The proposal to abandon gift duty is effectively another tax cut for some of NZs wealthiest families. It is yet another step to an unequal society where wealth is accumulating in fewer hands. Why does this offend me? Because a tax system should be fair, and neither aid in tax avoidance by those who can and should pay a fair share of taxes, nor aid in the undue concentration of wealth (and home ownership) based on accident of birth.
The government only collects $2m pa in gift duty and yet estimates NZers currently spend $70m pa on compliance costs. Ask yourself why they fork out that $70m pa? They don’t have to. They don’t think they are throwing that money away. So what benefits do they get by doing so?
There are a number. Some do it to protect assets. Politicians at risk of being sued for defamation often put their family house in a separate legal entity so that if they get sued their family does not end up on the street. Entrepreneurs do similar in case they get cleaned out in their risky ventures. In both instances this is legal and proper, and can be done effectively under current rules, which allow a couple to gift 27k each = 54k pa free of any gift duty.
But how the wealthiest benefit is via no control on transfers of wealth between the different members of their family, and to other legal entities which they control which may have tax losses they can utilise. In such cases it is not about protecting assets but about avoiding taxation.
Instead of tax being paid at the rate of 33 cents, they transfer assets to spouses and children who pay tax on the income from those assets at the rate of 10.5 cents and 17 cents in the dollar.
So without a limit on gifts free of gift duty, you will see more income tax avoidance.
The justification that gift duty should be dropped because those using current rules, up to the current limit of 54k pa, incur compliance costs is ludicrous. It is not forced upon them, and they choose to do so because of the various advantages they perceive.
I find it stupid logic to reward those already using current rules to their advantage by dropping those rules completely so they can do it more.
Having rejected income splitting for tax purposes because it is unfair, National is effectively allowing an increase in income splitting for those who are wealthiest. You still can’t do it if you are a wage worker on the minimum wage, but you will be able to split your income by transferring valuable income producing assets if you are wealthy.
Once again, National show their true colours. The rich get richer and the rest struggle to make ends meet. We have a government who, having just increased the after tax income gap between high and low paid workers, is now aiding asset inequality to grow further.
No wonder younger voters are increasingly frustrated. They see that NZ is increasingly being run in the interests of the few. As the few achieve ever larger shares of income and wealth, home ownership rates continue to drop. Many people can no longer afford to own their own home, but those lucky to be born into already wealthy families get yet another lift up from this government.
Any pretence by National that they are aspirational for all New Zealanders should be seen as just that.
Tax policy should strive to achieve fair outcomes for all New Zealanders. Once again, National’s tax policy fails this test.
