27-04-2023, 02:43 PM
The reporters seem to be confusing the concepts of income and economic wealth. I looked for and found the source document at https://www.ird.govt.nz/-/media/project/...0423203807.
At 155 pages I don't plan to read the whole thing. Luckily there is also a summary at https://www.ird.govt.nz/-/media/project/...0420234159.
We currently have income tax that people on PAYE can't wriggle out of but those with trusts and "charities" etc can and often do manipulate for their gain. Loopholes that can and should be plugged. When churches and the like are giving money to the needy within their organisations, fine. But when they run huge businesses, compete with legitimate tax-paying entities and keep all the benefit to those at the top, they should not be able to run under tax-free charity status. That's a huge tax loophole that should be plugged.
We have GST which means that those with plenty of money pay more of it when they buy expensive items which they can afford to do. Those with less money will overall buy less and therefore pay less tax. That brings in an element of fairness.
We used to have inheritance and gift tax. They ended in 1993 and 2011. Maybe both should be looked at again within the overall picture. The gift tax system was at the time getting in the way of people's desires to set up family trusts etc. That's a whole picture that could do with a review.
We don't have capital gains tax (yet). That would bring in revenue when assets are sold but only when they are sold. That wouldn't affect most investors who by definition invest and don't trade. Some of course do sell assets from time to time. Sometimes when they need cash, or maybe to reduce or eliminate debt. Everyone makes a big deal about CGT but I really don't see it doing much. And if it does come in, how do you account for it and what assets qualify? Some assets increase in value over time with "corrections" like we hare getting now for property. Others can be up and down with a great deal of volatility - eg sharemarket. Some assets are reliably income producing, although often not as much as people think. Others can also be very volatile. If we continue to take income tax as we do now, everyone pays according to what they have received. And IR should start with getting the tax off those who should be paying it under existing rules. There was never a need for the "bright line" rule. Income was always due on the sale of property that was purchased with that intention. No ten-year rules. No ifs and buts. If an asset was purchased to sell at a profit, the profit is taxable. But IR doesn't bother.
The concept of "wealth" tax is very difficult. How do you value something that is volatile? And how do people pay when their return on investment is very low. Assets with high ROI are likely to be those that are volatile and people will already be paying income tax when they are getting good income. To have to pay tax when you don't have income isn't really fair is it? And how would IR account for periods when assets reduce in value. Like property at present. Rented property provides an income tax stream whatever the value of the property. Under a wealth tax scenario last year would have been a higher earner for IR but would likely have put people out of the business, or at least would have forced rents up. This year with values dropping, would IR pay the difference back to the taxpayers? I think not.
Overall, whatever happens next needs to be thought through very carefully to ensure it doesn't just create more problems than it solves. Like forcing mid-level asset-owners out of their holdings so that those at the top just end up with more than ever.
Overall, we need a system that provides sufficient public revenue to give us decent health, education, roading and social systems. The way that it is structured needs to be fair to everyone. People need to be able to afford their tax obligations and the rich philanthropists and innovators need to be able to do what they do for society, each in their own way. We need the Elon Musks and Richard Bransons to continue their endeavours in the areas where they are expert. NZers need to have incentives to give to society in ways that are not just part of the tax take.
We also need to be clear about what "greed" actually is. Yes, some of the super-rich got that way from greed. But not all by any means. Many people do a great deal for society without feeling the need to stand up and shout about it. There are also many beneficiaries who don't actually need the benefits they stay on forever. Benefits are a helping hand up for those who have struck hard times. Those who need help permanently should get it, but those who can turn themselves around and become self-supporting again should do so, and at the moment so many don't. We have a huge problem because people who should be working won't, and we now depend on imported labour.
We need a tax system that is fair, rewards those who work, looks after those who need looking after, and can provide the collective benefit necessary to give us the services we all use every day.
At 155 pages I don't plan to read the whole thing. Luckily there is also a summary at https://www.ird.govt.nz/-/media/project/...0420234159.
We currently have income tax that people on PAYE can't wriggle out of but those with trusts and "charities" etc can and often do manipulate for their gain. Loopholes that can and should be plugged. When churches and the like are giving money to the needy within their organisations, fine. But when they run huge businesses, compete with legitimate tax-paying entities and keep all the benefit to those at the top, they should not be able to run under tax-free charity status. That's a huge tax loophole that should be plugged.
We have GST which means that those with plenty of money pay more of it when they buy expensive items which they can afford to do. Those with less money will overall buy less and therefore pay less tax. That brings in an element of fairness.
We used to have inheritance and gift tax. They ended in 1993 and 2011. Maybe both should be looked at again within the overall picture. The gift tax system was at the time getting in the way of people's desires to set up family trusts etc. That's a whole picture that could do with a review.
We don't have capital gains tax (yet). That would bring in revenue when assets are sold but only when they are sold. That wouldn't affect most investors who by definition invest and don't trade. Some of course do sell assets from time to time. Sometimes when they need cash, or maybe to reduce or eliminate debt. Everyone makes a big deal about CGT but I really don't see it doing much. And if it does come in, how do you account for it and what assets qualify? Some assets increase in value over time with "corrections" like we hare getting now for property. Others can be up and down with a great deal of volatility - eg sharemarket. Some assets are reliably income producing, although often not as much as people think. Others can also be very volatile. If we continue to take income tax as we do now, everyone pays according to what they have received. And IR should start with getting the tax off those who should be paying it under existing rules. There was never a need for the "bright line" rule. Income was always due on the sale of property that was purchased with that intention. No ten-year rules. No ifs and buts. If an asset was purchased to sell at a profit, the profit is taxable. But IR doesn't bother.
The concept of "wealth" tax is very difficult. How do you value something that is volatile? And how do people pay when their return on investment is very low. Assets with high ROI are likely to be those that are volatile and people will already be paying income tax when they are getting good income. To have to pay tax when you don't have income isn't really fair is it? And how would IR account for periods when assets reduce in value. Like property at present. Rented property provides an income tax stream whatever the value of the property. Under a wealth tax scenario last year would have been a higher earner for IR but would likely have put people out of the business, or at least would have forced rents up. This year with values dropping, would IR pay the difference back to the taxpayers? I think not.
Overall, whatever happens next needs to be thought through very carefully to ensure it doesn't just create more problems than it solves. Like forcing mid-level asset-owners out of their holdings so that those at the top just end up with more than ever.
Overall, we need a system that provides sufficient public revenue to give us decent health, education, roading and social systems. The way that it is structured needs to be fair to everyone. People need to be able to afford their tax obligations and the rich philanthropists and innovators need to be able to do what they do for society, each in their own way. We need the Elon Musks and Richard Bransons to continue their endeavours in the areas where they are expert. NZers need to have incentives to give to society in ways that are not just part of the tax take.
We also need to be clear about what "greed" actually is. Yes, some of the super-rich got that way from greed. But not all by any means. Many people do a great deal for society without feeling the need to stand up and shout about it. There are also many beneficiaries who don't actually need the benefits they stay on forever. Benefits are a helping hand up for those who have struck hard times. Those who need help permanently should get it, but those who can turn themselves around and become self-supporting again should do so, and at the moment so many don't. We have a huge problem because people who should be working won't, and we now depend on imported labour.
We need a tax system that is fair, rewards those who work, looks after those who need looking after, and can provide the collective benefit necessary to give us the services we all use every day.