26/04/23

NEW ZEALAND: Tax report shows ultra-wealthy paying less.

As published on au.news.yahoo.com, Wednesday 26 April, 2023.

The richest families in New Zealand pay tax at about half the rate of an average Kiwi, a new study has found, a disparity likely to kick-start an election debate over inequality.

On Wednesday, Inland Revenue (IRD) published the results of a two-year study ordered by Revenue Minister David Parker into tax paid by extremely high-wealth individuals.

The headline finding was that the super-rich pay a median effective tax rate of 9.5 per cent, including GST.

In contrast, Treasury calculates the comparable rate for an average New Zealander is 20.2 per cent.

Mr Parker said the research "would establish an important basis for any future discussions about tax", including Labour's policy at the upcoming election.

"This internationally ground-breaking research provides hard data showing that the wealthiest New Zealanders pay tax at much less than half the rate of other Kiwis," he said.

"Someone earning a salary of $80,000, with no other income, pays 22 per cent tax on that income, excluding GST."

Most Kiwis earn their income from taxable salary and wages, but for the ultra-wealthy, only seven per cent of their income is taxable as personal income.

The balance of 93 per cent comes from investment returns, including 80 per cent from capital gains.

Capital gains are not taxed in NZ and have long been the subject for heated political debate.

Former prime minister Jacinda Ardern supported a capital gains tax prior to taking office but did not implement one in government after failing to win support from coalition partners NZ First.

She subsequently ruled it out for the rest of her tenure, which finished up in January.

Her successor Chris Hipkins is yet to be drawn, but he said he would not seek to implement one without a mandate from voters.

"We should always look at how we can make the tax system fairer," he said prior to the report's release.

"We won't be leaping to conclusions."

The study looked at around 350 Kiwis who had a net worth north of $NZ50 million ($A46 million), or slightly less but with controlling interests in major businesses.

The rich-listers were required by law to divulge information around their wealth, and 311 did so.

Altogether, the respondents had a collective wealth of $NZ85 billion ($A79 billion).

Mr Parker denied playing the politics of envy.

"This work is not about chasing tax avoiders, nor is it about attacking the rich," he said.

"By providing information to the public ... we can have an informed debate on tax using solid evidence."

Opposition finance spokeswoman Nicola Willis pointed out the irony of Labour's probe into high-wealth individuals when the government was responsible for a massive transfer of wealth to the already rich during the COVID-19 pandemic.

"This is the direct result of the government's decision to allow the Reserve Bank to print tens of billions of dollars through its extended quantitative easing programme and the massive blow out in its own spending, up $1 billion a week since Labour came to office," she said.

"The practical issues with imposing a capital gains tax have not changed. National continues to oppose a capital gains tax."

Greens finance spokeswoman Chloe Swarbrick said the report showed "wealth hoarding" and confirmed the need for a wealth tax.

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