Kiwiblog

The SST reports:

Finance minister Bill English has signalled the government will next year get tough with tax-dodgers by closing loopholes that allow wage earners to avoid paying their share of tax.

The IRD says the government is missing out on $300 million a year because of wage earners who squirrel away money into trust accounts to avoid paying the top income tax rate. More is lost because of earnings that are “sheltered” by a company created solely to avoid tax.

Not sure how you can legislate to fix that.

The IRD, in its latest submission to the Tax Working Group, says the problem is that New Zealand’s multitude of tax rates is encouraging bad behaviour.

Oh I am sure it is.

It said the trust account and company tax rates were too far out of line with income tax rates. Taxpayers were placing income in a trust account, paying 33 cents for every dollar earned, rather than the top rate of 38c. Another common ploy was for individual taxpayers to “shelter” their money by creating a company so that they paid 30 cents of every dollar earned in tax rather than the top rate.

The preferred solution is to lower the top tax rate – in fact that is the Govt’s official goal – to have a top tax rate of 30% for individuals, companies and trusts.

The IRD says that when the top income tax rate of 39 cents (now 38 cents) was applied to earnings of $60,000+ in 2000, a flood of taxpayers rearranged their finances to avoid the new regime.

I understand the number of people who declared they earned exactly $60,000 increased literally exponentially.

English said large-scale “legitimate avoidance behaviour” by higher-income earners undermined the goodwill of lower-income earners.

“It’s quite telling that there has been virtually no growth in the number of people paying tax on $1 million of annual income, since the 39 cent top personal tax rate was introduced 10 years ago.

So reduce the incentives for avoidance and cut the top tax rate. When Muldoon’s top tax rate of 66% was dropped to 33%, it killed off much of the avoidance industry. Cullen recreated it.

Also some of the reason for no growth in people paying tax on a million dollars of income, is they have gone overseas.

“As a country, we want families, businesses, accountants and lawyers looking at how to unlock greater income and productivity, not working out how to minimise their tax.

“We don’t want people spending their time and resources trying to avoid tax. We also don’t want IRD devoting all its time to chasing tax and compliance issues.”

Then again drop the top tax rate!

The Dom Post reports on the trust which has received the money that was owed to the taxpayers by NZ First:

A trust set up to receive half the misspent $158,000 that NZ First was ordered to repay was not registered till three months after Winston Peters announced he had donated the money to charity, documents reveal. …

Mr Peters’ so-called “blood-brother” and lawyer Bryan Henry, his solicitor Dennis Gates, and Mr Henry’s colleague Brian Coburn have full control over how the money is spent, including the ability to pay themselves all reasonable expenses. …

Ms Couch is not listed as a beneficiary or a patron, and the only mention of her is in the title of the trust. The three trustees have full control over where the money goes.

Meantime more fascinating information emerges on the trustees and settlor.  Whale Oil blogs:

Kevin Gillespie is heavily involved in the Trinity Forest tax avoidance case – with links not to the Cook Islands as Winston is so fond of, but the British Virgin Islands. Gillespie held all the directorships for The Trinity Foundation (and related entities) and was a shareholder of The Trinity Foundation

Fact – Winston and his legal advisors are and continue to be involved with an Accountant at the centre of NZ’s largest tax avoidance case where the defendants were found guilty of a $3.7 billion tax avoidance

Now I hasten to add this is tax avoidance, not evasion. So Mr Gillespie personally has not been found to have done anything wrong. But as Winston has spent decades railing against corporates who avoid tax, it is ironic he donates to a trust controlled by his personal lawyers and an accountant in the centre of a $3.7 billion tax avoidance.

There are multiple links to media stories over on Whale’s blog.

Also just to show how small NZ is:

And the individual lawyers involved and named as promoters in the Trinity case?

None other than the same lawyers used by Vela Fisheries in their Court of Appeal case which surprisingly related to – TAX.

A very small world it is.