Trade Me founder says tax burden falls on workers
One of New Zealand's richest men says he effectively pays no tax.
Sam Morgan, who created online auction website Trade Me in 1999 and sold it in 2006 for more than $700 million, has criticised the tax system as unfair to "working people".
Flush with tax-free cash from the sale of Trade Me, he said the system meant he effectively dodged the tax man. "I was lucky enough to sell my company in a country with no capital gains, so I paid no tax on the sale.
"Now I've got no income effectively, because I don't have a proper job, so the tax that I pay is minimal.
"The tax I do pay, I throw money into my charitable foundation. I can't touch that money, it is for charitable purposes. I pay basically no tax. And that's not right, but what am I supposed to do?"
Mr Morgan, 32, was estimated to have made at least $227m from the sale of his business to Australian media company Fairfax, publisher of Stuff.co.nz and The Dominion Post.
He is now a member of the Fairfax Media board. According to the last annual report, a non-executive director earns about $155,000 (A$120,000) a year.
Mr Morgan is also a director on the boards of Tourism New Zealand and the online businesses Xero and Sonar6.
According to a National Business Review rich list published last July, he boosted his wealth by $30m to $290m in the previous 12 months, to become Wellington's third-richest behind Sir Peter Jackson and the Todd family.
His admission that he effectively does not pay tax was made in an interview published on the SciBlogs website.
Mr Morgan said the idea of a 25 per cent flat tax rate promoted by his father, economist Gareth Morgan, was part of a "quite hardcore" manifesto. "The amount of tax people pay in different areas is not fair. The people that pay the most tax are working people."
Revenue Minister Peter Dunne refused to comment on Mr Morgan's case, but said tax reforms due to be unveiled next month would cover his concerns. "I am not going to get into commenting whether he should or should not be paying tax. But I will say the tax reforms are designed to make the system fairer and to ensure we get from people who should be paying tax a fair share."
Up to $4 billion in personal tax cuts could be delivered in next month's Budget as the Government looks to raise GST and end some tax breaks on property.
John Peterson, a tax expert from legal firm Minter Ellison, said a capital gains tax would discourage people from selling businesses.
"Why would you sell your business knowing that when you do so you will lose a huge whack of cash? People like Sam Morgan should not be punished for their success.
"There is some debate at the moment about whether we should look at taxing people each year on their net worth, rather than their income."
It was quite common for people to sit on a "nest egg" made from selling their business and not pay tax, he said. It was also possible for a person to donate their income straight to a charitable foundation and pay tax after any rebates and tax credits were deducted.
The Dominion Post