Taxpayers

Written By: - Date published: 9:00 am, July 14th, 2011 - 35 comments
Categories: capital gains, Economy, gst, tax - Tags:

According to Gareth Morgan, “all income should be taxed if it is a fair income tax”.

So where are taxes coming from right now? The three main areas are PAYE (pay as you earn personal income tax), GST (goods and services tax) and Company tax.

The Consumer tax (green) above includes PAYE and GST. These two are lumped together as one total on the basis that the bulk of GST is paid by PAYE earners when they spend their after tax income. (For the record in 2010 for every dollar of PAYE collected 75 cents of GST was collected.)

Corporate tax (blue) is company tax paid by businesses on their profit not their total income.

Consumer and Corporate tax makes up close to 90% of all tax collected. The total tax take today is equivalent to the value of about 30% of all production (GDP). Business currently pays 4.2% of this and consumers an outrageous 24% of total production.

All of this supports Gareth Morgan’s assertion that “The highest contribution to the tax collect is not made by those with the greatest means, it is made by those with the highest taxable income” and ability to spend that income and pay GST.

Hopefully a well designed Capital Gains Tax (CGT), that taxes most if not all income, will take the unfair pressure off wage and salary earners. Clearly these people are the back-bone-of–the-country.

Sources: TreasuryGareth Morgan

35 comments on “Taxpayers”

  1. I don’t own any property – not something I’ve ever really agreed with. I’ve always thought there’s too much focus on everyone owning their own home.

    However, I pay tax on the occupational retirement pension I am now receiving from the UK (based on the money I paid into the teachers pension when I worked there). The amount of tax I pay and to which country is worked out between the UK & NZ tax offices, based on my total income – it’s covered by a treaty.

    But, anyway, if my retirement pension is taxed (which I don’t have a problem with), then also the income from property investments (including an investment made for retirement) should be taxed. And I’m happy to pay this tax because it contributes towards the kind of society I want to live in.

  2. deemac 2

    there is an argument to be made for taxing businesses rather than employees because only businesses can create wealth. Plus the taxes employees pay comes originally from their employers so it’s just a long-winded way of taxing the employer. But the simplest way to cut out tax avoidance is just to say all income is taxed.

    • mikesh 2.1

      This would mean that Paul Reynolds would pay tax at the same rate as a shop assistant in a Telecom retail outlet, since both are Telecom employees.

  3. Ianupnorth 3

    I remember around three years ago someone promising they wouldn’t raise GST; I also remember that lots of people said it would be the less well off that would end up contributing more to the treasury by virtue of a raised GST. I also saw on the news last night that the cost of living has gone up drastically in the last three years.
     
    I do hope someone will put these things on a bloody big election poster and in adverts in the paper.

    • Policy Parrot 3.1

      It would easy to say, and unchallengable – to make an advert with John Key saying “we will not put up GST”, and then saying “if he lies about GST, what else is he capable of?”

      • Colonial Viper 3.1.1

        😀

        “We won’t touch KiwiSaver”

        “If he lies about KiwiSaver, what else is he capable of?”

  4. Todd 4

    I would like to have my business pay more tax,I really would it would mean im making money.My business pays less tax now than 3 years ago even after cutting back on all/any unnecessary costs.pretty easy for any govt to introduce more costs for me but it will come at a cost.

  5. TightyRighty 5

    National already redressed the balance by giving high income earners a break on tax on their salaries and wages. High Income Earners pay the most tax, in absolute and relative terms, so why do those who achieve something then get harassed by a party of incompetents for more money? Jealousy envy or out and out hate? take your pick, or the lot, as labour and it’s low intelligence supporters seem to want to do.

    • Draco T Bastard 5.1

      High Income Earners pay the most tax, in absolute and relative terms,

      And yet of the top 100 income earners in the country 50 of them didn’t pay the top tax rate. This fact should lead you to realise what Morgan meant when he said:

      “The highest contribution to the tax collect is not made by those with the greatest means, it is made by those with the highest taxable income”

      …as labour and it’s low intelligence supporters seem to want to do.

      Fact gets in the way of the RWNJs delusion – again.

      The National Longitudinal Study of Adolescent Health – used by the London scientists – also inquired the adolescents’ political convictions. As the scientists wrote in Social Psychology Quarterly, those who saw themselves as “very liberal” reached an IQ of 106, while those who characterized themselves as “very conservative” had only an average IQ of 95.

      The low intelligence supporters? Yeah, they’re all on the right of the political spectrum.

      Jealousy envy or out and out hate?

      It’s because we realise that the policies the right espouse are stupid.

      • TightyRighty 5.1.1

        Are you saying liberals are only able to support parties on the left of the political spectrum draco? is that what you mean? that if you support a right wing party you are automatically a conservative? talk about living up to the stereotype of labour and it’s low intelligence supporters.

        • Draco T Bastard 5.1.1.1

          It was a US study where “liberal” = left. I thought even a stupid RWNJ such as yourself would have been able to work that one out.

          • TightyRighty 5.1.1.1.1

            but i’m not american and nor do i subscribe to the US lingo of liberals = lefties. Pretty gauche of you to use the american sayings draco, or remarkably stupid seeing as we use UK english, as in the Queens.

    • mik e 5.2

      Its called democracy not envy .to be a part of society we all have to contribute those who have more contribute more otherwise we might as well go back to the Dickensonian days. but then they,ll be even less customers for the businesses so they,ll be fewer rich people. you want to read the history of economics and you might change your mind.The unions and the likes of William Cadbury spread wealth and made a lot more people wealthy their by creating more customers unbelievable aye !

      • rosy 5.2.1

        There’s no point telling TR, mik e. If you look at previous comments you’ll find that s/he thinks s/he will be one of the rich – no matter what, can’t think laterally and doesn’t have an historical perspective.

  6. mikesh 6

    Common sense would suggest that there are two sources from which tax can be paid – income and wealth. PAYE and company tax are both from income, while CGT is from wealth, bearing in mind that a person’s wealth can increase either by adding unconsumed income or from an increase in the value of an asset held (capital gain).
    GST is probably predominantly from income but could be paid from wealth if an individual draws on his wealth to spend on consumption.

  7. BR 7

    “I don’t own any property – not something I’ve ever really agreed with.”

    What percentage of the population do you believe should be able to own property?

    “there is an argument to be made for taxing businesses rather than employees because only businesses can create wealth.”

    PAYE is handed over to the IRD by the employer, but it is widely believed, and confirmed by the wages documents, that the PAYE is paid in full by the employee.

    Retail buyers pay GST on most goods and services, but the money is paid to the IRD by the seller.

    So who really pays theses taxes?

    PAYE and GST are transaction taxes. Without them, the employer could pay out less, whilst at the same time the employee would receive more. A retail buyer would pay less and the seller would receive more. The seller, the buyer, the employer and the employee would all be better off if no tax was payable. Therefore, for all practical purposes, the tax burdens of both PAYE and GST are shared equally between both parties involved in these transactions.

    Bill.

    • Peter 7.1

      OK, no tax so we will borrow all we need to run the Police, Hospital and Schools etc?

    • deservingpoor 7.2

      “PAYE and GST are transaction taxes. Without them, the employer could pay out less, whilst at the same time the employee would receive more. A retail buyer would pay less and the seller would receive more. The seller, the buyer, the employer and the employee would all be better off if no tax was payable. Therefore, for all practical purposes, the tax burdens of both PAYE and GST are shared equally between both parties involved in these transactions.”

      Paye and gst are both neutral to the employer/business. Gross wages (before paye) are a deductible expense to the business. The business pays the employee, takes the tax portion of and passes this on to IRD.
      Gst is added on top of the price of a liable good or service provided by a gst registered person. The seller holds this in trust and passes it to IRD.

      Neither of these are taxes to the business but to the employee and customer respectively. That is why IRD and the courts take such a dim view of business owners who use the money to prop up their business and don’t pass it on.

      • Peter 7.2.1

        “Neither of these are taxes to the business but to the employee and customer respectively.”

        Exactly. Business owners who keep PAYE deductions and GST payments = theft.

    • mikesh 7.3

      [The seller, the buyer, the employer and the employee would all be better off if no tax was payable.]

      Payable by whom? Presumably either the employee or employer will have to pay some tax otherwise the government will receive no revenue. And if the tax paid by the business has to include the employee’s share as well its own how is that different from deducting PAYE and forwarding it to IRD. And how would the business be able to afford to pay the employee the slightly higher wage that you speak of.
      Much the same with GST. If that is eliminated or reduced the government receives less revenue.

  8. The Gormless Fool formerly known as Oleolebiscuitbarrell 8

    Corporate tax (blue) is company tax paid by businesses on their profit not their total income.

    You’re kidding, right?

    Are you suggesting that if it costs me $1.00 to make my widget and I can only sell it for 75c, I should pay tax on the 75c, despite the fact that I have lost money and, thereby, procured no income?

    • Lanthanide 8.1

      Um, no? Then you’d be making a 25c loss on that widget, therefore not a profit, therefore pay no tax.

      • The Gormless Fool formerly known as Oleolebiscuitbarrell 8.1.1

        Yes. I know that. You obviously know that. I would have thought that anyone functioning with half or more of an human brain would know that.

        Only, was I wrong to detect in our mystery guest some element of complaint when he or she wrote:

        Corporate tax (blue) is company tax paid by businesses on their profit not their total income.?

        Like somehow people who made no income were gaming the system. Rip-off merchants with your huge losses paying no income tax.

    • lprent 8.2

      The same logic therefore applies to PAYE then as well? I should be able to put all of my costs against my revenue and only pay tax on the ‘profit’.

      Ok now tell me the logic that says tax on businesses work on a different basis to that of labour?

      Now I think about it paying tax on income makes quite a lot of sense for businesses. It will make businesses that are marginal would fail – good idea. If they are that close to the margin then they are unlikely to survive anyway. Taxing income means that it become impossible to hide profits by pushing ‘costs’ into the business.

      Interesting idea – thank you for pointing it out..

      • The Gormless Fool formerly known as Oleolebiscuitbarrell 8.2.1

        Go for it Lprent. Put up a remit at the next conference. Labour’ll be able to enact when next it is in government.

  9. Peter 9

    You would procure 75 cents of income and a loss of 25 cents. In this case you could get a tax refund of 7 or so cents.

    A wage worker cannot run a personal loss and then get a tax refund, so lucky you!

  10. BR 10

    The seller, the buyer, the employer and the employee would all be better off if no tax was payable.]

    “Payable by whom? Presumably either the employee or employer will have to pay some tax”

    You’ve completely missed the point, which was that PAYE and GST are TRANSACTION TAXES. The financial burden of these taxes is borne by BOTH PARTIES, i.e. the employer and employee, or the buyer and seller.

    Forget what it says on the payslip or the GST receipt. If an employer pays out, say, $4000 to an employee for a monthly salary for example, and the employee receives $3000, the $1000 paid in tax has been levied on the transaction.

    Council rates are not a transaction tax because an invoice is sent out at regular intervals with the amount owing and a due date. There is no other party involved. Do you get it now?

    “otherwise the government will receive no revenue.”

    No argument from me there. That is not in dispute.

    “Much the same with GST. If that is eliminated or reduced the government receives less revenue.”

    You don’t say.

    Bill.

    • Colonial Viper 10.1

      Idiotic meaningless interpretation of tax.

    • mikesh 10.2

      [You’ve completely missed the point, which was that PAYE and GST are TRANSACTION TAXES. The financial burden of these taxes is borne by BOTH PARTIES, i.e. the employer and employee, or the buyer and seller.]

      I’m afraid I’m still missing the point. Is there one?

  11. BR 11

    “I’m afraid I’m still missing the point. Is there one?”

    I was originally responding to this:

    “there is an argument to be made for taxing businesses rather than employees because only businesses can create wealth.”

    Bill.

    • mikesh 11.1

      [Council rates are not a transaction tax because an invoice is sent out at regular intervals with the amount owing and a due date. There is no other party involved. Do you get it now?]

      I would have thought there were two parties involved, the council and the ratepayer.

  12. BR 12

    “I would have thought there were two parties involved, the council and the ratepayer.”

    Yes, but rates are not a tax on a transaction. They are a tax on the value of one’s property.

    Bill.

    • Peter 12.1

      This all seems pointless but there is a transaction. The household receives the services provided by the council. You are not paying rates for nothing, in the same way that you do not pay GST and PAYE for nothing.

  13. mikesh 13

    [Yes, but rates are not a tax on a transaction. They are a tax on the value of one’s property.

    Bill.]

    I think I see what you mean but I find it difficult to see where your argument is heading.

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