Paradise Papers Reveal Absurdity of GST

As if the Panama Papers weren’t enough, we have had more information about the barely legal and unethical dealings of the super-wealthy following the release of the Paradise Papers. Much of the focus has been about how individuals and corporations with the help of tax havens are able to structure their affairs to minimise their tax bills. In effect, they are stealing from taxpayers who bear an undue brunt of the cost for keeping their respective governments functioning.

This scandal has largely gone unnoticed in New Zealand because the corporate media is too busy recapping events in reality TV shows such as Couples Spend More Money Than Anticipated on Ego Projects, and  Ignorant White People Discover That Arranged Marriages Aren’t That Great After All. So I’ll need to turn to international media again. The Guardian is the most prominent Anglophone newspaper that has covered the Paradise Papers and has put out too many articles to cover in any great detail, but I would like to discuss one that particularly caught my attention:

2017 Formula One World Champion Lewis Hamilton avoided paying up to £3.3 million of VAT (value added tax, known as GST in New Zealand) when importing a Bombardier private jet. The jet was made to look like it was available for charter, by doing so VAT can be claimed against the purchase and running costs associated with business operations. VAT can not be reclaimed when jet was used for leisure purposes. Depending on the breakdown of business and leisure travel, Hamilton may have been required to pay a proportion of the £3.3 million in VAT.

My disdain for the wealthy avoiding taxes is not limited just to Hamilton, but to everyone who has been caught out in the Paradise Papers. If you want to live in a civilised society, someone has to pay for it. It is only logical that those with the most wealth are liable for most of the taxation levied by governments. The quality of life of the majority of the population suffers when governments are not able to provide high quality services such as education, healthcare, and security.

Furthermore, the wealthy are only wealthy because of public infrastructure, an educated and healthy workforce, state-funded research and enforced intellectual property laws. Were it not for strong and effective government, they could not have achieved what they have been able to do. It is in their best interest to support government, and that means paying taxes. Weak arguments such as “the government would just waste money anyway” are just shallow excuses made by sad individuals trying to allay their guilt.

Of course it one thing to insist that the rich should pay their full amount of taxes voluntarily, but no one listens to me. Instead it is up to governments to close down the loopholes in the law that have been exploited. What I find interesting about Lewis Hamilton’s case is that he was able to avoid VAT, a consumption tax like GST.

GST has been defended by neoliberals because it was seen as “simple”, “efficient” and “hard to avoid”. The Paradise Papers have shown that all of these arguments are a complete sham. GST is nothing more than a regressive ideological act of faith that puts more pressure on ordinary people while allowing for the rich to become richer. Even worse, there are mechanisms which allow wealthy people to actively avoid GST on big-ticket purchases!

Governments are largely paying lip-service to the idea that something must be done, but don’t expect the oligarch-funded centre-right to do anything about it. Meaningful change starts by electing solid left/centre-left candidates to national office. It’s encouraging to see Bernie Sanders and Jeremy Corbyn come out against the practices highlighted in the Paradise Papers. The British government should also intervene in their overseas territories to harmonise the tax structure within the UK. That action alone would close so many loopholes featured in the Paradise Papers.

It’s vital to the long-term welfare of our society that it is properly funded by those who have the ability to fund it, who also happen to be those who have benefited the most from it.

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Dirty Tricks From Aged Care Provider to Cheat Workers out of Pay Rise

A while back, rest home care providers achieved a superb legal victory against the New Zealand government to increase their pay rates. The argument was that workers were denied equal pay on the basis that the industry, which consisted mostly of women had lower wages than equivalent male-dominated industries. The wage increase was supported with a $2 billion cash injection to the aged care sector from the government.

Despite government funding of the pay increase and the lobby group representing companies providing aged care services endorsing the settlement, there are reports of costs being passed on to residents and their families. Today, there is a report that Aberleigh Rest Home in Blenheim will be restructuring their workforce, where care workers are replaced with lower paid “home assistants” who would not be covered by the equal pay ruling.

Such a development is usually met with the usual boilerplate rhetoric from the political right who claim that wage rises will hinder businesses and increase costs. But before we shed a tear for the poor, embattled rest home owners, let’s consider some of the backround behind Aberleigh Rest Home:

Aberleigh is operated by Dementia Care NZ and its co-owners have been in the sector since 1999. Dementia Care NZ owns 9 rest homes across New Zealand and are not publicly listed on the sharemarket, so information about their earnings isn’t accessible to the public.

It is worthwhile to consider the financial situations of some publicly traded aged care providers:

Ryman Healthcare: One of the largest aged care providers in the country. A cursory glance of their press releases illustrates that they have made record profits for the last two years. Indeed. many New Zealanders would have first heard about Ryman in the investment section of the newspaper. And with good reason, shares in Ryman have an excellent return on investment.

Oceania Healthcare: A more recent listing on the NZ Stock Exchange, Oceania reported a net profit in the year to May 31st of ~$45 million. Currently shares have gained 20% since the company was listed on the NZX.

Bupa: An international aged care company which operates rest homes in NZ. In the Australia/New Zealand market unit, their underlying profit for 2016 was $344 million. Their share price on the LSE has increased by ~25% over the past 5 years.

Judging from these market performances, it is clear that the aged care is a highly profitable sector and a great investment for bitter millennials! It’s also clear that these enterprises are not in a desperate financial situation where a wage rise would cripple them, especially when the NZ government claims that it has fully funded the cost of the pay rise.

Without seeing the specifics of Dementia Care NZ financial details, it’s hard to tell if their decision to circumvent the equal pay ruling was done to keep the business afloat or to preserve profitability. However, we may infer that Dementia Care NZ has less than $20 million in assets and has revenue is below $10 million since they are not filing financial statements with the Companies Office.

Given that approved aged care providers receive funding from the Ministry of Health, I believe that the public should have access to the financial details of all these providers. Regardless of the financial situation of Dementia Care NZ, the simple fact of the matter is that their employees should be given this pay rise since it is mandated by law. That the company is trying to avoid paying workers their due serves to reinforce the negative perception of an aged care sector that milks the elderly and their families for the enrichment of shareholders.

The nature of the aged care sector shows how far our society has degraded over the past three decades. Our elders are no longer valued for who they are, but valued for the money that the wealthy and powerful can extract from them. I can only hope that the media spotlight and public pressure will force Dementia Care NZ to do right by their employees and give them the pay rise that is their entitlement.

Let’s Make Magic Water Again!

Previously, I wrote about Te Kiri Gold, an extortionately priced product whose desperate users were told could cure cancer and suchlike. The product in question is no more than electrolysed salt water. I sardonically mused that such a product could be made from the reject stream of the reverse osmosis brine electrodialysis process, such as the one used in a chlor-alkali process designed by a team that I was involved with for an undergraduate project. Because of the low production cost and the attractive pricing, our generic Te Kiri Gold would generate a tremendous amount of revenue!

Recently Stuff.co.nz shared an article about another type of magic water, sold here in good ol’ New Zealand under the label of NZ Water Purifier Ltd. This magic water is different; while TKG was a solution of sodium hypochorite, NZ Water Purifier Ltd is a solution of dissolved chlorine dioxide. Chlorine dioxide should not be consumed by humans, let alone anything living. Funnily enough, it can also be produced by the chlor-alkali process!

During my undergrad project, another team also designed a chlor-alkali plant. They targeted it for use in the pulp and paper industry. A Kraft pulping plant is the perfect companion for a chlor-alkali plant since both the chlorine and NaOH are consumed on-site. Sodium hydroxide is used during the cooking and bleaching operations, while the chlorine is reacted with NaOH to produce sodium chlorate (famous for causing trousers to explode), which is reacted with hydrochloric acid to produce chlorine dioxide, which is the bleaching agent used.  Judging from the leading photo in the article (higher res at the original article at Newsroom.co.nz), sodium chlorite and HCl are sold in separate bottles* to mix together at home, or you can buy it pre-mixed for convenience.

Economically, how does this compare to TKG? We can’t use electrodialysis dilutate to produce NZ Water Purifier Ltd because the membrane cell requires highly concentrated brine (250 g/L as opposed to 32 g/L). So instead, lets just dump it back into the ocean and re-purpose the plant to make chlorine dioxide.

I’m not exactly sure about the amount of chlorine dixoide that can be produced, but from a crude analysis of the molar ratios in the chemical reaction equations I think there is a 2:1 ratio of sodium chlorate:chlorine. Thus we are limited by the amount of NaOH produced. There is then a 1:1 ratio of Chlorate:chlorine dioxide. Let’s say that from 90,000 t/y of NaOH, we can make 152,000 t/y of chlorine dioxide. (Note that I’ve ignored the production of HCl, which could be achieved from the remaining chlorine that isn’t used to make sodium chlorate. It becomes chlorine again during the reaction to produce chlorine dioxide anyway). Let’s assume we sell the solution at 25 wt%, then we are making 608,000 t/y of solution. Assuming a density of 1 kg/m³, and $190/L, we have a revenue of $116 million/y. Thus, we can conclude that a plant making Te Kiri Gold was a much better investment at $260 million/y in revenue.

Unlike TKG, this is not a kiwi product. In fact, NZ Water Purifier Ltd is already so infamous, that it has it’s own RationalWiki page (under the name, MMS). Consuming chlorine dioxide is a terrible idea, with some very unpleasant health effects. Beyond the usual aspirations of curing cancer, MMS has lately been marketed to parents of autistic children as a way to “detoxify” them. This is no doubt connected to the anti-vaccination movement, which has demonised autistic people as being “damaged” by vaccines. The level of ableist prejudice among the anti-vaccination and alternative medicine communities is outrageous. It only serves to increase the contempt that I have for them.

Fortunately, Medsafe has issued a warning over the product. Even better, the government has introduced the Natural Health and Supplementary Products Bill, which regulates the manufacture, sale, and export of “natural” health products and creates new offences for deceptive behaviour and harming human health. It’s currently at the committee stage prior to the third reading. Let’s get the bill passed and close NZ Water Purifier Ltd down.

*The concentrations of sodium chlorite and HCl are unclear. Are they weight percent, or per weight of water? Either way, it looks like sodium chlorite is in excess when the solutions are mixed. The pre-mix is given as 3000 ppm, is this weight, volume or molar? What  a bunch of scientifically illiterate bastards.

My Opinion on the Andrew Little Defamation Trial

On Monday, news broke that the Leader of the Opposition, Andrew Little has been partially cleared of defaming the owners of a hotel chain. This verdict makes writing the post easier as I know that some of Little’s statements were not defamatory and can report on them with less fear of negative consequences. Having read up on online defamation, I should be OK if I stick to verifiable facts and genuine statements of opinion. Of course that’s no guarantee. As Little has found out, you can be sued for defamation even when what you said wasn’t defamatory. The comments about the case on social media and other blogs were probably more defamatory than anything Little ever said. But I guess suing an internet random doesn’t have the same gravitas does it?

How did this all begin? The founder of the Scenic Hotel Group hotel chain donated $101,000 to the governing National Party prior to the last election. One month later, Scenic Hotel Group was awarded a government contract to run the Matavai Resort in Niue. That these two events occurred is beyond doubt, the issue is a matter of optics as to whether there is any connection between the events.

I think the timing could be described as “interesting”, or “unfortunate” as a cynical mind can’t help but wander, especially since there is history with National Party donors and unfortunately timed government contracts such as Beemer-gate. In that case, the dealer saw sense and didn’t sue anyone. With the hotel incident, Little made some comments where he alleged corruption. The Hagamans sued him for defamation prior to an investigation by the Auditor-General. Once the Auditor-General got involved and gave the process the all-clear,  Little apologised to the Hagamans.

From the reports of proceedings in the trial, Lani Hagaman said that she wanted a suitable public apology. I think that the statement on the Labour Party website was sufficient. They should not have expected an apology before the AG investigation when they sued him, why should Little apologise when the facts are yet to be determined? I found that Little was being sued for $2.3 million inconsistent with the claim that Hagaman just wanted an apology. I am unconvinced by the excuse that it is to restore Earl Hagaman’s reputation. Ironically, my opinion of Hagaman is diminished by the fact that Lani Hagaman thinks that his reputation can be restored by an amount of money that would bankrupt Little. If they didn’t want me to think poorly of them, then they shouldn’t have donated money to the National Party in the first place.

I am also concerned about the political motivations that could have been involved. National Party donors and presumably supporters suing a Labour Party politician unsettles me. Will suing for defamation under unconvincing circumstances become a tactic for the wealthy and powerful to censor dissenting voices? The integrity of our democracy is more important than the feelings of greedy multi-millionaires whose own actions do more to harm their reputation than anything Andrew Little could say. Fortunately, one of the findings of this case was that Little has qualified privilege as Leader of the Opposition to draw attention to potentially murky dealings. As noted by Antony Robins, this is good for democracy.

Unfortunately, it may not be over yet. Lani Hagaman looks to be seeking a retrial over the inability of the jury to decide whether Little had defamed Earl Hagaman. She also does not believe that Little is not protected by qualified privilege. Little has washed his hands of the issue as has the corporate media, who have moved on to other things.  By donating to the National party, companies are making a statement that they view their customers and New Zealand with contempt. However, contempt goes both ways so I will not be purchasing goods and services from Scenic Hotel Group in the forseeable future.

My Concerns About Toastmasters International

I’ve been a member of a Toastmasters club for the past 3 years. While I am by no means a terrible speaker, I appreciate being able to keep my speaking skills up to date and network with a group of like-minded people. Lately, I’ve become increasingly concerned about the path Toastmasters International has been taking. Where I take issue may be divided into two main categories: finances and democracy.

Let’s start with the finances: Each member of a Toastmasters club pays membership fees in order to access the educational program resources. The club then pays this money to Toastmasters International (TMI). Clubs may also charge extra to cover essentials such as room hire and non-essential items such as snacks and (in the case of NZ clubs) the District Service Charge.

This year, it was announced that the membership fees that clubs would have to pay to TMI will increase by 25%. TMI published a vague and verbose FAQ to allay concerns. All good right? Sure, if you’re sycophantic with cult-like tendencies then everything’s great. Even with the fees increase, “Toastmasters is still great value!”.

However if you are capable of empathy or if you have experience with university club sign-up days (I have both!), then you will know that telling someone that joining a Toastmasters club will cost you about 120 NZD/year* is an effective way to scare off new members. Increasing this number by 25% will only serve to make Toastmasters more unattractive to university students.

And it’s not just us ivory-tower academic elitists that are affected. What about the unemployed, or those on low incomes who have the will-power to improve their skills in order to ascend the career ladder? A fees rise further shuts them out, which is perversely ironic as Toastmasters should be an instrument of social mobility!

It gets even worse. In NZ, $120 /year isn’t much for many people (about 30 cups of coffee from your local café). For other countries however, 120 NZD would be regarded as a lot of money. Are regional disparities considered when TMI calculates fees? Of course not, it’s 6 USD/per month for everyone! Undoubtedly, this inhibits the growth of the organisation in many parts of the world.

And yet, who adds the value that members experience when they attend club meetings? Why, it’s their peers and the club executive, none of whom are paid to reflect the value they add. In fact, they’re all contributing to the Amazonian revenue stream that flows towards TMI! In fact, there are executives (which most Toastmasters members probably have never heard of) who receive exorbitant salaries for doing what appears to be not much.

To summarise so far: Toastmasters members already pay fees which are prohibitive for those of limited means and those who work to ensure their clubs are of high quality do not get remunerated for their efforts. And now the fees are going to increase?!

Well, let’s look at what happened the last time that fees were raised in 2011. There was no increase in spending on membership services in the following two years, instead funds were used to play the stock market and building an unnecessary amount of reserves! How can we trust that TMI will spend the proceeds on membership services this time around?

As far as I’m concerned, we can’t. The fees rise should be vigourously opposed by everybody since it is unnecessary and has been inadequately justified**. But I’m just some guy ranting on the internet. What do other Toastmasters think?

Apparently not much. I was made aware of these issues by a mass email sent out by  a Toastmaster from District 59 (Southern and Western Europe). What did the District 72 (Toastmasters NZ) leadership have to say about this?

It has come to my attention that District 59 (European District) is sending unsolicited emails out to various clubs/people around the world regarding the upcoming fees increase.

Please be advised that the District Trio and World Headquarters are aware of this and there is no need to (sic) Clubs to respond to this email.

Well, that puts my mind at ease! \sarc. It also highlights the rather dictatorial, top-down approach that is persistent in Toastmasters where those in leadership roles generally stick to the establishment view. I see it as a classic example of groupthink. Those in leadership positions become immersed in their new-found importance (i.e. the organisation has done good things for them, therefore the organisation must be good) and become strident defenders of whatever TMI World Headquarters (WHQ) advocates.

That brings us along to the lack of democracy in Toastmasters: The upper echelons of TMI were not happy about this information being revealed. Of course, the logical course of action to take was to prohibit criticism of the organisation (see here for more details). It’s also become very apparent that the current system disenfranchises clubs from being able to get in the way of TMI WHQ’s aspirations.

For example, consider Proposal A from the 2016 International Convention in Washington DC. Passing this proposal would mean that TMI was no longer required to locate the WHQ in California. TMI argues that California is too expensive*** and that having the option to re-locate would be financially advantageous to all new members. On the web page which explains Proposal A, there’s a big information box advising clubs to vote “for” this proposal. Similarly, the District Director parroted the same endorsement in an email sent out to all NZ clubs.

Surely those who had reservations about this proposal would be given an equal platform to argue their case, right? No. For example, one California-based toastmaster was denied the opportunity to provide an alternative viewpoint on the TMI website.

Having decided that I opposed Proposal A (along with the rest of the club executive team), I then had to navigate the confusing world of proxy-voting. Since nobody from a university club in New Zealand is going to travel to the International Convention, we would need to allocate our votes to someone who is attending in person. We had two options: designate (1) the District Director as our proxyholder, or (2) any Toastmaster in attendance. Given our District Director’s enthusiasm for Proposal A, could we trust them to follow our instructions? After a bit of wrangling via email and Facebook, I was able to find a like-minded Toastmaster who was happy to be our proxyholder. Electronic voting would be much easier, allowing all clubs the opportunity to make their voices heard. We are able to elect student union representatives via electronic voting, why not make it more widespread? I don’t think it’s a good idea for parliamentary elections where integrity is paramount, but Toastmasters elections aren’t as important so the risks are not as serious.

So, how did the vote go? Badly. There doesn’t seem to be an official breakdown of the vote available online, but Facebook comments indicate that Proposal A passed with 98% of the vote. Now we find out that TMI is going to relocate its WHQ. TMI deny that the 2016 dues rise will fund the massive capital expenditure required for such a move, instead:

The potential relocation will be funded by Toastmasters International’s investment funds, which have been set aside for such a purpose.

i.e. the thing that the 2011 dues rise was spent on! TMI doesn’t list this as one of the things that the last dues increase was used for in the 2016 FAQ. Why weren’t more members outraged by this?

In some ways, such a one-sided result wasn’t too surprising. The members who are vocally opposed to this had spare time, experience with Toastmasters and a strong sense of justice. Not all club executives have all of these traits. They are well-meaning people who follow the advice of TMI and their District Director and vote for Proposal A and don’t think about it again. Other executives might not even know there were proposals to vote on. Executives may have wanted to vote “Against”, but didn’t know anyone who shared their view who was going to the International Convention. And, there’s no way of knowing whether District Directors followed the instructions of “Against” voters who gave them proxies. While the result is legitimate, that doesn’t mean that it is representative of club opinion.

What can I do about this? Not much. The bureaucracy involved with TMI is too difficult for members to propose and effect changes. As a club president, I owe it to my fellow members to not lead them head-first into a worse situation. For the club I belong to, I see three options:

  1. Accept it. Raise the fees and ignore the bad issues. If I’m going to be part of a cult, I may as well enjoy it! Drive away potential members because the price is too high.
  2. Arrange funding from the student union to pay for the fees rise. This would only apply to our student members, but would avoid potential chaos associated with leaving TMI.
  3. Leave. The club would then be free to manage things as it sees fit, but we lose the education programme, leadership training and contests. To replace the education programme with something in-house would be more effort than we would be prepared to make.

As things stand, the plan is to go with Option 2, a luxury many TM clubs won’t have. For those who want to leave, I would encourage you to check out Agora Speakers, an initiative that arose from the concerns of some of the members of District 59. They have some very good ideas which I look forward to seeing develop in the coming months and years.

To conclude, Toastmasters International is more corporatised than we would have imagined when we went along to our very first club meeting. It is my opinion that the top-level leadership have made a poor decision in choosing to relocate WHQ, leading to poorly justified fees increases. That the International Executives are highly paid, while those who actually add value to the organisation do so for free is completely unfair. To claim that TMI is democratic is fanciful, given the convoluted process that clubs need to go through in order to make their votes count.

We must all ask ourselves: Is this something that we want to be part of?

*This is the best-case scenario where a club charges the bare minimum to cover the charges that TMI imposes upon clubs. The fact that it has to be paid in 6-monthly blocks is also ridiculous and is a nightmare for any VP Membership who is sufficiently competent to notice.

**I also think the 2011 fees rise should be reversed given that the proceeds have been used inappropriately, that would make a massive difference in terms of making TM more attractive to potential members.

***This comes across as standard right-wing non-logic. A non-profit organisation shouldn’t concern itself with tax rates. Plus, it seems that the heritage of TMI being founded in California isn’t worth much.

Insurance Companies – Discrimination for Profit

Having recently found myself purchasing a car, the need to insure it is highly apparent. Since we can’t predict the future, insurance seems to be a very useful service. One may find themselves financially ruined should they become liable for costly repair bills.

However, I take issue with how the insurers calculate the premiums that they charge. For example, let’s look at the online calculator from Trade Me Insurance*: If I put in my details (23 year old male), it would cost me $532.77 per year to insure my car under full cover. By specifying that the main driver is female, the premium would reduce to $473.49. By changing my age to 25 years old, the premium reduces to $495.73.

Unlike NZ, The EU has sensibly forbidden such disparities (by gender at least). However as, the Telegraph reported **, insurance companies have dodged this regulation by using one’s occupation to set premiums. And occupations in which males are over-represented attracted higher premiums.

Now, an insurance company might say that they have “statistics” indicating that young drivers and male drivers are more likely to make claims. But I reject this. I’ve currently got insurance with another company (for more than Trade Me Insurance has quoted) who have known that I’ve existed for about 8 years. And in those 8 years, I’ve never made a claim on my insurance, or that of my parents. Despite my immaculate record, I’m still treated as an irresponsible young man who is a danger to society and should therefore pay through the nose to be insured. Yet, I’ve had my previous car damaged by people twice my age who would get to pay lower premiums by virtue of who they are.

This is unfair. There is no other way of putting it. Drivers should be either be treated as individuals or as homogeneous entities, not as demographics using lazy stereotypes. Yet, there is nothing I can do about it. The fear of things going wrong without insurance means that I still buy into this crooked system that I’ve railed against for the past ~350 words. I deserve better than this. And you probably do too.

*I should point out that I would expect this behaviour from all companies, not just Trade Me Insurance. Since it has the best online calculator, I have used it as an example for this piece.

**An article by the Eurosceptic Torygraph that portrays the EU as a voice of reason. Now that’s a pleasant surprise!