In line with authorities information, greater than 40% of millionaires pay tax charges which might be decrease than these of low-income earners

0
114
According to government data, more than 40% of millionaires pay tax rates that are lower than those of low-income earners

According to research by Inland Revenue and Treasury, the richest New Zealanders pay an average of just 12 percent of their total tax income.

The same research found that 42 percent of the richest New Zealanders paid lower tax rates than the lowest tax rate paid by people who earn their living from a normal job or service.

This compares to an effective tax rate of about 16 to 18 percent for New Zealanders, who earn the median salary and wages of $ 55,000 to $ 60,000.

An effective tax rate is the percentage of total tax that a person pays based on their total income. This differs from marginal tax rates such as income tax brackets or flat tax rates such as corporate tax or GST.

CONTINUE READING:
* Three large elephants are left despite an RMA overhaul and higher deposit rules
* New Zealand’s largest union officials are calling for a top tax rate of 50%
* Loans and loan guarantees are surprisingly difficult to give away

According to the Treasury, 42 percent of high wealth individuals (HWIs) pay less than 10 percent of their total tax income.

This is lower than the lowest 10.5 percent income tax rate that income recipients pay for incomes up to $ 14,000.

The reason for the inequality between New Zealand’s richest people and regular wage earners is that the richest New Zealanders tend to earn a large portion of their income in parts of the economy that are either lightly taxed or not taxed at all.

It is a good time to be rich in New Zealand.  The highest income New Zealanders pay less tax than everyone else.

It is a good time to be rich in New Zealand. The highest income New Zealanders pay less tax than everyone else.

The numbers come from a sample of HWIs analyzed by Treasury and IRD. In general, the IRD defines an UTI as an individual or family who controls assets in excess of $ 50 million. Although the Treasury paper in question did not specify what it meant by an HWI because it wanted to focus on anyone who could fall into the top 10 and 1 percent of New Zealanders because of their wealth.

The study looked at “economic income”, which is “a broader concept than taxable income and includes, for example, capital gains”. In New Zealand, economic income, as opposed to “taxable income” as defined in the legislation, is not a concept used in tax law.

The Treasury found that the 42 percent of HWIs who pay less than 10 percent of their economic tax income pay at a rate that is “lower than the statutory tax rate.”

The paper cautioned that “this could be due to the source of income (e.g. capital gains), use of credit, or use of loss carryforwards”.

“With nearly 80 percent of the taxes paid by these HWIs being corporate income tax, the timing of the credits and loss carryforwards will likely explain the wide variability in effective tax rates,” Treasury said.

The study comes from a financial report presented to Treasury Secretary Grant Robertson, Associate Finance Minister David Parker, and then Revenue Minister Stuart Nash last August. Parker has since become Revenue Minister.

According to the Treasury, Parker had requested “improved estimates of the wealth distribution in New Zealand”.

Currently, wealth data comes from Stats NZ’s Household Economic Survey (HES). It is carried out every three years by the government statistician and is an accurate estimate of the wealth of most New Zealand households.

Share of wealth in the top 10 wealthy percentiles

Stuff

Share of wealth in the top 10 wealthy percentiles

However, the HES is much less accurate in estimating the location of HWIs, especially the top 1 percent of New Zealanders.

The number of HWIs is too small to be accurately recorded in surveys and there is a suspicion that some underestimate their wealth when asked. According to Treasury, the HES is practically only useful for households with assets under $ 50 million.

The Treasury Department reported to Parker that there were two “experimental methods” that were designed to better measure the wealth of the rich.

Parker seems interested in that. Treasury mentions that two other briefings have been sent to him on the matter.

The data also looked at where the super-rich kept their wealth. It found that the top 1 percent of New Zealanders had 11 percent of the country’s property in condominiums. The data did not work out how much of New Zealand’s investment property was in the hands of the top 1 percent.

Use the rich list to compile a rich list

The first method Treasury used was to add the National Business Review’s popular Rich List – literally a list of the richest individuals and families – to the HES data.

This method may sound unconventional, but it is used in other countries such as the United States and Canada.

The other method was to look at the reserve bank’s household balance sheet using an Inland Revenue distribution, even though this only covers taxable income.

The Treasury Department used these two methods to calculate how much wealth belonged to the top 10 percent and top 1 percent of New Zealanders, respectively. The information was very different. With only the HES, the Treasury Department found that the top 10 percent of New Zealanders owned 59 percent of total wealth, which was viewed as an “underestimate”.

At the high end of the estimate – using Reserve Bank data – the Treasury Department believed the top 10 percent of New Zealanders owned 70 percent of total wealth. However, it was warned that the data were unreliable enough to be “underestimated or overestimated”.

Regardless, the top 1 percent of New Zealanders owned between 20 and 25 percent of total wealth, whichever calculation was used.

The unreliability of this data is a problem when it comes to getting a clear picture of the economy. The Treasury Department knows there is a problem, but figuring out how to fix it has been quite difficult. The Ministry of Finance is currently working on this.

As of 2018, the HES found that New Zealanders’ net worth was $ 1.37 trillion, while the Reserve Bank’s data totaled $ 1.54 trillion.

Adjusted for some durables and valuables that are not picked up by the reserve bank, the Treasury Department estimated a gap between the two numbers of up to $ 340 billion.

“There will be many reasons for this mismatch, such as differences in how housing stock is valued and how non-resident property is treated, but differences in reporting are likely a factor as well,” Tresury said.

Parker said yesterday that governments need good data on wealth distribution.

“I think governments need good data on wealth distribution,” said Parker.

“It’s accurate below, it’s not accurate above,” he said.