Rich Pickings

The wealthy need to pay their fair share or leave.

One of the arguments often used against introducing any form of capital gains or wealth tax is that it would lead to rich folks leaving our country. However new research by Victoria University’s Max Rashbrooke, commissioned by the Tax Justice Network, reveals that high earners in New Zealand pay far less tax than they would if they lived in nine other developed countries with similar political systems.

Using 2023 OECD data, Rashbrooke looked that the tax situation of someone earning five times the average wage in New Zealand – around $330,000 – and compared it to what equivalent high earners face in Australia, Canada the UK, the USA, Belgium, Denmark, Germany, Norway and Spain.

If the $330,000 income was a conventional salary, the total tax payable in New Zealand would be around $108,000, or 33%. Even on that basis, this notional high earner would face higher rates in the other selected countries, ranging from 37% to 55%.

For many high earners, though, much of their income is capital gains (money made selling assets like shares and investment properties), which is not taxed systematically in New Zealand.

Following OECD modelling, Rashbrooke looked at how much tax someone on $330,000 would pay if their income were half salary and half capital gains. In New Zealand, because of the absence of capital gains taxes, they would pay just $45,000, or 14%.

Almost every other country in the OECD, by contrast, taxes capital gains, though sometimes at lower rates than salaries. As a result, someone earning five times the average wage in those countries, if their income were half salary and half capital gains, would pay tax rates of between 26% and 44%.

The New Zealander on $330,000, who as above was paying around $45,000 in tax, would pay and additional  $41,000 if they faced Spanish rates of tax on higher earners, another $50,000 if taxed at Australian rates, and $98,000 extra at Danish rates.(my emphasis)

Last year, the IRD’s research on high-net worth individuals showed that the wealthiest people in this country pay a lower rate of tax than people stacking shelves in supermarkets.

So let’s stop this Coalition austerity nonsense that is giving even more tax breaks to the rich but closing businesses and putting people out of work.

Let’s introduce either a proper capital gains tax and/or a wealth tax and if the rich don’t like it then let’s be happy to wave bye-bye to those who want to exploit our people and resources but not pay their fair share.

PS. Thanks for your work Max Rashbrooke and good on the Tax Justice Network for commissioning it!

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