Quite right, except that IRD does require the taxpayer to demonstrate intent, on request. And those currently paying income tax on capital gains would be laughing all the way to the bank if they only had to pay 15%.
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Does your idea include a tax free subsistence income threshold, before income is taxed?
Why concentrate on income? Why not double your wealth (after a tax-free threshold) would mean double your tax? Or double your realised capital gains would mean doubling your tax.
Taxes often appear to be collected on what is easiest to collect i.e. at source from wages as PAYE, GST, RWT. Taxing income is easier than wealth/capital gains. If you are taxed on your own assessment of income/profit then it is not taxed at source and those who advise Inland Revenue of the income which is to be taxed have an unfair advantage as they can use creative accounting and all sorts of tricks to minimise and avoid tax. So there is the unfairness. How is it fair that someone pays tax on their labour/work and another person pays no tax on capital gains e.g. on rising house prices which they do nothing to earn? I don’t know what the solution is, but I can see the problem.
Here is Guy Standing’s view of how to transform the tax system.
https://greattransition.org/publication/precariat-transformative-class
The income from using commons resources should belong to every commoner equally. Accordingly, the tax system should shift from earned income and consumption to taxing commercial uses of the commons, thereby helping in their preservation. Levies on income gained from using our commons should become major sources of public revenue. This means such measures as a land value tax, a wealth transfer tax, ecological taxes such as a carbon tax, a water use levy, levies on income from intellectual property and on use of our personal data, a “frequent flyer levy,” and levies on all income generated by use of natural resources that should belong to us as commoners.
It is fair, because those with political power have political control and call the shots. Older (wealthier) people tend to participate politically more than younger (income earning) adults. Also the influential farming lobby with their land holdings and providing NZ's key exports for so long have perhaps ensured that NZ has a tax system that substantially avoids taxes on wealth, capital gains and estates. So the farming estates can pass through the generations intact.
In the meantime average salary and wage earners have taxes levied on both their incomes and consumption. The wealthier city dwellers of course finding common ground with the farmers as they are in a position to benefit from the light tax onus on capital profits and capital transfers.
So NZ has a system that encourages a type of pre-industrialised agrarian society. The emphasis is on land ownership as the means of developing wealth. This leaves a small institutional and pension fund sector and of course a small capitalisation of the stock market as the vast majority of NZ wealth is in investment in land. This means that NZ-based commercial and industrial companies are substantially owned by foreign off-shore interests, with little NZ-owned business operating overseas to compensate for it.
And yet no political party here, except TOP, thinks that CGT on the family home is ever going to happen. But the homeowner can make a capital gain just as much as a rental owner, a share investor, a farmer, a boat or bach owner, a classic car collection, a multi million dollar painting owner, or a business owner. Oh, some of those were excluded from Labour's CGT proposal and some were included - for reasons never satisfactorily explained. Except politics.
Most capital gains disintegrate when an asset is sold and a similar asset bought. Might have something to do with inflation.
And with some assets, eg shares in start ups, risk is priced in. Should an investor get some credit against a CGT for the risk in buying say ATM? You could say the buyer did nothing to earn the gain, apart from fronting up with some cash plus an appetite for risk.
And nor should it. A house is a place to live. Sooner we collectively get that into our heads the better. If it doubles due to Govt policy ((bldg regs, immigration, land restrictions etc) you still need to live somewhere, it doesnt mean you're suddenly wealthy. Unless you move to Gore perhaps. And if you have to move city for work and quarter of it disappears in CGT is it fair you can now only afford a smaller house in the next city because of factors you cant control?
Stamp and death duties are equally viable for discussion and might help with excessive wealth harbouring in the family home but generally hit all the same snags (trusts, exclusions, expensive ticket clippers etc).
You’re already taxed on the family home capital gains, it’s called rates. Every time your home and property value increases, so does the tax... Er rates.
That is also the case with other real estate - land, residential, commercial, farms, lifestyle blocks. Except that the main reason rates rise is that councils keep increasing rates above inflation. Otherwise, rate rises due to changes in value tend to be relative rather than absolute.
Rates are payments for council services - i.e. the beloved user pays. Landlords recover their rate expense through the rent that they charge their tenants. In Auckland there is a uniform general charge element to rates. That means part of the rate is the same whether the value is $500,000 or $5m. There can also be a targeted rate for amenities in the property’s neighbourhood.
We are talking about central government taxes. Not the payment for council services.
The only thing you’ll find when you dig deep into the process is that the rates tax is determined at local council level so there are differing approaches but the one thing common is a boffin with a spreadsheet that determines what your next tax rates rise will be and it’s directly correlated to QV. I contest every single rates rise and have every single one of them over turned by an on site valuation, always resulting in a lower valuation and a lower rates tax. Dig deep and you’ll find out how flawed the system really is. In any event it’s a tax on capital and increase in capital assessed, therefore it is a capital gains tax!
Im not suggesting a business ought be subject to CGT but for a start there are all sorts of tax breaks for a business (deductables, R&D credits when they are in vogue etc) that houses dont get during the lifetime and the whole point of a business is to make money so if CGT tax were implemented it seems a very different beast to a home which is, in the first instance, a place to live. One of the key elements of thingy's hierarchy of needs. Quite why you want to tax an owner occupied house for the sake of being a house, what it is you're trying to achieve, I cant see.
Al investments classes are for sustenance.
The point of owning a home is to provide a benefit (shelter) for which you would to pay rent out of taxed income if you did not own it.
The point of earning income is to enable you to pay for shelter.
The point of owning a business is to enable you to pay for shelter.
The point of owning shares is to enable you to pay for shelter.
For consistency, all or none should have their annual net benefit assessed for tax, and be included in any CGT.
For the last 2 pages i've read so far... the problems are easily solved. Just LOOK at how Australia, Canada, US, & UK treat taxes? Excesses of income should have more taxes levied. The wealthy holding excessive assets such as 3 or 20 houses need to pay more out of capital gain (not zero).
One of the most moronic excuses i've heard from an accountant was, he was in support of raising GST as to add more taxes. Of course he was a rich & wealthy accountant and had no regard on the working poor in how a consumption tax hits this group the hardest.
I disagree that all investment classes are for sustenance. Sustenance is about basic needs or subsistence living and providing the necessities of life. Having a home is a basic need but owning a house is a luxury that many people cannot afford. For most people owning shares is to provide you with the luxuries of life, with wealth and savings. When people have enough money for a nice house they do not stop investing in shares or running their business so there are other reasons and motivations for investments.
There is more to sustenance than owner-occupied shelter. You still need food, clothing and medical care to sustain yourself and keep alive. For that you need a business, income, or income earning capital.
For the retired or for those that cannot work, share investments and fixed interest provide their income for sustenance. They are just as essential yet they would be treated differently for a CGT. There is no logic to that.
There are lots of palatial homes. The NZ tax and financial system with leveraged capital gains (and tax-free benefit of occupation) encourages over-capitalisation of the family home and property after all. They have moved far beyond providing the basic need for sustenance or shelter. I see no justification to treat them or any other owner-occupied housing differently from share investments/business investments for any CGT.
An increasing number of people cannot afford home ownership. Home ownership may also be inappropriate for some, whose businesses may mean they need to move around the country and World. They need their businesses to provide returns for all sustenance, shelter included. There is no economic or financial logic behind treating business or other investments differently from the equity in owner-occupied homeownership when it comes to any CGT. The reason is political.
Oh FP still haven't worked out that GST is a regressive tax. One day you might get it, but as they say no point banging my head against a brick wall.
Just coming on to post this article. I liked Stephen Tindall because after he became successful he has carried on investing and trying to make NZ a better place. Now he is signing a letter asking to be taxed to help out the country. here is a person deserving of the title sir.
https://www.stuff.co.nz/business/122...or-the-wealthy
83 millionaires, globally I wonder what sort of percentage this is. I would guess relatively small.
The same can be said for those self interested people who would like gst to rise because they dont pay it (property investors).
Sir stephen is being fair and reasonable I think given this unprecendented situaton and the need to raise tax revenue.
Where did you get that idea? Residential property is subject to GST, as is rent, and only in rare circumstances will a landlord be gst registered for their residential property activity Everyone pays GST on any personal purchase of goods and/or services. Those few who are registered for their residential activity will pay gst on the eventual sale price, and of course lose out on the rent - so hard to see an advantage. GST catches everybody.
An article about High Wealth Individuals and their associated entities which have increased 75% over five years, which is massively above inflation.
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12252697&ref=art_readm ore
The number of super-rich earners on the New Zealand taxman's radar has skyrocketed in the past five years with 350 people now worth more than $50 million — some of whom are in a fight over more than $85 million in disputed tax.
The group - labelled High Wealth Individuals (HWI) by Inland Revenue - has soared 75 per cent since 2013, while the country's poorest residents continue to struggle.
Each HWI has, or controls, wealth in excess of $50 million. Their sources of income often include property development and investment.
Associated entities of the 350 super-rich individuals totalled 11,585.
Six years ago, in 2013, there were only 7009 HWIs and associated entities. In the 2014 tax year the disputed cost was $112.8m.
"You're seeing a real acceleration at the top end, whereas at the poorer end of New Zealand as best we can tell, the overall picture is either of growing debt or of stagnation."
To help resolve wealth inequality in New Zealand, Rashbrooke suggested implementing a wealth tax, which he acknowledged would ruffle feathers.
https://www.nzherald.co.nz/northern-...f=art_readmore
Vaughan Gunson asks who could possibly see the merit in wealthy New Zealanders paying a little more tax to help their compatriots out in a time of crisis?
That's the path to a more equitable and harmonious society.
Point taken, I will vote for the party at the next election that proposes to scrap taxes and rely on individuals intelligence and generosity to donate to the most worthwhile things that affect them directly, indirectly and not at all.
Unfortunately though, I appreciate you are very generous and know how best to spend your money. I on the other hand hate paying tax and would be more inclined to keep what I earn rather than donating it, if I don't have to. Also I lack the intelligence or broad information required to know how best to donate my money to have the greatest impact/benefit to the country as a whole.
I also lack the time or inclination to put in the effort required to make your proposal feasible. Possibly I am alone in this regard but suspect there may be others like me and that you Zaphod are one of a very select few with the generosity and intelligence to make such a system work. Although from what I read on this thread there are a lot more people on here like you than I meet in everyday society.
Perhaps sarcasm is not as easily picked up in the written form. But to spell it out I would suggest that taxation is not the destroyer of wealth and societies it is made out to be and I posted the article about Stephen Tindall because I thought it showed that there are some successful generous people out there who care for more than just themselves. This view was not shared by a couple of posters on this thread and blackcap suggested he is a "virtue signaling idiot" which I am not sure what it means but the idiot on the end would indicate it has a negative connotation.
Although I am pretty sure debt and/or printing money will be the preferred option for voters and their politicians over raising taxes on either side of the house.
oh right, thank goodness. Those views are not that worthy of a first world country.
Only two things in life are certain, death and taxes.
In some other forums placing a "/s" at the end shows sarcasm though not sure what the practice is on this one.
The reason I called Tindall a virtue signalling idiot is that is exactly what he is with his call. He is trying to be virtuous without actually taking any action himself. It would reflect a lot better on him if he actually paid more to the tax coffers and shut up about it. He is trying to look virtuous to others without actually being virtuous. Just like the politicians with their intent to take a pay cut during the Wuflu lockups, but in the end how many actually took a pay cut? Again, more virtue signalling. It seems to be a disease that afflicts the left proportionally in larger numbers. (in my humble experience)
I would be concerned if Stephen Tindall an unelected representative had any control over the tax system. Possibly he is trying to sway public opinion and therefore politicians in regard to raising taxes on the wealthy. To me it means more coming from some one wealthy rather than some one looking for a hand out. I suspect you would be critical of any person who raises the possibility of a tax increase.
It was masterful sarcasm. I read it with the voice of John Cleese!
Sarcasm or not? John Cleese..
https://www.youtube.com/watch?v=Ecc1XVhZkUA
Possibly he is and possibly he is trying to look like a decent man, caring for society that he is willing to be taxed more. (lets not forget the rubbish he imported from China into NZ with his red sheds and that damage that that caused) Maybe he is wanting the tax rates to go up, however he and the other millionaires are quite happy to pay their accountants and advisors to minimise their tax burden anyway. He looks good (calling for higher tax) but in practice pays no more. He should just shut up, and pay the money to the tax coffers. Or even better donate to his local community and bypass bureaucracy and other money wasting pen pushers.
I am sorry you see my posts as attacks on you personally. Although I hate paying tax I do see it as a necessary evil. So my posts were meant to be promoting my view rather than attacking you.
Your right you don't state that taxes should be scrapped I have obviously inferred too much from your statement which I have copied and pasted below.
"We have given regular support to the local health board redevelopment project, donated infrastructure to the council parks division, etc. That's a much more efficient method than doing so via tax, but obviously Stephen prefers compulsion amongst his peers."
I obviously mistook "That's a much more efficient method than doing so via tax" as meaning private individuals donating for public services was a more efficient method of paying for public services rather than taxation. The inference I took was that scraping taxes and relying on individual generosity was a better way forward. Was I the only one to make this inference based on Zaphod's post on this site??
I swore off the political threads a couple of years ago, rather than upset people perhaps I should stick to that.
P.s and in no way should my arguments detract from your donations to your local community. It is a wonderful thing and you should be proud and I write this without any sarcasm at all.
The context was that Stephen advocates for the wealthy to pay more tax to solve the various issues he sees in our society, but there are other ways to more effectively contribute to additional causes that he believes in.
I don’t begrudge paying tax, and I would hope that the majority of people do not, but the difficult part is always determining the level of taxation and what should be funded from it. Much of this is very subjective and invariably used for political gain during election years.
Stephen advocates for the wealthy to pay more tax to adequately fund various government services, but provides no details as to what he sees are the specific areas that are inadequately funded, nor why spending more money in these areas is the best method of rectifying the problem. Based on this alone we can’t decide whether his initiative is worthy of support.
We personally donated to specific initiatives such as a hospital refurbishment, trees & benches for a park because we saw a worthy cause that wasn’t being adequately fulfilled, in our opinion, based on existing spending from taxes. We are not in the top few percentage points of wealthy people in NZ either.
There also needs to be a much clearer definition of who is wealthy. Our PAYE system decrees that those who earn over $70K are wealthy, which places a proportion of those whom we believe are underpaid into the top (wealthy) bracket. With raging house prices, many people on modest incomes will be dragged into the top 5%, who would not be able to afford additional taxes without some significant compromises to their lifestyles.
IMO the situation and solution is complicated and deserves thorough analysis.
Don’t shy away from to continuing to post. It’s easy to misconstrue intent particularly on a long thread.
To pay off debt, support modern infrastructure and maintain super at 65 among other worthy and important goals.
That's not this govt's legacy though. The previous admin were in for nine years and did nothing about this theshold. The top 5% mostly pay nothing for the most part. what you're talking about are wage earners who are (rapidly) dwindling in their importance to the economy.
It may be time to update and modernise your way of thinking about things :)
Debt will be a significant issue post COVID-19.
What modern infrastructure isn't being supported currently? Why isn't it being supported? What are the adequate levels of support?
Should we maintain super at 65? Many other countries have raised the age required to qualify for superannuation in line with increasing lifespans due to overall higher levels of health in the community. Cullen himself penned a paper proposing that national super should only top up income derived from an annuity purchased using Kiwisaver funds, so perhaps that's the solution to maintain super?
Claiming these are worthy and important goals is highly subjective.
Raising wages while not increasing the income thresholds is most certainly is a legacy of this government, as well as many predecessors.
Not really, lowest in the world and owned by the RBNZ at 1%.
The infrastructure commission will have some recommendations although the govt is delivering alot of announcements recently. I like the approach of making it more region-based than it was in the past. My personal hope is a country wide freight network through Kiwirail. This will reduce the enormous damage trucks do to roads (so less spent on resurfacing and maintenance) and stop the importation of feul and new models of trucks.Quote:
What modern infrastructure isn't being supported currently? Why isn't it being supported? What are the adequate levels of support?
It can be if we re-fund the NZ super fund and lift Kiwisaver, two epic mistakes by the last government. Though they don't believe in red tape and that it will impose a burden to some businesses so it wasn't done sadly.Quote:
Should we maintain super at 65? Many other countries have raised the age required to qualify for superannuation in line with increasing lifespans due to overall higher levels of health in the community. Cullen himself penned a paper proposing that national super should only top up income derived from an annuity purchased using Kiwisaver funds, so perhaps that's the solution to maintain super?
You sure have some strange ideas. Here is the real picture from NBR
"As a result, the rich shoulder a disproportionate burden of tax. The top 3% of all households (above $250,000 a year) pay a quarter of all income tax. The top 10% (above $175,000) pay 50%. The bottom 60% (less than $80,000) pay $6 billion in tax but receive $7 billion in handouts such as Working for Families. They are net tax recipients. In total, they suck in a billion dollars.
Meanwhile, the top 10% of households pay more than $11 billion in tax. They suck in nothing."
Capital gains is not counted as income in NZ.
Interest rates are unlikely to stay at 1% until the debt is paid off though. Having relatively low debt compared to other countries, albeit only at this stage, does not offer comfort to tax payers who must still repay it. Debit is still a problem according to treasury forecasts.
Do the government announcements correlate with what the infrastructure commission recommendations? Can these be funded adequately through existing taxation? Or are you proposing we just throw more money at it?
Yes I think that if we had not funded the CHCH rebuild, we could have started recontributing to the NZ Super fund, or perhaps there was another way?
What do you mean since the interest is fixed for 10-30 years when the govt issues a bond.
after-inflation the interest is 0% ..
All of the above. the response should be adapted to the conditions we are in... which it has been for the most part.Quote:
Do the government announcements correlate with what the infrastructure commission recommendations? Can these be funded adequately through existing taxation? Or are you proposing we just throw more money at it?
Look around the world and we are in great shape. :)
It certainly is when it is income, although not when it is not income. The IRD will tell you the difference because I can't be bothered - or any accountant will explain it to you. And capital gains is a plural term. Therefore 'Capital gains are ...' is correct. 'Capital gains is ...' is not. Any educated person could explain that to you, but note that does not include school teachers.
So really most businesses are getting a government subsidy because they are not paying their employees enough to cover their expenses such as raising their children without extra financial help from the government. If it was really a free market we would have a population that is less healthy and less educated and with other social problems. Raising children is reproducing human capital which business expects to have without contributing to the financial cost, someone else bears the cost.
What say employers are paying employees what they are actually worth. Plenty of employees are low skilled and that skill level might be because of their own choices. We are starting to see a serious wave of layoffs and the low skilled are going to be first out. And double that if employers are forced to pay more than the return they get.
Raising children is only one way to ensure future employees. Immigration, upskilling, automation ...
Inflation and price rises effect bonds, particularly when this impacts the wider economy. What source did you use for the 1% inflation figure? Are you also claiming that the effective interest rate will be zero for the term of the bond, or is this just a momentary blip in interest rates?
Thanks to prudent fiscal management of two successive governments. The real test will be how we emerge economically from this event, especially with major turmoil with exporters (also due to geopolitical factors) and the tourism & foreign education sectors effectively shut down.
When are we to learn what we are in for?
"(i) tell people who lost their jobs that it was their bad luck to be working in the wrong sectors, and that they should borrow to get through the emergency until they could find employment in some other sector, or with their original employers if the jobs were still there when the emergency passed.
(ii) increase taxes by large amounts immediately on those who remain in employment (and those in receipt of capital income) in order to provide transfer payments to those unemployed or those whose businesses had suffered;
(iii) borrow from those most able to lend, to reduce the costs of option (ii), to be repaid by future taxes;
(iv) create money to provide the transfers."
https://www.interest.co.nz/opinion/1...ed-public-debt
It should apply to the well paid too. CEOs paid well but not always competent. Certain sectors such as finance and insurance are well paid because of the sector, not necessarily the skill level. The wage gap between the low and high paid not does reflect actual skills.
https://www.nzherald.co.nz/business/...ectid=12352640
Forget a capital gains tax – what New Zealand needs is a tax on inherited wealth.
New Zealand first taxed inter-generational capital transfers in 1866. However, the rate of estate duty was reduced to zero in 1993 and gift duty was scrapped in 2011.
The tax working group, established by the Labour-led government after the 2017 election, specifically excluded an inheritance tax. While there were good theoretical reasons for such a tax, group member Geof Nightingale said, it "breaks down at the politics".
Inheritance taxes are intensely disliked, so if you haven't got one it's very hard to put one in.
Baby boomers, the wealthiest generation that has ever lived, will increasingly start dying during the 2020s.
Tax policymakers cannot ignore the opportunity – arguably the moral imperative – of taxing and redistributing those transfers.
First, the application of tax needs to shift from the deceased to the living. In other words, we need to focus on the recipient of the wealth transfer. Ireland's capital acquisitions tax (CAT) applies a flat rate of 33% to accumulated gifts and inheritances over the relevant threshold.
Unlike a CGT, which can be perceived as penalising business owners, a CAT targets unearned windfalls from an accident of birth. This should make a CAT more politically acceptable than a CGT.
Second, the younger generations most critical of baby boomers' "unfair" acquisition of wealth (Gen X and millennials) must accept that taxing this unprecedented transfer of wealth will promote both inter- and intra-generational fairness.
If we don't tax and redistribute these transfers, wealth inequalities will be exacerbated and entrenched among future generations.
And finally, arguments in favour of a more equitable system have to overcome the rhetoric of "death taxes". As far back as the 1960s, Canada's Royal Commission on Taxation did this by popularising the idea that "a buck is a buck", no matter how it is earned.
In other words, if you have the money you can pay tax, whether that money comes from labour, investment or inheritance.
I agree. Just a slightly more skilled worker could end up saving a lot in costs or boosting revenue by more than their current extra employment cost . Similarly a slightly better CEO could make a material impact in profitability, especially in large organisations.
However a boost to the minimum wage rates and social welfare benefits help create a high consumption market for various products and services - which could boost business revenue by at least the amount of the extra payments . In addition a more “egalitarian” society with equal opportunities to achieve potentials could help create a more socially peaceful society less prone to social unrest and revolution. That is good for wealth creation and retention?
As long as a majority of politically engaged people think they will or could benefit from untaxed inherited wealth and capital gains, then leaving these gains untaxed but taxing gains from what is currently classed as “assessable income” will continue to be deemed a “fair” way to raise tax.
I'd love to see an inheritance tax in NZ - there's no time I'd rather pay my tax than after I'm dead. A society where each generation stands on its own two feet a little more should be an improvement - it obviously won't do anything about the better schooling and connections of the well-off but it gives those less lucky in birth a bit of a fighting chance. Ideally I'd pitch it higher than 33% as this money is truly unearned and receiving it is correlated with the other benefits I've mentioned, but I guess that's a good starting point.
I guess there's different ways of thinking about it. To my mind, if I inherit money I've not earned it in any way, so to complain about paying tax on it would seem strange. As the person leaving an inheritance, I'd much prefer that tax is taken from my estate after I'm dead rather than chasing me for it when I'm alive.
Low skilled workers get what is offered. Unlike those in the professions they cannot set their own wages.
Lawyers, surgeons, company directors and others in public office etc seem to set their recompense for
their efforts on whatever they think the market will bear without too much protest.
The essential workers during the lockdown were mostly in the lower paid positions.
westerly
Exactly, what the market will bear with too much protest. That also applies to low skilled workers. Wonder why that is? Lawyers, surgeons can only set their recompense at what society/market thinks they are worth. Same applies to other occupations thus the same rules apply to all.
FP is correct in that there are those that are overpaid due to the artificial barrier to free markets and price discovery that the minimum wage provides.
Ha, classic. You believe that tosh? That might apply in a mythical "perfect" market. Market/society has no idea what lawyers/dentists etc are worth, as lawyers/dentists etc well know and strive to maintain. Much like houses. Their fees go up CPI+ 5% each year, they sit back and as long as some weird breakout doesnt rock the boat they all prosper. Occasionally some rascal will increase fees 20% and a new low will be set. They know we are too stupid to query it. We moan a bit then book an appointment. The professions with the strongest lobby groups ensure nothing too crazy happens to them.
Overpayment/underpayment? Its largely guesswork. Non market forces are many.
https://www.abc.net.au/news/2016-11-...f-life/8058578
Inheritance taxes efficient, but unpopular
Inheritance taxes are incredibly efficient on economic grounds.
After all, you can't really change your behaviour to avoid them. We're all going to die one day.
This is surely one of the biggest frustrations for economists — for some reason, the 'best' taxes also seem to be some of the most unpopular ones.
People grudgingly accept income tax and stamp duty, which are 'bad' taxes.
They discourage people from doing positive things, like working more or moving to a more suitable home.
There is one big flaw in inheritance taxes, aside from being deeply unpopular, however.
Experience shows that many people manage their affairs to minimise the inheritance tax they have to pay.
For instance, they might set up a family trust during their lifetime to avoid some of the tax bill.
These problems are not insurmountable, after all there's plenty of historical experience in Australia and current lessons from overseas about how governments can minimise this avoidance.
However, the combination of avoidance and various exemptions (such as high thresholds) used to minimise popular backlash against death duties mean they raise relatively little revenue.
Belgium raises the largest proportion of its taxes from the dead but, even there, the OECD found estate taxes make up just 1.6 per cent of total tax revenue.
So are death duties worthwhile if they raise so little?
The answer is yes if they prove to be an effective tool to redistribute some of the accumulated assets of the wealthy to those born without a silver spoon anywhere near their mouths.
Certainly, renowned economist and author of a best-selling analysis of wealth and income inequality, Professor Thomas Piketty, thinks estate taxes have a significant role to play.
"If you have labour income of $50,000 or $100,000 you are going to pay a lot of tax, but if you receive $1 million or $2 million in property from your family the tax rate will be zero per cent — there is no inheritance tax — which is very small as a tax rate."
How would inheritance taxes apply in NZ? Family trusts are very popular in NZ. The wealthy in NZ have to a great extent settled their wealth into discretionary family trusts. In NZ to include inherited wealth in the tax net, you would need to introduce death duties together with some sort of a capital transfer tax.
Another way to tax inheritances in NZ could be to treat trust assets in a trust, in which the settlor retained a beneficial interest in the assets in the trust as a discretionary beneficiary, as forming part of the settlor's estate upon their death. The trust assets would then be taxed at the marginal estate duty rate applicable to the deceased estate.
Thomas Piketty and his data are not the best to rely on when formulating policy or even opinions.
In any case although there might not be death duties etc here atm, those who inherit assets are required to pay tax on any income from them. So swapping labour for capital as an income source. Just like working at the office for $50k, but without the working.
Wouldnt be that difficult, thats the way it used to be (gift and estate duties in tandem) until not so long ago. then just need to discourage trusts as a tax dodge e.g. with tax rates, put estate duty on people, then wealth duty and/or higher income tax on trusts. Once the disincentive goes they generally stop being much use. Not sure if there is s genuine reason for trusts anyway, if it is to ring fence assets against creditors then presumably you've done something wrong. If one has a valid reason then the extra tax becomes the price one would have to pay for that insurance. Or some such thing.
Correct me if i'm wrong but aren't NZ Trusts taxed at 33%? Any income they derive would be taxed at that rate? Also being a trust, and like a company, they lose the benefit of tax free capital gain vs an individual owning a principal resident home?
Most places have some form of CGT and likewise, estate or death tax. Why should NZ be excluded? FYI, the US has death / estate tax which the threshold is set at a whopping $10.5M and higher. Nothing wrong with that but I think NZ needs to be careful on the level of taxation as more and more will continue to leave - find ways ways to move wealth abroad.
Death duties can be very unfair and may not be good for Nz.
For instance they may force the sale of a family farm that a son has spent all his life contributing to but his father has wanted to hold on to.
Nz is a country made up of small business paying taxes and contributing-they maybe forced to sell it in order to pay death duties.
The rich will find ways to avoid.
The old will be encouraged to gift their assets to family before death-hence no luxury in resthomes
It is a form of double taxation for most cases that will be hit and why should this be so?
True, it will be the moderately well-off who will end shouldering the burden. The seriously rich will have the well-paid advisers to find the loopholes.
There are lots of instances of double , treble and more taxation. The government clips the ticket when income is earned, then when it is spent. Then when it earns income from investments made from tax paid income etc.
Except in certain specific cases such as inter-spousal inheritances and your example of the son not receiving a market place salary for working on his father’s farm, from an inheritor’s point of view, receiving a legacy is an untaxed windfall gain.
Yes you're correct. Trusts are still subject to tax and they're not really a viable entity to use as a tax dodge as others have suggested. IRD gets their share one way or another.
What they have traditionally provided, is a method to shield family assets. This has slowly been chipped away by the courts, along with many other advantages.
The point was regarding estate duty, the old tax dodge was to set up a trust which lives longer than the parents thereby avoiding estate duty when they meet their demise. Another was (before it was closed down) a way of removing assets from means testing regarding aged care subsidies. Tax dodge/careful planning, call it what you like.
And to the question about the farm being built up and handed down, no different from building up a panel beater shop or just building up a nest-egg for your kids' education or whatever, not sure farmers should get a specific tax break. Some bigger question than just farmers to be addressed.
I noticed this and thought of you Blackcap.
Obviously Stephen Tindall doesn't know how to properly virtue signal as it looks like he is actually giving away quite a lot (about $10million a year). What a virtue signaling w*nk*r.
Maybe you should contact him to point out what an idiot he is making of himself by asking for the wealthy to contribute more to society.
https://tindall.org.nz/who-we-are/
https://www.theguardian.com/world/20...ir-go-identity
New Zealand's astounding wealth gap challenges our 'fair go' identity
New data shows the richest 1% are worth 68 times more than a typical New Zealander.
The extent of wealth inequality in supposedly egalitarian New Zealand has been laid bare by figures showing the wealthiest individuals have over NZ$140bn (US$93bn) stashed away in trusts – and overall have nearly 70 times more assets than the typical Kiwi.
The wealth inequality data, developed in conjunction with Statistics New Zealand researchers, also show that the 1% have an average (mean) of $3.6m held in trusts, $1.6m in shares and $470,000 in cash. Their debts are on average just $80,000.
Overall, the wealthiest 10% have 59% of all the country’s assets, and the middle classes around 39%. That leaves the poorest half of the country with just 2%.
Wealth understandably tends to increase with age with the 55-65 age group being the most wealthy. With NZ houses becoming so expensive, the disparity in wealth from young to older has no doubt increased over the years. I also think it would be meaningful to gauge wealth inequality within age groups. That perhaps would be more significant marker of the growth in inequality in NZ.
Also, It would be interesting to know what percentage of wealth the top 0.1% has. I suspect that the top 1% figures will be slewed by the mega wealthy 0.1%
Critics of Oxfam's global wealth reports, and there are many critics, have pointed out that the bottom global wealth group includes US students close to graduating from the ivy league colleges.
Point is that debt is common enough but not taken into account. And the trouble with inequality is that is usually means inequality of outcome, a position barely relevant in New Zealand where opportunities are everywhere for most households. Does require opportunities to be chosen though.
Nothing being proposed from any party to reverse the rising inequality.
2011 I started this thread by suggesting I would vote for whoever proposes a capital gains tax. Obviously too hard to bring it in and stay in power. Much like Nationals superannuation surcharge, they bring in something sensible but the average bludging NZer has his/her hand out and is happy to sell their vote to the most generous party.
This election I will promise to vote for whichever party promises to scrap targeted inflation. Politically easy to do as people don't seem to care about such things. I will say, not if it is the Advance NZ Party they seem a bit fruity.
James Shaw has shown his true colours by insisting our tax dollars go to a private school. It said "green" so I guess his ideology overrode common sense as well as his own parties policy against privatising education. I would want to know his relationship to the people involved as well. Any hint of corruption and he should go. So far it only looks like stupidity any school that is planting crystals to improve fifth dimensional consciousness is one taxpayers should not be funding ever.
In my not so humble opinion.
P.s. Blackcap have you talked to Stephen Tindall yet?
What about the social investment approach, partly implemented by the previous government. It is / was structured to improve opportunities and thus outcomes by careful targeting of support rather than scattergun funding.
Check out the Young Parent Payment, implemented and actually expanded under the last government, and I hear anecdotally (from a couple of MSD staffers) now less resourced and ticking over at best currently. And check out the policy to remove school decile funding and target support for pupils identified by schools as meeting risk profiles.
NZ used to be regarded by migrants as a great place for raising kids.. However now we are ranked 34/41 for chid wellbeing in the OECD. Perhaps not a concern for some wealthy STers, who maybe have the wealth for a Bach/Crib beside the sea and access to private healthcare and education. Growing wealth inequality, Poverty, education quality and health outcomes all help NZ achieve this disappointing situation today.
https://www.stuff.co.nz/national/935...oped-countries
They sound more like policies addressing the symptoms rather than addressing the main issue to me. Rising wealth inequality is not a bad thing per se, hard working people making good choices should be rewarded but having central banks push up house prices 7% a year (compounding) over the last 20 years feels good but doesn't seem sustainable to me now we are finally at 0% interest rates. Demand from excessive immigration will also be contributing but 20 years ago the 90day bank bill rate was 6% now it is .3%. Targeted inflation has driven up asset prices while exporting jobs to asia has meant a drop in the price of manufactured goods has disguised the effect. Trickle down economics is bulls**it. Surprised so called left leaning parties aren't addressing this. The more dopey this gets (e.g. Adrian Orr discussing negative interest rates) the more likely some other dopey option looks good, like communism.
I disagree. Absolute poverty (affecting shelter and health) is relevant along with comparative poverty. Rising inequality and inequality in general can affect those at the most disadvantaged end. For example with rising inequality those at the disadvantaged end would feel more excluded and could become less involved with the political and social environment, the more unequal society becomes. Also the latest technology, medical breakthroughs etc. would more likely be further out of reach for those at the most disadvantaged part leading to further divergence in opportunities and feeling of hopelessness and exclusion.