Yesterday the IRD released its landmark report on the ultra-rich in New Zealand and the tax they pay. It starkly illustrates the extent to which the wealth of the ultra-rich has skyrocketed in recent years. The richest 311 families have a combined wealth of $85 billion, and own a quarter of the country’s assets.
Their income in the last year of the study, 2020-21, was $14.6 billion. But the rate of tax they paid on this income was, according to IRD, only half of what the average taxpayer pays. According to business journalist Bernard Hickey, if those ultra-rich families paid the same rate of tax as middle-income New Zealanders, the government would’ve raised an extra $3.4 billion in tax in that one year.
How our tax system became so unfair
The IRD report raises the age-old question of how we divide up our society’s resources, and who should pay for the costs of running the country.
New Zealand’s economy is set up in a way that enables the creation of great wealth, but not in a way that sees it evenly distributed. Those who own businesses and other major assets and resources become wealthy through the profits, capital gains and high salaries they extract from the economy, while ordinary people who work for a living get what is left over – which often isn’t very much.
Because of this vast economic inequality, in theory taxation systems are set up in a way that takes this into account. The concept of progressive taxation means citizens with the most ability to pay tax are expected to pay a greater proportion than those with less capacity.
Yesterday’s report shows that New Zealand’s tax system isn’t so progressive – in fact, it’s particularly regressive. And it turns out that it’s designed this way. Reforming Rogernomics politicians of the 1980s established a tax system in which poor and middle-income earners pay too much, and the wealthy pay relatively little. They introduced a regressive GST and significantly reduced progressive income and company taxes. Various reforms over the years by National and Labour governments have only embedded and accentuated this unfairness.
The Need for a debate about wealth and taxation
The IRD report’s findings are a huge wakeup call about the politics of tax and wealth. It shows, as Revenue Minister David Parker says, that New Zealand’s tax system is fundamentally unfair.
New Zealanders care very much about fairness – it’s a central part of our political culture. And so, the IRD’s exposure of this unfairness should kickstart a big debate on reforming NZ’s tax system. In particular, we need a proper debate on wealth, land, and capital gains taxes.
However, New Zealand has historically been very poor at debating taxation. Partly this is because the issue of taxation can appear to be very dry – all accounting and maths. Yet it’s a vitally important issue – the dynamics and levels of taxation determines so much about how a country works. Taxation determines levels of resourcing for fundamental services like our healthcare system, roads, and whether we can afford to pay for superannuation.
Debates on taxation are also let down by the politicians and political parties. Part of the problem is that the politicians simply don’t prioritise taxation issues. Not only are there much more exciting issues to debate and campaign on, more crucially, our politicians lack the courage required to provide leadership on taxation reform.
This is especially the case for politicians and parties of the left. They’re very afraid of being bold on taxation, which would require persuading the public of the benefits of reform. Contemporary Labour and Green politicians generally do their best to stay out of debates on capital gains taxes or wealth taxes, or even progressive taxation in general.
The best example of this was the 2018-19 capital gains tax debate sparked by the Labour Government’s consideration of implementing a new scheme. The debate back then was remarkably superficial, partly because the Labour Government deliberately stayed out of it. And then, of course, Jacinda Ardern simply announced that a CGT was off the agenda while she was Prime Minister. This was one of Ardern’s biggest failings as a leader – she claimed to believe strongly in a CGT, but wasn’t willing to make the case for it and convince the public.
Ardern epitomised the political left’s orientation to taxation reform. Whereas in the past, parties of the left would run major campaigns to convince the public and create a consensus in favour of reform, now when it comes to taxation, the contemporary left capitulate, and instead rely on focus groups and polls to tell them what they should do.
Vested interests and the wealthy dominate the debate on taxation
When politicians are unwilling to lead the debate on taxation and wealth they hand over the debate to vested interests who dominate the public discourse. In what is effectively a tax debate void, the wealthy and those who represent them can win the debate by default, blocking any reform of taxation.
This month we saw lobbyists and vested interests blatantly enter the debate, seeking to stymie any demands for a change to the status quo. The most obvious example was a report that tax consultants OliverShaw commissioned from Sapere Research Group, which claimed to show that the wealthy pay their fair share of tax.
This was designed to pre-empt yesterday’s IRD report release. And OliverShaw’s directors, Robin Oliver and Mike Shaw went public with their concerns about what they thought would show up in the IRD research, as it could produce a “misleading and confusing picture of our tax system”.
Similarly, the Herald’s Jenée Tibshraeny reported that Chartered Accountants Australia New Zealand (CAANZ) tax lead John Cuthbertson was also worried that the IRD report would be “beat up” to encourage people to think the rich aren’t paying enough tax. He expressed his concern that this might pressure the politicians into a “knee-jerk reaction” of taxing the rich.
Other lobbying to prevent taxation is now underway. Today, Baker Tilly Staples Rodway tax director Andrew Dickeson told NBR that the IRD’s report is “a self-serving study for the Labour Government. It’s really giving the Government ammunition to start a conversation around, they would say, improving fairness.”
Economist Shamubeel Eaqub wrote yesterday that the onslaught from vested interests will help ensure that the latest tax reports don’t have any impact on changing tax policy: “The very wealthy will inevitably mount a strong and co-ordinated opposition, using a wide array of organisations and people. They can afford to do it, and it would be a small cost relative to taxes they may have to pay.”
And we can see this happening. Groups and politicians representing the interests of the wealthy are mobilising and casting doubt on the IRD’s research and what it could lead to in terms of taxing high incomes and wealth.
A Failure of political leadership
In contrast, it looks like Prime Minister Chris Hipkins will say virtually nothing meaningful about the stark unfairness uncovered in the report. His cautiousness and conservatism, mean that he’s unlikely to reverse Ardern’s prohibition on even discussing wealth taxes.
By conceding the taxation debate to vested interests, this will ensure that New Zealand continues to have a largely regressive taxation system – one in which the poor subsidise the rich, much like the days of the Sheriff of Nottingham. Sadly, we don’t appear to have any Robin Hoods to intervene in what is essentially a class war.
We should be thankful for the IRD and David Parker for making this latest research happen. But we now need a proper debate about wealth and taxation. And it’s time for the politicians to be bolder on what they really think is needed. If that’s a wealth tax, a land tax, or a capital gains tax, then let’s hear the arguments in favour. We can’t afford to continue with the status quo.
legalised embesselment which labour will do nothing about, the rich pick our pockets and our leaders do nothing….NZ is a laughing stock
and before the rightwing trolls jump in, every dollar the rich steal from the taxman has to be made up BY YOU
Labour will do nothing because they are part of the rich, and they want to part of the ueber rich.
I mean, did you not know and understand that over the last five years?
National and ACT will do nothing because their donors are the Uber rich.
I mean, did you not know and understand that over the last thirty five years?
That wretched Lange Labour Government are to blame.
Fairy tale comments from Bob, made up to sound real.
Just another day in Bob’s fantasy world.
But at least you don’t expect national and ACT to do anything that disadvantages the wealthy, Labour on the other hand…
On the other hand what –
Labour are not going to do anything just like they did nothing over the recommendations in the welfare report.
Correct.
Incorrect.
Michal. I agree. My first thought was that a party which abolished the Commissioner for Vulnerable Children, is capable of anything.
Second, a party determined to stop biological women, or anybody, from having free speech is plain bad.
Once this story broke I immediately thought “here come the Minto’s.”
Grist to their groan mill.
Once this story broke I immediately thought that the whack job right wing fairy tale storytelling Bob would come on here and have a go at John Minto.
As usual I was right.
Every time I think “here come the Minto’s” I think here comes humility and empathy. Whereas every time I think “Bob the first”, I try to skip past the comment because it’s driven by conceit, selfishness and arrogance.
And a little bit of Dulwich private school. No wonder Bob likes bed leg Uffindell.
Conceit?
That’s tough I harbour no conceit.
Don’t know Uffindell,he may be a thoroughly decent chap.
You don’t know, he’s your idol.
what’s up bob the last no appropriate ‘anecdote’ to hand?
Sorry gagarin have I let you down? If yes please accept my apologies.
“The Need for a debate about wealth and taxation”
Fuck the debating! We need rioting!
We also need our shit back! Like rail. Like housing. Like com’s, like properly funded health and dentistry, like well funded education and like a four day week for five days fucking pay!
We need a royal commission of inquiry don’t you reckon Dr Bryce Edwards?
We do need a political round up all right, then we need to herd the fuckers to in front of a gallows.
The guillotine!
And can I also write. Great Post @ Dr Bryce Edwards. Thank you.
He is 100% correct in stating that NZers care about “fairness”.
But let us start with “care” and then consider “fairness”.
So our real debate should be what kind of society we want. One that is equal or one that cares.
Outcomes do matter. Equality of outcomes matter less as it does not guarantee improved average outcomes in a globalised world.
equality of outcomes is horse shit, it’s equality of oppertunity that matters….
a thicko is not a qualified neurologist no matter how many boxes they tick….sorry they just ain’t and frankly it’s cruel telling them they can be anything you want to be
Feelings, feeling count.
Back to the re-education camp.
Im witrh stephen fry on that one..
oh you’re offended–so fuckin what
This, on The Guardian.
New Zealand’s millionaires pay lower tax rates than cashiers – it’s time to fix the system
Max Rashbrooke
https://www.theguardian.com/world/2023/apr/27/new-zealands-millionaires-pay-lower-tax-rates-than-cashiers-its-time-to-fix-the-system
And here’s a double dang right there I tell ya. Russell Brand, right? On Rumble and Rumble’s co-owned by jonky’s bestie peter thiel. George Monbiot told me that.
The point is that in our society we do not pay tax on wealth. We pay mainly tax on realised income and on consumption.
Sure, we should continue with the debate. But it is disingenuous to argue that we are not debating this when it dominates our debate, ad nauseam.
To redistribute wealth more equally and base it on merit we need to tax inheritance and realised capital gains. But we hate merit!! What to do?
We should tax land. Land is a “common”, so the privilege of private ownership should be paid for through a land value tax. And since capital gain is built into the value of land the latter also taxes capital gain.
To argue that our tax is not progressive when the study shows that it is, constitutes misinformation.
The report highlights that there is inequality in wealth distribution. Put in another way, there is inequality in outcome.
A revelation?
Only the fastest on the day win the gold medal.
Let’s work towards equality of outcome is so obviously the way to go………. It is time to put “Posie Parker” to bed.
Equality of outcome is the most deluded, stupid idea ever created.
Would you fly in a plane with a pilot who barely passed their pilots licence because “well we must have an equal number of pilots from every walk of life or else or society is not equal!”
Feelings.
I feel that you need to go and educate yourself with sone urgency.
The woke media is correct, repeat after me…….
If one feels safe, who cares who flies the stupid airplane………
Jacinda Arden didn’t make the case. So it didn’t happen. And she got another term.
There is no way enough of a mass would have voted her in with a capital gains regardless of the fairness of it. The greedy crazies would have gone crazy.
Correct.
Maybe the masses would vote for it. But this govt pissing away our tax money doesn’t help the case. “Look at the way they are wasting money on all sorts of shit, like consultants and Te Pukenga and 1.8bil on mental health and 350K to cut a ribbon on a highway and billions on a slow train set and millions on 10 water entities…it’s bloody insane!!!!” That the talk of the town and it doesn’t make for good argument to grab more taxes.
Jacinda and Grant practically laughed at the fact that they blew $50,000,000 on a stupid cycle bridge idea.
So instead Ardern abandoned ship and headed for the USA.Safe haven?
Anyone else see the irony in this?
John Key might
The best and brightest always leave, Key stayed.
Abandoned ship, fuck you’re thick Bob.
Can you give me your home address Bob or is it your safe haven?
But Bert she did abandon ship?
She’s going to Massachusetts?
She took a post to support the likes of the Christchurch massacre never happening again. Do your homework and you with a haven is equivalent to you parking your car outside a primary school.
Have a number of havens Bert.
If you were nearby I’d invite you over for a beer or whatever your favourite tipple is.
Good to know that the government helps fast track infrastructure on flood plains for the super wealthy aka Lord Sleepyhead estate.
Meanwhile not really telling the whole story about tax – aka half of people in NZ effectively pay nothing at all because they get so many handouts and top ups! https://www.stuff.co.nz/business/opinion-analysis/114628351/an-inconvenient-truth-about-tax-in-new-zealand
If they stopped the hands outs to super wealthy and the other half of people paying no effective tax, then NZ would have plenty left to pay for hospitals and infrastructure.
Just as importantly NZ government have been giving away free pensions to foreign pensioners for decades who have paid very little or zero tax, but threatening to means test the future workers already paying tax!
Can they also OUT the media hungry, woke advisors to government and lefties who support foreign nationals getting free NZ pensions while forcing the younger members working in NZ to pay for it, while campaigning for more taxes out of taxpayers in NZ, all while sporting hidden family members from overseas who now receive a free NZ pension and health care, after contributing next to nothing or nothing, but no mention of that in their books and articles.
Very pleased commenters on this site aren’t running the country,othey would be worse than the current dopey government.
Dopey comments don’t help either, Bob.
That’s all Bob does really
he’s trying to troll but frankly just isn’t smart enough..he should go back to shovelling pig shit or whatever
Always attract your attention gagarin so I guess I must be doing something right.
Doing something right isn’t grooming boys Bob!
yea bob the last the same way treading in dog shit attracts my attention
Gosh that’s awful gagarin.
awwwww diddums
Got a rusk feeling better.
Bryce
“Their income in the last year of the study, 2020-21, was $14.6 billion.” Bryce, say you bought a Picasso for 10 million. Now someone says it’s worth 20 million. Is your income therefore extra 10 million, even if it’s hanging on the wall gathering dust. Or is your perceived worth now 20 million? See the big difference? This govt is a piece of shit for being underhand and sneaky with the presentation of the facts – and their intentions! Just be bloody honest and say we need to tax net worth in advance of realisation. So what, NZ won’t collapse. But they’re to chicken, because anyone with even one rental will then get nailed every year.
We need to be crystal clear what this means. In healthcare it means long-term pain, unnecessary disability and in some cases, (preventable) death. Our health system is starved of resources. It needs money and staff.
The words murder and grievous bodily harm come to mind.
I can prove all three are happening unnecessarily in public health from different examples within just my own, average-sized family of origin.
Apparently, any death is one death too many. It seems the working class was never included in this metric of humanity. What a pity so few of our health needs involve infectious diseases that might spread to those whose lives actually matter.
Well said Dr Edwards.
Yes, a rational debate on taxation would be so worthwhile – but with so many well funded influential people likely to be financially affected it would quickly become the ‘rich’ against the ‘bottom feeders’.
I don’t mind people being ‘rich’ but nobody should be given an unequal ‘tax’ advantage.
Quite correct Peter and why is it the rich feel so entitled?
Broadly the economic system we have here delivers results in proportion to effort.
My recommendation to those who think they’ve been hard done by is:
1. Pay attention at school. Do your homework and pass exams.
2. Don’t commit crime
3. Get into a paying profession or trade and work hard.
4. Don’t have children out of wedlock and teach your children self discipline and work ethic.
Then you’ll do just fine
good advice andrew but it does nothing to fix the scam we’re addressing
Excellent advice Andrew.
5. Be born into a wealthy family with oodles of capital
As for #4 – Wedlock? WTF does marital status have to do with anything. My bastard children are doing just fine, thanks. Mind your own business.
yea trinity but look around you at how other ‘fatherless’ children are doing..not saying stay with a fucked up man…just wait before breeding
and don’t name your kid dwayne, rambo or kop killa it shouldn’t be this way but research shows it is….’ethnic’ names get job applications binned…sorry but facts is facts.
“Sadly, we don’t appear to have any Robin Hoods to intervene in what is essentially a class war”.
Why bother! Storm the Bastille!
Why are the decks stacked to suit the well off is the question.
The answer lies in political party donations.
He with the biggest wallet gets the biggest say now matter how much they say its democratic, its not.
NZ is just as corrupt as many other countries around the world, the organisation that says we are one of the least is obviously using the wrong data to measure corruption.
I’ve seen the old boys club corruption first hand with regards a particular family I was involved with. For all their wealth, they were all fucked up and boring, playing stupid games. Tax the fuckers.
“more crucially, our politicians lack the courage required to provide leadership on taxation reform.”
C’mon Bryce – throw your hat in the ring – there are plenty of left wing champions commentating from the sidelines but few of substance in the game.
NZ needs to move on quickly from this neo-liberal shit fest and come up with something more humanist in nature, fast.
Do we have to rely on the libertarians to actually kick some life into this dog. God help us.
The dog that is the Labour Government?