NZ earners' tax burden second-lowest in OECD

By Michael Dickison

A tax wedge is the difference between how much employers pay workers and how much workers take home. NZ's is second-lowest behind Mexico, an OECD report has found. Photo / Glenn Jeffrey
A tax wedge is the difference between how much employers pay workers and how much workers take home. NZ's is second-lowest behind Mexico, an OECD report has found. Photo / Glenn Jeffrey

The average New Zealand earner's total tax burden is second-lowest in the OECD when superannuation and other compulsory taxes are counted, according to a new report.

The OECD, representing 30 of the world's richest economies, reported
yesterday in its annual publication Taxing Wages that New
Zealand's "tax wedge" was half the OECD average and only higher than Mexico's.

A tax wedge is the difference between how much employers pay workers and how much workers take home.

The report also said that New Zealand had the smallest tax wedge for
one-earner married couples with two children earning the average wage, at 0.6 per cent.

Many countries had lower tax rates than New Zealand, but had compulsory superannuation and social security payments that increased their tax wedges.

Green Party co-leader Dr Russel Norman said the report showed the Government was misleading people that New Zealand had high taxes, to justify tax cuts for the highest-earners.

The Government is expected to cut the top tax rate from 38 per cent to 33 per cent in next week's Budget announcement, putting it in line with company and trust rates.

"With the second lowest tax wedge in the OECD, it is hard to justify
borrowing to pay for tax cuts at the top," Dr Norman said.

"The Government misleads people when it compares our headline tax rates with other countries without taking this into account."

The top five:

Belgium: 55.2 per cent
Hungary: 53.4
Germany: 50.9
France: 49.2
Austria: 47.9

The average: 36.5 per cent

The bottom five:

Iceland: 28.3 per cent
Australia: 26.7
South Korea: 19.7
New Zealand: 18.4
Mexico: 15.3

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