Scoop has an Ethical Paywall
Licence needed for work use Learn More

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


Gift duty: A check on widespread tax avoidance?

Gift duty: A check on widespread tax avoidance?

Published: December 9, 2010

by Russel Norman

Frog Blog

The Green Party opposed the first reading of the Taxation (Tax Administration & Remedial Matters) Bill last night on the grounds that the Bill will abolish gift duty—a left-over tax from a time when New Zealand had estate duties.

Gift duty was designed to prevent people giving away all their wealth on their death bed to avoid paying estate duty. Estate duty was abolished in 1992.

Inland Revenue estimate that New Zealanders today spend up to $70 million a year on fees to set up gifting programmes to avoid paying the duty. (Gift duty kicks in when people gift more than $27,000 per annum.) As a result, gift duty only raises $1-2 million in tax revenue each year. If you believe IRD’s figures, gift duty is a very inefficient tax that serves only to make lawyers and accountants rich, so shouldn’t we get rid of it?

Maybe, but tax efficiency isn’t the only way to measure the worth of a law. Gift duty has incidentally acted as a check on the amount people can move into tax avoidance vehicles like trusts. Trusts can be used for the purposes of tax minimisation, defeating creditors, lowering personal worth to qualify for Working for Families, or depriving partners of their matrimonial property rights.

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.

The extent that trusts are being used for such purposes is not yet known. The Law Commission is currently reviewing trust law but this Bill will precede their eventual findings by over a year.

The Government clearly has the process all wrong; they’re abolishing gift duty before they understand the way it’s acting as a check to all kinds of bad behaviour. Abolishing gift duty poses a real risk to the tax base; this Government is acting with imprudent haste.

Finally, the IRD’s own comments on the move are worth noting:
We believe that gift duty does not fulfil its current objectives and the risks of its repeal are low. However, it is not possible to precisely determine the extent to which gift duty alleviates issues such as income tax minimisation, social assistance targeting and defeat of creditors. Therefore, it is important that affected government agencies monitor the effects of gift duty repeal on their areas and make any necessary operational changes.

The Taxation (Tax Administration & Remedial Matters) Bill hasn’t a single special monitoring provision to ensure the abolition of gift duty isn’t detrimental to the integrity of the tax base. That’s simply inexcusable.


© Scoop Media

Advertisement - scroll to continue reading
Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On National Spreading Panic About The Economy

It is a political strategy as old as time. Scare the public with tales of disaster and stampede them into supporting your ideological agenda because they believe There Is No Alternative. Yet, if the NZ economy truly is as “fragile” as PM Christopher Luxon says it is... Then how come New Zealand has enjoyed a double AA+ credit rating from the international rating agencies for so long? If we have truly been in the thrall of incompetent tax, spend and borrow extremists for the past six years, how come our net government debt burden is only in the middling average of OECD countries, and how come our government debt-to-GDP ratio – however you measure it – is less than half the average for the Asia-Pacific region?..


Labour: Grant Robertson To Retire From Parliament
Labour List MP and former Deputy Prime Minister and Minister of Finance Grant Robertson will retire from Parliament next month, and later in the year take up the position of Vice Chancellor of the University of Otago... More

Government: Budget Will Be Delivered On 30 May

Plans to deliver tax relief to hard-working New Zealanders, rebuild business confidence, and restore the Crown’s finances to order will be unveiled on 30 May, says Nicola Willis... More

Government: Humanitarian Support For Gaza & West Bank

Winston Peters has announced NZ is providing a further $5M to respond to the extreme humanitarian need in Gaza and the West Bank. “The impact of the Israel-Hamas conflict on civilians is absolutely appalling," he said... More

Government: New High Court Judge Appointed

Judith Collins has announced the appointment of Wellington Barrister Jason Scott McHerron as a High Court Judge. Justice McHerron graduated from the University of Otago with a BA in English Literature in 1994 and an LLB in 1996... More




InfoPages News Channels


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.