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New data highlights staggering tax gap in New Zealand

Image of NZCTU Economist Craig Renney

The very wealthiest are not paying their fair share in tax, according to two separate data sets from the Inland Revenue Department and Treasury, says the New Zealand Council of Trade Unions.

Released today, the data indicates that inequality continues to be a huge issue for New Zealand.

NZCTU Economist Craig Renney said the IRD data backs up what most New Zealanders have known for a long time.

“The effective rate of tax for the wealthiest 311 families interviewed by IRD was 8.9%. The comparable rate for the average New Zealander was 20.2%, more than double what the richest people pay.”

Renney said this inequity occurs because the wealthiest have a greater proportion of their income in areas where there is little or no taxation paid, such as in capital gains.

“Most New Zealanders pay tax on every dollar that they earn, whereas the wealthiest are paying no tax on large parts of their economic income. Not only is that unfair, but it also means that the government is potentially missing out on billions of dollars in taxation. That places a greater burden on families who are just trying to get by.”

The data provided by Treasury also showed in stark terms the wealth gap in New Zealand.

“The top 10% of households by wealth own 60% of all the wealth. The bottom 50% own around 1-2%. That is a picture that has barely changed over the past decade.

“Treasury states that the wealth disparity in this analysis means that New Zealand is more unequal than the UK and that it has become harder for ‘the average earner to reach higher wealth deciles through ordinary earnings alone’. Basically, Kiwis can work harder, but it won’t help them get ahead.

“This data demonstrates the urgent need for transformation of New Zealand’s tax system and in the wider economy. Our tax system increasingly looks neither efficient nor effective. “We all need to ensure that the very wealthiest are paying their fair share. That would not only benefit the government, but the economy would also benefit too.”