Despite an historic swing back towards lower tax rates in the past 30 years, most of us still expect those who earn more to pay more. Photo / Getty Images
Despite an historic swing back towards lower tax rates in the past 30 years, most of us still expect those who earn more to pay more. Photo / Getty Images
Editorial
EDITORIAL
It's one of the great ironies of modern social democracy: The richer you are, the more able you are to avoid tax.
It goes with the territory, that the wealthy can afford the lawyers and accountants needed to structure their affairs in the most "tax efficient" way.
But isthat fair in a world where the rich appear to be getting a lot richer?
New data shows that the number of super-rich earners in New Zealand has soared in the past five years with 350 people now worth more than $50 million.
Fundamentally, New Zealand still has a progressive tax system.
Despite an historic swing back towards lower tax rates in the past 30 years, most of us still expect those who earn more to pay more.
And their trusts and investment structures are as complex as you would expect.
And while high-profile left-wing politicians, such as Bernie Sanders in the US and Jeremy Corbyn in the UK, have talked about a return to mega-wealth taxes, there appears to be no groundswell for that on the New Zealand political landscape.
New Zealand is seeing tougher enforcement of the "bright-line test" around property investment - as an alternative to the more politically problematic introduction of a capital gains tax. Photo / File
New Zealand's current centre-left Coalition has focused instead on tougher enforcement of the tax rules already in place.
There is no doubt the tide of public opinion has turned on multi-national corporations that some how manage to draw profits from countries in which they pay little or no tax.
We're also seeing tougher enforcement of the "bright-line test" around property investment - as an alternative to the more politically problematic introduction of a capital gains tax.
On face value at least, that tougher enforcement policy appears to be working with high wealth individuals as well.
The numbers for the amount of tax assessed for this group suggest the Government coffers have benefited to the tune of more than $100 million in the past four years as the top tier of wealthy grows.
We have created an economy where inflation and economic growth are low for almost everything except property and equities - heavily favouring those who are already wealthy.
Meanwhile, the amount of tax currently in dispute is down from $112.8m in 2014.
Legitimate concerns about widening inequality remain.
We have created an economy where inflation and economic growth are low for almost everything except property and equities - heavily favouring those who are already wealthy.
And that has laid bare that relying on "trickle down economics" alone is not enough.
There is still a crucial role for the State to ensuring social balance and (dare we say it) the wellbeing of everyone in society.
But the numbers confirm that the rise of the mega-rich has been beneficial - boosting the tax take.
The IRD should have the resources and regulatory power to match the sophistication of the mega-rich. Photo / File
That's before factoring in the benefit of jobs the wealthy may have created, either through their business investment or simply through their spending.
A small nation like New Zealand can't afford to discourage wealth creation.
We should encourage and celebrate business success.
What is fair is that the IRD should have the resources and regulatory power to match the sophistication of the mega-rich.
We need to maintain a simple and efficient tax regime. One that we can enforce strictly and for the benefit of us all.
