New data from Inland Revenue (IRD) and Treasury shows that the richest segment of the population – known as high wealth individuals (HWIs) – pay an average of 12% of their income in tax. By comparison, those earning median incomes between $55,000 to $60,000 pay an effective tax rate of 16-18%.
In New Zealand, HWIs are defined as a person or family controlling over $50 million in wealth. The same set of statistics shows that fully 42% of HWIs pay an effective tax rate of less than 10%. This figure is lower than the official tax rate for income of less than $14,000 per year. Such income is taxed at a rate of 10.5% – theoretically the lowest income tax rate. By earning types of income that are untaxed or very lightly taxed by the government, many wealthier citizens are able to keep a larger proportion of their earnings.
Responding to the report, the finance spokeswoman from the Green Party expressed concern over this wealth disparity, urging for the restructure of New Zealand tax system.
Finance Minister Grant Robertson has assured the public that the government “continues to work on making New Zealand’s tax system fairer,” although it “has very clearly ruled out a comprehensive capital gains tax and a wealth tax.”
In terms of overall inequality, New Zealand’s richest 10% own 59% of the country’s privately held assets, while the poorest 50% of people collectively own just 2%. Many see such disparities as a real cause for concern, as the country begins to plan for a post-pandemic future.