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Your Views: Do we need to change the tax system?

Is the NZ economy in trouble? Are tax changes the answer >> Send us your views >> Read the story >> Forum rules

An international report on the New Zealand economy has called for a major overhaul of the taxation system, including cutting income tax but raising GST.

The Government quickly dismissed the OECD proposals, saying they read like a "National Party manifesto".

Here is the latest selection of your views:

Andrew Montgomery
Agree totally. It is a shame Roger Douglas was unable to complete the job in the 1980s. Everyone would be better off now.

Heather Roycroft
Yes Please! I support the total elimination of Tax and raise GST on all purchases to 20 per cent. This way your taxation will be tied to your spending not your saving. I am sure that this method will increase the tax take available to the Government!

In response to Margaret: You're actually quite wrong there about having to be with Kiwibank to gain from Kiwisaver - from memory, all major banks have been approved for it at this point. The money is collected with your TAX by IRD, and put into a savings scheme (either you can pick one, IRD can pick one, or your employer can pick one - it just has to be approved for it), heck the government even pays part of the management fees on it.

Nothing to do with Kiwibank (or any other bank) unless you choose to at all.

Somethings wrong with the economy so something has to change. Getting rid of the current government would be a start. We have had 9 years of socialism and the poor are worse off than ever.

Andrew Atkin
In a market-based economy wages are primarily governed by supply-to-demand. So why not just strategically restrict immigration until we get a natural wage-correction, and in turn progressively remove taxes altogether (as education and health become universally affordable, and supplimentary welfare irrelevant)? Because Labour won't be able to control your life via its big (and unnecessary) tax-and-subsidy cycle, of course. They need to ensure that you have to send your kids to their "free" education-system, especially, so they can indoctrinate your children into a collectivist mentality.

Raising GST will not change anything. New Zealanders have to learn to save and look after themselves. We have been tugging on Mummy's apron strings for far too long. The government is always far too eager to step in and give us a hand out. when will we see that we can't spend all our pay on a new dress or going out for dinner or a new car. we have to take a step back and each asses our situation and live within our means. Each person is in control of their own life, they are the only one that can truly make it better, if they would only try.

Colin England
There is, quite simply, no way to justify our present form of income tax. A working definition of a business is 'to make a profit'. This is the same for those people called 'workers'. Once we accept that workers are in business as much as the entities that are called businesses then the bias in favour of a small group of the present laws becomes visible. One example is that "business" gets to claim tax reductions due to expenses to make make a profit. The worker, who has several expenses so that he can go to work to make a profit, doesn't. This is categorically unfair but to extend the present business oriented taxes out to include workers as well would unbalance the economy - half the working population would be tax accountants and half of them would be working for the government. The only fair and cost effective way to equalise the taxes and promote a free-market is to remove income taxes and replace it fully with GST. If this is to be done though then every transaction would need to be have GST applied rather than the select few that do at the present time. See for more info.

High marginal tax rates at ludicrously low threshholds are turn people away from reaching their earnings potential. They turn down promotions, shorten their working week etc having recognised that paying 40 per cent tax on anything over US$60k is simply not worth their while. Perhaps we don't have a shortage of skilled workers in NZ, rather a penal taxation policy that actively discourages incremental effort and initiative.

Mark Thomson
Issues as complex and important as tax policy, international competitiveness and declining living standards deserve thoughtful discussion. Dismissing an international report by likening it to a National Party manifesto does little to advance that discussion.

A capital gains tax will only affect the speculators as most home owners dont change their property very often. In addition local authorities need to be less greedy when charging developers outragious reserves contributions.

Nathan Soich
Regardless of political views I think it can be agreed that this is typical partisan politics on the part of Labour. From reading the NZ Herald article between the lines it's seems the opinion of people like Mallard and one would assume Cullen and Clark that they will reject this and any other economic advice from the likes of Treasury simply because "it reads like a National party manifesto". My question to Mallard would be simply: "So what?" Why would any government who claims to be serving it's people reject the advice of experts? (it should also be noted that after the election Treasury advocated much the same approach to tax). If there ever was a government that was more interested in preserving it's own position of power this is it. This is a classic example of a mother knows best state.

Brian F
Are you starting to get the impression that this Labour Government has been in power for too long? The arrogance of a few, who are supposed to be responsible for managing the economy, and the Country, is frightening. As soon as we get politicians who tell us that they are right and everyone else is wrong, that they know what's best for us, and we don't know what we need and they do, you know in your heart - it's definitely time for a change! They can ignore the OECD, the Economists, their Advisers, but they won't be able to ignore the Ballot Box!! Thankfully!

I agree with Coli. All this means is that middle and lower New Zealand consumers get stuck with a greater tax bill while higher earners get more in their pocket to buy Italian leather boots. We've tried this before: it was the supposed 'trickle down' effect of the neo-liberals in the 1980's and what an almighty disaster that was.

The problem with our tax regime is that it doesn't tax wealthy, avaricious, carpetbaggers enough and if our politicians of all hues cared more about the people than their re-election prospects they would take the GST off food and children's clothes and introduce a capital gains tax etc. immediately. The rich always say they want to be taxed like Australia. Let their wish be granted.

The only reason Labour wants to raise GST rates, is to "chubby-up" their surplus fund for the next election. That way they can buy their votes again.

Chris Wadsworth
GST is flat rate tax which has a regressive effect, in that poorer households spend a much higher proportion on GST than wealthier households.Income tax is structured in such a way as to be 'kinder' to those on lower incomes. Reducing the top tax bracket may provide some incentive for households to work more, but will not necessarily increase productivity.The removal of GST on essentials such as milk, bread, local produce, etc., would provide an effective tax cut across the economy, benefiting the poorest households the most, incentivising healthier living, raising living standards (extra disposable income for savings/increased petrol costs) and bring our economy more into line with our larger neighbour and other members of the OECD. It would be relatively easy to introduce, inexpensive to monitor and control, and very effective at putting more money into the kiwi pocket.How much longer must this particular 'Rogernomic' imposition continue to degrade our way of life?

The message is boost living standards, Income tax has to be reduced .. but raising GST is the not the solution.... this will make things more expensive. There are other ways to cover the shortfall which if the finance ministry look deep in the over all tax structure can make out.... "Where there is a will there is a way"

Move to Australia!

M Juma
Sadly the OECD has got it wrong. The Labour government (or even if National was in power) would never raise the eligibility of Super and decrease its value over. Nor would it raise GST. Suggestions made by a bunch of over-zelist business hags in Europe bare no relation to NZ or New Zealanders, they're out of touch and the government couldn't care less what reports they put out. The truth is the government is in the best shape to deal with an aging population, has set up a programme for saving (Kiwi Saver) and has secured our future.

Eliminate income tax all together and just have GST. The collection costs would plummet and the country would save un told millions, the lawyers and accountants can concentrate on making real money instead of finding loop holes new structures that ultimately require legislation to overcome them. If you do not spend you pay no tax so savings will be a real incentive. GST collection is self generating and has no complex issues and few, if any, loop holes. If we are to have income tax then women having children should share in their husbands income until the child goes to school. It is a gross injustice for a family to have one member pay the maximum rate and the other to pay nothing. What sort of investment is that in our future?

Derek Slatter
Everyone - including the experts from the OECD and elsewhere just need to accept the fact that Trevor, Michael and Helen know best. They will look after us - they say so - so it must be right. We don't need to worry about a thing and should be happy to accept lower and lower living standards because we are good citizens of the world and can remain ideologically pure. If the price of higher living standards is for Helen, Michael or Trevor to admit they are wrong then lets just guts it out.

Regarding the cutting the Income tax is a good idea, but for a middle class it will still be a pain (GST is increased). It wouldn't make much difference for a middle class until and unless if you are trying to raise the 33 per cent threshold to people earning 60,000 and above. GST which is already 12.5 per cent which is more compared to our neighbouring country. I think the idea would work like in Australia if you don't have to pay GST on food stuffs and impose a hike in the GST for essential items like Petrol. This is because a middle class man can take pain to travel by Bus but not for a high income person. This would solve a bit more problems like traffic, increase savings and more money going into the public transport which sound legitimate. Please let me know if my approach is right.

All I can say is "Uh duh!". They needed a study to say that! This is the most obvious conclusion that anyone could come to. And to Trevor Mallard and the Labour Government... the fact that it reads like a "National party manifesto" does not make it wrong. You have been elected to govern in the interests of the country. Get over yourselves and make the changes recommended as they are in the best interests of the country. Toughen up! You might not agree philosophically with the changes that are recommended, but a qualified 3rd party without a vested political interest has made the recommendations and that is what you should do (or you should resign en masse as you are not serving the voting public).

Stuart Donovan
Completely agree. Higher GST and lower income tax would stimulate a more resource efficient, productive, economy and encourage people to work rather than spend. It would also mean that international visitors, who place a relatively high burden on infrastructure, cover more of their true cost on society.

Eliminate income tax all together and just have GST. The collection costs would plummet and the country would save un told millions, the lawyers and accountants can concentrate on making real money instead of finding loop holes new structures that ultimately require legislation to overcome them.If you do not spend you pay no tax so savings will be a real incentive. GST collection is self generating and has no complex issues and few, if any, loop holes. If we are to have income tax then women having children should share in their husbands income until the child goes to school. It is a gross injustice for a family to have one member pay the maximum rate and the other to pay nothing. What sort of investment is that in our future?

Generally speaking, GST is a repressive tax that tax the poor more. While income tax is a progressive tax that tax the rich more. And generally speaking, the more repressive the tax, the greater the income disparity. You get a lot more poor people, and a few super rich, like America, you'll get a lot more civil unrest, and slums will form.

Be nice. If the government would make it easier for average kiwis to live easier instead they drive us all to Australia.

M Smith
If the government truly wanted to address the problem they would fully reassess Income Tax, welfare payments and GST. Instead of a flat rate of GST basic food and household items could range from Nil to average. Luxury items should attract a higher rate. Alternatively avoid the higher costs of managing multiple tax systems and remove personal tax. The more you spend the more tax you pay. Lower income households would benefit as they spend less. Many of the changes put forward in the past to assist families ignore a group that generally ends up worse off. The current system is not truly based on full household income for tax implications. The result is families receiving multiple benefits bringing in more cash than a family working hard paying tax. Another group is married couples without children.
Supposedly defacto relationships are taken into account. The fact remains there are not the resources to manage this and benefit fraud is rife costing tax payers millions every year.

Leonard Lee
OK Trevor, you're right and the OECD economists are wrong...not! Admit that there are things in our system that are screwed up and that you need help fixing it.

How like the Labour Party to reject the OECD proposals. Mention 'tax cuts' and they run a mile! Perhaps if people had more of their own money to spend they could afford a mortgage, they could afford to save for their retirement. But, no, Labour takes from the many and gives to the chosen few. Michael 'Scrooge' Cullen will never agree to tax cuts, and in the meantime the Government's surplus keeps growing and growing. Oops, sorry, it's not the Government's money is it -it's ours. A point that Comrade Helen, 'Scrooge' and their self-serving cronies seem to forget. As for Trevor (you didn't want my stadium so now you can't have any money) Mallard's comment that the poor workforce productivity levels are largely due to NZ's low unemployment rate; if you only have to work one hour a week to be regarded as 'employed' is it any surprise? It all sounds like the usual Labour 'spin' to me. However, don't despair, the Kiwisaver scheme is going to boost the country's savings ! Yeah right. Oonly if you're with the Kiwi Bank, us other poor mortals will have to continue paying tax on our savings.

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