Before that though, a quick glance at the Crown Accounts for 2023/24 FY published on October 10th. What they comprehensively show is that the country is living beyond its means.
Government income was $167.3 billion. It spent $180.1 billion.
I’m no accountant but you don’t need to be to realize that a country, a company or even a household cannot keep spending more than it earns. Yet that’s what this country has done – at an outrageous rate – since 2017, when Labour came to power.
In those six years, Crown revenue increased from $110 billion to $167.3 billion. The tax take component of that was $80.2 billion in 2017 increasing to $129.3 billion this year.
Seems like we’re paying plenty of tax already eh?
But here’s the killer. Crown expenditure increased from $104 billion in 2017/18 to $180.1 billion in just six years! What the hell did we spend it on??
Between 2017/18 and 2023/24 the Crown increased its income by $57.3 billion - more than a billion dollars extra a week. Where did it go?
Did we put it in the bank? Did we pay down some debt? Did we improve our services?
No, no and no.
We spent it all, and we borrowed some more. While there was more than a billion dollars a week extra coming in during 2024 than in 2018, we were spending more than a billion and a HALF extra each week.
The government has increased its share of spending in the economy by a massive 7.6 percentage points, probably the largest expansion of the state spending in 80 years.
Of course you see the benefits of all that extra spending don’t you? In our hospitals and schools and roads ?
Oh, maybe not.
So don’t tell me this country needs to introduce new taxes or make changes to the way we are taxed. What we need is much better economic and fiscal management so that we spend more efficiently and try to live within our means.
But now let’s see who pays income tax in New Zealand.
Last year Robin Oliver, the former IRD Deputy Commissioner, released a report through his new consultancy OliverShaw which showed that those earning over $70,000 in 2021 made up 21 percent of taxpayers but paid 68 percent of income tax!
Breaking it down even more the figures show those making between $180k and $300K represented less that 2 percent of taxpayers but paid nearly 10 percent of the income tax take.
On the other side of the ledger, a study back in 2016 showed over 660,000 households – around 40 percent of the country – received more in tax credits and other benefits than they pay in income tax.
I doubt those figures have changed in eight years. It might even be a bigger share of the nation’s households.
All up 2,606,670 taxpayers earn less than $50,000 a year.
At the other end of the scale just 51,850 New Zealanders earn more than $250,000 a year.
So what share of the income tax pie do the respective groups pay?
If you’re one of the highly paid 33,000 taxpayers earning over $300,000 a year you’re in a group contributing $6.27 billion to the IRD coffers.
So less than 1 percent of the country’s 3.8 million taxpayers are handing over around 5 percent of the tax revenue.
There are all sorts of statistics to show the so-called “rich” or well-paid already pay their fair share. Four years ago the largest amount of income tax – about a quarter of the total – was paid by the 3 percent of taxpayers who earned more than $150,000 a year.
That year 56 percent of income tax was paid by those making $80,000 a year or more.
Yet the lefties keep on with this endless rant – the wealthy should pay their fair share.
Ever realized that they already do – and then some? How much do the socialist-marxist politicians and their supporters want to rape and pillage the only group in the country that makes a real taxpaying contribution?
Here’s why a CGT is a stupid and unfair idea:
In those six years, Crown revenue increased from $110 billion to $167.3 billion. The tax take component of that was $80.2 billion in 2017 increasing to $129.3 billion this year.
Seems like we’re paying plenty of tax already eh?
But here’s the killer. Crown expenditure increased from $104 billion in 2017/18 to $180.1 billion in just six years! What the hell did we spend it on??
Between 2017/18 and 2023/24 the Crown increased its income by $57.3 billion - more than a billion dollars extra a week. Where did it go?
Did we put it in the bank? Did we pay down some debt? Did we improve our services?
No, no and no.
We spent it all, and we borrowed some more. While there was more than a billion dollars a week extra coming in during 2024 than in 2018, we were spending more than a billion and a HALF extra each week.
The government has increased its share of spending in the economy by a massive 7.6 percentage points, probably the largest expansion of the state spending in 80 years.
Of course you see the benefits of all that extra spending don’t you? In our hospitals and schools and roads ?
Oh, maybe not.
So don’t tell me this country needs to introduce new taxes or make changes to the way we are taxed. What we need is much better economic and fiscal management so that we spend more efficiently and try to live within our means.
But now let’s see who pays income tax in New Zealand.
Last year Robin Oliver, the former IRD Deputy Commissioner, released a report through his new consultancy OliverShaw which showed that those earning over $70,000 in 2021 made up 21 percent of taxpayers but paid 68 percent of income tax!
Breaking it down even more the figures show those making between $180k and $300K represented less that 2 percent of taxpayers but paid nearly 10 percent of the income tax take.
On the other side of the ledger, a study back in 2016 showed over 660,000 households – around 40 percent of the country – received more in tax credits and other benefits than they pay in income tax.
I doubt those figures have changed in eight years. It might even be a bigger share of the nation’s households.
All up 2,606,670 taxpayers earn less than $50,000 a year.
At the other end of the scale just 51,850 New Zealanders earn more than $250,000 a year.
So what share of the income tax pie do the respective groups pay?
If you’re one of the highly paid 33,000 taxpayers earning over $300,000 a year you’re in a group contributing $6.27 billion to the IRD coffers.
So less than 1 percent of the country’s 3.8 million taxpayers are handing over around 5 percent of the tax revenue.
There are all sorts of statistics to show the so-called “rich” or well-paid already pay their fair share. Four years ago the largest amount of income tax – about a quarter of the total – was paid by the 3 percent of taxpayers who earned more than $150,000 a year.
That year 56 percent of income tax was paid by those making $80,000 a year or more.
Yet the lefties keep on with this endless rant – the wealthy should pay their fair share.
Ever realized that they already do – and then some? How much do the socialist-marxist politicians and their supporters want to rape and pillage the only group in the country that makes a real taxpaying contribution?
Here’s why a CGT is a stupid and unfair idea:
1. The country already collects enough tax. The Government has to learn to spend it better.
2. The family home will always be exempt from a CGT because politically a home is a no-go area for tax.
3. Only assets purchased after a CGT becomes law will be subject to the tax. Otherwise there will have to be a massive valuation exercise on all liable assets, a process which will be time consuming and subject to rorting and appeal.
4. Because of the usual time lag between an asset purchase and a sale, a CGT is likely to take some considerable time before any meaningful revenue is collected.
5. Those in the business of buying and selling property already pay income tax on their profits.
6. Is a CGT only liable on a second house? What about other assets? Art ? Shares ? Cars? For many, their Kiwisaver is their biggest asset. The money invested is after-tax income, the investments inside the fund are taxed and the return is therefore tax-exempt. Surely there wouldn’t be a tax grab on the final payout would there?
A CGT strikes me as nothing more than an envy tax, which will do nothing to close the gap between rich and poor, do nothing to make houses more affordable (based on overseas evidence anyway) and as most assets liable for a CGT would be owned by higher income earners, this is another hit on the group who already pay, by far, most of the income tax in this country.
Anyway, sometimes assets decrease in value. Has there ever been a question asked about a tax credit in that circumstance?
CGT is a nonsense that Labour and the left will preach to their choir.
It’s just confounding that so many business leaders, including those two bank CEOs, think we need it in the interests of fairness.
The numbers above suggest we already have a very fair tax system, which is possibly even skewed against high income earners.
A party campaigning on a CGT in 2026 will be swamped at the polls.
Peter Williams was a writer and broadcaster for half a century. Now watching from the sidelines. Peter blogs regularly on Peter’s Substack - where this article was sourced.
14 comments:
The Left will not listen - they know no other economic strategy than to redistribute wealth. This is the big danger - when the NZ economy is so weak.
And....... major demographic shift is coming ( European exodus - vs Asian arrivals). The 83 % who pay the lion's share will look very different and may be less willing to pay when they understand the emerging power structure.
Your points are well made, Pete. The number of people getting tax credits is shocking, as is the imbalance in the tax take.
However - here's another perspective:-
If I run a business to make money by (for example) buying second hand cars and re selling at a profit, I pay tax on that profit.
By contrast, If I buy second hand houses / properties and resell at a profit, I pay NO TAX !!
Is that a fair and equitable system?
We already have a CGT. When rates are calculated upon the land and improvements value everytime QV gives your property a higher value the rates reflect this. Even when that value is not even realised every time your valuation is done your pay, pay, pay.....
To be fair, my example above is very much simplified. In reality, the labyrinthine complexity of enforcing CGT would be a nightmare (= a lawyer's delight !)
As the right are fond of repeating, all taxation is theft. That's why any tax system needs to fairly distribute the tax burden over as wide a base as possible to ensure every member of society has an equal risk of being taxed. GST is a fair tax - everybody has an equal chance of paying it and the more you buy the more tax you pay. Income tax is not a fair tax because anyone with a clever accountant can avoid paying it, in part or altogether by structuring their finances to earn income from untaxed capital sources. Williams repeats the common misapprehension that the rich are being targeted. Chasing untaxed capital gains is a game the whole country can play, although the rich and famous are certainly better at it. But the more tax revenue that is lost by some folk gaming the system, the more income tax has to be paid by the middle-income wage and salary earner. And that's not fair.
Good points Peter, but Doug also makes a very valid one. But meantime, since we'll be paying for the left's economic incompetence for decades to come, anything that reduces their chances of re-election is all good by me. Now, if only that proved so for the Greens? Despite their constant stupidity, nonsense identity politics, and corruption, they seem to keep garnering more votes. One can only assume we have another epidemic sweeping the country - one that infects the brain, compromising rational thought and, more obviously, common-sense and decency.
Doug , Check with IRD as you may find you can argue your way through one flip purchase but if rapid flipping properties shows to be profitable then your accountant will I am sure suggest you set aside taxation to IRD. Long term rental property business is quite different though as you are not flipping them.
I am sure that Labour and the left in general know full well that a CGT would be a complete nonsense in a gradually deteriorating economy. Its only purpose would be to accelerate this decline. The reduction of the economy and the destruction of the country are the real goals.
This is why they (corporate government/central bank) will increase their cunning stealth tax (inflation) by borrowing more fiat currency into existence. This of course will devalue the dollar. We ain’t seen nothing yet.
So you’re saying that income tax is easily avoided, so the solution is higher income tax?
Unknown suggests that higher income tax is the solution to income tax avoidance. Strange logic. If you hike the rate of income tax, those who are paying nothing now will continue to pay, well, nothing. Far more sensible to widen the definition of income to include capital gains, thereby spreading the total tax burden over a wider base and allowing for an overall reduction in tax rates.
Forget CGT. Too cumbersome and after accountants and lawyers have taken their cut, Govt doesn''t get much. We need higher GST, eg 20% (easier to work out than silly 15%) and a tax free threshold on income. Much more efficient, and harder to rort without getting caught
Personally I have no issue with taxation being discussed; as long as we largely accept that we have a reasonable system now, one that avoids complexity compared to those of many other nations. If, for example, a CGT looks possible or practical, we must ensure that it doesn’t add to our overall taxes, nor cause difficulties (the infamous ‘unintended consequences’). We have a consumption tax (GST) now, and company tax, income tax and so on. All I ask is that if a CGT is to be adopted, we the general public have understood the ramifications, and have agreed to the format intended. No misinformation, no tricks - a clear majority citizen decision.
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