Herald on Labour’s tax the rich pricks more plan

June 26th, 2014 at 3:00 pm by David Farrar

The Herald editorial:

Taxing the rich seems a defining policy of the Party. It plays especially well to its left wing, a point underlined by the Council of Trade Unions’ hearty welcome to the announcement that proposes lifting the top personal rate from 33c to 36c for those earning more than $150,000 a year. On other grounds, however, the policy doesn’t make a lot of sense. Not only is it unnecessary but it will surely raise far less additional revenue than anticipated.

Labour says the new top rate would raise almost $200 million in the 2015-16 year, increasing to $350 million a year by 2020-21. 

It won’t. The 2000 tax hike for those earning over $60,000 did not produce any significant extra revenue, and may in fact have reduced it. It will just drive high earning NZers to set up a company (28% tax rate) or to move their tax base overseas.

Nor is much of value likely to come from its plan to clamp down on tax avoidance by internet-based multinational corporations such as Google and Facebook. As welcome as this instinct may be, and as unwelcome as the practice of avoidance is, there is little hope that its approach will yield anything like $200 million a year. 

It won’t bring in $1.If anything, it will see them pay less tax in NZ, as they close their NZ subsidiaries, and just have people deal with say their Australian one.

The only was one can deal with global companies choosing a tax base in a low tax country, is through international agreement. Not press releases.

 

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20 Responses to “Herald on Labour’s tax the rich pricks more plan”

  1. kowtow (8,524 comments) says:

    “I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”

    ― Winston Churchill

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  2. radvad (767 comments) says:

    4 words:
    Matt
    McCarten
    Unite
    Union

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  3. Mark (1,488 comments) says:

    DPF I agree it is dumb policy by Labour but I wouldn’t be suggesting that Australia will be a preferred location because of a change to 36% for the top marginal tax rate. Aus has a top marginal tax rate of 45c over $180,000 and 37c from $80k to $180k.

    Sort of destroys the logic of your argument.

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  4. burt (8,275 comments) says:

    radvad

    If the tax was higher McCarten might have paid it …. perhaps he though it was too low and not worth paying … lol

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  5. KiwiGreg (3,255 comments) says:

    I love how every arm chair tax advisor thinks it’s so easy to avoid tax or achieve a lower rate. “Just set up a company”. “Shift profits overseas”.

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  6. Alan (1,087 comments) says:

    Sure company tax rate is 28%, you’re not the company and you can’t spend the money.

    When you withdraw the retained profit from the company you have to pay the difference, in most cases 5%. Net difference zero.

    The idea that you can simply tax a lower tax rate just by having a limited company is false.

    The trick is to be able to move expenses to the company and pay them with pre-tax income

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  7. cosmopolite (9 comments) says:

    Mark: Non-Australians can reside in Australia on the following policy, laid down by Peter Costello a decade ago.

    1. Any Australian wages and investment income are fully taxable in Australia.
    2. Foreign investment income is exempt from Australian tax.
    3. The immigrant and his family do not qualify for any Australian social benefits.
    4. The immigrant and his family do not get any health care paid by the Australian public purse.

    New Zealand offers nothing similar, and all wealthy New Zealanders should move to the Gold Coast.

    Everyone: Labour’s proposed 36% rate on income over $150K will raise some money from people whose salary is rigidly set by their rank. But most well off Kiwis are farmers and other proprietors. They will find ways around the proposed 36% rate, just as they found ways around the 39% rate in effect 2000-08.

    The top tax rate on individuals, companies and trusts should all be the same. Otherwise you will see tax arbitrage ad infinitum.

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  8. burt (8,275 comments) says:

    Alan

    The idea that you can simply tax a lower tax rate just by having a limited company is false.

    So profits retained in the company which are paid out after the personal tax rate has been reduced … the difference between the imputed credits at the company rate and the personal rate… Guess the talking points didn’t cover that one !

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  9. burt (8,275 comments) says:

    The top tax rate on individuals, companies and trusts should all be the same. Otherwise you will see tax arbitrage ad infinitum.

    Ironic as it is, highly paid tax advisers do better with a Labour govt. Yes, a government that claims to look after the best interests of the low income earners.

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  10. spanish_tudor (81 comments) says:

    “If you could tax yourself to prosperity, the Soviet Union would have won the Cold War.” – Richard Prebble.

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  11. burt (8,275 comments) says:

    Is Labour’s new threshold going to be locked in for 9 years so it’s capturing 75% of high school teachers before it’s lifted – that worked so well last time.

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  12. Manolo (13,840 comments) says:

    Taxes, higher taxes, and more taxes: the way to salvation according to the hopeless Labour Party.

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  13. Pete George (23,602 comments) says:

    Labour’s tax proposals are quite modest, presumably trying to scare off as few voters as possible.

    A key factor though is whether their fiscal plan is non-negotiable, or whether they would do deals on it with Greens and Mana and NZ First to form a coalition.

    Are Labour’s tax plans bottom lines?

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  14. altiora (279 comments) says:

    I am all for low taxes. But we must ensure that the rich and corporates do not game countries into a Dutch auction with their tax policy. That aside, I do wish leftists would stop treating progressive tax rates as some sacred cow to show how ‘fair” they are,, and start taking note of empirical evidence which shows that high tax rates = high tax avoidance rates.

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  15. Alan (1,087 comments) says:

    Although if you work from a home office and you can legally avoid the attribution rules, and have a spouse without other income sources the savings on headline tax rates can be very large.

    That’s where the labour policy falls over; increased GST and lower income taxes are better.

    It easier to avoid income tax, many sectors like drug dealers do entirely. GST is a harder tax to skip.

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  16. Alan (1,087 comments) says:

    @Burt


    So profits retained in the company which are paid out after the personal tax rate has been reduced … the difference between the imputed credits at the company rate and the personal rate… Guess the talking points didn’t cover that one !

    This got me thinking; if right now imputed credits are calculated at 28% and the personal tax rate was to increase after a hypothetical Labour victory. Anyone leaving retained profit in a company is taking a risk, it may become expensive to actualize these profit later?

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  17. big bruv (13,934 comments) says:

    So many here still think in FPP mode. Do any of you really think that should Labour form the next government the top tax rate will only be 36c ?

    The stinking Greens will be a part of any Labour led government, make no mistake the stinking Greens will not be happy with 36c, those bastards will want the top tax rate to be closer to 50c.

    Cuntliffe can lie all he likes about the tax rate, he is well aware that in any coalition government he will not hold enough cards to be forced to stuck to his manifesto.

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  18. elscorcho (154 comments) says:

    What sort of selfish, anti-patriotic *cunt* (word used deliberately for maximum effect) sets up a company to avoid paying tax?

    JFK said “Ask not what your country can do for you, ask what you can do for your country.”

    If you don’t want to pay tax in NZ, piss off. Simply put, if you put your own monetary gain above enriching the coffers of the country – and paying for hospitals, soldiers, coppers, and teachers – I don’t want you here, and you shouldn’t be here.

    You can’t say tax evasion is un-selfish, and from what I understand, selfishness is regarded as immoral in every major religion and ethical tradition.

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  19. big bruv (13,934 comments) says:

    elscorcho

    “What sort of selfish, anti-patriotic *cunt* (word used deliberately for maximum effect) sets up a company to avoid paying tax?”

    The sort of —- who does not want to financially raped by stinking socialists.
    The sort of —- who thinks that he pays more than enough already and is sick of funding parasites and bludgers who breed for a living.
    The sort of —- who has had enough of watching the left wring their hands and tell us the answer to all of our social ills is for me to pay more tax.
    The sort of —- who thinks that anybody accusing us of being “anti-patriotic” (sic) is themselves a —-
    The sort of —- who pays far more in income tax than you probably earn in a year.
    The sort of —- who you should be kissing the arse of everyday, we fund the things you demand and no doubt do nothing to provide for yourself.

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  20. seanmaitland (501 comments) says:

    @elscorcho you nasty little parasite. It is a person’s moral obligation to ensure that his family gets as much of his income as possible. Giving it to the government so they spend close to 50% of all his tax (28 billion out of 64 billion crown revenue) on social welfare is morally wrong.

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