No ideas on creating fairer society

Last updated 07:36 06/09/2012

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Two elements in how New Zealanders like to see themselves - that we're all in this together, and that this is a great place to bring up kids - took a hammering last week.

First, Inland Revenue Department figures showed that slightly more than half of 250 individuals in this country with wealth estimated in excess of $50 million, are able to arrange their finances so that they can legally claim to be earning less than $70,000 a year. This means avoiding the top rate of tax, which currently kicks in at 33 cents in the dollar.

Ironically, one of the main arguments used in the past to justify lowering the top tax rate from 39 cents in the dollar to 33 cents had been that this would reduce the incentive to avoid tax. Clearly not. Most wage and salary earners are not so fortunate, or (perhaps) as unscrupulous.

To critics, this IRD evidence underlined the need for a robust capital gains tax, so that all of this country's wealthy citizens pay their proper share of tax. Even the government's Tax Working Group in 2010 had expressed concerns about the rich avoiding the top tax rate through income sheltering devices such as family trusts.

So far, the government has done nothing about it. At the other end of the social scale, it appears to be just as paralysed by the extent of child poverty in New Zealand.

Even though definitions of poverty can vary, a report last week from an expert panel appointed by the Children's Commission indicated that 270,000 New Zealand children were living in poverty.

In response, the report recommended a universal child benefit for under sixes that would peak at birth when costs were highest (and then gradually reduce) or, instead, a system of tax credits for parents. The report also urged a "Warrant of Fitness" for rental properties in terms of warmth and insulation, a wider food-in-schools programme and the creation of a Child Poverty Act with annual targets to ensure the government of the day remained focused on the need to reduce child poverty.

Fat chance. The Government's immediate response could hardly have been less encouraging. Prime Minister John Key called the suggestion of a universal child payment a "dopey" idea, adding for good measure that "We went away from that some years ago in New Zealand. We have a very targeted system through Working for Families. It's highly proportional to your income, so we make much larger payments to lower income families."

What Key seemed unable to grasp was that children in beneficiary families (who bear the brunt of child poverty) do not receive any relief from Working for Families, because their parents are excluded from it. It was precisely because such children were falling through the cracks that the Children's Commission report had recommended a universal child benefit in the first place. If anyone was being "dopey" here, they seemed to be situated on the ninth floor of the Beehive.

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To all outward signs, the government appears incapable of a credible response on either front. A wide-ranging capital gains tax or a universal child benefit may, or may not, be dumb ideas. Yet having no ideas at all to offer about tax avoidance or child poverty made the government look even dumber.

- Kapiti Observer


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