Figures suggest wealthy carry tax burden
How much tax do you pay?
The kneejerk answer is always too much, but parliamantarians on the Finance and Expenditure Committee tried to find out what the effective tax rate of the very wealthy was.
The estimate of the Inland Revenue is in 2010/11 when income tax was 38 per cent for the highest-earners for the first part of the tax year, but dropped after October 1 to 33 per cent rate taxpayers, was that the "high net wealth" individuals tracked by the IRD, who each control $50 million or more of wealth, paid 33.9 percent for their personal income, and 28.2 percent when other taxable income was included, such as that earned through a trust, a PIE, or a company.
The committee was slightly sceptical about whether that truly reflected their income, in the broadest colloquial sense, as the wealthy are able to structure their affairs to make money which is not classified as income for tax purposes, most notably through capital gains.
How do the effective tax rates of the wealthiest contrast to New Zealanders of more modest income.
The parliamentarians found it was more difficult to calculate an average tax rate for middle income New Zealanders, but an indicative comparator for someone on an average wage was 17.9 per cent, although Working for Families entitlements would reduce the average net tax rate to 8.4 per cent for a single-earner parent with one child, or 2.3 per cent with two children.
Since the changes in tax rates things will have changed a little, and the wealthiest will have seen their effective tax rates drop on paper at least, because the IRD has been strenuously pursuing them to extract more tax, and the IRD expects to bring in an extra half a billion dollars in revenue from the high net wealth individuals in the next 10 years through its crackdown.
But actually, when it comes to income taxes, New Zealand is something of a tax haven, because when Working for Families rebates are taken into account, 40 to 50 percent of households "effectively pay no net income tax, and roughly 40 to 50 percent of total net income tax is paid by those in the top 10 per cent income bracket, suggesting that the tax burden falls most heavily on the wealthy".
- © Fairfax NZ News
The 50c increase in the miminum wage is:Related story: Minimum wage up 50c