Sunday, May 16, 2010

“Property tax decisions awaited in budget” plus 3 more

“Property tax decisions awaited in budget” plus 3 more

Property tax decisions awaited in budget

Posted: 16 May 2010 12:26 PM PDT

The focus for business in the government's budget on Thursday will be on changes to rules surrounding property investment and the detail of the well-signalled switch to lower income tax funded by a higher goods and services tax (GST), according to analysts.

Overall, a slightly improved economic outlook will deliver slightly improved deficits from the government December economic and fiscal update, but the debate in the business community will be about what Finance Minister Bill English does to reduce the size of government and prompt investment in the productive sector, rather than in property.

"The overall thrust of changes are likely to be designed to deliver a tax system which is less distortionary and more conducive to economic growth," ASB economists said in a budget preview.

Taxation of property is the mystery item ahead of the budget as a rise in GST to 15 percent from 12.5 percent has been well signalled.

And, according to economist predictions, personal tax rates are likely to fall from 38c, 33c, 21c and 12.5c in the dollar to 33c, 19c and 10c from October. This is in line with what economists have been forecasting.

This would give someone on $50,000 an extra $20 a week in the hand but when the GST rise is included, it reduces to $6.

Revenue Minister Peter Dunne said on TV One's Q and A that New Zealand had a low wage economy and had to do more to boost incomes. The country had repeatedly failed to encourage investment in the productive sector of the economy.

This is the issue that any tax changes to property investment is expected to address.

Deutche Bank expects the Government to move to ring fence losses made on property income from other sources of income to discourage people from investing in property solely for capital gains.

The Tax Working Group noted that $200 billion of investment in rental housing generated net rental losses of $500m and $150m in tax revenue losses in 2008. It also noted that loss attributing qualifying companies were one of the main mechanisms used by investors. The so-called LAQCs are companies with a special tax status that enable losses to be offset against shareholders' personal incomes.

The other issue raised by the Tax Working Group was that it was illogical that investors often claimed depreciation, which reduces taxable income, on buildings which were appreciating in value. The group suggested changes to depreciation rates on buildings or taxing gains on depreciable buildings.

Deutsche Bank said that depreciation loadings on property may be reduced or removed entirely.

ASB said changing depreciation rules would increase government revenue and discourage unproductive investment and debt accumulation in rental housing.

"Tax changes will aim to address the situation where highly uneven tax rates apply between taxpayers with similar incomes, due to property investors' use of property related losses to reduce tax liability," ASB said.

Deutsche Bank points out that Treasury's economic forecasts were finalised in mid-April before a surprisingly large fall in the unemployment rate was revealed and before European financial worries rattled financial markets.

Economists think the Reserve Bank of New Zealand will be looking for evidence of a removal of fiscal stimulus to the economy but that the central bank is prepared to look through the increase in inflation resulting from the GST increase and take a long term view of the economic impact of the budget.

They will also be watching closely to see how ratings agencies react to the budget.

Five Filters featured article: The Art of Looking Prime Ministerial - The 2010 UK General Election. Available tools: PDF Newspaper, Full Text RSS, Term Extraction.

Forecasting budget woes, Orange Beach council to reconsider property tax hike, refinance debt

Posted: 16 May 2010 07:17 AM PDT

By Ryan Dezember

May 16, 2010, 9:06AM

ORANGE BEACH, Ala. -- Still trying to figure out how to plug an anticipated $750,000 budget deficit that is expected to widen with the effects of the Gulf oil spill, elected officials plan to reconsider a proposal to levy an extra mill of property tax.

Joni Blalock.jpgPress-Register file photoOrange Beach City Councilwoman Joni Blalock is among the elected officials who have asked to reconsider a proposed 1-mill property tax hike to alleviate an anticipated budget shorfall.The City Council voted 1-5 against the tax hike last month but two of the members who opposed the increase -- Ed Carroll and Joni Blalock -- have asked that the measure get another vote. That vote could come as early as Tuesday and probably no later than the end of the month.

To be able to collect the tax in 2011, the city must tell county revenue officials by the end of the month what the millage rate will be, municipal officials said.

A mill amounts to $1 for every $1,000 in assessed value. In Orange Beach, owner-occupied homes are exempt from the municipal millage, so many residents would not be affected by an increase. For the owner of a $500,000 vacation condo, however, it would mean $100 of new tax.

Even after an increase, Orange Beach would continue to boast one of the lowest tax rates in coastal Alabama. Gulf Shores, Foley and Robertsdale also collect 5 mills. Property owners in Daphne and Fairhope pay 15 mills.

And because tax values are expected to fall by another 10 percent or so in this year's appraisals, most property owners will see smaller bills despite a millage hike.

"I don't know if there's enough support or not," Blalock said in an interview. "None of us want to tax but I think (5 mills) is very fair."

If passed, the tax will include a sunset provision, meaning that it would only be collected for a year, said Mayor Tony Kennon.

The mayor plans to hold a referendum this fall to ask voters if they'd approve of a permanent 2-mill increase.

"We want to give the folks an opportunity to vote on the tax," said Kennon, who has pledged not to support any new taxes.

If voters approve that measure, the money wouldn't be available until 2012 and with the BP PLC's oil spill causing unexpected expenses and likely dragging down tourism-related revenue, city officials are looking at the 1-mill increase as a quick fix.

"We may get something from BP but we may not be made whole," Blalock said. "At least that (1-mill) is something we can count on."

Tony Kennon.jpgOrange Beach Mayor Tony Kennon

Kennon is also seeking the council's support for a plan to refinance debt. Stemming from a pair of bond issues that were used to raise money in 2005 and 2007 to renourish the beach and build a disaster reserve fund, the debt is scheduled to be repaid in 2015.

The mayor's plan would free up about $2 million annually over the next five years, and entails paying interest only on a pair of bond issues until 2015 and extending the payoff date to 2020.

Doing so will ultimately cost Orange Beach about $600,000 in added costs but will provide money now to help solve the city's near-term financial woes.

Of the $2 million, Kennon said that $1 million would fund city operating expenses and the rest would be used for beach renourishment efforts.

The mayor said he will ask the council Tuesday to vote on a resolution supporting the plan. If that resolution passes, he would then engage the bankers and lawyers needed to enact the plan, he said. Once the paperwork is in order, the council will then have to vote again to make the refinancing official.

"We didn't want to waste everyone's time and spend money if we didn't have a resolution supporting (the plan)," the mayor said.

Five Filters featured article: The Art of Looking Prime Ministerial - The 2010 UK General Election. Available tools: PDF Newspaper, Full Text RSS, Term Extraction.

Property tax decisions awaited in budget

Posted: 15 May 2010 07:57 PM PDT

The focus for business in the government's budget on Thursday will be on changes to rules surrounding property investment and the detail of the well-signalled switch to lower income tax funded by a higher goods and services tax (GST), according to analysts.

Overall, a slightly improved economic outlook will deliver slightly improved deficits from the government December economic and fiscal update, but the debate in the business community will be about what Finance Minister Bill English does to reduce the size of government and prompt investment in the productive sector, rather than in property.

"The overall thrust of changes are likely to be designed to deliver a tax system which is less distortionary and more conducive to economic growth," ASB economists said in a budget preview.

Taxation of property is the mystery item ahead of the budget as a rise in GST to 15 percent from 12.5 percent has been well signalled.

And, the Weekend Herald reported that personal tax rates are likely to fall from 38c, 33c, 21c and 12.5c in the dollar to 33c, 19c and 10c from October. This is in line with what economists have been forecasting.

This would give someone on $50,000 an extra $20 a week in the hand but when the GST rise is included, it reduces to $6.

Revenue Minister Peter Dunne said on TV One's Q and A that New Zealand had a low wage economy and had to do more to boost incomes. The country had repeatedly failed to encourage investment in the productive sector of the economy.

This is the issue that any tax changes to property investment is expected to address.

Deutche Bank expects the Government to move to ring fence losses made on property income from other sources of income to discourage people from investing in property solely for capital gains.

The Tax Working Group noted that $200 billion of investment in rental housing generated net rental losses of $500m and $150m in tax revenue losses in 2008. It also noted that loss attributing qualifying companies were one of the main mechanisms used by investors. The so-called LAQCs are companies with a special tax status that enable losses to be offset against shareholders' personal incomes.

The other issue raised by the Tax Working Group was that it was illogical that investors often claimed depreciation, which reduces taxable income, on buildings which were appreciating in value. The group suggested changes to depreciation rates on buildings or taxing gains on depreciable buildings.

Deutsche Bank said that depreciation loadings on property may be reduced or removed entirely.

ASB said changing depreciation rules would increase government revenue and discourage unproductive investment and debt accumulation in rental housing.

"Tax changes will aim to address the situation where highly uneven tax rates apply between taxpayers with similar incomes, due to property investors' use of property related losses to reduce tax liability," ASB said.

Deutsche Bank points out that Treasury's economic forecasts were finalised in mid-April before a surprisingly large fall in the unemployment rate was revealed and before European financial worries rattled financial markets.

Economists think the Reserve Bank of New Zealand will be looking for evidence of a removal of fiscal stimulus to the economy but that the central bank is prepared to look through the increase in inflation resulting from the GST increase and take a long term view of the economic impact of the budget.

They will also be watching closely to see how ratings agencies react to the budget.

Five Filters featured article: The Art of Looking Prime Ministerial - The 2010 UK General Election. Available tools: PDF Newspaper, Full Text RSS, Term Extraction.

Planet Election Guide: Property tax hike

Posted: 16 May 2010 06:44 AM PDT

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Five Filters featured article: The Art of Looking Prime Ministerial - The 2010 UK General Election. Available tools: PDF Newspaper, Full Text RSS, Term Extraction.
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