GST one of lowest in OECD

October 20th, 2010 at 10:00 am by David Farrar

Susie Nordqvist in the Herald reports:

New Zealand has one of the lowest goods and services tax rates in the OECD, despite households being charged at a higher rate than before.

Tax accountants KPMG said even at 15 per cent New Zealand has the fourth lowest rate in the OECD and contrary to global rates, corporate tax rates were trending down. …

KPMG New Zealand’s GST partner Peter Scott said unlike any other country in the world, the recent increase in GST was matched by personal tax rate reductions.

But didn’t Labour say the reason they want to exempt fruit and veges was because our GST is one of the highest in the world? That wasn’t a populist porkie was it?

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67 Responses to “GST one of lowest in OECD”

  1. MikeG (425 comments) says:

    How many other countries have GST on everything, and how many exempt food and/or other items? Let’s get the complete picture.

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  2. Murray (8,847 comments) says:

    Not really a good argument David. We’re not beating you as hard as other masters so say thank you.

    I don’t think so. Some us remeber a time there was no such thing and untill there isn’t again there’s something wrong as far as I’m concerned.

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  3. Gwilly (158 comments) says:

    That’s not the point. There was no need to increase GST, simply lower our spending which is excessive.

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  4. malcolm (1,952 comments) says:

    Concerned that GST has gone from 10% to 12.5% and now 15%? Fear not, you silly NZ person. We still have the fourth lowest GST rate amongst a group of over-taxed and stagnate economies. 15% is the new 10%, didn’t you know?

    Oooh, look at the Emperor’s news clothes. Aren’t they looooovely.

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  5. Monty (980 comments) says:

    Labour are proven liars. Such as their irrelevance that they are now like Winston and will say anything to scramble together a few votes. I hold that in the 2011 election Bill English’s record will be beaten by Labour as people realise the damage they will do to the country and the economy.

    Anyone up for a Labour / Greenies / Winston/ Progressive/ United and Maori co-alition?

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  6. PaulL (6,038 comments) says:

    Most independent tax reviews are rather clear that it is much less distortionary to tax consumption than to tax income. There are a couple of reasons for this:
    – economically speaking, in most countries consumption is less desirable than making income. Taxing consumption may reduce consumption, taxing income production may reduce income production. Better to tax consumption
    – consumption is much harder to hide – GST is harder to avoid than income tax
    – mostly the intent with progressive tax systems is to tax wealth. Income isn’t necessarily a good proxy for wealth – there are many wealthy people with very low taxable incomes. If you tax consumption, you drag those people into the system.

    So having a low GST rate is not, to my mind, a good thing. We should have higher GST and lower income tax. We should also have a capital gains tax (that’s where lots of wealthy people with low taxable income hide their wealth), but that’s a story for another day.

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  7. bhudson (4,740 comments) says:

    “Oooh, look at the Emperor’s news clothes. Aren’t they looooovely.”

    malcolm, you seem to have conveniently forgotten who raised it from 0% to 10% and then to 12.5%, in the first place.

    Given that the increase from 12.5% was offset by general tax cuts and other increases for lower income earners, the effect of this GST increase is a taxation rebalancing – unlike Labour’s 10% -12.5%which was just an outright hike.

    These ‘emperors’ seem to have found some clothes. A better fashion, too, than those that Labour discarded in the 80’s and never bothered to put back on.

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  8. malcolm (1,952 comments) says:

    bhudson, don’t get me wrong. My previous comment and cynicism was directed squarely at National and their revenue-neutral ‘tax-cuts’. And this rather floppy attempt by DPF to run interference. Sure it’s better to have higher GST and lower income tax, but the real problem for NZ is the level of taxation. It’s too high and it’s slowly but surely turning NZ into a third-world country.

    It also helps not to view everything through the is-this-person-national-or-labour prism. That will make you cross-eyed.

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  9. Manolo (14,029 comments) says:

    All I would say is that 15% is DEFINITELY higher than the 12.5% we had before, which John Key conveniently opposed hiking before the election.

    Spin is a tool of limited power, after all.

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  10. Murray (8,847 comments) says:

    Oh jess stop thrashing the tax cuts for the rich bullshit party line Robinson.

    When you’re paying the bulk of the tax any cut means you get a higher dollar value of YUOR OWN money back. If you’re not paying fuck all you wont. You do understand the concept of a percentage don’t you? Tax cuts work on a percentage of what is taken from you, not a dollar value. On that basis the “rich” are being punsihed by the envious low contributing “poor”.

    If those ideas are too hard for you to get your head around maybe you shouldn’t comment at all.

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  11. malcolm (1,952 comments) says:

    Best Misuse Of The English Language Award, goes to Robinson 666:

    (someone has to pay for [the] rich man’s tax cuts)

    When you reduce tax you take less money from the person who owned it in the first place. It was their money. You are not giving them money taken from others. You are confused. You have let someone insert a silly nonsense into your head, by means of twisted language. But it’s not too late. Look at your sentence, think clearly about what tax is and what a tax cut really means and you will be OK. You can do it.

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  12. malcolm (1,952 comments) says:

    ..tell me why I should be celebrating being ripped off by John Key instead?

    OK, but first explain how you’re being ripped off by the recent tax changes.

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  13. Pete George (23,680 comments) says:

    The overall tax take was down significantly in the last year, so taxes as a whole haven’t been raised.

    Upping tax on the consumption side is moving us to a flatter tax system. It’s possible it will pull in more tax revenue as those that avoid income tax will pay more.

    The “benefits the rich more” on a dollar value basis is populist (and being pushed by Labour for all it’s worth). But small gains are much more valuable to those on lower incomes – if a rich person and a poor person both buy a packet of seeds and grow their own veges the relative impact on their food budgets will favour the poor person significantly.

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  14. MikeG (425 comments) says:

    “unlike Labour’s 10% -12.5%which was just an outright hike.”

    But it wasn’t sold as being anything else other than a hike – whereas National are trying to fool everyone with their “neutral” line.

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  15. bka (135 comments) says:

    If a consumer item is smallish and easy to post it is often cheaper to buy on ebay or amazon and avoid GST altogether. Perhaps that is something to think about if they decide to keep putting GST up, as other overseas bought items start looking less expensive?

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  16. PaulL (6,038 comments) says:

    Robinson, explain the circumstances of someone who is worse off under the changes? My recollection of the tables was that pretty much everyone ended up a bit better off, other than property investors. Are we worried that property investors might be poor? Is your definition of poor different than mine?

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  17. Brian Smaller (4,024 comments) says:

    Robinson 666 – what is your definition of rich? I pay the top rate and I am not rich. The rich people that I know don’t work for a living. Fuckwit.

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  18. malcolm (1,952 comments) says:

    Oh, giving high income earners the tax cuts somehow benefits low earners

    Firstly, everyone got a tax cut. Naturally someone earning a lot will see more $’s than someone earning a little. If you want to defy that gravity, then you need negative tax rates. Second point is that ultimately you can’t benefit the poor by over-taxing the wealthy. That is just a road to slow economic ruin, for everyone. All will benefit from a stronger economy and the best way to achieve that is by reducing the involvement of government in the economy and reducing taxes. Plenty of other countries have done this.

    low earners who get impacted more by the raising of gst?

    Low income earners get impacted more by rises in any type of tax. That is an inescapable fact of being poor. Lowering income tax gives them more reward for improving their situation. That and a general improvement in the economy is the only sustainable way to improve their lot.

    Over-taxing the productive to subsidise the less-productive, is just a dead-end road.

    Now, please examine you nonsense statement “(someone has to pay for [the] rich man’s tax cuts)”. If you look carefully you will be able to see where you’ve been tricked. There’s no shame in being wrong. Just learn from your mistakes.

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  19. Brian Smaller (4,024 comments) says:

    No, you are the fuckwit.

    You are right – I am for working hard to get a good job when I could earn a whole lot less with less stress and bludge off WFF to increase my income. I should learn from bludgers like you.

    and…what is your definition of rich?

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  20. malcolm (1,952 comments) says:

    Middle and upper income earners.

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  21. Brian Smaller (4,024 comments) says:

    Are you a seven year old? The majority of tax in NZ is paid by the top 10-15% of tax payers. The bottom half pay nothing when you consider what they get back in WFF and other state largess.

    And…what is your definition of rich?

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  22. malcolm (1,952 comments) says:

    Robinson, in your perfect world, what would be the tax bands and what would be the rate of GST?

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  23. Pete George (23,680 comments) says:

    The majority of tax in NZ is paid by who? Not the people getting the tax cuts, thats for sure.

    That’s a mind-bogglingly stupid statement. All income tax payers are the people getting a tax cut.

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  24. Brian Smaller (4,024 comments) says:

    In Robinsons perfect world we would all be wearing Mao jackets and little caps and singing the Internationale. Meanwhile he and the party elite would be living it large and shooting counterrevolutionaries who disagree with their socialist utopia.

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  25. Brabus (31 comments) says:

    Oh FFS,

    Every income band received a tax cut and by greater that the rate of the GST rise, so the statement “The majority of tax in NZ is paid by who? Not the people getting the tax cuts, thats for sure.” is nonsensical.

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  26. bhudson (4,740 comments) says:

    “The majority of tax in NZ is paid by who? Not the people getting the tax cuts, thats for sure.”

    Robinson 666 you have just shown your absolute ignorance.

    Something along the lines of 85% of all income tax is paid for 3%-5% of the population – the highest income earners!!

    You don’t even understand the ‘progressive’ tax system you love so much – it is predicated on the notion that those earning more subsidise the rest. And they do!!

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  27. malcolm (1,952 comments) says:

    Robinson – don’t let other people do your thinking for you. As Pete has pointed out, your statement “The majority of tax in NZ is paid by who? Not the people getting the tax cuts, thats for sure.” is plain stupid.

    When you reduce a PAYE rate, the ‘cut’ goes back to the people from whom the money came in the first place, exactly in proportion to how much they were paying.

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  28. bhudson (4,740 comments) says:

    malcolm,

    My apologies for my earlier response to you. You are right I ass-umed (according to Benny Hill.)

    I agree with your point that higher consumption tax and lower income tax is better. And that we are too highly taxed at present

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  29. Pete George (23,680 comments) says:

    I’ll be very pleased if those avoiding income tax, including property developers who have blown property values far too high, will have to raise the amount of tax they pay.

    I’ll be paying less tax, and will be investing that in things that will lower my cost of living in the future by reducing my ongoing energy needs and increasing my food and energy self sufficiency. That will reduce my tax bill further.

    In the midst of a double dip recession, the govt wants to lower the tax takings?

    What they’re trying to do is boost business investment and job growth. That will lead to a regaining in tax take, and more businesses and workers will be happier.

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  30. Brian Smaller (4,024 comments) says:

    Is Robinson actually that James Sleep fellow – you know – the 16 year old who cries like a baby about people being mean to him?

    Come on Robinson – tell us who is rich. Commit it to words. Who are the hated rich who are exploiting you poor saps?

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  31. William2 (24 comments) says:

    The OECD ranking for GST is irrelevant. This Govt claims to be trying to close the gap with Australia yet increases our GST rate even further away from their 10%.

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  32. malcolm (1,952 comments) says:

    Bhudson, no worries – sarcasm doesn’t always work online. I was also having a gentle poke at DPF. You may think he’s running interference for National, but of course I couldn’t possibly comment.

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  33. Brian Smaller (4,024 comments) says:

    Pete George – I spent all last weekend digging in new gardens. We are reducing our outgoings by being more self-sufficient. I am actually selling surplus eggs now which is raising enough to make owning the chooks sustainable in a financial sense (ie – they are paying for their own food).

    Robinson – worried about GSt on veges – grow your own you lazy hack.

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  34. James (1,338 comments) says:

    Robinson 666: What perfect world? The one where the rich make up the rules so they can screw everyone else, the real world? The rich who own the media and have the politicians in their pocket to tell we should be grateful for being screwed?

    You have just described the problems as Libertarians see them and want to change by strictly limiting Government,freeing the market,abolishing privilage for anyone and maximising individual liberty…and personal responsibility.

    Well done Robinson 666..you get it….membership forms in the mail.

    ;-0

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  35. malcolm (1,952 comments) says:

    Robinson, you’re all over the place. First you were moaning about “tax cuts for the rich”, now you’re moaning about tax increases. You’re in a muddle man. And nothing demonstrates that more than:

    What perfect world? The one where the rich make up the rules so they can screw everyone else, the real world? The rich who own the media and have the politicians in their pocket to tell we should be grateful for being screwed?

    My advice to you: Stick to facts and try to understand how things actually work. Resist the temptation to let lazy political one-liners into your mind. Most of them use twisted language to misrepresent reality. They’re like ravenous worms and will eat your brain. But it needn’t be that way. You can help yourself. You can beat this problem.

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  36. malcolm (1,952 comments) says:

    Umm, not quite. But keep trying – you’ll get there.

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  37. malcolm (1,952 comments) says:

    Maybe it’s too late. The worms have been busy…

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  38. Brian Smaller (4,024 comments) says:

    Answer the question Robinon – who are these rich? When do they move from being poor to rich? Is it when you get a place on Labour list and can become an MP and get the best paid job a Labour party member can probably ever have?

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  39. shady (246 comments) says:

    You idiots decrying the “tax cuts for the rich” line really bug me. I for one am going to help this economy by pouring the extra I get back into the economy – much to the disgust of my partner. Not only will the government get 15% GST back off that money, but my spending will help employ more people. People will not be losing jobs over the GST rise, but they do have a chance of gaining jobs through the economic stimulation of the money being spent.

    We are lucky enough that we can afford to build a 2nd small home for our (in)dependent kids to live in. This little project will employ a reasonable number of people during this year and into next, – but God forbid that anyone should be able to earn a decent living that we can plough it back into the economy to pay for that employment.

    The other thing that really grates on me – we employ around 30 people in NZ. We have risked everything we own in order to keep these people employed. It hasn’t always been easy, but now we would definitely fall into the “rich prick” category – but definitely not super rich. We are still exposed by the world economic climate. It irks me that you bastards who want to take any reward (that you deem to be more than our fair share) away from us are the very same people we risk everything for to keep employed – and infact unemployed as well – with our taxes.

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  40. s.russell (1,646 comments) says:

    Most people on this blog welcome rational arguments, even if they disagree with them. We enjoy the debate!
    But, Robinson 666, your arguments are neither rational or consistent. I invite you to review them.
    It may thus be be pointless, but:
    * The changes to tax rates are real: they are not lies covered up by a media conspiracy.
    * The media is mostly left wing, and does not take orders from wealthy owners. I know this because I work in the media.
    * Even the lowest income earners did get an income tax cut that matches the rise in GST.
    * The income tax cuts do not compensate for non-GST price rises (but no Govt has ever given tax cuts to compensate for inflation)
    * Yes, people on average and high high incomes get an income tax that more than compensates. Of course, those peopel pay enormously more tax in the first place.
    * People on high incomes are the ones hit by changes to property tax rules. Many who pay little income tax but make a pile from owning lots of property will curse the tax changes because they really do lose out by them.

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  41. Pauleastbay (5,035 comments) says:

    Shady and S.Russell

    Wonderful comments both of ya

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  42. RightNow (6,995 comments) says:

    Rich prick on $100k gets to keep an extra $69 per week (pays $25958/year now including earner’s levy, vs $29547 prior to the tax cuts).
    Oppressed worker on $31,200 ($600/wk) gets to keep an extra $16 per week (pays $5131/year now including earner’s levy, vs $5985.72 prior to the tax cuts).

    Looking at the ratios – rich prick used to pay 4.93x the tax oppressed worker paid. Now rich prick pays 5.06x the tax oppressed worker paid.

    Figures can be verified here http://www.ird.govt.nz/calculators/tool-name/tools-p/calculator-paye.html?id=homepage

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  43. big bruv (14,126 comments) says:

    Robinson

    I am no fan of Key but I applaud the tax cuts, it is time that I got to keep more of my money.

    Labour stole more than they needed from me for over nine years (Key is still do that but at least the amount has decreased)

    Do I care that social services might be cut?…….nope, could not care less.

    Do I care that teachers might not get another 4% pay rise?……nope, could not care less.

    Do I care that DPB slappers and dole bludgers might be doing it tough?……nope, I could not care less about those parasites.

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  44. burt (8,305 comments) says:

    Robinsod 666

    So who is rich…. It use to be easy to define rich and poor. Rich was earning over $60K and poor was earning under $120K. These thresholds being where the top tax rate kicked in and where you became ineligible for middle class welfare.

    Under Labour 75% of high school teachers were classified as rich so surely you support taxing teachers more and if National won’t do that surely you would support suspending their filthy rich prick pay rises of 4%.

    Do you see the trouble when you just repeat Labour talking points without actually understanding anything about it…

    So who are the rich Robinsod 666 ?

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  45. Steve (4,587 comments) says:

    No matter what the GST rate is, why do I pay ACC levy + GST? Good word (levy)
    Why do I pay Rates + GST?
    I paid for some school fees for my granchildren, + GST. Get the idea? double dipping

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  46. GJM (64 comments) says:

    The thing about GST that everyone forgets to mention is inflation and the majic of fiscal drag. GST is self adjusting for inflation as prices rise, and at the same time inflation pushes up wages = more income tax. Our so called tax cuts will be gone in 2 years from fiscal drag, so then we end up paying more wiht higher GST, higher ACC tax (cars, bikes, earners), higher petrol tax, and all the other quiet tax increases the pollies have foisted on us since the last election. My income tax cuts didn’t even pay for the increase in other taxes, let alone GST.

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  47. lofty (1,317 comments) says:

    You guys have been mean to robinson and he has run away…..Bastards ;-)

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  48. bhudson (4,740 comments) says:

    Steve,

    Where is the double dipping?

    ACC = insurance service. GST = Goods & SERVICES tax – you paid GST on a service. Where is the problem?
    Rates = local council services such as water & sewerage – you paid GST on a service. Where is the problem?
    School fees = expense cover for services the school provides – you paid GST on a service. Where is the problem?

    You have three examples of paying GST on a service, which is what the tax is designed for. If you want to pick on an example why don’t you try complaining that you are forced not to pay GST when you purchase a residental property (a ‘good’.)?

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  49. burt (8,305 comments) says:

    ACC isn’t a service it is a tax. There is no correlation between the amount of ACC I pay and the benefits available to me.

    Tell me any other service (real service) where what you pay (or not) has no correlation to what you receive ?

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  50. bhudson (4,740 comments) says:

    burt,

    Water, sewerage, garbage disposal – all local body services funded out of rates (which GST applies to) where you get no additional benefit but your charges increase with the vlaue of your property.

    They are real services (even though you can argue that some things your rates fund are more of a straight tax than a service)

    Incidentally ACC charges are linked to the activity you undertake – so they do apportion the charges against the risk of the activity (not that they always get it right of course.) In that sense it is an insurance premium payment and not simply a tax

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