New Zealanders work nearly half the year to pay ta

Media release
For release on Thursday June 1

New Zealanders work nearly half the year to pay tax

New Zealanders have spent nearly half of 2006 working to pay their taxes, according to a new report.

Leading independent accounting firm, Staples Rodway, has revealed that Thursday June 1, is Tax Freedom DayTM for 2006. This is the day New Zealanders will have officially paid off their tax debts and can start putting money into their own back pockets.1

The Staples Rodway-commissioned research shows that the average New Zealander has had to work 151 days, or nearly six months of the year to pay off all their taxes. This is six days longer than last year.

Roger Thompson, Staples Rodway’s Tax Director in Auckland, says the results of the research are dismal.

“This year we are experiencing the combined effect of a marked slowdown in the economy, together with continued strong growth in tax collections. It takes some time before a decline in economic growth feeds through to slower tax revenue growth,” he says.

Staples Rodway’s Tax Freedom Day research – which is the only internationally benchmarked research to compare New Zealanders directly with taxpayers in Australia, the United Kingdom and the US – paints a bleak picture for New Zealand taxpayers.

Last year it took the average New Zealander 145 days to pay off his or her income tax, local body rates, and indirect taxes on items such as petrol, cigarettes and alcohol but this year it increased to 151 days.

According to the research, revenue from direct taxes increased this year by almost 15 per cent, while indirect taxes grew by only three per cent. Company tax revenue increased around 15 per cent, while personal tax revenue increased nine per cent. The increase in taxes is much higher than the increase in the country’s GDP for the period of less than five per cent.

“This increase in personal tax revenue reflects a combination of employment growth and wages growth and probably some tax creep as higher wages take people into higher marginal tax brackets,” says Mr Thompson.

He says during the 1990s, considerable progress was made in reducing the tax burden on New Zealand taxpayers.

“By 2002, Tax Freedom Day was almost four weeks earlier than it was in the early 1990s. However, New Zealand has progressively slipped backwards during the last four years, eroding two weeks of that earlier improvement,” says Mr Thompson.

International Tax Freedom Day Results

The research shows the estimated date for Australia’s Tax Freedom Day was May 10.2

“This means that Australians, from a tax perspective, are financially better off than New Zealanders by a full three weeks, which further compounds the argument persuading Kiwis across the ditch. Their wages are also generally higher.

“Given tax cuts announced in the recent Australian budget, it is likely the gap between New Zealand’s Tax Freedom Day and Australia’s will continue to deteriorate,” says Mr Thompson.

But we are still better off than the UK, whose citizens will have to work a week longer than us to account for their tax debts. In the US, Tax Freedom Day fell on April 27, three days later than last year, however New Zealand has a more comprehensive social welfare system than the US and this needs to be considered when making comparisons with the US.

People can determine their own personal Tax Freedom Day by visiting the Staples Rodway website www.staplesrodway.com and going to the Tax Freedom Day calculator.

ENDS

About Staples Rodway

Staples Rodway is New Zealand’s leading independently-owned accounting firm that provides a full range of intelligent business services to successful New Zealand businesses. It has offices in Auckland, Hamilton, Christchurch, Hawke’s Bay, New Plymouth and Tauranga and employs more than 400 staff nationwide. It’s service offerings include taxation, auditing, client advisory services and has particular expertise in the IT and HR sectors.

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