Scoop has an Ethical Paywall
Work smarter with a Pro licence Learn More

Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Tax take from wealthy fell when top rate went up: Treasury

Tax take from wealthy fell when top tax rate went up: Treasury

By Pattrick Smellie

Aug. 3 (BusinessDesk) - Treasury research has found the proportion of all tax paid by the highest earners fell after the 2001 tax changes that took the top personal income tax rate to 39 percent from 33 percent.

Far from its intended purpose of increasing the contribution by wealthy people to the cost of running the government, the 2001 tax increase spurred the highest income earners to find ways of avoiding tax, the "Elasticity of Taxable Income in New Zealand" paper found.

Published on the Treasury website, the research paper tracks the proportion of income tax paid by different income bands between 1994 and 2008, and finds the top 10 percent of income earners had begun to pay an increasing share of total income tax in the years immediately preceding the tax rate increase and peaked at 38.9 percent at the time the tax rate increase was announced.

"However, following introduction of the 39 percent rate, it fell to 33.9 percent in 2001," the report says. "Between 2001 and 2009, the share of taxable income obtained by the top decile fluctuated between 33.7 percent in 2008 and 34.6 percent in 2005."

Treasury warned the results should be treated with caution, but that it showed "the elasticity of taxable income is substantially higher for the highest income groups", meaning the higher the income bracket, the more capacity that group of earners has to manipulate declared income.

Advertisement - scroll to continue reading

Are you getting our free newsletter?

Subscribe to Scoop’s 'The Catch Up' our free weekly newsletter sent to your inbox every Monday with stories from across our network.

"For lower deciles of the income distribution, the elasticity was found to be negligible," the report found.

Men had greater opportunity than women.

"This may be largely because the taxable incomes of men are systematically above those of women," the researchers say. "Changes in the timing of income flows for the higher income recipients was found to be an important response to the announcement of a new higher-rate bracket."

The Inland Revenue Department last year won a landmark case against two Christchurch orthopaedic surgeons who declared dramatically lower incomes after the 2001 income tax changes than in previous years.

(BusinessDesk)

© Scoop Media

Advertisement - scroll to continue reading
 
 
 
Business Headlines | Sci-Tech Headlines

 
GenPro: General Practices Begin Issuing Clause 14 Notices

GenPro has been copied into a rising number of Clause 14 notices issued since the NZNO lodged its Primary Practice Pay Equity Claim against General Practice employers in December 2023.More

SPADA: Screen Industry Unites For Streaming Platform Regulation & Intellectual Property Protections

In an unprecedented international collaboration, representatives of screen producing organisations from around the world have released a joint statement.More

 
 
 
 
 
 
 
 
 
 
 
 

Join Our Free Newsletter

Subscribe to Scoop’s 'The Catch Up' our free weekly newsletter sent to your inbox every Monday with stories from across our network.