Is it Time for a Total Overhaul of Our Tax System?

Opinion: Peter Malcolm

Photo by Kelly Sikkema on Unsplash

Congratulations to Labour for finally raising the issue of our tax system saying

they are prepared to talk about a capital gains tax. It is also interesting that

journalists are talking publicly to a few of the very rich about their wealth and

their place in society. Some of the wealthy are saying that we don’t raise enough

tax for the Government and many of us would agree but they are concerned that

Governments may not spend the extra money wisely. I am not sure there is any

answer to this as there will always be aspects of government expenditure that

some of us will disagree with.

So maybe now is the time to take a serious look at our total tax system which

hopefully will result in some significant changes.

It is clear that for the last 30 years New Zealand has had a tax system which

favours the wealthy and the highly paid, is tough on the moderate to lowly paid

wage and salary earners, and has caused our country to have an increasing rate of

income and wealth inequality. This has led to increasing levels of social and

economic ills, higher levels of personal selfishness and lower levels of society

cohesiveness. Added to which, much spare capital from those that has been

invested in unproductive areas like housing.

Compared with many countries we are lightly taxed: our tax system is not

comprehensive excluding many areas which other countries tax eg capital gains, is

not vertically fair with the wealthy and highly paid contributing a smaller

proportion of their total income than the rest and is not horizontally fair ie the

actual source of income determining the amount of tax paid. And finally much of

our tax system is regressive ie those who have less pay a higher proportion of tax

than those with more. GST is a good example of this.

What can be done about this? The Green Party and Te Pati Maori have already

looked at some further ideas such as a wealth tax. Let’s hope that Labour will also

broaden their thoughts.

The list of what many other countries tax but we don’t is quite long but contains

things we need to seriously consider, and some of which we used to tax. The list

includes taxes on capital gains, wealth in general, housing (through capital gains

or “risk free rate of return”), estate or death duties, land and charities.

On top of this our rates of tax in general are lower than many other countries.

Our top personal tax rate should be at least 45%. (mine was 66% at one stage but

didn’t include GST). And company, trust and PIE investments tax rates should

significantly increase.

These issues listed above must be considered if we want a fairer, more civilized

society with lower income and wealth inequality and increased wellbeing.

The major argument against the things listed above is that the wealthy and highly

paid will leave the country. The research and evidence suggest the number who

will do this is relatively low, and I have got to ask “do we want these rich selfish

p….. to stay anyway?”

Let’s hope that we can have proper debate about these issues resulting in

changes which will make New Zealand a better place for everyone.

Peter Malcolm