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

Patience: Drive Safe

Be patient before passing is the AA's message for drivers this Labour weekend.

"People taking crazy risks to get past other vehicles is one of the most dangerous things on the road,” says AA spokesperson Dylan Thomsen.

“The weather is looking good for the long weekend so the roads will be busy. Unfortunately, that also increases the chances of people getting frustrated and trying a risky passing manoeuvre. When they get past, there will probably be more traffic up ahead anyway so it won’t get people there faster.” More>>

 
 

Parliament Today:

Employment Relations Bill: Govt Strains To Get Tea Break Law Through

The Government has been left with egg on its face - failing to get its much-vaunted, but hugely unpopular, meal break law passed in the first week of its new term, Labour spokesperson on Labour Issues Andrew Little says. More>>

ALSO:

Guns: Police Association Call To Arm Police Full Time

"The new minister gave his view, that Police do not need to be armed, while standing on the forecourt of parliament. The dark irony was that the interview followed immediately after breaking news of a gunman running amok in the Canadian parliament in Ottawa..." More>>

ALSO:

Gordon Campbell: On The Tokenism Of New Zealand's Role Against Islamic State

Our contribution against IS will be to send SAS forces to train the Iraqis? That’s like offering trainers to General Custer just as the 7th cavalry reached the Little Big Horn. More>>

ALSO:

Scoop Business: Shell And Todd Caught Drilling Without Approval

Multi-national oil company Shell’s New Zealand arm and local energy giant Todd Energy have breached the new law governing New Zealand’s Exclusive Economic Zone, the Environmental Protection Authority says in an Oct. 10 document released by the Green Party. More>>

ALSO:

Gordon Campbell: On Pharmac, Gough Whitlam And Sleater-Kinney

We’re not at the outset of these negotiations. The outset was six years ago, and negotiators were hoping to have some sort of ‘framework’ deal finished in time for the APEC meeting in a few weeks’ time. These ‘extreme’ positions are what we’ve reached near the intended end of the negotiations… More>>

ALSO:

PM Of Many Hats: Questions, No Answers On Whale Oil

Dr RUSSEL NORMAN (Co-Leader – Green) to the Prime Minister: How many times since November 2008 has he spoken with blogger Cameron Slater on the phone and how many times, if any, has he texted him?
Rt Hon JOHN KEY (Prime Minister): None in my capacity as Prime Minister. More>>

ALSO:

Aussie Investigation Dropped: Call On Minister McCully To Pursue The Case Of Balibo Five

West Papua Action is deeply concerned at the lack of any clear outcome from the Australian Federal Police inquiry into the 1975 deaths of the ‘Balibo Five’ including NZ journalist Gary Cunningham. More>>

ALSO:

'Feed The Kids' Bill: Metiria Turei To Lead Fight On Feeding Hungry Children

Green Party Co-leader Metiria Turei is urging all political parties to support the Feed the Kids Bill which she inherited today from Mana leader Hone Harawira. More>>

ALSO:

Parliament Today: State Opening Of Parliament

The House sat at 10.30am on Tuesday before MPs were summoned to hear the Speech from the Throne in the Legislative Council Chamber. More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
Parliament
Search Scoop  
 
 
Powered by Vodafone
NZ independent news