Revenue Minister David Parker's investigation into how much tax top earners are contributing has been slammed as a "waste of time" during a university Q&A session.
In a speech "shining a light on unfairness in our tax system" at Victoria University in Wellington on Tuesday, Parker confirmed the Government has no plans to introduce new taxes, but is gathering more information on tax intake to make future tax policy decisions.
"Currently many people look at our headline personal income tax rates and see a system that charges higher rates on higher taxable income - and they assume that the system is progressive overall. It isn't," Parker said.
"What's hidden is that the effective marginal tax rate for middle-income Kiwis is generally higher than it is for their wealthier co-citizens. Indeed some of their wealthier Kiwi compatriots pay very low rates of tax on most of their income."
That's not to mention economic income that's currently untaxed, Parker added.
"Many believe those better off than themselves can structure their affairs to pay lower taxes. But can they prove it? This is a worldwide problem, and that problem is compounding year upon year.
"The Labour Government believes it is the responsibility of government to shine light, and we will. Only IRD can gather the data needed, and now, for the first time in our history, they are."
Parker said Inland Revenue is investigating how much goods and services tax (GST) groups in our population pay because data is limited on the effective overall GST rate paid by New Zealanders.
"We don't really know this by either income or wealth decile."
Inland Revenue is also investigating what Parker described as more serious: "We have virtually no idea what rate of tax is paid by the very wealthy."
"As wealth concentrates into the hands of an ever-smaller cohort at the very top, more and more of their income, and a greater proportion of national income, is represented by returns on capital," Parker said.
"How much this amounts to, and how much of it is taxed or untaxed, is currently unknown in New Zealand."
Parker said the current rough measure of net assets suggests that outside the family home, 65 percent of all wealth is held by the top 10 percent. It could be that more than two-thirds of all financial assets are held by the top 5 percent, with most of that concentrated in the top few percent.
The rough measure is based on the Household Economic Survey, which Parker said has "severe limitations at the top end" because questions don't delve into capital income, for instance.
"When I delved into our survey measure, we proved that the highest net wealth ever surveyed in the Household Economic Survey was $20 million. That's right. The NBR rich list is a better data set than the official statistics," Parker said.
"How come, in a country with billionaires, our data set used for policy purposes effectively ignored the wealthiest? It's not out by a factor of 10 - that would be huge in itself. But that maximum is out by a factor of hundreds.
"It beggars belief that we currently don't know what rate of tax is paid by the top cohort in New Zealand on their economic income. We do know the rate paid by wage and salary earners, and by small business owners."
The Government last year gave the Commissioner of Inland Revenue information-gathering power and funds to conduct research relating to the tax paid by the wealthiest New Zealanders relative to their economic income.
"It has attracted ill-informed speculation on the Government's motives, which is why I emphasised at the start that the Government is not secretly working on new taxes," Parker said.
"Rather, this research is about improving the evidence base about how the current tax system actually operates. This information will inform future tax policy advice and so it may feed into future tax policy development.
"What it will do is allow any future tax policy development to be based on solid evidence."
It was during the following Q&A session when Parker was challenged by an attendee named Simon, who said Labour should have introduced a capital gains tax after it was recommended by the Tax Working Group in 2019.
Labour was forced to rule it out after its then-coalition partner NZ First refused to support it.
"My observation is Labour's very good at talking the talk but when it comes to concrete measures, they fall far short, and I suggest that your wild goose chase for information is a complete waste of time because we had the Tax Working Group which came out with a unanimous decision to introduce a capital gains tax and you completely ignored it," Simon told Parker.
"We still have all the building blocks of neoliberalism, like no inheritance tax, no wealth tax, no gift tax, and so on. I think you're just basically wasting your time and the goal of trying to get a fairer and equal society is just gone by the ball."
Parker argued the Government has delivered more than its given credit for.
"When we came to office in the midst of a housing crisis, 10,000 houses per annum were being built in Auckland, 20,000 per annum are now being built, and to bring that about has required a really sophisticated change in tax rules, funding of infrastructure, planning rules, new national policy statements under the RMA, to double housing output," Parker said.
"So, it's not true that we have failed to deliver.
"The other one that our political opponents have a crack on is mental health services. Community-based mental health services which is what our promise was to improve are available in a way that has never been available in New Zealand and good progress is being made there."
Parker acknowledged Prime Minister Jacinda Ardern's refusal to revisit a capital gains tax.
"In terms of our inability to deliver a capital gains tax following the Tax Working Group, you'll be aware that we couldn't get the parliamentary votes to get that across the line and that's why it failed."
