Parliament

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

Gordon Campbell: On The
America’s Cup

The fact New Zealand now reigns supreme once again in the most sophisticated contest in the world’s most elite sport – yacht racing – can’t help but reflect the trajectory the country has been on since the 1980s...

Elite sport used to feel more like a collective, shared experience. It was our team, composed of people who lived and worked like us. Now, not so much. More>>

 

PM's Press Conference: Red Socks And Secret Tapes

Prime Minister Bill English began his post-cabinet press conference by explaining how well the National Party's annual conference went. He also mentioned today's announcement of changes to the EQC disaster insurance legislation and wished Emirates Team New Zealand well in the America's Cup. More>>

Max Rashbrooke: On How To Make Government More Open

International surveys, while often complimentary, have also pinpointed major weaknesses: political donations are badly regulated, for instance, and appointments to government boards frequently go to those with strong political connections. More>>

In Court: Hamilton Student's Lawsuit Over Climate Change Policy

A law student from Hamilton is preparing to challenge the Government in the High Court on Monday over what she says is a “failure” to properly address climate change. More>>

ALSO:

Gordon Campbell: On The Fallout From The Barclay Tape

This is hardly a case of cleaning out your desk and being turfed out onto the pavement. As others have pointed out, the disgraced Clutha-Southland MP will remain on the public payroll for three months until the election, and for three months afterwards. More>>

ALSO:

 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

Featured InfoPages

Opening the Election
 
 
 
  • PublicAddress
  • Pundit
  • Kiwiblog