NZ’s LTC Regime – National Has Legislated Orwell’s Slogan of the Police State Into Tax Law.

LTC’s, the penultimate revisit. The initial rant on this new tax regime was here, although you’re probably well advised to begin with the second LTC post here, to learn how, and why, I believe this regime has been drafted so ‘unfairly'. The only piece left to write is to tie this and the previous post together into a submission suitable to send to IRD’s Policy Advice Division.

In the nightmare police state of Oceania that George Orwell created in his novel 1984, when protagonist Winston Smith is being tortured into submission to the Big Brother state, in order to take away his sense of reality, of self, the torturer holds his fingers up and asks Winston how many there are. Whenever he gives the correct answer - the answer of a free, blameless man - he has pain inflicted on him, until, a crying wreck by the end, he states he’ll say any number of fingers Big Brother wants him to see, yet he is still never able to get the answer right by his antagonist, which gave the ultimate chilling reality of that society: 'If you want a picture of the future, imagine a boot stamping on a human face — forever.’

Thinking on this image by Orwell I'm wondering if the stunning sentence from IRD legal and Technical Services in my previous LTC post has really sunk in. Interest in that piece outside of the blogosphere seems to be nil. But read it again.

I note your comments that the rules are not truly ‘loss limitation’ because in certain circumstances they can lead to taxable income for a shareholder even if the company overall … has made a tax loss … This is the intended outcome of the loss limitation rule.

Playing on that opening fingers motif in 1984, Big Brother uses the following slogan which comes to represent the null, defeated mind of a populace a police state needs in order to strip men of their liberty:

2 + 2 = 5

Returning to the LTC example given in IRD's own guide, IR 7G, the calculations for which are the result of policy makers over-analysing the notion of economic loss to a cruel absurdity, (as explained on my second post), prior to New Zealand’s LTC taxing legislation, the following equation was true, as it always will be under the mathematics of an objective reality that free men need to live:

6,000 - 10,000 = - 4,000 loss

However, after that legislation, inception date 1 April, 2011, sometimes, now, in your tax return, it can incredibly be Orwell's police statematics of:

6,000 - 10,000 = 5,000 profit

Which is another way of saying, literally, 2 + 2 = 5

On a company incurring a $4,000 loss, no cash, and remembering under the LTC rules such a company is no longer a separate entity, it merely 'is' the shareholders, as with a partnership, a shareholder can still have to (impossibly) pay tax on a profit of $5,000 out of, apparently, the thin air inside the heads of those who legislated this mess in the Fortress of Legislation.

Unlike Winston Smith, I am still, circa 2012, prepared to state clearly how many fingers the policy makers are holding up to me: it's two, and they're not giving me Winston Churchill's V for victory - that rightly proud man's classical liberalism has long been expunged in the West. No, I’m being given the fingers, an obscenity, for via the LTC regime our policy makers have legislated George Orwell’s very slogan representing the police state, 2 + 2 = 5, into the law of the land.

And that, is stunning. But where's the mutiny of the sensible and free?