On Thu, 19 Sep 2024 16:14:57 +1200, Crash <
nogood@dontbother.invalid>
wrote:
On 19 Sep 2024 02:19:02 GMT, Gordon <Gordon@leaf.net.nz> wrote:
https://www.stuff.co.nz/money/350421324/why-nzs-rich-pay-so-much-less-tax-similar-countries
Another look at the tax rates for the rich(er).
Rather interestin that they only looked at 9 comparable nations. Is this a >>fair sample? However it is a good start.
The take away point of the article is that NZ seems to have no or little >>extra taxes for the rich and other countries do.
Also the point about housing in not where NZers should invest in for the >>good of the country.
It certainly appears that some readjustment of the tax burden is requrired.
You only need to look at the headline in the Stuff article to
understand that this is an emotive rather than objective. It clearly
intends to portray rich pricks as paying too little tax.
And it does that quite well.
Capital gain is taxed in NZ if it is deemed to be income by the IRD.
There is a long story behind how this is done, but tax-free capital
gain is rare, and usually because of a windfall circumstance for an
asset owned over a long period of time. The IRD would never allow
anyone who claims half their income is tax free because of capital
gain. Take property as an example. The 'brightline test' is used to >identify whether a capital gain on the sale of any one property is
taxable income or not.
Which is why Labour pushes the term of the '''bright line'' out and
NAct1st brings it back.
If anyone were to buy and sell properties on a
regular basis (whether or not the property is redeveloped) then the
IRD determines the developer is 'in trade' and taxes the property
capital gain as income.
Yes that has happened a few times - I recall an agent buying and
selling within days being pinged both on the ethical issues as well as
by tax. But generally it is all worked out so that if certain things
are done a landlord can easily avoid paying tax on capital gains with
holding for a relatively short period. As I have pointed out, this
very favourable treatment contrasts with tax on realised gains on the
sale of shares. There has been a shift over time from investing in
relatively passive ''conservative'' Kiwisaver accounts to more
aggressive "active" and "growth" funds - with the percentage of
investment in shares increasing - and all sales result in a liability
for tax on the capital gains (and yes for a tax credit on losses).
While that may have helped our sharemarket slightly, the huge
advantage for property investments has meant that overall we have a
stock exchange starved of capital in comparison with other countries -
but more importantly the tax advantages of property have led to a very
unequal ownership structure for property - it is getting to the point
where the next generation may find it very hard to buy a home unless
they inherit or are among the highest income earners.
But there are other issues with our tax system, highlighted in the
article. Our top tax rate is low internationally, and in part that has
been achieved in recent years through the introduction of GST and
increases to the rate of that tax.
So no we do not lose very high earning New Zealanders to overseas
unless they can earn significantly more in another country - in fact
we have examples of wealthy foreigners ''migrating'' to New Zealand
both as a bolt hole when the world gets into too much trouble, but
also because it can be used to reduce overall tax they have to pay.
Peter Thiel has been used as an example but I suspect he is too
wealthy to really worry - it may however have been enough incentive
for him to buy a property here . . .
Now however we are seeing quite a few middle-income people move to
Australia - for higher incomes, even though they have slightly higher
income tax and there is a need to have health insurance, those
advantages for NZ are disappearing, and the more vibrant economy in
Australia (yes we are in recession) offers more opportunities
especially for qualified nurses, police, doctors, armed forces. So we
are left importing poorer people to work towards being able to move to Australia after a suitable training period in New Zealand . . .
The article does not distinguish between capital gain taxed as income
in NZ, and capital gain that is not. Therefore the article is flawed.
We most certainly could look at tax fairness, including the 'Robin
Hood' approach to income tax. However any change to the what is taxed
needs to be include the lowering of existing tax rates to counter any
new taxes. Too often, tax reform is used solely as a means if
increasing the overall tax take. Finance Minister Roger Douglas
provided an example of this when income tax rates went down the month
before GST came into effect.
And when GST was increased by National there were also adjustments to
income tax - from memory in both cases they slightly favoured the
wealthy . . .
--- SoupGate-Win32 v1.05
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