Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search

 


Current tax system unfair for many NZ families

Hon Bill English
Minister of Finance


23 March 2010
Media Statement

Current tax system unfair for many NZ families


The current tax system is unfair and inequitable for many hard-working New Zealand families and the Government will address this in the Budget, Finance Minister Bill English said today.

Mr English highlighted in Parliament how the current system can allow a household earning $100,000 a year, with two dependent children, to reduce the tax they pay from $27,500 a year to less than $10,000 a year.

“In reviewing the Tax Working Group’s recommendations, the Government acknowledges the system needs to be fair and have integrity,” he said. “This is most apparently not the case at present, where highly uneven tax rates apply between taxpayers with similar incomes.”

Mr English said a self-employed person earning $100,000 a year would normally pay income tax of more than $27,500 a year on the top marginal tax rate of 38 per cent

But, in certain situations, the current system allowed them to significantly reduce their tax bill by, for example:

• Forming a company owned by another entity (on the current 30 per cent company tax rate), paying themselves a $48,000 salary and reducing their tax bill by $3000.

• Qualifying for Working for Families on this reduced salary with two dependent children, they would receive an extra entitlement of almost $8500 a year.

• Using an interest in a leveraged property investment producing, say, tax losses of $20,000 a year, their personal taxable income is further reduced to $28,000.

“At this point, the total tax paid, on income of $100,000, has fallen below $10, 000,” Mr English said. “In other words, the effective income tax rate is less than 10 per cent – or lower than the lowest personal income tax rate.

“The example is not uncommon. The Tax Working Group found that 10,000 households were reporting investment losses while also claiming Working for Families credits. We are aware of tax advisers actively marketing schemes similar to this.

“The current system lacks fairness and integrity because of the way income is defined and because different tax rates have proliferated.

“In the Budget, the Government will make the tax system fairer by closing this type of loophole. We will make sure that taxable income more accurately reflects true economic income – and that the system is fairer to all taxpayers.”


ENDS

© Scoop Media

 
 
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

 

Plain Packs Plan: Gordon Campbell On Tobacco Politicking (And The TPP Death Watch)

Has Act leader David Seymour got the easiest job in the world, or what? Roll out of bed, turn on the radio and hmm…there do seem to be a lot of problems out there in the world. Must think of something. And so it came to pass that this morning, David Seymour took up his sword and shield to fight for a world that’s about to be denied the rich and vibrant beauty of tobacco advertising. More>>

ALSO:

.


RECENT TPP MEETING:

Professor Ian Shirley: The Budget That Failed Auckland

The 2016 budget offered Auckland nothing in the way of vision or hope and it continued the National Government’s threats against the Auckland Council. Threatening the Council with over-riding its democratic processes if it fails to release land for housing is a bullying tactic aimed at diverting attention away from the fundamental problems with housing in the region. More>>

ALSO:

PM's Post Cab Presser: Budgets, Trusts And Pacific Diplomacy

Today Prime Minister John Key summarised last week’s budget and provided further detail about his upcoming trip to Fiji. He said that there has been “plenty going on” in the last couple of weeks and emphasised the need for Auckland council to facilitate more housing supply. More>>

ALSO:

Max Rashbrooke: A Failure Of Measurement: Inside The Budget Lock-Up

Shortly after the embargo lifted at 2pm news organisations started filing reports claiming that health, and to a lesser extent housing and education, were the ‘big winners’ out of the Budget. It failed to take into account the fact that in most cases the apparent increases were in fact cuts. Because of the twin effects of inflation and population. More>>

ALSO:

DOCtored Figures: Minister Clarifies DOC Budget

“Commentators have overlooked the fact $20.7m of that perceived shortfall is new funding for Battle for our Birds 2016, provided for in last week’s Budget...” DOC also has approval in principle to carry over a further $20m to 16/17 due to unexpected delays in a number of projects. More>>

ALSO:

For The Birds: Gordon Campbell On The Budget

Budgies, so their Wikipedia page says, are popular pets around the world due to their small size, low cost, and ability to mimic human speech. Which is a reasonably good description of Finance Minister Bill English eighth Budget. . More>>

Max Rashbrooke On The 2016 Budget

The best label for this year’s announcement by Bill English might be the ‘Bare Minimum Budget’. It does the bare minimum to defuse potential political damage in a range of areas – homelessness and health are prime among them – but almost nothing to address the country’s most deep-rooted, systemic social problems. Indeed the Budget hints that these problems may get worse. More>>

ALSO:

Gordon Campbell: On Bank Scandals (And Air Crashes)

Last month, the Australian Securities and Investment Commission (ASIC) filed proceedings against Westpac over activities that have some distinct echoes of the Libor scandal. More>>

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
 
Parliament
Search Scoop  
 
 
Powered by Vodafone
NZ independent news