From David Farrar at Kiwiblog:
The best system would be that no one pays any tax until they are earning what one regards as the minimum amount needed for a family of their size. Churning money from tax to welfare to inefficient.
And after that make it a one rate flat system.
It would be simple, fair and effective. No more wasted money on tax agents to creatively balance the books to pay the minimum amount.
Bernard Hickey has a column in the herald this morning calling for changes to New Zealand’s financial system. (http://blogs.nzherald.co.nz/blog/show-me-money/2009/11/1/steps-ease-squeeze/?c_id=3) This is not the first time he has called for changes, (I think it is the third), but is anyone actually listening?
The changes suggested are:
1 Introduce a capital gains tax to ensure the property-owning classes think twice before making losses to reduce their tax bills, comfortable they can make it back with tax-free capital gains.
John Key saying he would resign if this happened was probably a very dumb political move in the long run. All it is doing is allowing the rich to get richer through a giant hole in our tax system. We need to fix that hole now.
2 Introduce a land tax to broaden the tax system to include those who made $300 billion of tax-free capital gains from 2002 to 2007. Those without property face the biggest tax burden in the years to come. Without some change to tax the rich, the perceived unfairness will drive away our youngest and most productive generations.
Same as point 1 really, we need tax on land and property.
3 Introduce a single, flat tax rate at 25 per cent for the income, corporate and trust rate. Set a high tax-free income threshold to ensure the poorest taxpayers retain plenty.
The current progressive tax system is simply unfair and does nothing to encourage people to get ahead in life. A single tax system would be fair and balanced to all.
4 Shut down Working for Families and the Student Loan scheme to remove the ruinous marginal tax rates and debts that are building up.
Getting rid of WFF makes sense. The student loan scheme on the other hand is a whole lot harder. You either have to make the courses free (like they used to be pre 1990) or have someone else lend the money at interest. The current system works because anyone can qualify and it allows anyone the chance to get ahead.
5 Increase GST to 16.6 per cent to help rebalance the economy away from consumption and towards saving. Ensure the poorest who spend most of their income are compensated using extra revenue from the capital gains and land taxes.
As painful as this sounds it makes sense and we need to do it in time.
6 Reduce government spending growth over the next decade to return core government spending from the current 36 per cent of GDP to the 29 per cent that it was in 2004.
Yes. But what do you cut?
7 Intervene in local district and city councils to consolidate duplication, reduce their combined size, reduce their rates growth and focus them on freeing land for home building.
Home building can lead to problems in the long run. We can’t just turn all our land to houses we need the land for production and other industries.
8 Increase the Reserve Bank’s prudential liquidity target for banks so they are forced to raise more funds locally and rely less on cheap foreign funds. This will continue to reduce their profit margins, increase deposit rates, encourage local savings and reduce New Zealand’s vulnerability to market freezes.
Yup. Focus on New Zealand first.
9 Increase the amount of capital that banks must put aside when lending against land and property to discourage the heavy lending to property investors that powered the 2002-2007 property boom.
Again a great idea, but why would the banks do this when they make money from people doing this too?
10 Raise the retirement age progressively to account for longer life spans and reduce the pension progressively to 62 per cent of the average wage from the current 66 per cent.
I read yesteday that the pension age was introduced at 65 around 1900 when life expectancy was only 62, now we live 20 years longer, and the age needs to go up, otherwise we cannot afford it.
As fast as I ask will National have the guts to move to a flat tax system they rule it out.
http://www.stuff.co.nz/business/industries/2958390/No-flat-tax-PM
The Government will not introduce a flat tax system despite Treasury advice in support of one, Prime Minister John Key says.
The working group and Treasury were working on similar ides and the Government would consider a wide range of issues, he said.
Cabinet will discuss all those issues but “there’s not going to be a flat tax system”.
So what is the point in getting Treasury to consider all options and issues but ruling out one of the best ideas before cabinet has discussed it? A flat tax system is not some big scary monster, it is a simple system that just makes sense.
“We also need to make sure we put together a system that isn’t regressive and that is fair,” he said.
Finance Minister Bill English said the tax working group and Treasury were looking at “all sorts of models” but the Government was “certainly not considering a flat tax”.
Those looking at the tax system were told to “rule nothing out” and “by the looks of it they’re doing a pretty thorough job”, Mr English said.
So Treasury is not to rule anything out, but National can before even discussing it. And they want a fair system, but the most fair system of them all a flat tax system is rule out. Is National doing some double speak here?
Labour deputy leader Annette King said her party was opposed to a flat tax because it raised questions about what other taxes would have to be raised to cover expenses.
“But I have to ask every time Treasury puts out a suggestion they are working on, it is knocked back either by Mr English or by Mr Key.
“Why are they wasting taxpayers’ money with Treasury officers working away on policies they don’t intend to implement and they rule out every time they are announced?”
Labour have hit the issue on the head here. They may not support it, but at least they have the sense to wait and see what the all the issued considered are. This is a very bad move by National, they are trying to stop debate on a potentially controversial topic, but by doing so they are opening a can of worms and will piss off their more right-wing supporters (and probably Act as well).
The Herald reports that Treasury is considering a flat tax rate to close the income gap between Australia and New Zealand (http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10602938)
Finance Minister Bill English had a unique opportunity to reform the tax system, Treasury said.
Two options were a flat tax rate or cuts to taxes on dividends, interest and profit, papers obtained by Radio New Zealand under the Official Information Act showed.
GST, land tax and capital gains tax would be increased to fund the changes.
A flat income tax system just makes sense. The current system does not encourage people to earn more because the more you earn the more you will lose through tax. A flat tax system is fair to all, and is simple, this will cut out a huge amount of compliant costs and IR3 returns and other useless bureaucracy.
Secondly, the sooner a capital gains tax is introduced the better. This system would be simple and just make sense.
This is an interesting video becuase the stats for beneficiaries include pensioners and Working for Families. Now I have no issue with the pension it is nice to be guaranteed some of your hard earned tax back when you retire. But Working for Families is crippling the rest of New Zealand. It as John Key put middle class welfare and the sooner a more fairer system that treats everyone as equals is introduced the better.
Okay, this is one of those rants that I have been planning for a while but have only now decided to piece it all together and type it out.
Firstly, check out this nonsense that appeared in the Sunday Star Times a week ago: http://www.stuff.co.nz/business/2585853/Tax-windfall-awaits-thousands
It is blatant advertising for a tax agency not a real news story.
The tax refund season has begun and thousands of Kiwi workers could find themselves with a nice big present.
Now workers can check to see if they are owed any of the estimated $100 million in overpaid tax for the 2009 tax year. And it could be more likely than you’d think.
At this point the story is reading like a nice ad for ird.govt.nz, okay good.
TaxRefunds.co.nz, a business that helps people file refund applications online, has calculated the chance of getting money back from Inland Revenue (IRD). For example, the table shows a worker on the average wage of $48,000 has a 20 percent chance of getting a payout with the average payment close to $245.
What! Advertising some dodgy company… hmm…
The probability climbs or falls depending on how much was earned. TaxRefund director Geoff Matthews said those hovering around the different tax brackets scored highly with those on $38,000 having a 55 percent chance of getting money back from IRD.
This is probably true.
“It’s like having a lottery ticket at the bottom of your drawer of course you’re going to check it,” he said.
Since when did filing a tax return turn into playing lotto? Unless you spend all your refund on lotto tickets.
… (5 more paragraphs of dribble, go read it on the link above if you have to)
If someone decides to go ahead and file the claim with the IRD, the company charges 12.5 percent of the rebate amount, up to a maximum of $500. The minimum fee is $12.50 per return.
Is there any news at all in this story? I don’t see any. All I see is advertising for some dodgy company and lotto. And lets make one thing very clear. Go to www.ird.govt.nz and do your own tax return there. You will get it all back and not give up 12.5% to some dodgy internet site.
Speaking of dodgy sites taxrefunds.co.nz seems to be getting dozens of complaints as highlighted here: http://tvnz.co.nz/business-news/ird-warns-online-tax-return-services-2706304
The Inland Revenue Department is warning people to be wary of online companies offering free tax return services.
This follows a number of complaints from people who say they didn’t realise what they were getting themselves into.
It’s ads like the current tax refund ones that Donna DeCleene thinking she was in for a windfall.
“I thought I may as well register and see if I have any money owed,” DeCleene says.
She went to taxrefunds.co.nz and typed in her IRD number to find out more about claiming back taxes.
But she was surprised when she received a letter from the Inland Revenue informing her that taxrefunds.co.nz would act on her behalf on all future returns.
“They were telling you to apply for old refunds not saying that they would then act for you in future years for any tax refunds,” she says.
The IRD says its received dozens of similar complaints about tax refund companies
“Read the fine print so you know what you are committing to before you do it. Or alternatively come to our website directly and you can do it for yourself anyway,” says Charles Ronaldson, Inland revenue.
When logging onto taxrefunds.co.nz you can see in the fine print that the company takes 12.5% on any refund, a commission that is also paid on things like family assistance credits and they will continue acting as your tax agent until you tell the IRD otherwise.
“It tells you on the site and you have to tick a box that accepts the conditions that we will be your tax agent like any chartered accountancy,” says Geoff Matthews, taxrefunds.co.nz.
Taxrefunds.co.nz was set up seven months ago and has already processed $62 million worth of returns
“I know I get a tax return through family assistance si i know i didn’t need them helping me because it’s all automated through IRD,” says DeCleene.
However Matthews says, “if we weren’t in the market nobody would know that they were due tax refunds”.
Mr Matthews people have been getting tax returns for much longer than the nine months you have been in the market. All it appears is that you are a very cunning scam artist giving people a service that they already had access to for free. It isn’t very impressive.
Finally be aware that IRD do seem to be on a go slow at the moment as highlighted here: http://www.nbr.co.nz/article/ird-go-slow-tax-refunds-angers-firms-102459 and http://www.gpforums.co.nz/showthread.php?s=&postid=6194020
I filed my tax return for 08/09 on May 12 and it took 9 weeks for them to process it, however, eventually I did get a refund and a nice big one too. So go and do your own. You will get more money and not get into bed with a dodgy company trying to take your money for doing nothing.
I have been planning to blog on this all week but have not had the time…
Simply read this: http://blogs.nzherald.co.nz/blog/show-me-money/2009/6/23/dear-generations-x-and-y-leave-asap/?c_id=3
Or if your even too lazy for that, check out the TV interview on the subject.
Entitleme is a new website that takes a look at your tax take and what you get back for it. Very rough information for me is shown below.
Check it out: http://entitleme.com/ I can’t believe that the largest proportion of my tax is going on social welfare. Maybe we really are in a communist country after all and we have been hoodwinked.
