Taxing our Future
The recently released Tax Working Group (TWG) report “Future of Tax” should more correctly have been labelled “Taxing our Future”. Tax is an incredibly important component of a well-functioning economy and it is good to review our tax structures periodically. Unfortunately, rather than being a visionary document as we might have hoped, the TWG have produced a report that is economically naïve and would, in our view, shift more of the tax burden onto aspirational younger people.
Before looking at some of the problems with the report’s recommendations it might be useful to shed some light on NZ’s current tax framework. Let’s start by looking at the amount of tax that New Zealanders pay. The best measure of this is the tax to GDP ratio which in NZ sits at 32.0% or just below the OECD average of 34.2% and above countries like Australia and the USA at 27.8% and 27.1% respectively. Relative to OECD averages the NZ structure is characterised by higher taxes on personal and company income, rates about average on property taxes and contains no separate taxes relating to payroll or social security contributions. So, all in all, our overall tax burden looks about right …