By Trevor Amundsen.
I always find it disappointing that politicians, on all sides of the spectrum, seem to be incapable of offering some innovation to the way taxes are raised; to allow the personal income tax we pay to be significantly lower. The people in this country pay too much tax; 38% of tax in NZ coming from income tax, whereas the OECD average is 24%. This is a significant difference, so should not our politicians be looking at ways to lower this? Unfortunately, they seem unconcerned, with parties on the left promoting additional taxes with no reductions of income tax and the other side promoting a slight adjustment through realignment of the tax tiers.
I believe that the average worker should bear far less of the tax burden, in fact, I feel he/she should pay no income tax at all. I am sure plenty of readers would sympathise with this thought, but I will go further. I also think no New Zealand owned company should pay taxes in this country. If we could do this, what a boost it would be for the country as a whole and workers in particular. But how can we do this?
The answer is quite simple; tax something else. The “something else” I feel could be focussed on for taxation is the movement of money. Why not apply a tax every time money is transferred out of an account? Based upon figures I obtained from NZ Statistics and the Reserve Bank, it would appear that a tax of 4% on financial transfers (withdrawals, transfers, payments etc) would allow us to do away with taxes on individuals or companies.
What would this mean to you? The obvious thing it means is that you get to keep your entire pay. If you earn $1000 a week, you get to take home $1000 a week. Superannuants will all receive an increase as the current tax deduction will no longer be applied. You will pay tax on what you withdraw, so for example if you were to withdraw funds from an ATM, a deduction from your account would also be paid for tax. The quantum of this deduction is minor; however, to the extent that if you withdrew all your entire pay the tax paid would be about 10% of the previous tax you paid. The benefits to our country are far more significant. For example, organised crime would suddenly become taxpayers, whenever they wanted to withdraw some of their ill-gotten gains. Tax free entities such as churches would likewise become contributors. Every capital transaction, be it the purchase of property or a company, would likewise be affected. If you want to move money offshore, the country’s cash register would be ringing.
We would also benefit through an influx of commercial interests to New Zealand, providing income streams and employment opportunities to various levels of our society. With exports being encouraged and imports discouraged by this system, you would expect improvements in our trade deficit. The list of benefits goes on and on.
Who could not like such a change to our tax system? The answer is obvious; people who move lots of money as they suddenly bear the tax burden. Any company that pays out significant sums will not like paying out a bit more and so I would expect opposition, and derision, from such quarters. But my initial point remains valid. Our politicians are not putting enough thought into how our taxation system can be re-organised. Good ideas exist. This was one of them.