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BRYCE WILKINSON: When debating tax, don’t forget spending quality

An IRD report on effective rates of tax attracted much public attention last week.


It was launched by the Minister of Revenue, David Parker.


In proposing that high income people are not taxed enough, Parker asserted in the report’s foreword that: “New Zealand is not a highly taxed nation”.

This claim is false.

Parker’s case is that we “sit in the middle of the OECD in terms of total taxes as a proportion of the economy.” That is like claiming that an obese person in New Zealand is not obese by American standards. So what?

Member countries of the OECD commonly have big (and problematic) welfare states. This gives them amongst the highest government tax and spending burdens in the world, New Zealand included.

On the Heritage Foundation’s database for 2022, only 31 of 178 countries gathered more in taxes relative to gross domestic product than New Zealand’s 32.3 percent. The ratio for the median country was only 18.5%.

Successful countries can have much lower tax burdens. Singapore’s tax ratio was put at only 13.1% of GDP. Some of its infrastructure we can only envy.

The IRD’s paper illustrates the point that when asset prices are rising fast those who own lots of property gain relative to those who do not.

Everyone has always known this of course. The case for a broader capital gains tax has been debated by government tax taskforces for as long as I can remember.

The Tax Working Group’s 2019 report rehearses the pros and cons. Even tax experts can agree to differ.

The minister argued that it was unfair if the very wealthy did not pay at least as high a proportion of their economic income in tax as everyone else. His example defined economic income to include all unrealised capital gains.

The public is also likely to think it is intolerably unfair to force households to sell the family home, farm or small business to get the cash to pay the tax on a paper capital gain that may be temporary. Most senior politicians know this.


Discussions of tax burdens should not be allowed to distract attention from the elephant in the room – an abundance of ill-justified spending.


Big government is no guarantee of prosperity, literacy, a well-run health system or quality public infrastructure. Sadly, these days New Zealand exhibits this point.



Bryce Wilkinson is a Senior Fellow at The New Zealand Initiative.

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62 opmerkingen


Why does Russia have so many millions, simple answer, it has a flat tax rate of 13 %.

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winder44
winder44
08 mei 2023

Bob was paid $100-00

Tax was 19% 19-00

Balance $81 -00

Bob buys food 31-00

GST 15% 4-04

Product value 26-96

Balance $50-00

Bob pays Jim $50-00

Jim pays Tax19% 9-50

Balance $40-50

Jim buy Fuel 20-00

Tax, duty, & GST 10-35

Product value $9-65

Balance $20-50

Jim buys KFC 9.50

GST 15% 1-24

Product value 8-26

Balance $11-00


Product Value $44.87 Tax $ 44.13


Not as simple as that but. just reflects product value against tax.

Admittedly no value was included for the tax collected, but approx. 35%

of the tax take is absorbed in running cost and ancillary expenses

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Reageren op

Don’t forget the hidden TAXES. !!! Sales Tax and Duty on. Tobacco and Alcohol and new Vehicles & Fuel Tax. And everyone’s favourite GST. So many ways the Gov’t get their income.

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"Member countries of the OECD commonly have big (and problematic) welfare states."

This is the crux of the problem! Welfare is for the needy, not the lazy or greedy! Sometimes people will not get off their backsides and work unless it is too uncomfortable. No one, but the truly needy, should expect to be carried by society. If you are able, but too lazy to work, then a bit of suffering might concentrate the mind!

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Capital is not income and attempting to collect taxes on non-cash "income" leads to a kickback. The former Land Tax was abandoned because of the defaults. I was one of its assessors and knew the groans it was creating.


Excise taxes, the classical over-the border ones, may interfere with commerce but have the hub of providing for the States take for maintenance--if you want goods to enter the country you pay.


GST is an updated version of that where that State gets an agreed percentage of the cash surplus from a commercial exchange. Ultimately the consumers bear the net load. That helps to see that each user of State services pays an equitable charge.

Income taxes can be income levellers…


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Economics 101. Put spendthrift, unworldly no hopers in charge of the treasury and it matters not what sort of tax system you have. They’ll waste everything they are in charge of however much it is and whether tax or borrowed, cause prices for everything to explode and result in abject misery for all.

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