An international report has flattered New Zealand by portraying it as one of the lowest-tax countries in the developed world, the Taxpayers’ Union says.
Kiwi families bringing up two kids on a single income at the average wage face the lowest income tax bill in the Organisation for Economic Cooperation and Development (OECD), once family benefits are taken into account, the OECD reported last Tuesday.
The “tax wedge” for single people on the average wage was the second-lowest, behind Chile. Taxpayers’ Union executive director Jordan Williams said New Zealand came out well in the report because the measures chosen by the OECD hit a “sweet spot” where Working for Families benefits came into play.READ MORE: * Small number of taxpayers bear the brunt of New Zealand tax bill * Bill English cagey on tax cuts * OPINION: Are we being fairly taxed? The OECD reported the “tax wedge” for Kiwi families at 6.2 per cent of average labour costs, versus the average figure of 26.6 per cent across the 35-member OECD, and 40 per cent in France.
That was for a family with one wage earner, bringing in the average wage.
Williams said the Taxpayers’ Union had taken advice on the 584-page OECD report and “the reason New Zealand comes across so well is it is right in the sweet spot for Working for Families which is very kind to that two-child household”.
The figures did not take into account GST or any hidden costs consumers faced buying services from state-owned monopolies, he said. It also did not take into account ACC charges.
A more objective figure to measure the “burden of the state” could be found by looking at total government outlays as a proportion of GDP, Williams said.
By that benchmark, New Zealand was positioned as much less of an outlier, with a figure of 39.8 per cent, versus the OECD average of 40.4 per cent.
Policies such as Working for Families, which flatten out middle-earners’ incomes, have previously made international comparisons of income inequality nuanced.
OECD data has indicated New Zealand is relatively unequal compared with the OECD average when the income of the top 10 per cent of the population is compared with the lowest decile.
But it is more equal than the average when income across all income groups is measured as a deviation from the mean.