The 2004 purchase of the 25,000 ha Motatapu and Mt Soho high country stations in Otago by companies linked to Canadian singer Shania Twain and her then husband was hailed by politicians and the media as signalling a new “smart, win win” approach to the controversial subject of foreigners buying up great chunks of prime NZ land (for example, the Listener devoted an approving cover story to it – 9/10/04, “Come On Over: The Shania Twain deal puts a new face on foreign ownership of our most precious landscapes”, Bruce Ansley). The official approval for the purchase was personally announced by the Minister of Finance. Michael Cullen, which is not at all the standard procedure for foreign investment approvals (they are usually buried in the monthly Decisions of the Overseas Investment Office, or the Overseas Investment Commission, as it was in 2004). The Prime Minister, Helen Clark made sure that she got extensive media coverage when she attended the opening of the walking track through those stations (the provision of the track, at the foreign owners’ expense, allowing limited public access through the stations, was a condition of the purchase). Shania Twain was the poster girl of the Clark government’s policy on major land sales to foreigners.

All of this was critically analysed in detail in Watchdog at the time, and needless to say, the deal was nothing like as rosy as portrayed by its political and media apologists. See Watchdog 107, December 2004, “Shania Twain Buys Up Big In Otago. A New Ingredient In Land Sales: The Celebrity Factor”, Murray Horton, http://www.converge.org.nz/watchdog/07/03.htm, and Watchdog 109 August 2005, “Shania Twain Locks The Gate”, Murray Horton, http://www.converge.org.nz/watchdog/09/07.htm.

In February 2010 a company linked to Shania Twain was given Overseas Investment Office approval to buy the 8,579 ha Glencoe Station, which is near the other two stations, in Otago. Coincidentally, Helen Clark was briefly back in the country, from her UN job in New York, to receive a number of awards and honours and to generally bask in the glow of the warm fuzzies. So it was a good opportunity to see what, if anything, NZ stands to gain by allowing the likes of Twain by buy high country stations.

Tax Losses

An examination of the accounts of the Motatapu and Mt Solo Stations (“Lean earnings from Twain’s high country playground”, NBR NZ Property Investor, 16/2/10) reveals that they have been consistently running at a loss since their purchase. In the case of Soho: “It has built up $8.4 million in tax losses that may be applied against future earnings” plus “liabilities are $61 million, resulting in negative equity of $8.8 million”. Federated Farmers is one of the most craven apologists for the sale of NZ rural land to foreigners but even its President, Don Nicholson, had to admit that he was shocked by these tax losses. “However, he did not believe the tax losses were a cause for concern, suspecting they were the result of massive reinvestment in the properties” (Press, 2/2/10, “Twain’s farms lose millions”). Naturally, he didn’t have any actual evidence of this “massive reinvestment”. He went on to repeat the hoary old nonsense that foreign owners can’t take the land away overseas. But why would they want to, even if they could? The whole point is to get the benefits, profits (and tax losses) from it as is where is. It’s the same reason why Telecom doesn’t want to take all our phones away overseas.

“Lincoln University senior lecturer Dr Ann Brouwer, a high country lease expert, said for Twain to be able to write off tax losses against what was effectively a second home – ‘I suspect she didn’t buy it for revenue from merino wool’ – seemed a bit funny. The vast majority of New Zealanders were unable to use the tax benefits Twain was getting, she said. ‘The recent tax review did nothing to plus up those issues, therefore did nothing to increase the public benefit of selling Crown land to a country music star’” (ibid.).

Tax losses don’t feature anywhere in the “substantial and identifiable benefit to New Zealand” that the former Overseas Investment Commission (and politicians and media) trumpeted in relation to these purchases. Tax losses on investment properties are a subject of major public discussion at present and the target of some of the most high profile recommendations of the Tax Working Group’s recent report on tax reform. But we weren’t told, in 2004 or this year, that there was any suggestion that these high country station purchases were investment properties for tax loss purposes. Because where is the “substantial and identifiable benefit to New Zealand” in that? Let’s see if these properties continue to remain in their current ownership when, and if, the Government does actually toughen the law relating to tax losses on investment properties, even 25,000 ha ones.

CAFCA’s Message About Shania Twain Goes Worldwide

One intriguing sequel to this story was that CAFCA (“a left-wing lobby group”) got our message out to the big wide world, into the New York Times no less (to be precise, into the International Herald Tribune, which is the Times’ international edition). Maybe because it involves a globally known North American musical superstar and therefore registers on the radar of the American “journal of record”. The article “Debate Continues Over Foreign Ownership In New Zealand” (9/4/10), was published in the Great Homes And Destinations section of the Times. It was written by Auckland journalist Anne Gibson, who is the Property Editor of the New Zealand Herald. The article concludes: “Rules controlling land purchases by interests based overseas have been debated here several times. While the Campaign Against Foreign Control of Aotearoa has not been successful in changing laws, its criticisms have drawn national attention in the media”.

The International Herald Tribune is a truly global paper. We were alerted to the article by an e-mail to Bill Rosenberg from his brother George, an international lawyer, who frequently travels in Africa on business: “I am sitting here at Addis Ababa airport reading the IHT and whose name do I see – Murray Horton”. Actually this is not the first time that CAFCA has made the American papers – we appeared in a lengthy Los Angeles Times feature several years ago about American investment in NZ.