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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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  • David McLean appointed as KiwiRail chair
    David McLean has been appointed as Chair of KiwiRail Holdings Ltd, the Minister for State Owned Enterprises Dr David Clark and Minister of Finance Grant Robertson announced today. “Minister Clark and I are confident that David’s extensive business knowledge and leadership experience, including his time as former Chief Executive and ...
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    15 hours ago
  • New Ambassador to Turkey announced
    Foreign Affairs Minister Nanaia Mahuta today announced the appointment of Zoe Coulson-Sinclair as New Zealand’s next Ambassador to Turkey. “Aotearoa New Zealand and Turkey’s relationship is one of mutual respect and underpinned by our shared Gallipoli experience,” Nanaia Mahuta said. “Turkey is also a generous ANZAC Day host and has ...
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    15 hours ago
  • Announcement of new Consul-General in Guangzhou
    Foreign Affairs Minister Nanaia Mahuta today announced the appointment of Rachel Crump as New Zealand’s next Consul-General in Guangzhou, China. “China is one of Aotearoa New Zealand’s most significant relationships – it is our largest trading partner, and an influential regional and global actor,” Nanaia Mahuta said. “As the capital of ...
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    16 hours ago
  • Government marks International Day of Persons with Disabilities
    The Government joins the disabled community of Aotearoa New Zealand in marking and celebrating the International Day of Persons with Disabilities, Minister for Disabilty Issues Carmel Sepuloni said. The theme for this year’s International Day of Persons with Disabilities is “Leadership and participation of persons with disabilities toward an inclusive, ...
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    16 hours ago
  • Deputy Inspector-General of Intelligence and Security, and Advisory panel member appointed
    Prime Minister Jacinda Ardern has announced the appointments of Graeme Speden as the Deputy Inspector-General of Intelligence and Security, and Ben Bateman as a member of the Inspector-General’s Advisory Panel.  “These are significant roles that assist the Inspector-General with independent oversight of New Zealand’s intelligence agencies,” Jacinda Ardern said. “While ...
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    17 hours ago
  • Five million COVID-19 tests processed
    Associate Minister of Health, Dr Ayesha Verrall has congratulated testing teams right around New Zealand for reaching the five million tests milestone. Today, an additional 31,780 tests were processed, taking the total since the beginning of the pandemic in 2020 to 5,005,959. “This really is an incredible and sustained team ...
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    18 hours ago
  • Funding for extra ICU capacity
    Care for the sickest New Zealanders is getting a major boost from the Government, with plans to spend hundreds of millions of dollars on expanding intensive care-type services, Health Minister Andrew Little announced today. “Through good planning, we have avoided what the COVID-19 pandemic has done in some countries, where ...
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    23 hours ago
  • “THE LEGAL AND CONSTITUTIONAL IMPLICATIONS OF NEW ZEALAND’S FIGHT AGAINST COVID.”
    Speech to the New Zealand Centre for Public Law Tēnā koutou katoa Thank you for providing this opportunity to speak with you today as Attorney General. I’m here to talk about the constitutional consequences of Covid -19. I love the law. The way it exists with the consent of the ...
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    2 days ago
  • The legal and constitutional implications of New Zealand’s fight against COVID
    Speech to the New Zealand Centre for Public Law Tēnā koutou katoa Thank you for providing this opportunity to speak with you today as Attorney General. I’m here to talk about the constitutional consequences of Covid -19. I love the law. The way it exists with the consent of the ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Pharmac Review interim report released
    Health Minister Andrew Little has released an interim report by an independent panel reviewing the national pharmaceuticals-buying agency Pharmac. Pharmac was established in 1993 and is responsible for purchasing publicly funded medicines for New Zealanders, including those prescribed by GPs or administered in hospitals. The review, chaired by former Consumer ...
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    2 days ago
  • Appointment to Network for Learning board
    Former MP Clare Curran has been appointed to the board of Crown company Network for Learning (N4L), Education Minister Chris Hipkins says. Hon Clare Curran served as a Member of Parliament for Dunedin South from 2008-2010. During this time, she held a number of ministerial portfolios including Broadcasting, Communications and ...
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    2 days ago
  • Putting home ownership within reach of Pacific Aotearoa
    Pacific community groups and organisations will get tools to help them achieve home ownership with the implementation of the Ministry for Pacific Peoples (MPP) Pacific Housing Initiative, said Pacific Peoples Minister Aupito William Sio. In July 2021, MPP launched the Pacific Community Housing Provider Registration Support programme and the Pacific ...
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    2 days ago
  • Coastal shipping will help keep New Zealand’s supply chain buoyant
    Transport Minister Michael Wood today welcomed the release of the Coastal Shipping Investment Approach State-of-Play report as an important step towards a more sustainable coastal shipping sector, which will further diversify New Zealand’s supply chain. “This Government is committed to strengthening our domestic supply chain by making coastal shipping a ...
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    2 days ago
  • Response to Human Rights Commission's reports into violence towards disable people
    Tēnā koutou, tēnā koutou, tēnā tātou katoa.   Thank you for that introduction Hemi and thank you for inviting me to respond on behalf of Government to the release of these two important reports (Whakamanahia Te Tiriti, Whakahaumarutia te Tangata -Honour the Treaty, Protect the Person and Whakamahia te Tūkino kore ...
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    2 days ago
  • Law change strengthens petroleum decommissioning regulation
    Petroleum permit and licence holders operating in New Zealand will now have an explicit statutory requirement to carry out and fund the decommissioning of oil and gas fields after a new law was given Royal assent today, says Energy and Resources Minister Dr Megan Woods. Once in effect The Crown ...
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    2 days ago
  • New Zealand Response to assist peace and stability in Solomon Islands
    The New Zealand government has announced that it will deploy Defence Force and Police personnel to Honiara to help restore peace and stability. “New Zealand is committed to its responsibilities and playing its part in upholding regional security,” Prime Minister Jacinda Ardern said.  “We are deeply concerned by the recent ...
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    2 days ago
  • Continued growth in volume of new home consents
    In the year ended October 2021, 47,715 new homes were consented, up 26 per cent from the October 2020 year. In October 2021, 4,043 new dwellings were consented Canterbury’s new homes consented numbers rose 31% to higher than post-earthquake peak. New home consents continue to reach remarkable levels of growth, ...
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    3 days ago
  • Saddle up for summer with cycle trail funding
    New investment will keep the best of New Zealand’s cycle trails in top condition as regions prepare to welcome back Kiwi visitors over summer and international tourists from next year. “Cycle tourism is one of the most popular ways to see the country ‘off the beaten track’ but the trails ...
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    3 days ago
  • New Zealand provides additional funding to COVAX for vaccine delivery
    Foreign Affairs Minister Nanaia Mahuta today announced additional funding will be provided to COVAX to support vaccine delivery in developing countries. “New Zealand remains cognisant of the dangers of COVID-19, especially as new variants continue to emerge. No one is safe from this virus until we all are and this ...
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    3 days ago
  • COVID-19 Community fund providing support for 160 organisations focused on women and girls
    Minister for Women Jan Tinetti today announced financial support will be allocated to the 160 successful applicants for the COVID-19 Community Fund, to support organisations helping women/wāhine and girls/kōtiro in Aotearoa New Zealand affected by the pandemic. “COVID-19 has had a disproportionate effect on women around the world including in ...
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    3 days ago
  • Government delivers reactivation package as Aucklanders reconnect for summer
    A new support package will help revive economic, social and cultural activities in our largest city over summer, and ensure those in hardship also get relief. The Social Development and Employment Minister Carmel Sepuloni and the Economic and Regional Development Minister Stuart Nash have announced a Reactivating Tāmaki Makaurau Auckland ...
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    3 days ago
  • Mobile services and broadband come to Chatham Islands for first time
    World class mobile and broadband services have been switched on for the 663 residents of the Chatham Islands, Minister for the Digital Economy and Communications, David Clark and Minister for Economic and Regional Development, Stuart Nash announced today. “This eagerly awaited network will provide fast broadband and mobile services to ...
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    3 days ago
  • Crown accounts reflect strong economy amid pandemic
    The Government’s financial accounts continue to reflect an economy that has performed better than expected, despite the latest Delta COVID-19 outbreak. The Crown accounts for the four months to the end of October factors in the improved starting position for the new financial year. Core Crown tax revenue was $2.5 ...
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    3 days ago
  • Applications open for new 2021 Resident Visa
    The first round of applications for New Zealand’s new 2021 Resident visa open today (6am). “This one-off pathway provides certainty for a great many migrant families who have faced disruption because of COVID-19 and it will help retain the skills New Zealand businesses need to support the economic recovery,” Minister ...
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    3 days ago
  • More Vietnam Veterans to receive compensation for Agent Orange Exposure
    Minister for Veterans, the Hon Meka Whaitiri announced today that two new conditions associated with Agent Orange exposure have been added to the Prescribed Conditions List. Under the 2006 Memorandum of Understanding signed between the Crown and representatives of Vietnam veterans and the Royal New Zealand RSA. Vietnam veterans in ...
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    4 days ago
  • Government commits to international effort to ban and regulate killer robots
    Minister of Disarmament and Arms Control Phil Twyford announced today that New Zealand will push for new international law to ban and regulate autonomous weapons systems (AWS), which once activated can select and engage targets without further human intervention. “While the evidence suggests fully autonomous weapons systems are not yet ...
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    4 days ago
  • New freedom camping rules – right vehicle, right place
    Tougher freedom camping laws will be introduced to prevent abuse which has placed an unfair burden on small communities and damaged our reputation as a high quality visitor destination. Tourism Minister Stuart Nash has confirmed that new legislation will be introduced to Parliament following an extensive round of public consultation ...
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    4 days ago
  • Government invests to support a classic Kiwi summer
    Vaccinated New Zealanders can look forward to Kiwi summer events with confidence, while artists and crew will have more certainty, following the launch of details of the Arts and Culture Event Support Scheme, Minister for Arts, Culture and Heritage Carmel Sepuloni announced today. “The Government recognises that the arts and ...
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    4 days ago
  • Grace period for expired driver licences cruises into 2022
    Due to the ongoing Delta outbreak and extended lockdowns, all New Zealand driver licences and licence endorsements that expired on or after 21 July 2021 will now be valid until 31 May 2022, Transport Minister Michael Wood announced today. “This further extension to the validity of driver licenses recognises that ...
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    4 days ago
  • Delivered: 1,000 extra transitional homes
    A further 1,000 transitional homes delivered  New housing development starts in Flaxmere, Hastings  The Government has delivered the next 1,000 transitional housing places it promised, as part of its work to reduce homelessness. Housing Minister Dr Megan Woods is marking the milestone in Hastings at a new development that includes ...
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    4 days ago
  • Traffic light levels announced
    The levels at which different parts of New Zealand will move forward into the COVID-19 Protection Framework this Friday have been announced. Northland, Auckland, Taupō and Rotorua Lakes Districts, Kawerau, Whakatane, Ōpōtiki Districts, Gisborne District, Wairoa District, Rangitikei, Whanganui and Ruapehu Districts will move in at Red The rest of ...
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    5 days ago
  • Financial support to move to traffic light system
    A new transition payment will be made available particularly for affected businesses in Auckland, Waikato and Northland to acknowledge the restrictions they have faced under the higher Alert Levels. Transition payment of up to $24,000 as businesses move into traffic light system Leave Support Scheme and Short Term Absence Payment ...
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    5 days ago
  • New Ambassador to Russia announced
    Foreign Affairs Minister Nanaia Mahuta today announced the appointment of Sarah Walsh as New Zealand’s next Ambassador to Russia. “Aotearoa New Zealand and Russia have a long-standing relationship, engaging on a range of regional and global interests including disarmament and Antarctica issues. We also work together as members of the East ...
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    5 days ago
  • New Permanent Representative to the UN announced
    Foreign Affairs Minister Nanaia Mahuta today announced the appointment of Carolyn Schwalger as Permanent Representative to the New Zealand Permanent Mission to the United Nations in New York. “Aotearoa New Zealand is a founding member of the UN and we have worked hard to ensure our stance on human rights, ...
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    5 days ago
  • Further COVID-19 economic support for Cook Islands and Fiji announced
    Foreign Affairs Minister Nanaia Mahuta today announced a further package of support for the Cook Islands and Fiji for COVID-19 economic support and recovery. “Aotearoa New Zealand remains committed to supporting our Pacific fanau and vuvale to respond to the impacts of COVID-19 on their economies, and move towards long-term ...
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    6 days ago
  • New law will clear the air for tamariki in vehicles
    From today, it’s illegal to smoke or vape in most vehicles carrying children aged under 18 years old - whether the vehicle is moving or not. “Second-hand smoke poses an unacceptable risk to our tamariki and rangatahi,” Associate Minister of Health Dr Ayesha Verrall said. “We know children in vehicles ...
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    6 days ago
  • Nine countries designated very high risk
    Nine southern African countries are being added to the very high risk countries list following public health advice around the newly discovered COVID-19 variant Omicron, COVID-19 Response Minister Chris Hipkins said. This afternoon, a public health risk assessment was carried out to assess the emerging evidence and any risk to ...
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    6 days ago
  • Foreign Affairs Minister concludes final stage of world trip
    Foreign Affairs Minister Hon Nanaia Mahuta today departed North America to return home to Aotearoa, concluding the last stage of her 17-day world trip. The final leg of her trip saw her visit the United States of America and Canada for a number of high-level discussions. While in Washington D.C., ...
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    6 days ago
  • Milestone launch of Pacific Languages Unit
    Today’s official launch of the Pacific Languages Unit is a milestone for our Pacific communities, the Minister for Pacific Peoples, Aupito William Sio said. The Pacific Languages Unit brings together a new set of language supports within the Ministry for Pacific Peoples to provide advice, commission research, maintain standards, promote ...
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    7 days ago
  • Public Health Lecture – University of Otago
    Public Health - Lessons from New Zealand’s COVID-19 response and opportunities for the future E nga mana, E nga reo,                                          E nga iwi. Tēna koutou katoa. Ka huri ki nga mana whenua o te rohe nei. Tēna koutou. He mihi hoki ki a tatou kua tau mai nei I raro I ...
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    1 week ago