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

 


Significant income redistribution after tax reforms

Hon Bill English

Minister of Finance


28 May 2014

Media Statement
Significant income redistribution after tax reforms

New data indicates New Zealand’s income tax and support system continues to provide significant income redistribution, with households earning more than $150,000 a year forecast to pay 74 per cent of net income tax in 2014/15, compared with 58 per cent in 2008/09.

“Four years after the Government’s comprehensive tax reforms, latest data confirms that New Zealand’s income tax and support system significantly redistribute incomes to households in need,” Finance Minister Bill English says.

“It is now clear that higher income households are paying a larger share of income tax than they were in 2008.”

“As I’ve said previously, the Government has maintained a redistributive income tax and income support system that supports low and middle income families and helps New Zealanders through times of need. So at any particular time, a large number of households effectively don’t pay income tax,” Mr English says.

“The amount these households pay in income tax is exceeded by the amount they receive from welfare benefits, Working for Families, paid parental leave and accommodation subsidies. That’s entirely appropriate for those families genuinely in need.”

Using data from the Household Economic Survey, Treasury has updated information provided last year to include forecasts for the 2014/15 tax year.

The Treasury estimates that this year households earning over $150,000 a year – the top 15 per cent of households by income – will pay 49 per cent of income tax.

But when benefit payments, Working for Families, paid parental leave and accommodation support are taken into account, these 15 per cent of households are expected to pay 74 per cent of the net income tax. And that is before New Zealand Superannuation payments are counted.

It also excludes the impact of other aspects of the tax changes in 2010, including tightening property tax rules and compliance, and increasing GST.

By contrast, households earning under $60,000 a year – which is just under half of all households – are expected to pay 9 per cent of income tax.

“When we take income support payments into account, as a group they will actually pay no net income tax at all,” Mr English says.

“That’s because the $2.5 billion of income tax they are expected to pay will be more than offset by the $7.3 billion they will receive in income support.

“It’s appropriate to maintain a tax and income support system that helps low and middle income households when they most need it.

“But people who call for even greater transfers to low income families, or who call for the top tax rate to be raised, need to be aware of how redistributive the tax and income support system already is,” Mr English says.

“This also highlights the importance of Government policies to support people out of welfare and into work.”

Note: These figures focus on income tax and some of the main government cash transfers. The latest detailed study of Government taxation and expenditure up to 2010 shows even greater amounts of redistribution and can be found at:

http://igps.victoria.ac.nz/publications/files/2d6039de603.pdf



Click for big version.

© Scoop Media

 
 
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

 

Sugar: Auckland Leisure Centres Axe Unhealthy Drinks

Auckland Council is to stop selling drinks that are sweetened by sugar from vending machines at its leisure centres in a bid to try to reduce obesity and type 2 diabetes... More>>

ALSO:

Gordon Campbell: On Todd McClay’s Faulty Memory

Time and again, whenever an issue arises the initial response by government is to deny or diminish the problem – nothing to worry about here, everything’s OK, move on. Then, hang on. In line with the usual pattern, as embarrassing details emerged into daylight, the story changed. More>>

ALSO:

Labour's 'Future Of Work': Major Reform Of Careers And Apprenticeships

The next Labour Government will transform careers advice in high schools to ensure every student has a personalised career plan, Leader of the Opposition Andrew Little says. More>>

ALSO:

State Investments Management: Treasury Likes IRD, Not Education Or Corrections

The Inland Revenue Department has scored an 'A' in the first tranche of the Treasury's investor confidence rating for state agencies that manage significant Crown investments and assets, gaining greater autonomy as a result, while the Corrections and Education ministries gained a 'C' rating. More>>

ALSO:

Govt Goal: NZ To Be "Predator Free" By 2050

Prime Minister John Key has today announced the Government has adopted the goal of New Zealand becoming Predator Free by 2050... “That’s why we have adopted this goal. Our ambition is that by 2050 every single part of New Zealand will be completely free of rats, stoats and possums." More>>

ALSO:

Gordon Campbell: On The IOC’s Treatment Of Russian Sport, And Lone Wolf Terrorism

A blanket ban on Russian athletes would also have exposed the IOC to criticism that its treatment of Russia would have been marked contrast to its treatment say, of the track and field team from Kenya – a country about which the IOC has very similar doping concerns. More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
 
Parliament
Search Scoop  
 
 
Powered by Vodafone
NZ independent news