Category Archives: Money

Venture capitalism, getting funding, investment

Refactoring the tax code

Our tax system is broken, properly. It is insanely complex. It’s a messy mix of transfers (e.g. the old age pension) and taxes (e.g. income tax). Normally, when code ends up as a huge ball of mud someone steps in and re-writes it, or re-expresses it bit-by-bit (refactoring) until it’s much better – clearer, faster with a smaller footprint.

Before you refactor, you’ve got to figure out what the system is meant to do – what kind of country do we want Australia to be?

Generally I imagine Australians agree they want a progressive taxation system, where poorer taxpayers pay a smaller proportion of their income in tax compared to the richer members of society. They want one where tax can’t be evaded (the system has high integrity), and the proportion of the economy devoted to the evaluation, collection and remittance of tax is low (it is efficient). There seems to be an appetite for a system that operates, over the long term, neutrally – no Greek-style runaway spending, nor perpetual budgetary surpluses. Equally, while Australians like the idea of a small government, they actually want a large one – one that intervenes to take the rough edges off of life, that provides a safety net no matter what misfortune befalls you; but they don’t want their government’s generosity to be exploited by those without need. I look at as: I don’t want to look at poor people; make it better.

We’ve got unemployment benefits, single parent benefits, old age benefits, disability benefits and more. But the nub of all of these payments is that a civilised society doesn’t leave anyone in abject poverty, and that problems that aren’t your fault ought to be covered by broader society. So what makes the unemployed less in need of support than a single parent? Free money reduces the incentive to work, if one can. How can a government tell if you’re merely free-loading? Should it care, or should we – as a society – deem that if you don’t want to work, you shouldn’t have to? What should we be doing when there’s a worldwide depression, and there just isn’t any work to be had? If there’s no work for you locally, ought to be compelled to move, potentially away from friends and family – it reasonable to say that if your friends and family are so great that you refuse to move, they (instead of the government) can look after you? If you bought your own home while you were working, ought the government give you have an easier go of it once you retire? If you retire in the city, ought payments be made to you to compensate for the higher cost of rents than rents in the country?

The recent budget has decided that tertiary students ought to contribute more towards their education (by way of paying for a greater proportion of the cost of their education, and then paying more for the associated debt), and do so more quickly (by way of lowering the repayment threshold to basically the minimum wage). Which is all good and well, but it seems that all those who got their education at lower rates or even free ought to shell out too – so if you got your education in the late 1970s, you ought to have a retrospective charge levied against you today. I’m not clear on what use art degrees are to our economy, but if fewer are undertaken, is that so bad? Don’t we want a well-educated citizenry? It’s been pointed out that graduates earn more, so they ought to pay their way – but don’t they do that in higher tax brackets? What, if anything, should we do about the perpetual student – gaining education but never applying it to the benefit of society? What of those who build up a substantial education debt and then move to another country to apply said education?

The tax system is a little more complex – there are some taxes (sin taxes) that try to discourage legal but morally undesirable things – drinking, gambling, smoking, greenhouse gas emissions. Other taxes discourage consumption – taxes on insurance, land transfer, Goods and Services Tax, excise on fuel. Still more taxes try to level income inequality; our income tax system taxes are proportionally higher on higher incomes. In Australia we don’t have much in the way of asset taxes to level out disparity in asset ownership, but there are the odd example here and there.

If you design a tax system wrong, it discourages desirable behaviour and relatively encourages undesirable behaviour. These behaviours ought to be enumerated somewhere. Is saving better than consumption? Can you have too much of one or the other? Societal happiness increases with greater income and asset uniformity, but communist societies have shown that reward must follow effort or work becomes demoralising. So how much equality is enough, and how much inequality is too much? Should sin taxes be eliminated by eliminating the associated sin, as New Zealand is doing with tobacco?

I see a lot of our tax expenditures don’t mesh with any reasonable model of how the world ought to be, or commonly held views.

FBT – what the hell? Weddings are funded by the taxpayer? Allow me to refactor FBT for you: Organisations can spend money on whatever they like. If they want to deduct that expenditure from their taxable income, they need to either: show it was a legitimate business expense, or attribute it to another taxpayer for whom it will be income. Thousands of pages of legislation replaced with two sentences.

There’s been a lot of rhetoric lately, and from it I’ve learned that apparently debt is bad – especially being indebted to foreigners. If it’s bad, make interest payments to foreign entities deductible at 98% rather than 100%, and keep lowering the proportion of the international interest bill that Australian taxpayers will subsidise until an acceptable mix of domestic-international debt is reached.

The Howard government decided that we needed more children, and women in the home, so paid for giving birth and underfunded childcare. Payments were made for birthing and having children, almost regardless of income. Welfare payments blew out to be by far the largest part of the budget, and importing children (via adoption) just got harder, slower and more expensive. I guess they were the wrong colour or something – bloody protectionists. Anyway, we ought not be growing babies locally, we ought to be importing them. The demographic issues have been well studied. Global population is expected to top out after the next couple of billion people, and then start dropping, but as I understand things Australia has no plan to balance its population growth. Is that the kind of country we want, covered in population centres, with cities that smear across hundreds of kilometres?

The biggest expenditure is on the Department of Defence, but I’m unclear what that department is tasked with or why it costs so much. Apparently its role is to “protect and advance Australia’s strategic interests by providing military forces“, but that could be any armed force in the world. Is it meant to repel a foreign invasion? Is it meant to protect our exclusive economic zone? Is it meant to provide an acceptable contribution to UN interventions? Is it a coiled spring, ready to train up millions of soldiers in case of emergency? Why does it need tanks, or fighter aircraft? The USA is clear what their DoD is for, it’s the employer of last resort and a jobs program for domestic companies that can’t find other purchasers elsewhere. What is our DoD for?

There’s currently a bunch of whining about how Australian median Real Disposable Income has been stagnant for the last decade. The Liberal party is convinced the only way to get it moving is with Trickle-down economics – dropping the corporate tax rate. Labour seems to think if we get rid of enterprise bargaining, roll-back anti-union legislation and raise the minimum wage everything will be sorted. I think it’s globalisation at work – everything will level out, with wages in the developing world rising, and those in the developed world dropping. If you want less of something: tax it; if you want more of something: tax it less. If you want employees to be paid more, make wages deductible at more than 100%, rather than taxing corporate profits less.

So, tax system broken, needs more income (and perhaps dramatically less air superiority fighter jets).

Increasing and broadening the GST would dramatically increase the tax take, but that comes at a cost. The GST is a regressive tax. Taxing things like fresh food, health-care and financial payments (interest, insurance) is complex, in that there are a large number of interacting considerations. On the whole, I’m in favouring of taxing everything (broadening that tax) and hiking the rate. But this is where the complicating considerations come in.

Push up GST and a lot of high-value purchases will go overseas – cameras, phones, breast implant surgery, etc. – because international transactions are not taxed. This no-tax on international transactions has the effect of pushing multinational companies to bill from foreign countries and avoid GST on their sales (e.g. Google, Apple, et al). So: just tax international financial transactions; credit cards and PayPal to start with, that will catch 99% of low-value transactions, but you’re going to have to keep moving to catch whatever the latest work-around becomes. I can see health insurance funds moving overseas, for example. Or just tax all international transactions, with a simple piece of paperwork to fill in if that wasn’t a payment for goods or services, but was in fact a transfer.

There’s a complaint that if taxes are set too high, the taxpayers will leave. High income earning English speaking workers are highly mobile, and can move to whatever tax jurisdiction they like, and they can move their money there too. But if they’re living in Australia, consuming Australian government services, they’ll get taxed here.

Anyway, once you’ve hiked up the GST tax take, you’re going to have to compensate the poor – consumption taxes are regressive (i.e. the proportion of your income gobbled up by them is higher the lower your income is). This is where negative income taxes come in; everybody (children included) becomes a taxpayer, and gets a cut of the negative income tax goodness. And thus we’ve closed off this inequity – yes, more GST is paid, but if you don’t have any income the government hands over money that ought to cover the additional GST you’ll be shelling out.

Companies and Trusts are taxed as a different rate to the rest of the population, although I’m not clear as to why that is. In fact, I’m not clear as to why companies pay tax at all. Companies and Trusts ought to be legally obligated to hand over their profits to their owners each tax year, and have the owners deal with the tax liability arising from that. Doing so would remove an enormous world of complexity and opportunity to manipulate the tax system. Naturally taxpayers without TFNs will have to have tax withheld at the highest marginal rates, for later imputation. Admittedly, this will lead to an increase in unemployment for accountants and lawyers, but I’m really not upset by that.

Although donations to a registered charitable cause are wholly tax deductible, for some weird reason there’s a company tax exemption on companies owned by charities – why not just donate all of this year’s profits to the owning entity? In the same breath, government-owned businesses pay tax, but the tax paid by businesses owned by state governments are refunded to those same state governments. No doubt this is some relic from the transfer of taxation power from the States to the Commonwealth, but enough is enough.

Often companies don’t pay out all of their profits as dividends – some of that money is retained to fund growth. This can continue to happen under my proposed system; the liability for the full profit is transferred to owner, but the amount of cash transferred is up to the directors.

So, by taking companies out of the tax-paying regime an enormous amount of fiddling and pissing around will be removed – creating a simpler, more straight-forward and transparent tax system.

Capital Gains Tax makes a poor attempt at smearing the real (i.e. inflation-adjusted) realised capital gain over period it was made and taxing it as income, but while treasurer Peter Costello introduced concessional taxation and since then Australian housing has become unaffordable for a large section of the population. The ATO is perfectly capable of applying capital gains over the entire earning history, and ought to do so. 50% CGT concession ought to be removed, as it doesn’t encourage investment but instead speculation.

CGT exemption for housing is a hard problem, but one I think I have a solution for. Read below.

Houses have proven to be a failing in our taxation system. Concessional taxation treatment means CGT is not payable on homes. State governments have become addicted to the revenue of turnover in the property market, which is a volatile income stream. Stamp duty on property is a substantial impediment to transactions – it costs a lot of money to move home, which means labour will be much less willing to move to follow work. Inflexible labour markets drive up employment/business costs. Instead of stamp duty on property transfers, state governments ought to do as the ACT is doing and move from stamp duty to levying annual property taxes.

Tony Abbott said in 1995, “The basic objective of compulsory superannuation is that the government is taking our money now so that it does not have to pay us a pension when we retire.

“The government is making us worse off now so that it will be better off in the future.”

This is a laudable goal. Choosing to not work merely because you’re old is foreseeable, and the government ought not be expected to insure you, or the broader populous, against foreseeable certitudes.

Super is not a con as Abbott asserted, and the rates need to be increased. Given that people can generally be expected to earn income for 45 years and be retired for 20, putting away a third of your income for old age wouldn’t be outrageous.

Superannuation is fabulous idea, tucking away income for the future, and is concessionally taxed on the way in, and also while in the super system – enabling growth of superannuation savings. On the way out – if you wait long enough (60 years of age) – the money is tax-free. Why tax free? Isn’t it income? This is madness, and needs to stop.

Because of the tax-free status, super is seen as a fantastic mechanism for inheritance planning, and that’s outrageous.

It’s time to rework superannuation; make it an income-smoothing scheme:

Make all contributions 100% tax deductible, and split each contribution into two – one part vested until retirement, the equivalent of today’s super system. Money transferred into super, or earned while in super, will be non-taxable. If you inherit super money, it’s income – but you can shove it straight into your own superannuation account and avoid paying tax on it. When you pull money out of super, it’s income. Employers won’t pay their employee any more – it will all go to their super fund, who withhold appropriate amounts for tax and old age, and pay the employee whatever they ask for – more or less than they earned, it’s up to them, because it is all smoothed out and tax accounted for. There’s only hundreds or thousands of super funds, so push the tax paperwork onto them rather than the millions of businesses around Australia.

If you want to buy a house, they’re considered superannuation investments and can be bought with your superannuation money. When you sell it the sale proceeds are wholly income – which you can pay tax on or shove back into your super account.

When not working, for example if you’ve retired, you draw down on your super account and pay tax on it like everyone else.

This set-up will demolish the distinction between assets and income. For too long you’ve been able to build up enormous assets and hand them on to subsequent generations without being clipped for a contribution to running the country.

Of course, much of this was considered by the Henry Tax Review, The Australia’s Future Tax System Review couldn’t consider super or GST, and they’re two areas that need reform too. But this stuff is simultaneously obvious and too hard for our politicians.

Replacement Hot Water Service

All my electricity is green: my retailer buys RECS sufficient to back my electricity purchases. As such, I don’t care how much electricity I use, except such that it costs me money.

Breakeven analysis is fun.

My house has a twelve year old 160 litre resistive electric hot water service (HWS). General opinion seems to be that a HWS will last perhaps as long as 12 years before failing (my last house had one that was 30 years old and still going strong). It’s currently inside the house (taking up valuable floorspace), and may not survive being moved outside in the coming renovation. I want an instantaneous gas HWS (unlimited hot water at exactly the temperature I dictate), but refuse to use gas.

Instantaneous electric HWS exist and are only about $1000, but require three-phase power (an upgrade costing a surprisingly small $1000, plus electrical work on my side of the divide). How much power will it consume? Turns out, the same as resistive heating the water, but it’s all peak electricity. That pushes its daily cost quite high. There are other HWS options; reusing the existing tank (free-ish), replacing it with a larger tank (still resistive, $1000), sucking up all the spare electricity from the PV solar system (perhaps $1000), or a heat pump ($3400), and combinations of the above.

I was able to figure out how much electricity we’re using to power our HWS by virtue of it being on a separate meter to the rest of the house – 4.6kWh/day, costing about $0.85/day because it runs off peak. Hot water consumption is expected to increase after the renovations. It turns out that how much hot water is consumed, and when, is very important for accurately pricing electricity consumption. I’ve a fairly complex spreadsheet modeling current and projected consumption patterns, and the resultant energy requirement timing and costs. We have a PV solar system, which is how I thought I could push our cost of hot water down – heat it from the panels during the day, when electricity is cheap for me ($0.119/kWh). If your tank is too small (which ours will be/nearly is already) then you’ve got to heat using electricity other than cheap solar electricity.

I calculated the Total Cost of Ownership at the 5 year mark, and the average daily cost of hot water for the various options (note, this is for my projected hot water consumption profile – yours will differ, altering the values):

Option	TCO	Daily Cost
Keep existing HWS, peak electricity	$4,340	$2.27
Keep existing HWS, off peak only, coupled to instantaneous electric HWS	$7,411	$2.69
Buy 315L resistive HWS, off peak only	$5,497	$2.46
Keep existing resistive HWS, run off PV solar and off-peak	$3,764	$1.51
Buy 315L resistive HWS, run off PV solar	$4.968	$1.63
Buy 315L heat-pump HWS, run off PV solar	$3,888	$0.27

The heat pump can run off solar using its built-in clock, saving $1000 in diverter costs. You can see that its TCO is a little more than a salvage job on the existing HWS run from solar power, but the daily cost means the heat pump is going to pull away at a mad rate. Hot water that cheap is making me think of grand ways to heat my house.

Ditching gas

All my electricity is green: my retailer buys RECS sufficient to back my electricity purchases. When I calculated my household’s Green House Gas emissions equivalence, we pulled in emissions below 15% of that of the average Australian household. In fact, our emissions were down to two sources: our car (7000 km/year @ 9l/100km – emitting a quarter of that of the average Australian household) and our natural gas consumption (20300MJ/year – home heating emissions 57% of that of the average Australian household). Apparently emissions can vary from 3 to 30 tonnes/year – I’ve calculated my household at around 2.5 tonnes per year at the moment. I think we can do better. How about 1.5 tonnes per year?

I’ve had a poke around the non-hydrocarbon motorised transport market. There isn’t much there for me, cars are north of $50,000, lifespans are limited. If I could buy an electric car for $20,000 that was going to last 20 years, I’d be up for it. Because I can’t, hydrocarbons will continue to be used for this form of transport. Will revisit when car fails, I’m guessing in less than a decade. Besides, I’m pretty convinced “car ownership” will end up being something people did in the 20th century, not the 21st.

We don’t cook with gas; we have an induction cooktop. I hate electric cooking – resistive electric cooking. It’s inefficient, slow, too cold, too hot, ugly and messy and too expensive. I’ve always cooked on gas. Induction cooking has turned me around; it’s everything gas cooking is, without the explosions, burnt-on gunk, poisoning and GHG emissions. However, it is fussy (it only works with ferrous cookware) but that’s inconvenient, not a showstopper (example: coffee pecolators are almost all aluminium, and those that aren’t have a very small base. The pecolator has to go in a small pot to be used).

Our gas consumption is purely for space heating via a ducted heating system. It costs less than $770/year to heat our house, so an electric replacement will need to be competitive with that. Having run the numbers, I’ve calculated our gas consumption produced 4000kWh of heat in the house each year. Doing that with air conditioners would (assuming 400% efficiency, which is pretty middle-of-the-road) require 1000kWh of electricity. I seem to pay about 30 cents/kWh (if you can figure out what your electricity actually costs you, I’d love to hear what you did to get that number), so that’s $300/year to run air conditioners instead of ducted heating. Payback is less than 10 years if $4000 is spent on adding aircon units.

From an environmental and financial perspective it’s time to ditch gas, so I’m off. Each gas bill raises the daily connection fee. It’s about $1/day now, so if you don’t use much gas there’s an increasing incentive to use no gas at all. Nearly half my bill is for the privilege of having a gas supply.

But wait! I love wok cooking, and there’s almost no way to wok-fry stuff without gas. What to do? For a couple of years we’ve used a butane camp stove as a stop-gap until we got around to plumbing in our dedicated wok burner, but if we’re cutting off gas we’ll continue living like animals for the rest of our squalid lives! No fear, says my plumber: convert to LPG – like used for BBQ cooking. And so, we now happily wok-fry on gas, which I figure will cost us $30 – $60 a year to refill the bottle. $38 for the LPG conversion kit for the burner, which would have been avoided if I’d thought this all through a couple of years ago when buying the wok burner.

The next problem is: what to do about hot water?

Retroactive HECS fees

I think it’s about time we introduced HECS fees for all those people who obtained degrees without contributing to the cost of those degrees.

The argument is that educating tertiary students costs the taxpayer money, and what’s in it for the taxpayers – why ought they fund some snotty kid’s education? By the same argument, those who got those free educations between 1974 and 1989 ought to cough up and return the same portion of the cost of that education back to the people of Australia.

Disable PayPass or PayWave RFID with a light globe, a pen and a drill bit

I got a new credit card in the mail, and I noticed the PayPass logo in the top right corner. I’m no fan of RFID, especially with so many documented weaknesses. Also troubling is the loss of two-factor authentification that we’ve had for decades in Australia; both Visa and Mastercard require only the presence of the card for EMV transactions under $100. I like my credit card, I don’t like that other people can spend my money with it. I thought about trying to convince my bank to give me one that wasn’t PayPass enabled, but Mastercard won’t issue cards without PayPass, so it seems I need to make my new credit card compliant with my privacy and security policies.

Admittedly, all the exploits for RFID enabled cards seem to affect cards in the USA, whose banking system (as best I can tell) is run by a bunch of morons. I assume that the cards in Australia leak no information other than an identifying card number… but even that. RFID can allow unintended transactions, so I’d prefer my transactions to be intentional. I considered killing the whole chip in the microwave, but there’s a risk that would affect the mag-stripe. You don’t need a radiographer to lend you an xray machine to locate the RFID antenna. Turns out that a light globe is plenty bright enough to spot the antenna tracks, or the sun (if you can spot it at this time of year).

I lay my card on a horizontal compact fluorescent light globe, and look what I could see:

Just drill out the point where the tracks narrow down, and the antenna is toast

I dutifully marked the point where the antenna traces all converged on the one location, then drilled that point out with a hole made with a 3mm drill bit. I took it off to my local Kmart, and it worked. However, it failed at the Coles, and every subsequent retailer (dozens) I’ve tried using it. Apart from that one Kmart (others haven’t worked) the PayPass functionality is now turned off.

I’ll update here if I make additional modifications that are successful.

Tap and Go causes crime: duh

Ken Lay says that in the last year in Victoria, 11500 extra crimes caused by Tap and Go cards have meant that the crime rate in Victoria has gone up (5%) rather than down. These additional “crimes of deception” and are apparently tying up police.

It’s slack. Totally slack. There’s no control over it. And what are we finding? There’s been a huge spike in different offences committed to facilitate it; cars being broken into, mail stolen, handbags grabbed, purely because of industry introducing a new practice without any regard to security.

We have taken the view we should be taking on industry over this because our concern is they’ve introduced new practices with no regard to the implications on security and there’s no prevention measures, which is at times bogging down our members in work and time that could be better spent on some really serious type of investigations or responding to critical issues.

Assistant Commissioner Stephen Fontana

And the ABA says “no ways!” and says that dollar value of fraud is down since chip-in-card (neglecting that this isn’t about that) but allowing that losses following theft are up 35% (to only $20m/year). And ignores all the crime that would be associated with obtaining the cards.

Political donations are not the problem

Corrupt politicians have recently been in the Australian news.

It has been observed that money, in the form of political donations, is a corrupting influence. This causes hand-wringing, as banning donations is considered to hinder the freedom of political expression.

As a response to this demand for cash to finance political expression, suggestions are made that private funding of politics be replaced by public funding – basically an increase on the funding which parties already receive (something of the order of $2.48 per primary vote in lower house seats in the last federal election, for example). This grates those with a strong dislike of politicians and the political process. In addition, the current funding model of retrospective funding (based on votes received) disenfranchises new political views – it locks in the existing players by funding them, allowing them to campaign for votes that will fund them; those outside the system will not be able to break in.

To allow new entrants into the political system to be funded on an equitable basis, some kind of on-going polling could be done and a funding stream allocated on proportionate support in non-electoral polls.

However, switching to purely taxpayer-funded funding isn’t necessary, even if in effect the tax-deductibility of political donations makes them taxpayer subsidised.

Political donations are not the problem, the problem is that donors can be identified by the political party and and expectation of quid pro quo is raised. Beyond that, large donations from a single donor are also a problem – even if political party donations were anonymised and repudiable the donation’s existence could be inferred by the velocity of money flowing out of any anonymising system.

Let’s say you’re trying to run a corrupt political party under an annoymised donation system. Someone comes to you and says “I will give your corrupt party $10m, and I expect you to make this corrupt thing happen.” You’d then donate the $10m, and your donation would be pooled along with the hundreds of other donations made to the party. The Donor Anonymising Service (DAS) would then hand over a certain amount of money to the party, but it would not be $10m. It would be the stipend that the party had requested from the DAS, along with advice that the current amount held in reserve is enough to last at least X days, where X was the same number (give or take a couple of days) as it was yesterday. You don’t know if the $10m donation was actually made, all your party knows is that it’s got enough money to last X+2 days. You could up the rate of the stipend, but the DAS would scale back the reported window so that no extra information is revealed by the reported minimum duration the reserves will last. You’d limit the rate and number of times the stipend could be changed to discourage probing. Naturally, it would be illegal to make a political party aware of a donation or its amount.

Of course, then you have all the fun and games associated with loaning money to political parties, and with corrupt administration of a Donor Anonymising Service, but you get the gist of where we could go with this idea.

Please make it okay for KITT to drive itself around

Driverless vehicles are coming. A clear legal framework will make them come all the sooner, and there’s an opportunity to make autonomous vehicles as safe as passenger aircraft.

Don’t drive a car like a smuck, get the car to drive you!

Make the manufacturer(1) solely responsible for all liabilities incurred by the vehicle, driverless or not. Transfer this liability to anyone who modifies the vehicle without manufacturer approval(2) – covering up sensors, adding systems, modifying software etc. While autonomous, fines for driving infractions are the responsibility of the manufacturer; demerit points are treated as unidentified and the fine for failing to identify the driver is payable by the manufacturer. Annual vehicle registration fees(3) remain payable by the vehicle owner, but third party insurance costs – personal and property – are remitted to the manufacturer, who could be expected to pay you to… not drive the car – if you drive the car, that creates an uncontrollable liability, but if the car drives itself then the risks are only those that are those due to the product, which presumably would lead to product improvement to decrease crashes and injury.

How would you force owners of cars that are the liability of someone else to properly maintain them? Simple; you make the manufacturer cover maintenance costs too – tyres, servicing etc. So now we’re getting to the point where we ask: what are people paying for cars that they only have to cover the running expenses for? How does the manufacturer recoup the cost of maintenance? Doesn’t really matter, but I think you’ll see that driverless cars will only be able to be leased, or hired, or rented, or some other such model. They’d basically be taxis – paid for by time and distance.

Every driverless crash will be investigated by a federal body – the Australian Transport Safety Bureau. To aid investigations, vehicles will be required to detect crashes and refuse to function after them; extensive data logging like on aircraft will be mandated. Because of the lack of humans involved, crashes come down to systems failure and the crash rate should be highly controllable.

(1) Autonomous vehicle manufacturers might baulk at these plans to make them directly fiscally responsible for their products. Fine; they could instead put an insurance/finance company in as the responsible entity, but whomever is responsible would have to prove to the government their capability to meet their contingent liabilities.

(2) That is, you can hack your car if you want. But if you do, you wear the (potentially quite substantial) risks associated with having done so. Find an insurance company that’s willing to cover you (ha!).

Have you played thePopulation: Tire game? If not, you haven’t lived.

(3) Why do we charge registration fees? Owning a car doesn’t impose any costs on society. Driving it does; parking it does. There ought to be taxes on… tyres. The consumption of tyres by a vehicle is roughly correlated to the wear and tear on infrastructure and other externalities. Motorbikes, two tyres; semis eighteen or more. There are already taxes on fuel, again because of externalities – and presumably, because they’re easy-to-levy taxes that are hard to avoid. But infrastructure wear is not a function of fuel consumption, but it is a function of using tyres. The problem with a tyre tax is that people will naturally buy tyres that last a long time, rather than other considerations – for example braking efficiency; to address this some wear factor ought to be applied too.

This is why retail is in such trouble

To our surprise, we’ve discovered our youngest has terrible vision due to dud eyes. He’s proven a superlative example of the brain’s ability to work around systems failures – his parents didn’t have the slightest idea his vision was as stuffed as it is. The discovery that something was wrong was made at his 3.5 year ~~overhaul~~ child health check. We got a recommendation to an optometrist who was reportedly good with youngsters; and she determined the exact problem and quantified it (without using any lasers at all, which seriously disappointed me). Medicare covers the entire cost of this testing.

Neither Cathy nor myself wears or has ever worn eyeglasses (I recently complained to my doctor that my vision had deteriorated, and after testing he told me to quit bitching because my vision has dropped to 20/20), so we were lost at sea when it came to acquiring and purchasing.

With a prescription in hand we went shopping, with prices ranging from $350 to $550 for a single set of eyeglasses that will need replacing in six months. These prices seemed dramatically above what the cost ought to be; I’ve bought sunglasses before and paid between $1 and $100 a pair. “To the Internet!” I cried. And lo, the Internet said that if we were willing to wait three weeks instead of one to two, it would hand over the same kinds of vision correction devices for ~~$90~~ $78; actually that was USD, so it was going to be less again. Not only that, all the stores on the interwebs had memory metal eyeglass frames, whereas the physical stores often didn’t carry that vital (in a three year old) option, hoping instead that arms that were double-hinged might be able to survive (or, given the warranties involved, perhaps even hoping they wouldn’t survive).

Australian retailers are in trouble and want GST charged on all imports into Australia, rather than with the $1000 limit that currently operates; the GST is the least of the problems with retail in Australia. And the cost of collecting GST on imports is high:

The Productivity Commission said that reducing the threshold to $100 would raise an additional $472 million, but, based on the current customs processing charges, this would cost consumers and businesses approximately $715 million.

So that’s not taxing everything, just anything where $10 of tax could be collected. An efficient way of taxing imports would be just to tax everything based on the cost of posting it into Australia; one could argue that if someone’s willing to pay $50 postage on something, the goods must be worth something more than… say $50… to them. So charging Australia Post $5 for the parcel will collect some tax on the thing that we don’t know what the price is, but can make some guesses about its value. AP will just pass on this charge to the postal services it operates with, pushing up the price of posting to Australia. People receiving gifts would be able to fill out paperwork to claim this tax back.

The 55m parcels imported into Australia below the $1000 threshold account for a guessed $5.8b of value, that’s an average of about $100/parcel. My proposal would collect… perhaps $200m, with a very low administration cost – 40% of the tax for 1% of the cost.

But none of this is going to save retail, because the problem retail has with eBusiness is that the fixed costs are so much higher. Once property prices – and rents – drop to a reasonable level, retail will have a chance. And for that to happen, many retail businesses are going to have to fail. Until then, retail is going to need a 50% markup on everything, and will continue to struggle against competitors that don’t need that margin.

Interestingly, our optometrist probably has the right model for a business – they are a service provider providing a service that can only be performed in person, with an adjunct retail business selling glasses etc, ready to mop up consumers who don’t baulk at $550 for a pair of glasses. They can justify these prices because have the right kind of warranty – two years, no question, anything happens and we’ll fix it. Accidentally drove over them? No worries, we’ll replace them. Try getting that from the intertubes.

Of course, this whole discussion assumes capital and materials mobility, and low labour mobility. If fuel costs skyrocket, or immigration becomes just a matter of getting on an aeroplane, the whole ball game changes.

Update: Ten days (six business days) after placing the order, the glasses have arrived from China. That’s right in the delivery window suggested by local providers, and half the delivery time promised by the online eyeglasses retailer we used. Everything looks great; I’ll whine if anything isn’t right, but with my limited knowledge, all seems well at the moment! On the downside, our health insurer says that we choose poorly if we wanted a refund; the cheap Internet places they pay out with want $200 for the same glasses, so screw ’em – our out-of-pocket’s the same whichever way, and this way has less paperwork.

Josh has something even simpler than budgeting

Just write down what you spend your money on. At the end of the month, review. You might want to classify things, graph total expenditure and other fiddling around with the numbers. But that’s all you’ve got to do: just monitor things. If it turns you on, the monitoring etc can be done via a spreadsheet or personal finance application, but a sheet of paper marked out with every day in the month will do just fine.

When you become aware of what you’re spending your money on, and look at it as a proportion of your monthly spending, the awareness alone may be enough to change your behaviour to be more fiscally responsible.

Five years on: VoIP? No. Well, maybe. But not really.

Five years ago we looked at dumping the POTS and going VoIP to save big dollars. It cost more to use VoIP.

So, recent events have suggested that moving to ADSL2+ is now a good idea. Now that the local loop is unbundled, true competition has smashed into the marketplace, and VoIP has finally gone mainstream. ADSL2+ prices are cheaper than ADSL. There’s dozens and dozens of VoIP providers, you can even port your existing POTS number to a VoIP number (for certain providers, from certain telecoms companies).

Interestingly, there’s a $10 difference between going with Naked ADSL2+ and ADSL2+ bundled with a home phone; typically you also lose some data allowance, for example going from 20Gig to 15Gig, and that 15Gig will have a further (quite small – I’ve seen an estimate of 30Meg/hr) amount consumed by ‘phone calls. So, you get less, and the question is, can you pull in VoIP functionality for less than the $10 price difference?

Well, maybe. If you insist on porting your existing phone number to the VoIP provider, there are charges (say $3/month), plus an upfront charge ($55). You’ll also need to acquire a convertery-thing to turn your Ethernet cable into a POTS connection for your existing phone handsets, or buy a network-connected VoIP phone, or whatever – some kind of connectivity to your network and thus the ISP and thus through to your VoIP provider is required. If you want a VoIP account with a Direct Inward Dialing (DID) number (you might know that as a phone number) they start at $5/month. So, of your $10 price difference, you’ve just chewed up $8. You get to amortize the connectivity hardware and charges over the $2 savings you’re making; if you’ve got the hardware lying around, the $55 port charge is will be clawed back in just 28 months. Did I mention you’re running with a smaller data allowance? And there’s also the cost of keeping the convertery-thing powered up each month. And the fact that if you lose you broadband connection, you lose your phone (POTS have very high availability rates; broadband not so much).

Now, admittedly, VoIP calls are hella cheap compared to POTS calls. If we made many, that might be a factor. But we don’t, so it’s not. Our phone line’s more for people to call us. If we wanted to place calls cheaply, VoIP accounts without DIDs start at $0; we’re looking at replacing the home phone, and the numbers still don’t stack up, even after all this deregulation and vastly increased competition. Which makes no sense.

Or maybe it does. If the costs are approximately at parity for VoIP and POTS, surely that’s showing that the prices are competitive?

Here’s another scenario. You go with POTS and ADSL2+, plus VoIP with a freshly allocated local number which you use for all outgoing calls. You still need the bridge, and now you need a second phone. You retire your POTS number (advise everyone you know of that you’ve changed numbers – doctor, dentist, home insurer, car insurer, friends, family, work’s HR department, your bank, etc etc – shouldn’t take more than a day or two), but keep it alive for, say, six months (this assumes your ISP loves the idea of you starting out with a POTS line and then dropping it after the six months; I haven’t checked, but I can guess what their reaction will be). You’re paying $15/month over naked prices (ignore bandwidth differences), but your call costs are lower. At the end of the six months you’re saving $5 a month, so another 12 months to break even, and then you can start amortizing the convertery-thingy at $5/month – about two years for every $100 it costs. And once that’s amortized, and you’ve recovered the price of the extra electricity you’ve been using, you’re making pure profit.

I can’t wait.

When the phone line is $5, or $8 for your existing number, rather than $30, that’s when it’ll make sense. But it’s almost at that price now, when you get down to brass tacks, it’s $10 plus they throw in a little extra bandwidth. So we’ve got a competitive situation (at least on the connectivity costs), and VoIP, as a result, sucks balls. Interestingly, bundled plans aren’t sold as “naked plus $10, and we’ll throw in some extra bandwidth!”.

Let’s say you were forced to change phone numbers anyway (perhaps an interstate move), so now it makes sense to go without the POTS number at all. You’ve still got to amortize the convertery-thingy at $5/month, but on the upside you’re saving money on your calls – if you make any.

Final analysis: if you’re forced to change you telephone number anyway, you might as well go Naked ADSL2+ and VoIP. Otherwise, not worth the bother.

ANZ computerised banking is user-hostile

I have an ANZ Bank account. Using their website to pay bills is an exercise in frustration. I only have one account, but the website insists on me picking it out of a dropdown with two entries – the first one, the default, instructing me to pick an account. Failure to do so results in an error – “Please choose a From Account.” I only have ONE! Assume that’s where I want to pay from! Then one must pick who to pay, with an option to pick previous billers from a drop-down list. If you pick from the dropdown without JavaScript enabled, you get the error “Please select a biller from the drop-down list or enter a biller code.” – with JavaScript it fills in a few fields for you, but why does it even need you to fill those fields in if you’ve picked your biller already? Fill them in when I click the “I’m done” button!

Finally, we come to a bugbear I have with ANZ currency fields. You can’t enter a dollar amount, it has to include a decimal point with two following cents; they can’t infer from a lack of a decimal point you’re talking about a dollar amount. They enforce this rule on their website, and they insist that at an ATM you enter the number of cents you wish to withdraw from the ATM. Given the smallest unit of currency available from an ATM is $20, what is wrong with this picture?