The opposition like to hate on the rich, wanting to tax them even harder. Unfortunately, there aren’t enough of them to do that and, furthermore, 40% of this country don’t even pay any taxes once you include all their subsidies.
More than one in four households are contributing nothing to New Zealand’s tax take.
A table from Finance Minister Bill English’s office shows 663,000 households – or 40 per cent – receive more in tax credits and other benefits than they pay in tax. Thousands more are neutral contributors, or are close to it.
[…]
[T]he top 3 per cent of individual income earners, earning more than $150,000 a year, pay 24 per cent of all tax received.
Mark Keating, a senior lecturer in tax at the University of Auckland Business School, said the idea of “net tax” – the amount paid after credits and benefits were deducted – was hard for some people to get their heads around.
But he said people who received any benefit, or superannuation, as well as people who worked and met the criteria for Working for Families tax credits could end up with a net result that was negative or neutral.
“If you are working and earn $1000 a week but have four children, you might pay $200 a week in tax but get back $300.
“They are net receiving. It’s quite a strange system. It’s not common overseas because it’s quite bureaucratic.”
Peter Vial, New Zealand tax leader at Chartered Accountants Australia and New Zealand, said some people would be surprised to find they were not paying more than they received.
“It’s not a calculation they would do automatically. In an ideal world it would be good if there was more knowledge about the interaction between the tax and benefit systems.”
Many were unaware how dependent New Zealand was on a small group of high-earning, salaried individuals to pay a large chunk of the tax, he said.
“We never talk about that. It’s always a risk to our tax base because people are mobile and can move. But New Zealanders want a progressive tax system, the more you earn the more you pay.”
The tax system is lopsided and unfair. When the top 5% pay nearly a quarter of all taxes collected that is outrageous.
We need to do several things in my belief: remove all the tax credits entirely and lower everyone’s taxes as a result, and introduce a tax-free threshold (we effectively have one anyway).
One other way that would focus people’s minds is to make voting available to net tax payers…net tax takers can miss out.
There is still something terribly sad going on when 40% of people don’t pay any taxes. People bang on about corporates not pulling their weight. Well, 40% of this country’s individuals don’t pull their weight either.
– Fairfax
