Taxes and the transtasman drift

As many as 30,000 New Zealanders will cross the Tasman this year to start a new life in Australia. Will tax cuts help keep our best and brightest from leaving for other countries, notably Australia?

Probably not, says Westpac chief economist Brendan O'Donovan, who believes higher pay is the motivator for those looking at jobs abroad. But while few thinking of going overseas would look at tax rates, he says New Zealand should not disadvantage itself in a globally competitive marketplace for skilled labour.

PricewaterhouseCoopers tax partner John Shewan believes one major question that needs answering is whether New Zealand can afford not to cut taxes given that labour is increasingly mobile.

Finance Minister Michael Cullen says tax comparisons with Australia can be fraught. He says the aim of recent Australian tax cuts was to move at least 80 per cent of the population onto rates of 30 per cent or lower. But in New Zealand about 75 per cent of taxpayers are already on 21 per cent or lower.

Taxpayers at the top end in Australia actually pay significantly higher taxes than their counterparts here as Australia has two higher scales – 42 per cent and 47 per cent.

Australians also have to pay stamp duties, a capital gains tax on housing, Medicare levies, payroll taxes and state taxes.