What is the Tax Working Group?

Economist, author, fund manager and commentator Gareth Morgan is one of the members of the Tax Working Group. Photo / Bay of Plenty Times.

The Tax Working Group, which released its recommendations today, was set up to consider the medium-term direction of the New Zealand tax system, and advise Government on different tax policy options.

The group is a partnership between Victoria University, the Treasury, Inland Revenue and the Centre for Accounting, Governance and Taxation Research.

Members of the group include fund manager and economist Gareth Morgan, PricewaterhouseCoopers chairman John Shewan and Stock Exchange chief Mark Weldon.

According to Treasury figures, just 118,000 New Zealanders fit into the top two income brackets - those earning NZ$100,000 and above annually.

But those 118,000 Kiwis - just three per cent of the population - contribute 26 per cent of the country's total income tax.

Conversely, those in the income brackets of between NZ$10,000 and NZ$50,000 - 58 per cent of the earning population - contribute only 35 per cent of total income tax revenue.

This imbalance in income taxation is one of the issues the Tax Working Group has been asked to address.

The group is also investigating the possibility of lowering personal tax rates, while raising GST to compensate for lost revenue.

The group has estimated that a 2.5 per cent raise in GST would result in an extra $2.9 billion in annual tax revenue.

Based on Treasury figures, for the year ended June 30, 2009, personal taxation contributed 47.76 per cent of total taxation.

Corporate taxation contributed around 17.13 per cent of total taxation.

GST contributed 21.33 per cent of total taxation, while indirect taxation - such as road user charges, alcohol and tobacco taxes - contributed 21.33 per cent of total taxation.

Total taxation revenue collected in the 2009 financial year was NZ$54.15 billion.