The intention is to measure an individual’s ‘economic amount of risk’ over the lifetime of a business; so overall an individual will be able to claim in deductions only what they have personally funded by taking on an economic risk … 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. This is in keeping with the policy rationale discussed above, because it indicates that the company’s losses are not being ‘funded’ by that particular owner. In this example, the current rule is operating with the intended policy that their tax deductions should be restricted to their economic loss.’
However, I believe there is a relatively easy solution to this which would put back into LTC’s none of the sense required, but at least in this respect, a very little of that word the Minister seems to have fallen in love with, despite evidently having little idea what it means: fairness.
Author, George Orwell, a socialist who was ironically the most significant writer on demonstrating how socialism always fails, unfortunately seems to have foretold ‘your’ LTC legislation as long ago as 1946. In his novel, 1984, about a nightmare police-state society - which this legislation raises misgivings that you may be converting into a manual - the protagonist, Winston Smith, is tortured into submission to the Big Brother state: this torture was not by being made to read our taxation legislation, attend your yearly compliance update, TEO courses, or even becoming a victim of the Department’s increasing use of retrospective enforcement: no, the process was rather to take away his sense of reality, of self, by the torturer holding his fingers up and asking Winston how many there were. 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, such as some unfortunates will be with their LTC returns in hand, 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.’
'Do you remember,' he went on, 'writing in your diary, "Freedom is the freedom to say that two plus two make four"?''Yes,' said Winston.O'Brien held up his left hand, its back towards Winston, with the thumb hidden and the four fingers extended.'How many fingers am I holding up, Winston?''Four.''And if the party says that it is not four but five -- then how many?''Four.'The word ended in a gasp of pain. The needle of the dial had shot up to fifty-five. The sweat had sprung out all over Winston's body. The air tore into his lungs and issued again in deep groans which even by clenching his teeth he could not stop. O'Brien watched him, the four fingers still extended. He drew back the lever. This time the pain was only slightly eased.'How many fingers, Winston?''Four.'The needle went up to sixty.'How many fingers, Winston?''Four! Four! What else can I say? Four!'The needle must have risen again, but he did not look at it. The heavy, stern face and the four fingers filled his vision. The fingers stood up before his eyes like pillars, enormous, blurry, and seeming to vibrate, but unmistakably four.'How many fingers, Winston?''Four! Stop it, stop it! How can you go on? Four! Four!''How many fingers, Winston?''Five! Five! Five!''No, Winston, that is no use. You are lying. You still think there are four. How many fingers, please?'
Until finally, reality is defeated:
In the end the Party would announce that two and two made five, and you would have to believe it. It was inevitable that they should make that claim sooner or later: the logic of their position demanded it. Not merely the validity of experience, but the very existence of external reality, was tacitly denied by their philosophy. The heresy of heresies was common sense. And what was terrifying was not that they would kill you for thinking otherwise, but that they might be right. For, after all, how do we know that two and two make four? Or that the force of gravity works? Or that the past is unchangeable? If both the past and the external world exist only in the mind, and if the mind itself is controllable—what then?
Translating this to the issue at hand; the reality that New Zealand businesses must operate under to survive has to be expressed under the real world mathematics of:
And returning, finally, to fingers held in the air, it’s hard not to get the impression the State has got only two held up in this legislation, and they’re not giving the taxpayer that proud classical liberal, Winston Churchill’s, ‘V’ for victory sign. A fair fix to the Owner’s Basis please, or tell me why not.