According to the Crown Accounts for the period to October 2021, which were released by Treasury on December 1, 2021, income taxes on individuals accounted for 48% of all Total Tax Collected (excluding levies and fees). Corporate tax added another 17% and GST some 25%. (These proportions are for the twelve months to October.)
It peaked in the year to March 2021 at just over 49%, but the latest levels are at the high end of the data over the past decade.
Company taxes deliver tax depending on profitability and that has been stunted since the onset of the pandemic.
It is the reliance on taxes on individuals that makes up the core of Crown 'revenues'. Together with GST, that now accounts for almost three quarters of all income taxes.
Government spending essentially depends on taxing the citizenry.
While that is hardly 'news', what might impress readers is how fast those taxes are growing, especially income taxes.
Income taxes have 'never' grown so quickly (our downloading of the record goes back to 2003).
Here is a summary of the recent data:
| 2017/18 | -> | 2018/19 | -> | 2019/20 | -> | 2020/21 | |
| $ bln | % | $ bln | % | $ bln | % | $ bln | |
| Nov | 3.192 | 9.8% | 3.505 | 8.9% | 3.816 | -7.6% | 3.527 |
| Dec | 3.081 | -2.5% | 3.004 | 3.9% | 3.121 | 31.2% | 4.095 |
| Jan | 3.527 | 11.5% | 3.932 | 2.2% | 4.017 | -12.1% | 3.529 |
| Feb | 2.865 | 3.0% | 2.952 | 5.1% | 3.104 | 13.8% | 3.533 |
| Mar | 2.999 | 7.5% | 3.223 | 7.0% | 3.449 | 31.5% | 4.534 |
| Apr | 3.272 | -9.8% | 2.951 | 17.5% | 3.466 | 12.0% | 3.882 |
| May | 3.332 | 7.8% | 3.593 | -22.8% | 2.773 | 44.3% | 4.002 |
| Jun | 2.477 | 30.0% | 3.219 | 16.9% | 3.764 | 16.5% | 4.384 |
| Jul | 3.109 | 4.2% | 3.240 | 10.5% | 3.582 | 11.6% | 3.999 |
| Aug | 3.109 | 4.2% | 3.240 | 10.5% | 3.582 | 11.6% | 3.999 |
| Sep | 3.109 | 4.2% | 3.240 | 10.5% | 3.582 | 11.6% | 3.999 |
| Oct | 2.992 | 15.1% | 3.443 | 4.5% | 3.598 | 8.9% | 3.917 |
| ---------- | -------- | ---------- | -------- | ---------- | -------- | ---------- | |
| 12 months | $37.064 | 6.7% | $39.543 | 5.8% | $41.853 | 13.3% | $47.399 |
Two effects are driving this - more people employed in the workforce, and bracket creep. With borders closed and higher pay levels as a result, the effect of bracket creep is turbocharged.
The detail of this data isn't the point; the point is the unprecedented recent growth. But the detail does show the growth isn't due to weak base effects. This growth is on top of tax growth on individuals that has been much faster than the expansion of economic activity.
What is underway is a steady, relentless and accelerating redistribution of income from taxpayers to the Government. In turn, they redistribute 'some' of that back to those they deem needy, although State Services Commission data shows a growing portion is going on expanding the public sector where pay increases have been rising faster than the private sector for a long time.
Whatever the reason, the proportion of the New Zealand economy needed to support central government activity is growing. In the year to September 2021, nominal GDP was $343.5 bln and income taxes transferred $99.4 bln to central government, or 28.9%. In the year to September 2011 nominal GDP was $208.4 bln with $51.6 bln in income taxes transferred, or 24.8%. The extra transferred away from individual taxpayers in 2021 over the 2011 levels amounted to $14.2 bln.
42 Comments
Taxes are up, house prices are up, inflation is up, crime is up, child poverty is up, homelessness is up, mental illness is up, weakening of social cohesion is up, NZ govt. net debt is up and the gap between rich and poor is up.
The only thing which is down is interest rates.
Life expectancy is up, large amounts of diseases have been eradicated or are treatable, we live in an age of technology that would've been unimaginable even decades ago, there are no major wars and haven't been for quite some time, there's an unlimited amount of information right at our fingertips.
Wanted: my cake and to eat it too.
Actually life expectancy is trending down again as the next generations are expected and likely to have worse life expectancy than previous ones. Somewhat the results of poor housing environments, poorer access to steady wages and missed medical appointments and lack of medical service access.
Taxes are up, house prices are up, inflation is up, crime is up, child poverty is up, homelessness is up, mental illness is up, weakening of social cohesion is up, NZ govt. net debt is up and the gap between rich and poor is up.
Purchasing power of your income and savings is down. Sorry for the DGM, but it's all about trade-offs.
Dislike of all politicians is up, respect for the RBNZ down so low that it could be regarded as entering another dimension. Orr's tenure has been catastrophic for all New Zealanders who were not already financially well off. If he is not shown the door soon then surely Grant has to follow him.
"Government spending essentially depends on taxing the citizenry".
Well no it doesn't. That is not how the governments finances operate. The government creates new central bank reserves when it spends and which cannot be replicated by the private sector. Taxation only allows for the destruction of these reserves after they have served their purpose. The government never spends money that has been created in the private sector.
Economist L.Randall Wray gives us an explanation here of how our currency operates. https://www.levyinstitute.org/pubs/Wray_Understanding_Modern.pdf
Wray is talking nonsense
Why MMT would lead to hyperinflation
That is the point of taxation, it deletes currency.The government spends first and then it taxes back. What is left after that becomes our savings of currency, which is either in central bank reserves or bonds. Only the government can create 'net financial assets' for our savings. Look up 'sectoral balances' online.
MMT is not a regime that you introduce or adopt, it describes how our financial system already works here and now.
The banks create far more money than the government does anyway. Why else are house prices rising? https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creati…
And there are some who would want to increase the tax on the "rich".
Even though there is this horrendous fiscal drag, local govt rates/ water costs/ targeted rate increases, phased in reduction of tax deduction on rental housing debt, increased safe car rego costs, upcoming clean car penalty tax, upcoming road tolling, upcoming term deposit insurance, etc.
Comparing Australia to New Zealand is like comparing a Rolls Royce to a broken E-scooter. New Zealand is a little joke country now, a woke laughing stock that pretends to care about Maori and the vulnerable whilst the government does everything in its power to make them suffer more. Housing costs and child poverty levels are sick. Hiding poor people in Rotorua motels will not work when tourists come back and they know it. Why do you think the borders are staying shut when we have COVID in the community.
Surely this 2019 rule change (ring-fencing of rental losses) accounts for some of the increase seen as well?
https://www.ird.govt.nz/en/media-releases/2019/changes-to-ring-fencing-rental-losses-rules
The NZ tax system screws income earners over - we wonder why productivity is so low and we cant grow decent sized companies.
Income tax needs to be substantially reduced with the following added:
a) comprehensive capital and wealth taxes
b) recourse mortgages should be banned (its absurd they exist) - this will better level the risks between business and home lending.
c) environmental taxes
d) property rates should be removed from cross-subsidising surface transport works and the road users pay for them
e) trusts should also be banned unless they have a legitimate purpose
NZ taxes the minimumly paid care home nurse who struggles to feed her family and the government diverts that tax back to her as an accommodation supplement so she can pay the landlord with 100 houses who has just put all the rents up and who has also just had his wealth increase by approximately 300k per home, or 30 million dollars. What a disgusting country this is.
I will not have bad words said about the 1999 Corolla. Absolutely bullet-proof in 7AFE form, would easily do 500,000km and could be almost totally serviced at home with over the counter parts and filters using nothing but a ten mil spanner - unlike most of the cars that followed it over the next 20 years.
Wow. I'd always thought it was around 30% and GST and company at another 30% each.
That really points to a need for reform of the system, particularly when so much of it is feed back to the low earners to subsidies the likes of rent and other essential living costs. I really HATE the use of "net tax" as it distorts what is really happening and inflates the cost of living via these subsidies as well as diminishing the tax contribution of lower paid.
With the stupid price of housing and the massive personal tax take we really have got it wrong haven't we.
No, it’s not when there is a debate about “fair share”
Agree that Govt spends far far too much money overall
What doesn’t get talked about enough is that around 1/3rd of every tax dollar, is completely wasted by the Crown with it’s spending.
Taxes should be reduced and so should spending, will drastically improve national productivity, and bring property down
less taxes not more are the solution
Government is still spending more money into the economy than it is taxing back out again. This is forecast to continue until around 2025 when spending and revenue should be about equal. The NZ tax system is far too reliant on income tax, which is highly ineffective at stopping wealth accumulating in the trust funds and financial assets owned by the top few per cent in NZ.
It really is time for a windfall tax on profits from asset sales (95% tax on profits earned since March 2020 charged at the point of sale) - with an ongoing land tax thereafter. A 2% tax on land value could provide a third of NZ tax revenue.
If you're going to go regressive, then go all the way back to when people started fleecing their progeny for tax free gains to finance Mustangs or baches or whathaveyou.
And the NZ spending/revenue approach only works because there is no chance of tax reform and inflation will continue to be taxed with incomes in nominal terms - Robertson has specifically ruled that out. Given the Govt requires inflation, this is basically knowingly stealing from the middle class, who will then face costs of living increases based on that inflation, but get less of the real wage increases that are meant to catch them up.
Will this huge 13.3% increase in income tax collected by the government over the last 12 months fuel inflation? CPI is currently 4.9%. The NZ Reserve Bank has a mandate to keep inflation between 1% & 3%. They have a difficult job as the government is setting a poor example as it intends to spend so much more than the 13.3% extra income tax it has collected. Inflation in NZ is likely to cause a lot more pain. NZ public needs to demand more responsible spending.
I do not understand a single bit of this article.
''$14 bln per year from wage and salary earners to Government coffers, giving political parties windfalls to make increasing spending promises'' Seriously !!
The NZ govt is a record $130 billion dollars in debt. Ardern has borrowed more debt than any other politician in NZ history. In the last decade, govt debt has increased by the greatest amount in NZ history. There is NO money to make any promises only, more debt!
Do you understand where the greatest percentage of taxation is coming from? It is tied to the $603 BILLION (yes that's half a trillion dollars owed by 5 million people!!!) that is being used to debt fund employment in NZ (as spelled out by John Key, so he could keep getting elected) building houses for immigrants. The number one sector in NZ by revenue and employment for over 15 years. This debt - the half-trillion- CANNOT BE PAID BACK.
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