing law on other bits around grooming etc, should be a watching brief. If somewhere else *does* find a way of my trilemma, great! We could piggyback on their version if voters wanted to do that. We wouldn't have bespoke compliance costs that platforms would be quick to ignore - or to use as basis for just blocking countries that are too small to be this stupid. 

And I just despair when I hear people from industries that have suffered enormous costs from legislation set to 'send a message' regardless of any cost-benefit assessment claiming to support social media bans because they 'send a message'. Crooked timber...

A weird way of slicing the stats

Ages ago I supervised a superb Honours thesis, which turned into a Masters, looking at the lesbian wage premium. It showed up regularly in the US data: homosexual women earned more than heterosexual women - the opposite of the pattern that obtains for men. 

I was curious whether the difference could in part be due to employers' expectations about the costs of accommodating maternity leave. And it looked like that mattered. Hayden Skilling did superb work on it, helped in part by Ron Oaxaca's visit to Canterbury while Hayden was writing. 

I'd wanted to use New Zealand data but that seemed to be impossible. We could, with a few clicks, get US data from the ACS without any bother. If we wanted to use NZ data, it would have been impossible. Stats New Zealand just makes it too hard to access NZ microdata. So we wind up with NZ researchers using American data and helping advance global understanding of what's going on in the US. 

Hayden's thesis was out in 2014. 

It's 2026. Stats NZ just put out a couple of releases looking at earnings among LGBT+ populations. 

I wanted to check whether the lesbian wage premium held up in NZ data. 

So I went to have a look. 

And it's just a big mess. 

First, we get a press release highlighting substantial differences in age-adjusted average annual personal disposable income between the (lumped together) LGBT+ population and the non-LGBT+ population, with the transgender and non-binary population having the lowest age-adjusted annual disposable income. 

That sounds like discrimination right? 

But then you check the second page. The one listed as a "related page" that folks might not click on. That one notes that the LGBT+ population reports disability rates of 25.6%, compared to 15.8% for others. 37.9% of the transgender and non-binary population were identified as disabled.

Disability will mean lower earnings. Stats NZ's big headline press release figures adjusted for age but didn't adjust for disability. That seems like an important omission. People might chalk differences up to identity that are at least partially differences by ability. A cross-tab so you could compare earnings by disability status across the categories could help, but this is one of those 'if we didn't pre-supply the cross-tab, it is unknowable' things. 

I downloaded the excel sheet, hoping that I might be able to check for differences in earnings between heterosexual and homosexual men and between heterosexual and homosexual women. 

But that appears to be impossible. 

In their gender splits by row in the cross-tabs, male and female include the transgendered identifying with each category. Heterosexual males (including the cisgendered and transgendered) earn more than males (including the cisgendered and transgendered) who identify with a sexual minority. That latter category lumps together people identifying as gay, those identifying as asexual, and many others. There could be substantial differences within that bundling. 

So I can't have a clean read on earnings differences between non-trans straight men and non-trans homosexual men. 

And among females (including cisgendered and transgendered), mean personal disposable income for heterosexuals is suppressed. Stats NZ does this when reported numbers are too low. But they do report earnings among females reporting as sexual minorities. Which is difficult to understand. The sample size tends to be smaller for minority groups. But even if it were not suppressed, it wouldn't be helpful. Because I wouldn't be able to get difference between cisgendered heterosexual women and cisgendered homosexual women. 

I don't know if US data has gotten any worse over the period, but NZ data sure hasn't gotten any better.

I've emailed SNZ asking whether any of this is knowable.

There could be good reasons for lumping groups together as they have; they have a lot of potential categories, and splitting out each one would just mean everything would wind up being suppressed. But splitting out the main obvious categories would seem pretty possible.  

Superannuation affordability options

Lyric Waiwiri-Smith at The Spinoff asked me what I thought the options might be for dealing with rising superannuation costs. 

Her story's here, along with comment from Max Rashbrooke and Shamubeel Eaqub. 

My most-preferred option is ongoing increases in immigration rates, coupled with shifting to CPI-indexation of super benefits and indexing the age of eligibility to healthy life expectancy.

I did some rough ballparking. If net migration were around 1.8 people per person turning 65, we could maintain current-ish ratios of 'working age' people relative to 65+. That would have to increase over time as life expectancy increases. 

But there is a real and obvious play here. NZ is aging; Europe as aged. Immigration New Zealand could explicitly advertise for young productive migrants in places where those young workers are being predated upon by their country's elderly voters even more heavily that they are here. Getting a small proportion of young and productive workers from large countries could postpone the inevitable here almost indefinitely. Remember that one big reason that NZ Super costs haven't already blown out is higher net migration than Treasury had expected in the 2000s. 

Consider the number of people aged 65+ per population aged 20-64. On that basis, NZ is around 29.5 and Germany is already at 39.8, France at 40.2, Italy at around 42. 

This kind of play is self-sustaining, on the receiving side. The more young Germans who leave for younger shores, the more who'll want to leave. And there'd be advantages to being in the first wave of leavers, because if the flow gets too large their government might start setting exit taxes. 

I asked GPT to come up with some sample Immigration NZ campaigns targeted on this basis: places where the demographics make NZ attractive by comparison. It did a reasonable job!

The top five, if this were a real campaign

I’d put serious money into:

1. Germany. The cleanest combination of size, ageing pressure, worker burden, education, and plausible NZ fit.

 

 

2. UK. Not the purest demographic case, but probably the best cost-per-success market. The sales pitch is less “escape pension collapse” and more “same language, better lifestyle, credible residency pathway, and fewer inherited fiscal messes.”

 

3. France. Strong burden story and strong human capital, especially if targeted at engineering, health, tech, science, agriculture, and public-sector professionals tired of state sclerosis.

4. South Korea. This is the big non-European play. The message writes itself: “Your country is about to experience the steepest demographic cliff in the OECD. Move before your peak earning years become the funding mechanism.”

 

5. Poland/Czechia/Slovakia. A regional Central European campaign could be very productive: educated, mobile, demographically pressured, and plausibly attracted by an English-speaking high-income destination outside the EU rat race.

 

Another non-tariff barrier

I do not see the problem here. I do see a lot of ways of creating a problem though.

Andrew Bevin writes for Newsroom:

Ministers were warned of trade implications relating to mandatory Health Star Ratings before choosing to vote against the development of the scheme.

If Health Star Ratings are made compulsory by Australasian food ministers, and New Zealand manages to opt out, Australia would likely block imports of non-compliant food.

That’s according to advice given to the Cabinet Economic Policy Committee ahead of New Zealand’s vote against developing a mandated Health Star Rating system earlier this year.

If NZ made the FSANZ health-star ratings compulsory, Kiwi firms would have to comply. So would anyone else wanting to sell food in NZ. International outfits would then either eschew our market as not being worth the hassle, run limited production runs meeting the FSANZ standard (at higher cost both because of the smaller run and because they'd lose flexibility to shift products across markets as market conditions change), or make Kiwi retailers put stupid little stickers onto everything manually. 

All of those would limit competition here and push up costs. 

If NZ did not make the health-star ratings compulsory, Kiwi firms wanting to export to Australia would have to comply. And that's fine. They can do that. They could even sell the same version of the pack in NZ. And product from other countries could come in too - if they met our biosecurity standards. 

Why create another non-tariff barrier?