Richard Prebble's Letter from Wellington
Monday, 25 March 2002

Death of NZ Film Industry

As Ministers hail Lord of the Rings as the start of a new era for NZ films, the IRD has killed the Kiwi film industry. The Commissioner of Inland Revenue has ruled that Alan Duff's film, What Becomes of the Broken Hearted, was not a legitimate business venture. His landmark ruling says those who invest in films are not engaged in an activity likely to produce taxable income, so they can't claim loses against tax.

If Alan Duff's movies are not commercial, no NZ film is. Hollywood may occasionally make films here using our scenery but the IRD's ruling is the death knell for locally-financed films. The Kiwi investors in Alan Duff's film have not only had their tax claims disallowed but have also been hit with penalty tax.

Where Is the Film Commission?

The government-sponsored Film Commission, an investor in What Becomes of the Broken Hearted, is strangely silent. The Letter believes the Film Commission, after persuading investors to back the NZ film industry, has an obligation to speak out. Given the IRD's ruling, it would be fraud for the Film Commission to seek investors for any NZ film in future. Indeed, the Serious Fraud Office and the Commerce Commission should warn Ministers that their statements about the rosy prospects for the NZ film industry might be illegal.

Lord of the Rings is not affected because the government put through a special tax law for that foreign-backed film. For foreign investors, they offer the world. For NZ investors, the IRD.

Commissioner After the Rich

The IRD Commissioner has taken his cue from Ms Clark's stated aim of transferring wealth from the rich to the poor. The IRD is now targeting "high net worth" individuals and has aggressively disallowed tax claims that in the past have been accepted. This is an abuse of state power.

No wonder the McLeod Tax Review noted that New Zealand's tax regime is driving from the country our most successful businessmen - those who are creating jobs.

Next time the Film Commission approaches a businessman to invest in a Kiwi film, the answer will be: "Ask Helen Clark for the money. I don't want the IRD auditing me".

Jim's Challenge

Jim Anderton originally thought he could resolve the Alliance Party's problems simply by replacing Matt McCarten and the party council. But he now knows that under the constitution, he can't. So he wants to break away from the Alliance and take most members with him. It's not going to be easy.

Challenge One

Anderton has written to 5000 Alliance members and needs an overwhelming vote - at least 3000 - to justify a break-up. Will the media, or someone neutral, be allowed to check the vote count? Otherwise, Jim will have no moral mandate. (We have a copy of Jim's letter. See http://www.act.org.nz/jimsletter.)

Challenge Two

A new party needs a constitution and a founding conference. Forty-five percent of the Alliance membership is now from the Democrats (formerly Social Credit). Presumably Laila Harre and Matt McCarten will have at least 1000 loyalists, which means Anderton will really be heading a Social Credit party.

Will the Democrats let themselves be Anderton's party, or will they want a say in policy and list selection? If so, places two and three on the list will go to John Wright and Grant Gillon. Given current polling, the other places are academic. Anderton is going from the loony Left to the Funny Money party.

Challenge Three

Under the Alliance rules, the leader is elected at the party conference. When Anderton leaves, no doubt the Alliance loyalists will hold a conference and elect Laila Harre as leader. How can the Speaker not accept her election? Then, under the Electoral Integrity Act, she can write to the Speaker and insist that Anderton and his MPs be expelled from Parliament. Laila could write to Helen Clark and say the next people on the Alliance list, who are not Anderton loyalists, will honour the coalition agreement.

It is a mess. The Letter predicts Anderton will, after breaking up the party, announce his retirement in October.

Spending Drives Up Interest Rates

The real reason interest rates are on the way up is increasing government expenditure. Government spending is more than $1 billion higher than Treasury's forecast at the last election. Dr Cullen has been foreshadowing an election-year spend-up since the announcement of the extra health spending in December. Extra government spending is inflationary.

A combination of high interest rates and a rising Kiwi dollar could spell trouble for the rural sector.

Cooking the Books

Police Minister George Hawkins proudly announced that burglaries are down, although violent crime is up another 5 percent. George claimed credit for this drop in burglaries. How is it done? In each police district, a clerk has gone through the burglary files and reclassified many as thefts. No evidence of a break-in? Call it theft. Don't know how the property was stolen? It's theft. The number of thefts increased by almost 3500 last year but the media haven't noticed this cooking of the books.

Violent crime is harder to re-classify - the most difficult of all is murder. NZ is on track for the worst-ever year for murders. Labour's soft approach to crime is not working.

Where Petrol Tax Is Going

Transit NZ presented its new spending priorities last week. Number one is a proposal to build a $600m tunnel to take the motorway beneath the Mount Albert electorate! Transit also wants to build the four-lane Eastern Arterial across scenic Hobson Bay. Guess which electorate Helen Clark represents.

See the ACT Conference

Videoed key speeches from the recent ACT Party conference are now on the ACT website - http://www.act.org.nz/livestream. This is a first for a NZ political party.

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