Do we live in a tax paradise?

For a society that provides a full range of services aren’t we remarkably low-taxed in New Zealand? I was comparing notes with my Australian-based brother this week, and the differences are stark.

Our top income tax rate is 33%, and we have no capital gains tax, while property rates (for me in Auckland) are just 0.29% of assessed value. We also have GST of 15%.

In Australia they pay 49% top tax rate (45% + 2% +2%). They also pay tax on any capital gains – the net capital gains are simply added to the taxable income, but net capital losses can’t be deducted from income. The family home is exempt from capital gains, but ordinary investments are not. You can get some relief by placing your money into a super fund – and you can self-manage this – but money going in is still taxed at 15% and is limited. If you contribute too much then the excess is taxed at 47%, and if your total income is over $300,000 in a year then there is another 15%. GST in Australia is also more complex than here, though lower at 10%. 

Whew – as you can see it’s also a much more complicated system – you’ll probably need a lot more expensive advice than here in NZ.

In the USA the top tax rates are over 40% just for the federal component, then you add state tax, not to mention health insurance and all the other things that their state does not provide. It gets over 50%. Sure their system is so rigged and wretched so that the effective rate for the wealthy is lower – so be prepared to pay a lot to a CPA as well. Let’s not get started on the absurdities of cascading regional taxes, nor regional taxes on  goods and services. It’s all incredibly expensive, complicated, and biased towards the very very wealthy. 

I like it here – our tax system is understandable and efficient. Sure we can do better, but it’s worth pausing now and then to say “well done” to a series of governments.