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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  • EV road user charges bill passes
    Transport Minister Simeon Brown has welcomed the passing of legislation to move light electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs) into the road user charges system from 1 April.  “It was always intended that EVs and PHEVs would be exempt from road user charges until they reached two ...
    BeehiveBy beehive.govt.nz
    15 hours ago
  • Bill targets illegal, unregulated fishing in international waters
    New Zealand is strengthening its ability to combat illegal fishing outside its domestic waters and beef up regulation for its own commercial fishers in international waters through a Bill which had its first reading in Parliament today. The Fisheries (International Fishing and Other Matters) Amendment Bill 2023 sets out stronger ...
    BeehiveBy beehive.govt.nz
    16 hours ago
  • Reserve Bank appointments
    Economists Carl Hansen and Professor Prasanna Gai have been appointed to the Reserve Bank Monetary Policy Committee, Finance Minister Nicola Willis announced today. The Monetary Policy Committee (MPC) is the independent decision-making body that sets the Official Cash Rate which determines interest rates.  Carl Hansen, the executive director of Capital ...
    BeehiveBy beehive.govt.nz
    17 hours ago
  • Stronger protections for apartment owners
    Apartment owners and buyers will soon have greater protections as further changes to the law on unit titles come into effect, Housing Minister Chris Bishop says. “The Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Act had already introduced some changes in December 2022 and May 2023, and ...
    BeehiveBy beehive.govt.nz
    19 hours ago
  • Travel focused on traditional partners and Middle East
    Foreign Minister Winston Peters will travel to Egypt and Europe from this weekend.    “This travel will focus on a range of New Zealand’s traditional diplomatic and security partnerships while enabling broad engagement on the urgent situation in Gaza,” Mr Peters says.   Mr Peters will attend the NATO Foreign ...
    BeehiveBy beehive.govt.nz
    20 hours ago
  • Keep safe on our roads this Easter
    Transport Minister Simeon Brown is encouraging all road users to stay safe, plan their journeys ahead of time, and be patient with other drivers while travelling around this Easter long weekend. “Road safety is a responsibility we all share, and with increased traffic on our roads expected this Easter we ...
    BeehiveBy beehive.govt.nz
    22 hours ago
  • Cost of living support for over 1.4 million Kiwis
    About 1.4 million New Zealanders will receive cost of living relief through increased government assistance from April 1 909,000 pensioners get a boost to Superannuation, including 5000 veterans 371,000 working-age beneficiaries will get higher payments 45,000 students will see an increase in their allowance Over a quarter of New Zealanders ...
    BeehiveBy beehive.govt.nz
    23 hours ago
  • Tenancy reviews for social housing restart
    Ensuring social housing is being provided to those with the greatest needs is front of mind as the Government restarts social housing tenancy reviews, Associate Housing Minister Tama Potaka says. “Our relentless focus on building a strong economy is to ensure we can deliver better public services such as social ...
    BeehiveBy beehive.govt.nz
    23 hours ago
  • Kermadec Ocean Sanctuary plan halted
    The Kermadec Ocean Sanctuary will not go ahead, with Cabinet deciding to stop work on the proposed reserve and remove the Bill that would have established it from Parliament’s order paper. “The Kermadec Ocean Sanctuary Bill would have created a 620,000 sq km economic no-go zone,” Oceans and Fisheries Minister ...
    BeehiveBy beehive.govt.nz
    23 hours ago
  • Cutting all that dam red tape
    Dam safety regulations are being amended so that smaller dams won’t be subject to excessive compliance costs, Minister for Building and Construction Chris Penk says. “The coalition Government is focused on reducing costs and removing unnecessary red tape so we can get the economy back on track.  “Dam safety regulations ...
    BeehiveBy beehive.govt.nz
    24 hours ago
  • Drought support extended to parts of North Island
    The coalition Government is expanding the medium-scale adverse event classification to parts of the North Island as dry weather conditions persist, Agriculture Minister Todd McClay announced today. “I have made the decision to expand the medium-scale adverse event classification already in place for parts of the South Island to also cover the ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Passage of major tax bill welcomed
    The passing of legislation giving effect to coalition Government tax commitments has been welcomed by Finance Minister Nicola Willis.  “The Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Bill will help place New Zealand on a more secure economic footing, improve outcomes for New Zealanders, and make our tax system ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Lifting economy through science, tertiary sectors
    Science, Innovation and Technology Minister Judith Collins and Tertiary Education and Skills Minister Penny Simmonds today announced plans to transform our science and university sectors to boost the economy. Two advisory groups, chaired by Professor Sir Peter Gluckman, will advise the Government on how these sectors can play a greater ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Government announces Budget priorities
    The Budget will deliver urgently-needed tax relief to hard-working New Zealanders while putting the government’s finances back on a sustainable track, Finance Minister Nicola Willis says.  The Finance Minister made the comments at the release of the Budget Policy Statement setting out the Government’s Budget objectives. “The coalition Government intends ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Government to consider accommodation solution
    The coalition Government will look at options to address a zoning issue that limits how much financial support Queenstown residents can get for accommodation. Cabinet has agreed on a response to the Petitions Committee, which had recommended the geographic information MSD uses to determine how much accommodation supplement can be ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Government approves extension to Royal Commission of Inquiry into Abuse in Care
    Cabinet has agreed to a short extension to the final reporting timeframe for the Royal Commission into Abuse in Care from 28 March 2024 to 26 June 2024, Internal Affairs Minister Brooke van Velden says.                                         “The Royal Commission wrote to me on 16 February 2024, requesting that I consider an ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • $18m boost for Kiwis travelling to health treatment
    The coalition Government is delivering an $18 million boost to New Zealanders needing to travel for specialist health treatment, Health Minister Dr Shane Reti says.   “These changes are long overdue – the National Travel Assistance (NTA) scheme saw its last increase to mileage and accommodation rates way back in 2009.  ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • PM’s Prizes for Space to showcase sector’s talent
    The Government is recognising the innovative and rising talent in New Zealand’s growing space sector, with the Prime Minister and Space Minister Judith Collins announcing the new Prime Minister’s Prizes for Space today. “New Zealand has a growing reputation as a high-value partner for space missions and research. I am ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Concerns conveyed to China over cyber activity
    Foreign Minister Winston Peters has confirmed New Zealand’s concerns about cyber activity have been conveyed directly to the Chinese Government.     “The Prime Minister and Minister Collins have expressed concerns today about malicious cyber activity, attributed to groups sponsored by the Chinese Government, targeting democratic institutions in both New ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Independent Reviewers appointed for School Property Inquiry
    Independent Reviewers appointed for School Property Inquiry Education Minister Erica Stanford today announced the appointment of three independent reviewers to lead the Ministerial Inquiry into the Ministry of Education’s School Property Function.  The Inquiry will be led by former Minister of Foreign Affairs Murray McCully. “There is a clear need ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Brynderwyns open for Easter
    State Highway 1 across the Brynderwyns will be open for Easter weekend, with work currently underway to ensure the resilience of this critical route being paused for Easter Weekend to allow holiday makers to travel north, Transport Minister Simeon Brown says. “Today I visited the Brynderwyn Hills construction site, where ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Speech to the Infrastructure Funding & Financing Conference
    Introduction Good morning to you all, and thanks for having me bright and early today. I am absolutely delighted to be the Minister for Infrastructure alongside the Minister of Housing and Resource Management Reform. I know the Prime Minister sees the three roles as closely connected and he wants me ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Parliamentary network breached by the PRC
    New Zealand stands with the United Kingdom in its condemnation of People’s Republic of China (PRC) state-backed malicious cyber activity impacting its Electoral Commission and targeting Members of the UK Parliament. “The use of cyber-enabled espionage operations to interfere with democratic institutions and processes anywhere is unacceptable,” Minister Responsible for ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • NZ to provide support for Solomon Islands election
    Foreign Minister Winston Peters and Defence Minister Judith Collins today announced New Zealand will provide logistics support for the upcoming Solomon Islands election. “We’re sending a team of New Zealand Defence Force personnel and two NH90 helicopters to provide logistics support for the election on 17 April, at the request ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • NZ-EU FTA gains Royal Assent for 1 May entry to force
    The European Union Free Trade Agreement Legislation Amendment Bill received Royal Assent today, completing the process for New Zealand’s ratification of its free trade agreement with the European Union.    “I am pleased to announce that today, in a small ceremony at the Beehive, New Zealand notified the European Union ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • COVID-19 inquiry attracts 11,000 submissions
    Public consultation on the terms of reference for the Royal Commission into COVID-19 Lessons has concluded, Internal Affairs Minister Hon Brooke van Velden says.  “I have been advised that there were over 11,000 submissions made through the Royal Commission’s online consultation portal.” Expanding the scope of the Royal Commission of ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Families to receive up to $75 a week help with ECE fees
    Hardworking families are set to benefit from a new credit to help them meet their early childcare education (ECE) costs, Finance Minister Nicola Willis says. From 1 July, parents and caregivers of young children will be supported to manage the rising cost of living with a partial reimbursement of their ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Unlocking a sustainable, low-emissions future
    A specialised Independent Technical Advisory Group (ITAG) tasked with preparing and publishing independent non-binding advice on the design of a "green" (sustainable finance) taxonomy rulebook is being established, Climate Change Minister Simon Watts says.  “Comprising experts and market participants, the ITAG's primary goal is to deliver comprehensive recommendations to the ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Chief of Army thanked for his service
    Defence Minister Judith Collins has thanked the Chief of Army, Major General John Boswell, DSD, for his service as he leaves the Army after 40 years. “I would like to thank Major General Boswell for his contribution to the Army and the wider New Zealand Defence Force, undertaking many different ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Minister to meet Australian counterparts and Manufacturing Industry Leaders
    25 March 2024 Minister to meet Australian counterparts and Manufacturing Industry Leaders Small Business, Manufacturing, Commerce and Consumer Affairs Minister Andrew Bayly will travel to Australia for a series of bi-lateral meetings and manufacturing visits. During the visit, Minister Bayly will meet with his Australian counterparts, Senator Tim Ayres, Ed ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Government commits nearly $3 million for period products in schools
    Government commits almost $3 million for period products in schools The Coalition Government has committed $2.9 million to ensure intermediate and secondary schools continue providing period products to those who need them, Minister of Education Erica Stanford announced today. “This is an issue of dignity and ensuring young women don’t ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Speech – Making it easier to build.
    Good morning, it’s great to be here.   First, I would like to acknowledge the New Zealand Institute of Building Surveyors and thank you for the opportunity to be here this morning.  I would like to use this opportunity to outline the Government’s ambitious plan and what we hope to ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Pacific youth to shine from boost to Polyfest
    Minister for Pacific Peoples Dr Shane Reti has announced the Government’s commitment to the Auckland Secondary Schools Māori and Pacific Islands Cultural Festival, more commonly known as Polyfest. “The Ministry for Pacific Peoples is a longtime supporter of Polyfest and, as it celebrates 49 years in 2024, I’m proud to ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • 2024 Ngarimu VC and 28th (Māori) Battalion Memorial Scholarships announced
    ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Speech to Breast Cancer Foundation – Insights Conference
    Before moving onto the substance of today’s address, I want to recognise the very significant and ongoing contribution the Breast Cancer Foundation makes to support the lives of New Zealand women and their families living with breast cancer. I very much enjoy working with you. I also want to recognise ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Kiwi research soars to International Space Station
    New Zealand has notched up a first with the launch of University of Canterbury research to the International Space Station, Science, Innovation and Technology and Space Minister Judith Collins says. The hardware, developed by Dr Sarah Kessans, is designed to operate autonomously in orbit, allowing scientists on Earth to study ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Speech to the New Zealand Planning Institute
    Introduction Thank you for inviting me to speak with you today and I’m sorry I can’t be there in person. Yesterday I started in Wellington for Breakfast TV, spoke to a property conference in Auckland, and finished the day speaking to local government in Christchurch, so it would have been ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Support for Northland emergency response centre
    The Coalition Government is contributing more than $1 million to support the establishment of an emergency multi-agency coordination centre in Northland. Emergency Management and Recovery Minister Mark Mitchell announced the contribution today during a visit of the Whangārei site where the facility will be constructed.  “Northland has faced a number ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Celebrating 20 years of Whakaata Māori
    New Zealanders have enjoyed a broader range of voices telling the story of Aotearoa thanks to the creation of Whakaata Māori 20 years ago, says Māori Development Minister Tama Potaka. The minister spoke at a celebration marking the national indigenous media organisation’s 20th anniversary at their studio in Auckland on ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Some commercial fishery catch limits increased
    Commercial catch limits for some fisheries have been increased following a review showing stocks are healthy and abundant, Ocean and Fisheries Minister Shane Jones says. The changes, along with some other catch limit changes and management settings, begin coming into effect from 1 April 2024. "Regular biannual reviews of fish ...
    BeehiveBy beehive.govt.nz
    7 days ago

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