Tax freedom day falls again

Last updated 00:58 20/05/2008

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Depending on how you view it, the average taxpayer will stop working to pay this year's tax bill on May 21.

That's according to accounting firm Staples Rodway.

If you're more of the Business Roundtable's disposition, Tax Freedom Day has already been and gone on April 29.

The difference lies in the measurement criteria Staples Rodway managing director Roger Thompson said.

"We look firstly at GDP...and then we look at the amount of tax that's being collected by central government, local government and so on."

The Roundtable's calculation was based on central government core expenditure and if local government spending was added into the mix June 4 became the date.

Mr Thompson said he felt his company's was the more accurate measure, but expected the two dates over time would end up being the same.

"The central difference between ours and the Business Roundtable's is that theirs doesn't change if there's a budget deficit or surplus, but over a period of time surpluses and deficits must even out."

Staples Rodway says Tax Freedom Day also came five days earlier this year, due to slower growth in tax revenue and stronger nominal GDP growth.

However, the biggest contributor to the improvement in GDP growth was an increase in inflation, not real activity, he said. More than half of nominal GDP growth represents inflation.

Despite the improvement, New Zealand's date was still nine days longer than the Australians - a gap which widened to more than three weeks during 2004-2007.

While corporate profitability in New Zealand was being squeezed by cost pressures - affecting tax revenues - individual tax revenue continued to be underpinned by healthy wage increases and very low levels of unemployment.

"The challenge is now for Dr Cullen to deliver meaningful tax cuts in Thursday's budget so as to bring back Tax Freedom Day even further," Mr Thompson said.

According to the Staples Rodway gauge, Tax Freedom Day falls in the UK on June 4, while in the US it came on April 24.

- NZPA

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