Wednesday, April 27, 2022

Point of Order: Under-taxing the wealthy is a challenge for our Revenue Minister – but evidence for a new policy will be destroyed

Having got things admirably correct with his opinion as Attorney-General on the wretched Rotorua local body bill being promoted by Tweaker Coffey, it looked like David Parker had stumbled as Revenue Minister

The impression of a stumble was given by a Stuff headline which read Revenue Minister David Parker lashes very wealthy for being undertaxed, calls for new tax principles

But if someone is being undertaxed, very wealthy or not, shouldn’t someone at the Inland Revenue Department be hauled into the Minister’s office to explain what’s going on?

And if it turns out that the undertaxed individual is breaking the law, then the next step is clear. Prosecution is the path to be taken.

If the fault lies with the law, then the next step is clear, too, albeit on a different path. In this case, the law must be changed.

It seems Parker has twigged to the idea of changing the law because the Stuff report went on to say he intends to introduce a bill which would set out principles of fairness in the tax system.

The report says:

Speaking at the Victoria University in Wellington, Parker said authorities had “virtually no idea what rate of tax is paid by the very wealthy”.

“We do know the rate paid by wage and salary earners and by small business owners.”

Parker further said New Zealand is a country with inequality.

“More than two thirds of all financial assets are held by the top 5%,” he said.

But we knew about those sorts of inequalities already – didn’t we?

And wealth aggrandisement is one thing. Under-taxing is another.

So what’s the issue?

Point of Order went to the Beehive website to read Parker’s speech and find out for ourselves what is bugging him.

Alas, the speech has not been posted. The government perhaps wants to avoid Point of Order’s scrutiny of it.

In the absence of the official version of the speech, we are dependent on the Stuff account.

This tells us the Labour Government has “no secret plan” to introduce new taxes, like a capital gains or wealth tax.

Great. But Parker does give us cause to be suspicious because he mentions the collection of information which later will be destroyed.

Stuff says

The new bill, to be called the Tax Principles Act, was part of Parker’s work over the past few years looking into the wealth levels of the richest New Zealanders and how much tax they pay.

He said the research would inform future tax policy advice and development.

”The information collected will be securely held separately from Inland Revenue’s other systems. Only officials working on the project will have access to the individualised information, which will be destroyed at the end of the project,” he said.

“What it will do is allow any future tax policy development to be based on solid evidence.”


But the evidence will have been destroyed before analysts can get around to examining the tax policy.

Parker was given $5 million over two years in last year’s budget for the research., by the way.

The Stuff report goes on to say he described GST, a 15% tax added when people buy goods and services, as a regressive tax because it takes a larger percentage of income from low-income earners than from high-income earners.

But if taking the same percentage of income from low-income earners as is taken from high-income earners is Parker’s objective, then (ahem) – may we suggest a flat tax?

Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton.

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