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Nobody else is doing it so why should we?

Written By: - Date published: 7:26 am, January 21st, 2010 - 70 comments
Categories: class war, tax - Tags:

A commenter asked an interesting question yesterday:

of the countries that are wealthier than us, how many have aligned their top income, corporate, and trust tax rates? And which countries are they?

Well, I did some looking and here are the countries with higher GDP per person than us and their top tax rates:

  Personal Corporate     Personal Corporate
Australia 45.00 30.00   Italy 43.00 27.50
Austria 50.00 25.00   Japan 40.00 39.54
Belgium 50.00 33.99   Korea 35.00 24.20
Canada 29.00 31.32   Luxembourg 38.00 28.59
Denmark 26.48 25.00   Netherlands  52.00 25.50
Finland 31.50 26.00   Norway 25.30 28.00
France 40.00 34.43   Spain 27.13 30.00
Germany 45.00 30.18   Sweden 25.00 26.30
Greece 40.00 25.00   Switzerland 11.5 21.17
Iceland 22.75 15.00   United Kingdom 40.00 28.00
Ireland  41.00 12.50   United States 35.00 39.10

(sources income, corporate, seems most countries don’t have a seperate trust rate. When comparing rates between countries, you need to bear in mind that many countries have state taxes and/or pay social security tax additionally to income tax)
So… none of them have aligned their top tax rates. Why not, if it is such a great idea? Why, if we want to catch Australia, would we adopt an idea that the Aussies and everyone else have rejected? The fact that not a single one of the countries that is richer than us has aligned its top tax rates destroys the argument that alignment is both good and necessary, which has until now been held up as an undoubtable truth by the Right and accepted as such by the media.

Look, tax avoidance is a problem, but not a huge one. Not one you go throwing out your entire tax system over. The solution isn’t to let the tax avoiders win by giving them all a big tax cut and leaving the rest of us to bear the burden. We should just close the loopholes that let the bludgers pretend their personal income is trust or business income. They are ripping the rest of us off and we shouldn’t allow it. If  people were using loopholes to get benefits they shouldn’t, would we change the rules to make it OK? Why have different standards for the well-off?

You have to remember that this clamour for reducing the top tax rate by 8% to align it with the corporate rate is all part of a campaign by the wealthy to reduce their taxes that has been going on for decades.

Of course, they always dress it up as good for the economy. Back in the 1980s they promised us tax cuts for the rich, paid for by asset sales and slashing public services for the poor and the middle class, would lead to more spending creating jobs. But we found out that trickle down economics doesn’t work.

Now, they say that people will only work hard if tax rates are lower and it alignment will eliminate the false economy of tax avoidance. Even if small changes in tax rates change behaviour (and I don’t think they do), most people won’t be getting a tax cut anyway – only 22% of people earn enough to pay tax in the top two brackets. All lowering the 33% and 38% income tax rates to 30% will do is put a few tax accountants out of work and make the rich much much richer.

John Key stands to pay $26,000 a year less on his PM’s salary alone. The CEO of Telecom would make a whooping $400,000. It will be the poor and the middle class bearing the cost, again, this time through higher rents and GST.

We are being sold a con once more by the monied elite. Will we buy it?

70 comments on “Nobody else is doing it so why should we?”

  1. Scott 1

    A couple of things to consider.

    A lot of the countries on that list don’t have trust tax rates, because the trust is a concept that does not exist under their laws.

    And simply comparing personal and corporate tax rates doesn’t tell the entire story about who in society is bearing the tax burden. For example it is often said that the poor are harmed more by increases in sales taxes, because they spend most of their income on necessities. The UK has a VAT rate of 17.5%, whereas our GST is 12.5%.

    Also, unlike NZ, most countries don’t allow shareholders to receive imputation credits, meaning that in most countries corporate profits are effectively taxed twice.

    Also, shutting down loopholes may sound easy, but the IRD has dozens of people devoted to doing this. The more laws they pass the more complex the system becomes, and the more doors tax accountants find to open. Arguments about equity aside, there are some good reasons to look at aligning tax rates, to discourage avoidance schemes.

    I’m not arguing in favour of the proposed reforms, because I haven’t digested them yet. But comparing our tax rates to those in other countries probably doesn’t help a lot, unless you look at their tax systems as a whole.

    • Marty G 1.1

      You’re missing the point. It’s not about distribution of taxation it’s about the argument for alignment.

      We’ve been told that alignment of the top tax rates makes sense by the TWG and the media.Here’s the Herald today:

      “Sensibly, the group wants the top personal, company and trust tax rates aligned”

      But it turns out no country richer than us does it. So why is it so sensible? Well, it sounds sensible to the ones who get the massive tax cuts, I’m sure.

      • Clarke 1.1.1

        … and just to be absolutely clear about this, if you’re on PAYE, don’t have access to company profits, aren’t a beneficiary of a trust, don’t own an investment property and aren’t in the top tax bracket you will be worse off due to the impact of an increase in GST.

        I would suggest that definition covers most people in New Zealand.

      • PT 1.1.2

        the fact other countries aren’t aligned doesnt mean there tax systems are right, most tax systems are leaky

        • Marty G 1.1.2.1

          I’m not saying their tax systems are perfect. But it destroys the argument that alignment is self-evidently good.

          Now, how about some actual evidence that alignment works (not work as in ‘gives a giant tax cut to the rich’ but works as in ‘lifts economic performance’), considering no richer country than us has seen fit to adopt it.

          • PT 1.1.2.1.1

            lots of countries have good economic performance despite bad tax systems. being part of europe means they have access to rich markets to sell to, having lots of natural resources means they can make money despite inefficient tax systems, that doesn’t mean new zealand shouldn’t pursue a perfect tax system.

            • Clarke 1.1.2.1.1.1

              The proposals of the TWG will result in a decreased level of equity in New Zealand as more of the tax burden is shifted from rich to poor. Since when is this a “perfect tax system” – or even a desirable one?

            • Marty G 1.1.2.1.1.2

              and you’re assuming that alignment is perfect despite no evidence and not a single one of 22 richer countries having adopted it.

              That sounds a lot like religion rather than rationality.

              • Uroskin

                If we’re so worried about tax avoidance by the rich, why not align the company and trust tax rate to the current highest rate instead of the proposed vice versa?

    • lprent 1.2

      I’d agree with a lot of that – especially having to look at tax systems as a whole.

      However the point of the post was to look at the simplistic argument (ie idiotic PR soundbite) that we should align our tax rates.

  2. Any argument which pupports to “broaden the tax base” is fact arguing for spreading more of the tax burden on to lower and middle income earners. This is why consumption-based taxes like GST are so favoured by the right.

    I have to agree with Scott on the loophole issue though – the tax loopholes are longstanding and not easy to solve – its not as if these were deliberately written in to promote tax avoidance. And in addition to the IRD compliance people working on them, there has been enough good intentioned legal and tax experts in Parliament, that if were a simple thing – it could have been solved. Peverse incentives can be created with the best of intentions – i.e. law of unintended consequences.

    I however, sympathise with the argument that just because some higher earners are avoiding tax, we shouldn’t just let them off. As I said earlier, increasing the corporate, and trust rates closer to the personal rate, perhaps with tax credits for R+D, and for firms that pay all staff at least 20% above the minimum wage.

    • Marty G 2.1

      On closing the loopholes. The biggest one seems to be family trusts. these didn’t always exist, so I suspect there was a law change at some point to assist them.

      I’m no expert on trust law but there must be a way to ensure they are for genuine purposes, not just tax avoidance.

      • fizzleplug 2.1.1

        Family trusts aren’t the evil you make them out to be. In my experience as an accountant, the vast majority exist for genuine reasons. One of the main purposes of a Family Trust is asset protection, not income re-distribution.

  3. Scribe 3

    I thought writers on the Standard were often trumpeting the need for New Zealand to be more like Scandinavian countries….

    • Marty G 3.1

      yeah we are…. Oh lolz, you think that the Scandinavians pay less tax on their income than us.. Scribe, please try to remember that when you look at the Scandinavian top income tax rates they don’t include social security taxes that everyone pays.

      Social security taxes are a mix of tax on income and payroll tax. They pay for benefits, pensions, and in some cases national health insurance, which we just pay out of the consolidated fund.

      The systems are too complex to easily compare to here but here’s info on the Swedish system:

      http://en.wikipedia.org/wiki/Social_Security_%28Sweden%29

      • Scribe 3.1.1

        Marty,

        This post is about aligning personal and corporate tax rates. The fact that Scandinavian countries have closely aligned rates was my point, not the actual top personal rate (which is not the point of this post). Having written it yourself, I would have thought you’d have known that.

        • Marty G 3.1.1.1

          oh, I thought you were talking about the rates.

          No the Scando rates aren’t closely aligned.Finland and Norway’s are way off, Sweden and Denmark’s are closer.

          None of which proves any economic argument for alignment.

    • vidiot 3.2

      Russia & China are in Scandinavia ?

      Also should add that we should do apples to apples comparison, Marty’s figure of 45% for Australia only applies on income > AUD $180K, I do wonder what incomes are needed in those other countries he lists with higher rates.

      This side of the ditch we pay 38% on income >NZD$70K (AUD$55K) and in Aussie they pay 38% once they >AUD$80K / NZD$100K

      • Marty G 3.2.1

        “Marty’s figure of 45% for Australia only applies on income > AUD $180K”

        irrelevant. We’ve been told that the top tax rates must be lowered to align the top rates.

        If that were true we should surely expect at least some of the countries that are richer than us to have aligned their top rates.

        Incidentally, (and this will come in relevant in a couple of hours) how would you feel about adopting the Aussie income tax rates and thresholds?

  4. vto 4

    Tangent …

    I see there is a proposal to remove depreciation on buildings. If so, then how does one get to recover the expenses of buildings when working out profit? And make no mistake, buildings depreciate and need replacing and cost. Just like any cost for any business.

    I just dont get it. When in business you take all costs away from all income to work out profit. It seems the govt wants to disallow certain costs. Perhaps we also dont count the income received which relates to that cost?

    • Marty G 4.1

      on whether housing depreciates. The TWG had a discussion of that in one of its sessions.

      Sure, the physical house wears out and needs maintenance but as an economic asset they tend to appreciate.

      • vto 4.1.1

        The underlying land appreciates. The buildings wear out and depreciate. Ask anyone with an old house or commercial building. It is a very real cost.

        Key is only doing this (and I dont doubt one bit there has been some puppetering going on) to avoid the capital gains tax political nightmare..

        But anyways I aint read the thing and am just banging on based on media reports etc..

    • d14 4.2

      But you ARE taxed on the depreciation claimed if and when you sell the property at a hight than purchase price.. It seems that the depreciation argument is s red herring.

    • Clarke 4.3

      The proposal is to remove depreciation allowances that aren’t backed up by real-world experience. For instance claiming a 2% straight-line depreciation would result in a building being worthless after 50 years – and if this was true, landlords would then be faced with the cost of demolishing it and building a whole new structure. Clearly this isn’t what happens in the real world.

      As I understand it, under the new rules the costs of maintaining the building would still be deductible, but you wouldn’t simultaneously be able to claim maintenance and depreciation, as it’s the maintenance that is preventing the structure from depreciating in real life.

      • vto 4.3.1

        ahaa.. so effective replacement cost (depreciation) is accounted for now through maintenance. Capital replacement of the building therefore now becomes a maintenance item.

        Effect of tax change therefore equals nil.

        nb: if a house has no maintenance it will last no longer than about 50 years. They break down and fall apart. This is actual real world experience. Also, note that building code requires a house to last only 50 years.

        • Clarke 4.3.1.1

          As I understand it, there is a significant change in the way depreciation is treated and the effect is that it becomes non-claimable.

          For example, if there is a 2% depreciation allowance on a $300,000 house (excluding land) then there is a $6,000 “expense” that can be applied to income from the property. This would disappear altogether. Any money the owner used to maintain the building would still be deductible, but this is real cash that they’ve had to spend, not just an accounting entry for the depreciation.

          So there would be a material and very significant impact on the net tax position of a great many landlords. It will be interesting to see if the same rules are applied to commercial buildings rather than just residential ones ….

          • vto 4.3.1.1.1

            Ok. Methinks however that 2% of the capital value of a building is a very real annual cost, whether it comes out as maintenance or depreciation. So the net effect to tax revenue will be the same over time. Unless landlords are rorting the system.

            I understand what you say regarding short term annual cashflow. But, as said, at the end of say a 50 year period the amount claimed, whether by way of depreciation or maintenance, should be about the same. Net effect nil.

            • Clarke 4.3.1.1.1.1

              But, as said, at the end of say a 50 year period the amount claimed, whether by way of depreciation or maintenance, should be about the same. Net effect nil.

              Yes, that’s very much the common sense way of looking at things, and it aligns well with real life. However it’s not the current accounting view!

              Under the current rules, you can claim the depreciation and the maintenance simultaneously. This means that after 50 years, you’d have a perfectly maintained building that now had a book value of $0! This is the anomaly that I understand is corrected in the TWG proposals.

              • Herodotus

                When dealing with land improvements e.g. Paving, the paving is not depreciable but all subsequent costs are able to be written off in the year that the cost is incurred. Follows on the line that you have here

  5. Nick 5

    Why bother with working groups when The Standard can just write the policy? After all, you guys know everything.

    • Marty G 5.1

      Sorry if it upsets you Nick but in this country, we have political debate on the issues.

      Maybe you would prefer it if everyone just bowed down to the supposedly superior knowledge of Government appointed taskforces.

      • vidiot 5.1.1

        So when you want to bake a cake do you employ a chef or political debate ?

        Case in point, the government (who aren’t tax specialists, economists) have sought advice from a group of trusted experts from across the spectrum to nut out some ideas.

        Bob Buckle, Faculty of Commerce and Administration, VUW (Group Chair)
        Rob Cameron, Cameron Partners
        Paul Dunne, KPMG
        Arthur Grimes, Motu Economic and Public Policy Research
        Rob McLeod, Ernst & Young
        Gareth Morgan, Gareth Morgan Investments Limited
        Geof Nightingale, PricewaterhouseCoopers
        Mike Shaw, Deloitte
        John Shewan, PricewaterhouseCoopers
        Casey Plunket, Chapman Tripp
        John Prebble, Law School, VUW
        Mark Weldon, NZX Limited
        David White, Centre for Accounting, Governance and Taxation Research, VUW

        Members from Inland Revenue Department
        Matt Benge
        David Carrigan
        Robin Oliver

        Members from the Treasury
        Norman Gemmell
        Michelle Harding
        Bill Moran

        In addition, experts in various areas have been invited to attend some sessions:

        Len Burman, Syracuse University, New York
        Andrew Coleman, Motu Economic and Public Policy Research
        Peter Conway, New Zealand Council of Trade Unions
        Lew Evans, Victoria University of Wellington
        Phil O’Reilly, Business New Zealand
        Susan St John, The University of Auckland

        • Marty G 5.1.1.1

          These are government-appointed people, who by and large represent one strain of economic thought. Even if it was a balanced group it wouldn’t mean their conclusions are indisputable.

          Poke holes in my argument if you like but don’t fall back on the desperate ‘you have no right to argue’ line.

        • vto 5.1.1.2

          vidiot – virtually all academics, bureaucrats and accountants.

          … and so the world continues to turn …

          • Clarke 5.1.1.2.1

            …. a depressing number of whom are either from or previously worked for Treasury. And it’s worth noting that the support for the TWG (i.e. the actual research, running around and writing the analysis) came from Treasury and IRD officials.

            It’s notable that there is no input from anyone who represents low-income workers, beneficiaries, the small business sector, mum-and-dad property investors … it’s a long list of non-inclusions.

        • Draco T Bastard 5.1.1.3

          Would you listen to “experts” if the theory that they were working from could be proven wrong?

          I know I wouldn’t.

          • TightyRighty 5.1.1.3.1

            National standards anyone, Sorry for trolling, but the oppurtunities for having a lash are too great when one expert is lauded because you agree with them, and another is derided because the “theory they are working from could prove wrong”, AGW springs to mind too.

            • snoozer 5.1.1.3.1.1

              but we don’t think AGW is true just because the experts say so. We think it’s true because the experts can explain why it’s true and the counter-arguments don’t hold water.

              We hold it up to the crucible of debate, which is exactly what you are opposing us doing with the TWG report.

              For goodness sake, Tighty, how do you get through life without the ability to critique what you are told properly? Is it that you just believe whatever best suits your ideology? Or do you just accept the angle of the first person you hear?

              • TightyRighty

                and yet i can critique and do so. what if i believe that the theory the AGW proponents could prove wrong, and the critics of the national standards are also working from flawed theory, i’m not saying that the theories i ascribe to are neccersarily correct either, but i don’t rubbish the experts of opposing theories by calling them idiots etc. which seems to be very popular around here. and as for accusing me of believing what best suits my idealogy, well. pot, kettle …..

            • Draco T Bastard 5.1.1.3.1.2

              The economic theory that the TWG are basing their recommendations on has been proved, beyond reasonable doubt, wrong (hell, even some of the people who wrote the theory in the first place said it was over simplified and assumed away too much). National standards in education have also been proved wrong. AGW has been proved, beyond reasonable doubt, correct.

              See, even when I posted that I knew some RWNJ would come back with that reply. I suppose it comes down to choosing to listen to the right experts. The TWG aren’t them because they’re basing their report on the wrong theory.

              • TightyRighty

                i disagree that the arguments you promote re AGW and national standards are proved beyond reasonable doubt, and I can see your point re the economic theory behind the TGW. my point was that “your” experts are always, always right, even if some of what they have said has been proved to be based on shonky evidence. whereas any experts “i” might agree with are always, always wrong because some of what they have said is based on shonky evidence. gee that makes me a RWNJ doesn’t it? just love the way the left argues, criticise the argument and face a negative personal label.

              • snoozer

                this discussion came out of someone sarcastically saying we shouldn’t even question the TWG’s conclusions:

                “Nick
                January 21, 2010 at 8:47 am
                Why bother with working groups when The Standard can just write the policy? After all, you guys know everything.”

                It’s not about experts always being right or always being wrong. It’s about the right to question.

              • TightyRighty

                i did myself was question why the experts you hold faith to are always right, while the experts quoted by those on the right are wrong, delusional, idiots and so on? it’s the dismissive nature of your responses to things you don’t agree with that leads me to believe that no one can question your beliefs. it’s this from DTB above that made me question the attitude towards “experts” of either side of the political spectrum shown by commentators on this site.

                “Would you listen to “experts’ if the theory that they were working from could be proven wrong?

                I know I wouldn’t.”

              • Draco T Bastard

                my point was that “your’ experts are always, always right, even if some of what they have said has been proved to be based on shonky evidence.

                No, they’re not always right but they do make adjustments when evidence suggests that they need to do so. I haven’t seen such adjustment from the right which is why I call them delusional – disbelieving reality has got to be insane.

                just love the way the left argues, criticise the argument and face a negative personal label.

                That’s a rather general statement considering that you were talking about me. Most of the left, IME, actually do argue the facts rather than throw insults at people. I generally try to but I find it’s like hitting my head against the proverbial brick wall as the right just don’t want to hear them.

  6. burt 6

    Marty G

    The top rates are meaningless without the thresholds where they are applied. Can you plublish the thresholds with that as well ?

    • Marty G 6.1

      you can follow the links burt. Don’t be a lazy rightie.

      And the thresholds aren’t relevant to the argument about alignment.

    • lprent 6.2

      Actually a good point….. But you’d really have to publish the whole personal tax structure for each country to make it meaningful. Because of course you pay tax at lower rates up to each threshold.

      It’d be interesting to see how many countries have lower taxes than we do for the lower incomes. I suspect that most of them do.

  7. Draco T Bastard 7

    If tax alignment is so important to stop the tax rorts that are happening ATM then I suggest that businesses and trusts get put onto the progressive tax scale and make dividends tax deductible from the business end (Ie profit of $500m for the business would have them on the top tax rate but if that $500m is paid out in dividends then they pay 0 tax). We’d also have to get rid of provisional tax but I’m all for that anyway.

    The more laws they pass the more complex the system becomes, and the more doors tax accountants find to open.

    In reality, our entire tax system needs going over with a look to make the laws more consistent to get it properly sorted out. This is likely to result in less, more concise laws and not more.

  8. tsmithfield 8

    “We should just close the loopholes…”

    You are joking, right? When one loophole is closed up, another one just opens right up. Ask any accountant.

    The simpler a tax system is, the harder it is to evade. Bringing tax rates into line certainly goes toward achieving that goal.

    So far as reducing the tax on the wealthy is concerned, I would assume that you would like to see the poor become wealthy? Reducing the top marginal tax rate certainly provides motivation to escape poverty.

    • Draco T Bastard 8.1

      Reducing the top marginal tax rate certainly provides motivation to escape poverty.

      No it doesn’t. It has no effect on the motivation to escape poverty.

      Of course, the whole reason why we have poverty is because capitalism wouldn’t work without it.

    • snoozer 8.2

      “So far as reducing the tax on the wealthy is concerned, I would assume that you would like to see the poor become wealthy? Reducing the top marginal tax rate certainly provides motivation to escape poverty.”

      Sigh, No it doesn’t. Living in poverty provides all the motivation you need. The problem is opportunities to escape poverty and the fact that there is always a need for manual labour, so how do we ensure it is fairly rewarded? None of that is changed by a few cents off a tax rate that is two or three times the income of most people.

      “The simpler a tax system is, the harder it is to evade. Bringing tax rates into line certainly goes toward achieving that goal.”

      Sure, but that’s rewarding the cheats – ‘we give up, just take the lower tax rate’ and it’s a hell of an expensive way to solve a small problem.

  9. burt 9

    lprent

    It’d be interesting to see how many countries have lower taxes than we do for the lower incomes. I suspect that most of them do.

    Thankyou lprent, that was where I was going. Links where I have said that I think we should have a tax free threshold for low earners are not hard to find on this site.

  10. “…virtually all academics, bureaucrats and accountants.”

    not to mention white, male and probably well off.

    …i can’t see the maori party voting for an increase in GST based on some throwaway assurance of ‘compensation for lower income families.’

    • Zaphod Beeblebrox 10.1

      Err wasn’t that one of the reasons they voted for the ETS (apart from the iwi forest concessions)?

  11. Bill 11

    The reason NZ should do something that no-one else is doing is because this government is aspirational innit?

    The fact that the levelling of tax rates is covertly posited as an matter of fairness speaks volumes for the real ideological stance of this particular government innit?

    Which is why this government…shit!…ficking drugs are wearing off again

  12. RascallyRabbit 12

    Why hasn’t ‘first x of income be tax free been discussed?’ surely many of those same countries that are richer than us have this policy (Aus and UK as two examples)

    Seems to me like a good way to compensate for potential GST rises?

    Or am I missing something?

  13. SteveR 13

    If levelling the rates is such an important goal, why is there no discussion around raising the lower rate to meet the higher, or even moving both to meet somewhere between them?

    Of course, raising a rate is unpopular (though GST seems to be suggested for that treatment), but surely if levelling were so important that unpopularity would just have to sit there and be taken.

  14. tsmithfield 14

    SteveR “If levelling the rates is such an important goal, why is there no discussion around raising the lower rate to meet the higher, or even moving both to meet somewhere between them?”

    What you are talking about is a flat tax rate. This is what David Lange decided to put on hold when he had “his cup of tea”.

    Personally, I think having one single tax rate would be a great idea. Compliance costs would go way down, avoidance would be impossible, and the governments administrative costs would also reduce considerably. The IRD would probably be able to operate with 90% less staff. Also, it would be absolutely fair. Everyone would pay at the same rate. The wealthy would still pay more by virtue of the fact that the earn more to be taxed.

    • snoozer 14.1

      “Compliance costs would go way down, avoidance would be impossible, and the governments administrative costs would also reduce considerably. The IRD would probably be able to operate with 90% less staff.”

      No sense of scale ts. Those are minor benefits compared to the cost – a flat tax at any level implies a massive transfer of wealth from those on low and middle incomes to those on high incomes – either through higher tax on low incomes and lower tax on high incomes or a slashing of the social wage if the flat tax is too low to cover public services.

      I’m sure you have enough maths to see that for yourself.

    • SteveR 14.2

      No, all I meant was, why, if levelling the company and personal tax rates is such a vital idea that over-rides all other considerations, why not raise the company rate and trust rate to equal the personal one? Why are people only assuming levelling entails lowering the higher rates?

      Or is all this principled reasoning jettisoned directly self-interest seems threatened?

  15. randal 15

    well everybody is full of good ideas today.
    especially the ones who stand to gain a hell of a lot at the expense of lower paid workers.
    this is what is called voodoo economics and so far the high priests of making the workers money disappear are winning.

  16. randal 16

    well everybody is full of good ideas today.
    especially the people who want to make the workers pay for their tax cuts.
    this is what is called voodoo economics and so far the high priests of making the workers money disappear are winning.

    • Bored 16.1

      Thank God for that Randall, I have been watching the debate and it’s a bit depressing..too much focus on personal as opposed to corporate taxes so to add hereiss my wisdom on corporate tax differentials between countries, gleaned from years doing real business:

      1. Capital does not move because of tax rates. The most fundamental driver of capital migration is wage costs and conditions. Business will quit NZ, Australia or anywhere to produce more cheaply elsewhere as amply demonstrated by the growth of sweat shops in the third world. China too will face this problem. The corollary is that tax differentials between Aussie and NZ etc mean little in terms of “business friendliness’ and resultant capital investment / disinvestment.

      2. Capital also seeks places where there are few restrictions on what you can do (i.e beat up workers, rip down forests, pollute etc with minimal compliance costs usually a bit of bribery etc). This also trumps tax rate differentials between well regulated countries by a mile. The difference between 30% and 35% in the first world means nothing when you can pay only a bribe in the third world.

      3. When selling to a local market a few percent difference between countries in tax rates is often less than the cost of freight, making tax differences irrelevant.

      4. Tax is paid on profit: companies and in particular multinationals have crafty ways of transferring or hiding profits. A good example is transfer fees for “marketing collateral’ or “management fees’. These dubious and difficult to audit “costs’ mean that a multinational can set up transfers before tax to lovely spots such as the Cayman Islands where tax is sweet f.a.

      All of the above is a result of unregulated capital flow between nations in the true spirit of laissez faire, the whole tax differential debate is a smoke screen behind which corporate do things off shore we would not countenance here. Our refusal to prevent this makes us both culpable and ultimately as impoverished as where the production has gone to. So when I hear some “rich prick’ bleat on about tax rates I reach for the metaphorical rifle.

  17. deemac 17

    UK top rate of income tax is higher than the 40% you quote as you have to add National Insurance (pays for pension/sick pay/maternity pay etc) – plus tax rate will soon be 50% as crisis measure.
    Lots of tax evasion at highest levels – not unique but no political will to deal with it plus cutting tens of thousands of civil service jobs makes enforcement harder.

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  • Low-emissions options for heavy transport a step closer
    Getting low-emission trucks on the road is a step closer with investment in infrastructure to support hydrogen vehicles, the Energy and Resources Minister Megan Woods has announced. The Infrastructure Reference Group has provisionally approved $20 million for New Plymouth company Hiringa Energy to establish a nationwide network of hydrogen-fuelling stations. ...
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    14 hours ago
  • New training centre to upskill workers
    A new trades training centre to upskill the local workforce will be built in the South Waikato town of Tokoroa through funding from the Government’s COVID-19 Response and Recovery Fund, Education Minister Chris Hipkins and Regional Economic Development Minister Shane Jones have announced. The Government will contribute $10.84 million from ...
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    14 hours ago
  • Subsequent children legislation to change
    The Government has agreed to repeal part of the Oranga Tamariki Act subsequent children provisions, Minister for Children Tracey Martin announced today. “There are times when children need to go into care for their safety – the safety and care of children must always be paramount,” Minister Martin said. “But ...
    BeehiveBy beehive.govt.nz
    15 hours ago
  • Funding to expand mental health support for Pacific peoples
    A $1.5 million boost to grow primary mental health and addiction services for Pacific peoples in Auckland, Hamilton and Canterbury will lead to better outcomes for Pacific communities, Associate Health Minister Jenny Salesa says.  Pasifika Futures has received funding to expand services through The Fono, Aotearoa New Zealand’s largest by ...
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    15 hours ago
  • Funding boost for sustainable food and fibre production
    Twenty-two projects to boost the sustainability and climate resilience of New Zealand’s food and fibres sector have been announced today by Agriculture Minister Damien O’Connor. The $18m funding will deliver practical knowledge to help farmers and growers use their land more sustainably, meet environmental targets, remain prosperous, and better understand ...
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    18 hours ago
  • Mature Workers Toolkit launched on business.govt.nz
    Employment Minister Willie Jackson welcomes an initiative that assists employers to get mature workers into New Zealand small businesses. The disadvantages that older people face in the workplace was highlighted in the whole of Government Employment Strategy.  In order to address this, a Mature Workers Toolkit has been developed and ...
    BeehiveBy beehive.govt.nz
    18 hours ago
  • Trans-Tasman cooperation in a COVID-19 world
    New Zealand and Australia reaffirmed today the need for the closest possible collaboration as they tackle a global environment shaped by COVID-19, Foreign Affairs Minister Winston Peters said. “In these challenging times, our close collaboration with Australia is more vital than ever,” said Mr Peters. Mr Peters and his Australian ...
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    18 hours ago
  • Pike recovery efforts now in unexplored territory
    The recovery and forensic examination of the loader driven by survivor Russell Smith means the underground team are now moving into an area of the Pike River Mine that has not been seen since the explosion, Minister Responsible for Pike River Re-entry Andrew Little said. “The fifth and last robot ...
    BeehiveBy beehive.govt.nz
    19 hours ago
  • Government confirms CovidCard trial to go ahead
    The Government has confirmed a community-wide trial of CovidCard technology as it explores options for COVID-19 contact tracing. “Effective contact tracing is a vital part of the COVID-19 response,” Minister of Health Chris Hipkins said. “While manual processes remain the critical component for contact tracing, we know digital solutions can ...
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    19 hours ago
  • Enhanced process for iwi aquaculture assets
    The government is proposing changes to aquaculture legislation to improve the process for allocating and transferring aquaculture assets to iwi. Fisheries Minister Stuart Nash has introduced the Maori Commercial Aquaculture Claims Settlement Amendment Bill to Parliament. It proposes a limited new discretionary power for Te Ohu Kaimoana Trustee Limited (ToKM). ...
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    19 hours ago
  • Bill introduced to fix National’s Family Court reform failures
    The Minister of Justice has today introduced the Family Court (Supporting Children in Court) Legislation Bill – the next step in the ongoing programme of work to fix the failed 2014 Family Court reforms led by then Justice Minister Judith Collins.  The Bill arises from the report of the Independent ...
    BeehiveBy beehive.govt.nz
    20 hours ago
  • DOC takes action to adapt to climate change
    A new Department of Conservation (DOC) action plan tackles the impacts of climate change on New Zealand’s biodiversity and DOC managed infrastructure including tracks, huts and cultural heritage. Minister of Conservation Eugenie Sage says extreme weather events around the country have really brought home our vulnerability to changing weather patterns. ...
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    20 hours ago
  • Reduced international Antarctic season commences
    A heavily scaled back international Antarctic season will commence this week, Foreign Affairs Minister Winston Peters and Research, Science and Innovation Minister Megan Woods have confirmed. “Antarctica is the only continent that is COVID-19 free,” Mr Peters said. “Throughout the global pandemic, essential operations and long-term science have continued at ...
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    20 hours ago
  • New high performance sports hub for Upper Hutt
    The Government is providing up to $30 million to help fund the NZ Campus of Innovation and Sport in Upper Hutt - an investment that will create 244 jobs. “The sports hub is designed to be a world-leading shared service for a range of sports, offering the level of facilities ...
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    20 hours ago
  • Govt keeps projects on road to completion
    Transport Minister Phil Twyford announced today transport projects currently in construction will continue at pace due to extra Government support for transport projects to mitigate the impact of COVID-19. To keep the $16.9 billion 2018-21 National Land Transport Programme going the Government has allocated funding from the COVID Response and ...
    BeehiveBy beehive.govt.nz
    21 hours ago
  • First project utilising $50 million ‘shovel ready’ fund for rural broadband announced
    $50 million for further rural broadband digital connectivity has been allocated from the $3 billion infrastructure fund in the COVID Response and Recovery Fund has been announced by Shane Jones, Minister for Infrastructure and Kris Faafoi, Minister for Broadcasting, Communications and Digital Media. The investment will go to boosting broadband ...
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    22 hours ago
  • Ultra-fast Broadband programme hits major milestone with more than one million connections
    The Minister for Broadcasting, Communications and Digital Media has congratulated the Ultra-fast Broadband (UFB) programme on its major milestone of connecting more than 1 million New Zealand households and businesses to UFB. “This milestone has been 10 years in the making and demonstrates the popularity of the UFB network. “Uptake ...
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    24 hours ago
  • Vaping legislation passes
    Landmark legislation passed today puts New Zealand on track to saving thousands of lives and having a smokefree generation sooner rather than later, Associate Health Minister, Jenny Salesa says. The Smokefree Environments and Regulated Products (Vaping) Amendment Bill regulates vaping products and heated tobacco devices. “There has long been concern ...
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    1 day ago
  • Government repeals discriminatory law
    A discriminatory law that has been a symbol of frustration for many people needing and providing care and support, has been scrapped by the Government. “Part 4A of the New Zealand Public Health and Disability Amendment Bill (No 2) was introduced under urgency in 2013 by a National Government,” Associate ...
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    1 day ago
  • More competitive fuel market on the way
    Kiwi motorists are set to reap the benefits of a more competitive fuel market following the passing of the Fuel Industry Bill tonight, Energy and Resources Minister Megan Woods says.  “This Act is where the rubber meets the road in terms of our response to the recommendations made in the ...
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    1 day ago
  • Government delivers on rental reforms promise
    The Government has delivered on its promise to New Zealanders to modernise tenancy laws with the passing of the Residential Tenancies Amendment (RTA) Bill 2020 today, says Associate Minister of Housing (Public Housing), Kris Faafoi. “The Residential Tenancies Act 1986 was out-dated and the reforms in the RTA modernise our ...
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    1 day ago
  • New rules in place to restore healthy rivers
    New rules to protect and restore New Zealand’s freshwater passed into law today. Environment Minister David Parker and Agriculture Minister Damien O’Connor welcomed the gazetting of the new national direction on freshwater management. “These regulations deliver on the Government’s commitment to stop further degradation, show material improvements within five years and ...
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    2 days ago
  • Foreign Minister announces new Consul-General in Los Angeles
    Foreign Affairs Minister Winston Peters has announced the appointment of Jeremy Clarke-Watson as New Zealand’s new Consul-General in Los Angeles. “New Zealand and the United States share a close and dynamic partnership, based on a long history of shared values and democratic traditions,” Mr Peters said. “Mr Clarke-Watson is a ...
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    2 days ago
  • Rental reforms provide greater support for victims of family violence
    Victims of family violence can end a tenancy with two days’ notice Landlords can terminate tenancies with 14 days’ notice if tenants assault them Timeframe brought forward for limiting rent increases to once every 12 months Extension of time Tenancy Tribunal can hear cases via phone/video conference Reform of New ...
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    2 days ago
  • Apprenticeships support kicks off today
    Two employment schemes – one new and one expanded – going live today will help tens of thousands of people continue training on the job and support thousands more into work, the Government has announced. Apprenticeship Boost, a subsidy of up to $12,000 per annum for first year apprentices and ...
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    2 days ago
  • Infrastructure to transform Omokoroa
    The Government is funding a significant infrastructure package at Omokoroa which will create 150 new jobs and help transform the Western Bay of Plenty peninsula, Urban Development Minister Phil Twyford announced today. Phil Twyford says the Government is investing $14 million towards the $28 million roading and water package. This ...
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    2 days ago
  • Bill passes for managed isolation charges
    The Bill allowing the Government to recover some costs for managed isolation and quarantine passed its third reading today, with charges coming into force as soon as regulations are finalised. Putting regulations into force is the next step. “The COVID-19 Public Health Response Amendment Bill and its supporting regulations will ...
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    2 days ago
  • Unemployment drop shows Govt plan to protect jobs and support businesses is working
    Today’s unemployment data shows the Government’s plan to protect jobs and cushion the blow for businesses and households against the economic impact of COVID-19 was the right decision, Finance Minister Grant Robertson says. Stats NZ said today that New Zealand’s unemployment rate in the June quarter – which includes the ...
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    2 days ago
  • New role to champion reading for children
    A new role of New Zealand Reading Ambassador for children and young people is being established, Prime Minister and Minister for Arts, Culture and Heritage Jacinda Ardern and Minister for Internal Affairs and for Children, Tracey Martin announced today. The Reading Ambassador, announced at a Celebration of Reading event at ...
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    2 days ago
  • Funding boost for Community Law Centres
    Community Law Centres will receive a funding boost to meet the increased need for free legal services due to COVID-19, Justice Minister Andrew Little said. The $3.5m funding is for the next three financial years and is additional to the almost $8 million for Community Law Centres announced in Budget ...
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    2 days ago
  • New Zealand joins initiative to boost women’s role in global trade
    New Zealand has joined Canada and Chile in a new trade initiative aimed at increasing women’s participation in global trade. Trade and Export Growth Minister David Parker, together with Canada’s Minister for Small Business, Export Promotion and International Trade Mary Ng, Chile’s Minister of Foreign Affairs Andrés Allamand, and Chile’s Vice ...
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    2 days ago
  • Government provides $2.2m to heritage buildings for quake strengthening
    Building owners around New Zealand have benefited from the latest round of Heritage EQUIP funding with grants totalling $2,230,166. “The Heritage EQUIP grants for seismic strengthening assist private building owners to get the professional advice they need to go ahead with their projects or support them to carry out the ...
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    2 days ago
  • Better hospital care for Northland babies and their whānau
    •    New paediatric facilities, including a Special Baby Care Unit •    Up to 50 extra inpatient beds  •    New lab facilities  Northland babies and their whānau will soon have access to improved hospital care when they need it with Health Minister Chris Hipkins today confirming new paediatric facilities and more ...
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    2 days ago
  • Green light for Wellington and Wairarapa in $220m nationwide cycleways package
    People walking and cycling between Featherston and Greytown, or along Wellington’s Eastern Bays will soon have a safe shared path, as part of a $220 million shovel-ready cycleways package announced by Associate Transport Minister Julie Anne Genter. “During lockdown we saw many more families and kids out on their bikes, ...
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    2 days ago
  • New Zealand expresses condolences on passing of Vanuatu High Commissioner
    Foreign Affairs Minister Winston Peters today extended New Zealand’s condolences following the death of Vanuatu’s High Commissioner to New Zealand, Johnson Naviti, who passed away yesterday afternoon in Wellington. “Our thoughts are with the High Commissioner’s family and colleagues during this difficult time. This is a terrible loss both to ...
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    3 days ago
  • Government announces allocation of three waters funds for councils
    The Government has today set out the regional allocations of the $761 million Three Waters stimulus and reform funding for councils announced by Prime Minister Hon Jacinda Ardern this month.  "I want to thank Councils around the country for engaging with the Central Local Government Steering Group who have been ...
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    3 days ago
  • Funding boost for students with highest learning support needs
    Students with high and complex learning needs, as well as their teachers and parents, will benefit from a substantial increase to Ongoing Resourcing Scheme (ORS) funding, Associate Education Minister Martin announced today. “Nearly $160 million will go towards helping these students by lifting their base support over the next four ...
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    3 days ago
  • Govt connecting kiwis to affordable, healthy food
    Funding for innovative projects to connect Kiwis with affordable, safe and wholesome food, reduce food waste, and help our food producers recover from COVID-19 has been announced today by Agriculture Minister Damien O’Connor. “COVID-19 has seen an increasing number of families facing unprecedented financial pressure. Foodbanks and community food service ...
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    3 days ago
  • Getting infrastructure for housing underway
    Eight shovel-ready projects within Kāinga Ora large-scale developments, and the Unitec residential development in Auckland have been given the go-ahead, Minister for Housing Dr Megan Woods announced today. Megan Woods says these significant infrastructure upgrades will ensure that the provision of homes in Auckland can continue apace. “The funding announced ...
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    3 days ago
  • Napier walk and cycleway to improve safety
    The Government is funding a new separated walking and cycleway path along Napier’s Chambers and Ellison streets to provide safer access for local students and residents across Marine Parade and State Highway 51, Transport Minister Phil Twyford and Police Minister Stuart Nash announced today. Funding of $2.7 million has been ...
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    3 days ago