The 2019 budget is coming out this Thursday, and with it a whole bunch of impenetrable jargon. We’ve picked out some of the key words to keep in mind as it is being read.

A

Ambitious

The last budget was typically described as ambitious. Now the word gets thrown around a lot to describe the policy plans Labour used to have, which haven’t survived direct contact with government intact.

B

Budget Responsibility Rules

The self-imposed spending controls, through which the government intends to pay down debt. They’ve just been loosened slightly, but that won’t take effect for a few more years.

C

Capital Gains Tax

That thing that we spent most of the last 12 months talking about, which now most certainly won’t be bolstering the government’s revenue.

D

Deficit and debt

These two concepts are different in a crucial way. A deficit is how much more money is going out across a particular budget year; the debt is the total cumulative amount owed.

E

Expenditure

Budget-speak for ‘spending.’

F

Fiscal headroom

How much money you have access to if you need to start borrowing. “Fiscal” is a catch-all term for government tax and spending; compare “monetary policy”.

G

GDP

Gross domestic product. In effect, the total economic output of the country.

H

Hack

Is this how details of the budget got out early? We’re still not quite sure, to be honest.

I

Interest payments

If government debt gets too high, then the interest payments can be financially damaging.

J

Joint bids

No, that’s not about asking your mate to hand over the illegal herbs. Ministers will now be making joint bids for priority areas of spending, so that if a wellbeing outcome is prioritised, multiple different government departments will end up pulling together to make it happen.

K

Keynesian economics

Named after John Milton Keynes, an economist who theorised that governments can and should spend to stimulate the economy, particularly in times of recession.

L

Living Standards Framework Dashboard (LSF)

How Treasury will actually go about doing the measuring and tracking of wellbeing outcomes – and then put it all together in a handy/often confusing graph for people to have a look at.

M

Mental health

Certain to be a strong area of focus for this budget – in fact it was among the first points about what was actually meant by ‘wellbeing’ that Grant Robertson confirmed, back at the end of last year.

N

‘Neffs’

Formerly known as ‘NEETs’ (people who are not in education, employment or training) they’re now largely being called ‘Neffs’ instead. It’s short for nephews, and plenty of spending announcements are aimed at “getting them off the couch” according to associate finance minister Shane Jones.  

O

OBEGAL

Budget nerd heaven, this is operating balance, excluding gains and losses.

P

Pre-budget announcements

In the weeks leading up to Budget Day, governments these days always make various portfolio-specific announcements, which means greater attention for those decisions, and fewer surprises on the day itself. Sometimes, if you’re lucky, budget commitments get announced lots of times.

Q

Quantitative easing

A method by which (in simplified terms) the government increases the monetary supply in the economy through a central bank, often described as “printing money”. Widely used overseas, but tends not to be in New Zealand.

R

Robertson, Grant. The finance minister who last year impressed onlookers last year with a stonking and triumphalist speech about what the government was going to do. A lot less of it has actually come to fruition as he approaches his second budget.

S

Substance

What National’s finance spokesperson Amy Adams is warning the upcoming budget will lack.  

T

Ties

No, really. The colour of a tie the finance minister wears while presenting a budget supposedly sends a signal about how they want it to be interpreted. A bright colour means it’s a bold, big spending budget, a muted colour means the budget will be austere and dignified. Last year Grant Robertson’s tie was as red as the rose in his lapel.

U

Under-delivering

Last year our U was underfunding – what Grant Robertson accused the previous National government of doing to public services. This year it’s under-delivering – what the current opposition are accusing the government of doing relative to their promises.

V

Visualisations

These are generally the key ways that budget spending is communicated on the day, given the complexity of the figures being thrown around.

W

Wellbeing

The one we’re all here to see this year. Basically a wellbeing budget will track how the country is performing socially, culturally and environmentally, rather than just economically.

X

Xat

We couldn’t think of a new one for this year, so once again, it’s tax, but backwards. Next!

Y

Yes

The word the finance minister never says straight away when another minister asks them for some more money in the budget

Z

Zero budget

A budget in which there is no increase in spending. Typically used when governments are desperate to pay down debt.

This post is an updated version of a story originally published in May 2018.

All of The Spinoff’s coverage of Budget 2019 is made possible thanks to the support of Grant Thornton. Learn more about our partnerships here.

Budget 2019: Should the collection of taxes be the point at which we talk about fairness, or should fairness be part of a completely different conversation, asks Grant Thornton tax partner Oksana Simonoff.

It’s counter-intuitive, but when we talk about tax fairness we aren’t really talking about tax. We’re really talking about politics, economics and how we view the world. Tax is just the mechanism to deliver a predetermined outcome.

But is fairness an appropriate way of thinking about how the tax system should be designed? Can tax even be fair at all? The idea of who should pay what share is so heavily contested, that the question must always be – fair for whom? And there’s a corollary to all of this, in that often targets of fairness campaigns get picked based on how easily they can be scapegoated as behaving in a way that people see as unfair.  

Tax is based on fundamental principles that are thousands of years old. Historically we have always taxed things that can be seized, like bricks and mortar, for obvious reasons. Some, like anthropologist James C Scott from Yale University, have even theorised that we came to eat a lot of grain because, during the earliest development of agriculture a few thousand years ago, it was an easy type of produce for state makers to collect, as it stays above the ground, can be easily counted and matures all at the same time.  

As a result, we came to organise our affairs around how the tax system works, in accordance with the letter of the law. No more, no less. But things like the evolution of digital value creation will completely upend all of that. Digitised businesses don’t necessarily have to have a presence in a country to operate there. While multinationals with huge resources have dominated the conversation around this, digitisation of the economy isn’t just for the big players –digital business models underpin multitudes of emerging businesses as well, and fragile lower margin startups.

When it comes to a new idea like the digital services tax, we are all playing catch up. These ways of creating value and wealth have existed for a long time, untaxed. That’s a major reason why such a tax is now pitched more as a question of fairness than of revenue raising. After all, the revenue that actually gets raised will be negligible, at least in New Zealand. In a best-case scenario, it is expected to deliver about $80 million a year. But it hits targets like Google, Facebook, Amazon – companies who have built a reputation of being evil empires exploiting the ordinary consumer.

But can reforms like this actually be driven by fairness? Countries in Europe have come up with very blunt instruments for their digital services taxes; for example, France is pushing for 3% tax on turnover. But simply taxing 3% of turnover isn’t a particularly good tax solution, because it doesn’t take into account how value is created, and what you’re actually hoping to tax. It’s widely seen as a bad tax, and it will take years to come up with a better solution. We should also be deeply wary of taking aim at big players of overseas origin for more tax, because we’ll probably find tit for tat responses against our home-grown exporters.

As a tax advisor, I constantly hear an extraordinary amount of cynicism from my clients around digital services taxes, especially when they’re pushed under the pretext of fairness. There’s a huge uproar in corporate circles about such an approach, with claims they’ve been cast as characters in some great moral drama of tax. But everyone’s perception of fairness in the tax system will always directly relate to their own interests.

Fundamentally, the agenda of tax fairness is misguided, and we should be deeply sceptical of the principles underpinning it. No one, since the dawn of civilization, ever wanted their grain taken away from them, and presenting the issue in the moral light of fairness is not going to change that.

The recent Tax Working Group (TWG) report was a classic example of the fairness play. It was fundamentally aimed at fairness as a concept, and how the system should be reformed to become ‘more fair’ – that was even part of the title of the report. But in looking at the treatment of Goods and Services Tax, the TWG had an opportunity to consider fairness of outcome as something that can be achieved through the tax system.

It’s a widely acknowledged view that GST has unfair, regressive outcomes for those on lower incomes. If the TWG wanted to change outcomes on the basis of tax fairness, it was clear that something would have to be done about GST. We have the broadest GST system in the world at the moment, with 15% of absolutely everything consumed getting taxed. You may think it’s a fair tax because it taxes everyone the same. But in terms of fairness of outcomes, it fails, because lower income earners see a much greater share of their income disappear into government coffers than those who can afford to save and invest.

Put simply, there is no such thing as a fair tax. So if we want to accomplish anything in building a better society, we should focus our efforts on delivering fairer outcomes and leave the tax collector to their duties, benevolent or not.  

All of The Spinoff’s coverage of Budget 2019 is made possible thanks to the support of Grant Thornton. Learn more about our partnerships here.