Criticise the Government and there goes your tax free status

October 16th, 2006 at 7:21 am by David Farrar

If a charity is judged by a seven member panel all appointed by the Government as doing too much “advoacy”, it can now be stripped of its tax free status.

So if an organisation which raises money for drought victims in Africa, criticises the Government for not contributing more, bang goes the tax free status. Plunket wouldn’t dare challenge the Government over it withdrawing funding for Plinketline, if the Government could retaliate by getting its mates to withdraw their charitable status.

On the plus side, if the churches ever try and organise another “Hikoi of Hope” as they did in 1999, then they can all be deregistered also! :-)

No tag for this post.

64 Responses to “Criticise the Government and there goes your tax free status”

  1. tim barclay () says:

    It opens up the issue whether Unions should pay tax – do they???

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  2. Kent Parker () says:

    DPF,

    What type of organization is a political party? I thought they were tax free too.

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  3. david () says:

    Good question Tim. Where do unions fit in this? ( I can guess….)

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  4. David Farrar () says:

    People are confusing the difference between being a not for profit orgn and a charity.

    Neither generally pay tax (except on trading operations) but a donation to a charity can be deducted off tax while a donation to a political party or a union is not tax deductible.

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  5. Kent Parker () says:

    So all the charity would lose is that donations made to them would no longer be tax free.

    Nothing else.

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  6. sonic () says:

    Can you name another country in the world that does not regulate charities in the same way?

    Bit of a dud mate.

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  7. neil morrison () says:

    I think that Churches should have their tax status reviewed but bacause I don’t see any justification for such special treatment but aiming at any organisation that is set up “predominantly to advocate for social change” would include organisations such as the AIDS Foundation.

    There would be a real risk that this would be used to attack groups the government doen’t like. Which is actually the express purpose – the EBs.

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  8. Murray () says:

    “The looming shake-up has made some organisations afraid they could be punished for promoting political views that contradict the Government’s stance.”

    So its “bit of a dud” when this government has such a history of taking retribution against the unbelivers that people are quite litterally afraid to speak against them. Show me other countries that jail people for critising the government – ooo there’s a club we want to join.

    As always you can scream, squeal, fling poo and name call all you like but we’ll decide what we can talk about, not you.

    Feel free to piss off to Zimbabwe or North Korea chronic.

    You’ll fit right in with the other state apporved mouth pieces.

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  9. sonic () says:

    Out of interest Murray, how many people have been jailed for “critising’ (sic) the government.

    Comparing NZ to North Korea is just deluded.

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  10. Andrew () says:

    Setting aside the appalling curtailment of the freedom of speech (which is actually par for the course for the current administration) there’s the issue of what constitutes advocacy by any particular group. If I belong to a church, a football club, a poverty-action collective and model railway society which of these will be stripped of their charitable status when I take full-page ads decrying the corruption I see in government? Who will decide what constitutes the action of an individual or that of a group?

    This kind of proposal is either a nail in democracy’s coffin or another nail in Labours.

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  11. Owen McShane () says:

    In those countries that regulate in this way the key issue is whether the charity is a lobbyist or simply a public advocate. Indeed in New Zealand right now a charity can lose its charitable status if it is clearly a lobbyist and engaged in direct lobbying.

    The Centre for Resource Management Studies is a public advocate and we try to avoid activities which could be defined as lobbying.

    We make our case through public media or in conferences but have no office in Wellington and do not spend most of our time lobbying Ministers or bureacrats. We make submissions to select committees but in response to requests by Governments to do so.

    What is the difference between lobbying and advocating. I would hate to have to define it but I believe I know when I have crossed the line.

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  12. Redbaiter () says:

    The outrageous vilification of the EBs would not be occurring in a civilized country. Government and the Prime Ministers attacks on a group of people who merely exercised their right to free speech are an affront to democracy and indisputable evidence that this country is in the grip of power hungry totalitarian barbarians and thugs. Klark and her anti free speech cronies have to go. Fresh elections now.

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  13. Redbaiter () says:

    The outrageous vilification of the EBs would not be occurring in a civilized country. Government and the Prime Minister’s attacks on a group of people who merely exercised their right to free speech are an affront to democracy and indisputable evidence that this country is in the grip of power hungry totalitarian barbarians and thugs. Klark and her anti free speech cronies have to go. Fresh elections now.

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  14. Anon () says:

    sonic – No one has been jailed in NZ for criticising the govt, yet. But the govt is talking about making it illegal to criticise the govt during an election campaign. We don’t know what penalties this legislation will provide for, but if not jail then it will at least provide for fines. It sounds like you may be involved in the Labour or another left wing party. You really should advocate internally to stop such legislation rather than attacking those of us who think it would be an attack on free speech.

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  15. sonic () says:

    ” No one has been jailed in NZ for criticising the govt”

    Thanks.

    Nuff said.

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  16. rightkiwi () says:

    Sonic, no it is not enough said. The people you are an apologist for want the CHANGE THAT so that there will be political prisoners in New Zealand. Do you not think that is a worry? Or is it OK if Labour proposes such things?

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  17. sonic () says:

    RightKiwi, I was responding to a specific post viz

    “Feel free to piss off to Zimbabwe or North Korea”

    Now you are getting on the hysteria bandwaggon with

    “The people you are an apologist for want the CHANGE THAT so that there will be political prisoners in New Zealand”

    Get real.

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  18. lyndon () says:

    Fancy that. Some people getting taxpayer money (okay, not paying tax) will be effectively punished because (okay, if) someone decides to institute a more rigorous interpretation of the actual rules than has held up to this point.

    No wonder you guys are outraged, that’s unheard of.

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  19. rightkiwi () says:

    sonic: Pete Hodgson has said: “the law would work in such a way that that advertising, one assumes would become forbidden or if it happened, would need to be included in the cap of the party who had benefited. Now, the more likely of those is that you would simply forbid it, that you would simply say you’re not allowed to have a campaign.” So you need to get real about how dangerous the Labour Party is becoming to basic liberties, and try to stop your political allies from taking this step.

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  20. Andrew () says:

    Sonic said : Nuff said

    Nice try Sonic but there’s not nearly enough said about this subject. You wouldn’t be attempting to curtail free speech on the subject of free speech would you?

    That the Govt is even contemplating this kamikaze legislation is evidence that they’ve completely lost touch with how New Zealander’s feel.

    Free speech means just that – free. Free the from the fear of state sanctioned retribution. I want to live in that free country. Not the one that’s proposed.

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  21. Murray () says:

    So far one.

    One far too many.

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  22. sonic () says:

    Yes Andrew before you know it Helen Clark’s stormtroopers will be arresting honest, god fearing Conservatives and sending them off to a Stewart Island gulag to work for the rest of their short lives.

    Do you know what the worst thing about this is though? when you tell people about it they call you a paranoid, hysterical looney.

    Oh the humanity….

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  23. Sinner () says:

    Tim Selwyn.

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  24. sonic () says:

    Sinnerm could you pass on the address of your place of work so I can pop over and stick a large axe through your window?

    You do not hate free speech now do you?

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  25. rightkiwi () says:

    sonic – no one is talking about stormstroopers and gulags, but you have not dealt with the substantive point which is that the govt is talking about making it illegal to criticise the government. Aren’t you a little bit worried about that?

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  26. lyndon () says:

    Free speech means just that – free.

    So why should the taxpayer have to foot rebates for it? I’m not say this administration hasn’t annoyed me on freedom of expression, but in this paticular case the relevant difference is between ‘punished’ and ‘not supported’.

    I does depend on evenhanded enforcement.

    But what seem to be actually happening here is a change of agency for one aspect. The way charities work with repect to the IRD and the commission has always been odd.

    So, for correspeodents who’ve demonstrated any grasp of what’s being proposed, can you name another country in the world that does not regulate charities in the same way?

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  27. sonic () says:

    “no one is talking about stormstroopers and gulags”

    Yes they are, read the comments again.

    As for this legislation, well lets see it first before we go all

    “First they came for those who like to put axes through windows, but I did not speak out…”

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  28. kiwi_donkey () says:

    Sonic: My understanding was that Tim Selwyn merely produced a pamphlet. It wasn’t him who put the axe through the window.

    And as for Philip Field; any government that relies on his vote is as corrupt as he is. (Carthago delenda est.)

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  29. Paul King () says:

    I had a tenant that went mental and broke 33 windows once with a stick. They didn’t get put in jail. In fact after some sort of stupid meeting nothing at all happened to him.

    Tim Selwin was put in jail for sedition – “is a term of law to refer to covert conduct such as speech and organization that is deemed by the legal authority as tending toward insurrection against the established ordergovernment” source wikipedia

    The stick in the window was symbolic, just like shooting a flag with a shotgun. Not something I would do, although very effective for getting on TV news.

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  30. Whaleoil () says:

    Tim Slewyn is in jail for crticizing the goverment oh wait they called that sedition. He was not jailed for the axe, but for sedition.

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  31. sonic () says:

    “The stick in the window was symbolic”

    A symbolic axe, fancy.

    Personally I do object to a sedition law being on the statute books. However can anyone tell me how the government are responsible for the jailing as he was arrested and charged by the police and convicted by an independent court.

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  32. Insolent Prick () says:

    Kent:

    Political parties are unincorporated societies. They do not have charitable tax status. Unincorporated societies are not allowed to own property, do not have limited liability, but do not have to report their financial activities.

    Registered trade unions are incorporated societies. They need to comply with all financial reporting aspects of incorporated societies, which broadly mirror Companies Act reporting requirements.

    I actually think the Charities Commission is a sensible idea in principle. There do need to be clear rules around charitable tax status. They need to be applied consistently and fairly; the prospect of government-appointed members targetting charities that disagree with the Government is possible, and needs to be prevented.

    If Labour makes a move on trusts and anonymous donations, it might be worthwhile to include requirements to disclose expenditure by incorporated societies–such as trade unions–in political campaigns.

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  33. Murray () says:

    So far one. From this current lot that is.

    Labour have jailed numerous people for political reasons in New Zealands history.

    One however, is far too many.

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  34. sonic () says:

    Murray, name one person that Labour has jailed.

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  35. Andrew () says:

    In reply to the comment that “no one is talking about storm troopers and gulags” Sonic said Yes they are, read the comments again

    Sonic you are 100% correct…. it was you who introduced those terms to the discussion. Now with that little sideshow sidelined, let’s get back to the nub of the matter.

    Does anyone, irrespective of his or her political persuasion, want to live in a country where a government can legislate so that it becomes disadvantageous to criticize that government? Someone convince me that such a use of executive power is a normal function in a healthy democracy?

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  36. Kent Parker () says:

    Thanks for your answer, IP.

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  37. sonic () says:

    “…. it was you who introduced those terms to the discussion”

    Really?

    “Feel free to piss off to Zimbabwe or North Korea chronic”

    “”The people you are an apologist for want the CHANGE THAT so that there will be political prisoners in New Zealand”

    So now that little sideshow is dealt with can Andrew name me a single country in the OECD that does not regulate charities and take measures when they move from charitable work into politics.

    I was wondering why National supporters were building this up, then I remembered 1.3 million reasons at the last election.

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  38. Andrew () says:

    Sonic, no i can’t. Not because they don’t exist, but because it’s just not my field of expertise. I’m happy to admit to not being an expert when that’s the truth.

    Sorry mate… by you did introduce us to the colourful terms of storm trooper and gulags in this thread. Odd that’s you’d try to suggest otherwise.

    My questions remains: Does anyone, irrespective of his or her political persuasion, want to live in a country where a government can legislate so that it becomes disadvantageous to criticize that government? Someone convince me that such a use of executive power is a normal function in a healthy democracy.

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  39. Manolo () says:

    “Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies.”

    A good summation of this socialist Labour government.

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  40. kiwi_donkey () says:

    Sonic:

    Not prosecuted:
    – Helen Clark
    – Heather Simpson
    – David-Benson Pope

    Prosecuted
    – Share Adern
    – Nick Smith
    – Tim Selwyn

    Prosecuted only when it suited the PM
    – Philip Field

    That’s not definitive, but it smells a bit. The problem is, there are too many things that are not definitive, but smell a bit. Add them all up and get a god almighty stench.

    (And as for Philip Field, if Labour relies on his vote, they are as corrupt as he is.)

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  41. lyndon () says:

    Perhaps it might help this argument if, for example, sonic and Andrew both said what they understand these changes to be. It strikes me that Mr Farrar’s summary isn’t sufficiently anything to base a debate on.

    FWIW, you’re also ignoring the way organisations could get themselves deregistered, under this change and I’m guesing under the rules as they stand, for devoting themselves to supporting the government.

    The justice or otherwise would be down to individual cases.

    And, forgive me, I thought we were against the taxpayer subsidising political campaigning?

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  42. DavidW () says:

    This is all piss and wind and would be very difficult to turn into a bulletproof policy even if it was a good idea.

    All you would end up with is a political arm registered under another name to do the political stuff and the charitable institution would truck along as before.

    A bit like the IRA and Sinn Fein really, each pretending not to be a part of the other.

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  43. sonic () says:

    I was assuming that it would be something along the lines of the charity commission that exists in the UK. An independent non-party body that adjudicates complaints about charitable organisations, whose decisions are also open to judicial review.

    Hardly North Korea.

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  44. David Farrar () says:

    Sonic – the problem is all the Commissioners are appointed by the Govt. Make the Commission appointed by Prlt say, and then less of a problem.

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  45. sonic () says:

    No issue with that David, given recent controversy it should not ony be independent but be seen to be.

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  46. David Farrar () says:

    I think that is twice in a day Sonic we have ended up agreeing. This is of concern.

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  47. sonic () says:

    It has been a weird day like that David, I even got a email from Oliver Kamm that started “Well done”…

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  48. Cathi () says:

    Kent Parker said:

    So all the charity would lose is that donations made to them would no longer be tax free.

    Nothing else.

    Not so.

    Once the Charities Commission register has been running for two years, all not-for-profit organisations including trusts and incorporated societies will need to be registered if they want to keep/obtain exemption from income tax.

    NB tax exemption is from income tax only and will not be and never has been exemption from other tax requirements such as GST.

    Tax exemption, once indicated as probably applicable by IRD (which is all the letter you got ever said) is currently policed by self-assessment thereafter. This will no longer be the case. Each organisation/company seeking income tax exemption will need to be registered and complete annual returns to keep their exemption. The returns are more detailed than company annual returns and have questions covering sources of income and types of activity of the entity. The answers to these questions will allow the Commission to assess whether ongoing income tax exemption is warranted.

    I haven’t seen anything on this specifically but I’m picking that if you want tax rebate on donations you make to a charity, that charity will have to be registered.

    For its definition of charity, the Commission continues to rely on the “four heads of charity” as outlined in the Elizabethan act (1601 I think): poverty relief, education, religion, public benefit.

    There has been some debate around the role of advocacy and the inclusion/exclusion of sporting bodies. No clear guidelines have emerged on how the Commission will play the advocacy question, it’ll almost certainly be done on a case-by-case basis depending on the organisation’s other activities.

    This is old news. The Commission has been through a bill, select committees, an Act, regulation formation and finally aims to open its register in February 2007. It’s only now that the press have decided to point out that advocacy-only organisations may (only may) have a problem getting registered.

    Wake up people. The time to comment on this was two years ago.

    DPF said:

    People are confusing the difference between being a not for profit orgn and a charity.

    Plenty of not-for-profit organisations have tax exemption from IRD and will therefore fall under the auspices of the Commission if they want to retain that exemption. People are confusing the difference between being a not-for-profit organisation and not making a surplus – too often the assumption is that NFPs don’t make surpluses and therefore have no income tax liability anyway.

    I think in the past not-for-profit organisations have been getting tax exemption when they are not strictly charities. The fourth head of charity has been loosely interpreted and I believe it is this that will be tightened up.

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  49. Adolf Fiinkensein () says:

    Cathi, thanks for this. I have heard it said that any ‘charity’ which does not distribute it’s income for genuinely charitable purposes is likely to be taxed on undistributed income at the company tax rate.. In other words, use it or lose it. Is this so?

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  50. DavidW () says:

    sonic
    so the email that started “well done..” finished something like “… is how your ass should be roasted for tring to fudge the threads of other people’s blogs” ?

    More generally though,

    Use of the tax system to punish people is really the province of newly emerging Asian democracies. In Sth Korea in the 1990’s for example you would get a tax audit for having a foreign vehicle registered in your name if you were a local. They have grown through that phase. One would have thought our democracy was mature enough not to allow a Government to wield arbitrary power over its citizenry to this extent. It smacks of regression to despotic dictatorship.

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  51. DavidW () says:

    The other mportant plank of a charity is that the donors get some tax relief on their donations whereas NPO’s cannot give that benefit.

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  52. sonic () says:

    Not the sort of thing Ollie Kamm writes David.

    He tends to write more like this

    “Attentive – indeed any – readers will note that ignorance of Kalecki’s Principle of Increasing Risk can be seen as the grotesque sophistry that we have come to expect of Chomsky and his undergraduate cultists. Well, old bean, praise for a high and progressive marginal rate of personal taxation clearly points to rank stupidity allied to Fascism. I repeat: this pseudonymous master-intellect’s missive is to be regarded as support for totalitarianism and anti-Semitism. It will not have been lost on anyone in this ng that Chomsky knew full well that he was promoting the benign nature of a Nazi’s bigotry, because it is no less than the type of lunatic flat-earther conspiracy theory that would appeal to the feeble-minded and pro-fascist, and so is eminently well-suited to a Chomsky ng. Note for record: hatred of western democracies and admiration of totalitarianism amounts to the usual snobbery displayed by Chomsky’s groupies.”

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  53. PhilBest () says:

    I recommend the classic, classic, classic book “The Road to Serfdom”, by Friedrich Hayek. No, we haven’t got gulags – yet. We HAVE got around 40% of voters, SO FAR, who won’t switch their support away from Our Great Leader no matter what she does – and she knows it. One day, if you’re not one of them, they’ll come for you.

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  54. sonic () says:

    So we are on the road to serfdom now Phil….

    Quite, quite mad.

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  55. Anon () says:

    kiwi_donkey: sorry, you are wrong. Field has not been prosecuted. The police have announced an investigation but the word is that they haven’t actually begun that investigation many weeks later, with no interviews of any of the players having begun. In other words, the announcement of the investigation was just a piece of Govt spin – in fact, there is no investigation

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  56. Cathi () says:

    Adolf, I don’t know specifically on that question, let it be said I would not be surprised. I would also not be surprised if any surplus not spent on charitable activities called into question the charitable status of the organisation full-stop – ie the organisation could end up with a tax liability on the whole surplus even if some was distributed to charitable purposes.

    Like I say, I don’t know. It would probably depend on the surrounding circumstances and what else was triggering the alarm on that organisation.

    We don’t want not-for-profit organisations not being able to retain earnings for future development, that would be disastrous.

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  57. Danyl Mclauchlan () says:

    I recommend the classic, classic, classic book “The Road to Serfdom”, by Friedrich Hayek.

    Sweden.

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  58. PhilBest () says:

    Thanks Darryl, Sweden is a good example. Freedom of speech being legislated away. Multiculturalism and cultural relativism leading to building up of massive racial tensions and increasing violence. Private schools banned. A demographically unsustainable generous welfare system, and unsustainably increasing public debt. Fundamentalist Christians getting jailed, and “too strict” parents getting jailed and/or their children forcibly taken off them. Yes, I’d say, watch Sweden.

    This is in spite of the average Swede’s strong sense of duty, derived from their culture. This is the reason that their long trend to liberal socialism hasn’t got a lot messier a lot sooner, like it will, say, in New Zealand.

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  59. Danyl Mclauchlan () says:

    LOL – it’s always amusing to hear wingnuts talk about Sweden. The distopian nightmare state bears little resemblence to the actual country.

    Care to provide some proof that the Swedes have banned free speech or private schools?

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  60. Danyl Mclauchlan () says:

    This is in spite of the average Swede’s strong sense of duty, derived from their culture. This is the reason that their long trend to liberal socialism hasn’t got a lot messier a lot sooner, like it will, say, in New Zealand.

    After all, we’ve only had a strong socialist central government since the mid 19th century. Any day now . . .

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