Myth: John Key has said that New Zealand taxes consumption at a relatively low rate.
Reality: The rate of GST in New Zealand, at 12.5%, is relatively low, but the coverage of our GST system is particularly comprehensive. As a result, New Zealand has the sixth highest level of general consumption taxation, as a proportion of GDP, out of the 30 countries in the OECD.
The OECD stated in its 2007 edition of Revenue Statistics that: ” . . contrary to the expectations of some commentators, there has not been any general trend in OECD countries from direct to indirect taxation. Indeed, there has been a slight trend in the other direction over the last thirty years, following a sharper fall in the share of indirect taxes from 1965 to 1975. Over the past forty years, the general trend away from indirect taxes has been so strong that only six countries– Luxembourg, Mexico, the Netherlands, New Zealand, Poland and the Slovak Republic – escaped it.” (p. 38, emphasis added)
So despite some general trends in this direction, New Zealand has been an outlier. This reflects our late (1986) adoption of a GST but also its comprehensiveness.
Why do we have no sales tax on poor quality consumption and reduce it on necessities. Apart form excise tax is it just the cost of administration? I would be thinking environmental, import, packaging, power consumption/efficiency….
I know it got a bit ridiculous until Douglas came along, but is it worth any thought.
I think that’s a fine idea, Jeremy.
I’d go for 100% surchage on unnecessary plastic tat from the Warehouse, and use the proceeds to reduce the contribution related to the ETS.
Surely the Greens (if they really are primarily Green) would support this?
There’s hardly a person in NZ I reckon (whether classified as ‘in poverty’ or not) who doesn’t over-consume. At least a consumption based tax does something to address this. In principle that’s got to be better that taxing effort.
Wow I must not have read your comments properly as I think, at least in part, I agree with George. Dump income tax, company tax etc and replace it completely with a flat across the board GST.
whenever you post on tax myths – I was a day and go read catus kate to get the ‘other side’ – its interesting to see both sides of the coin – and one of you are really wrong.