Kerre Woodham: Is there such a thing as a completely fair tax system?

Is there any such thing as a completely fair tax system?  

Surely the most you can hope for is a least unfair tax system. I ask this because a UN report is calling for countries to check taxes are being applied proportionally to the wealthiest individuals, and questioning the fairness of GST. The UN Committee for Economic, Social and Cultural Rights said a tax policy that maintains a low personal and corporate income taxes without adequately addressing high income inequalities is an example of a regressive and ineffective policy, and consumption taxes —of which GST is one— can have adverse impacts on disadvantaged groups, such as low-income families and single parent households, because they typically spend a higher percentage of their income on everyday goods and services. They don't have the option of withholding spending; they have to buy the basics.  

In New Zealand, personal income tax rates went to a high of 69 cents in the dollar in the late 70s/early 80s until the Fourth Labour government came crashing in with a hiss and a roar and made changes that are reverberating to this very day. One of them being the major changes to our tax system. They standardised indirect tax and introduced an across-the-board tax on goods and services that is GST. It started at 10% and went up to 12% and is now 15%.  

Tax incentives were removed, personal income tax rates were simplified. At the time, there were just two personal income tax rates, 24 percent on income, up to $30,000, 33% above that. The introduction of GST was sold as a tax that would get those who didn't pay it. It would collect those in the black economy, those who took part in cashier's drug sales, that sort of thing. You know, they might not pay tax, they might not declare income, but they had to buy stuff. And once they bought food and once they bought cars, that sort of thing, then they had to pay GST on it.  

But even then, when it was introduced, it was slammed as a regressive tax, hitting those who had to buy the basics the hardest. It was interesting that David Lange, towards the end of his life, had a great deal of regret about how New Zealand had changed with the introduction of his government. It wasn't him leading the charge so much —he was the public face of the changes— it was Roger Douglas and Rogernomics that caused the greatest change. He said for those who wanted little personal involvement with government, those who did not want government in their lives, it was a fantastic thing. But for the uneducated, disabled, the disadvantaged, it was an absolute tragedy. And there was, I think, much regret towards the end of his life as to the changes that he had been a part of.  

New Zealand's tax system is widely regarded as a sensible one, in as much as you have to have taxes —that's how governments raise revenue and that's how they pay for the roads and the schools and the hospitals and the police and the like— it's straightforward, there's little room and little need for tax avoidance. The international tax competitive index rates 38 OECD countries on the best tax environment for investment, as well as for workers and for businesses and New Zealand ranks third in that because it is so straightforward.  

But again, it comes down to the least unfair tax system. I think there are always going to be people who feel that they are hard done by when it comes to the taxes they pay. They feel that they pay too much. They pay a disproportionate amount of their income towards tax, while others aren't pulling their weight. And then you also look at the way governments use your money. That was one thing that really ripped my nightie during the Labour Government’s last six years. We're getting up early, we're going to work, we're doing our bit, and they were squandering tax money, just burning it at a rate of knots with very little to show for it. You're always going to get people who say no, the government is spending money on projects I don't agree with it, I don't want my tax going to that. But I think the last government, the last Labour government, really took it to the nth degree and that's when you start resenting paying taxes. You don't want that in a society.  

Can you tax your way to a fairer society? I really don't think you can. You can certainly create an environment where those who cannot work, who need assistance get it. You can create an environment where it's easier for people to do business, to get work, for businesses to do well. I think the more you make it complicated and try and right inequities, the more room there is to evade tax to avoid paying it altogether. GST, most countries have it because it is a way of addressing the black economy – is that enough justification to maintain it?   

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Episode Transcript

Speaker 1 (00:06):
You're listening to the Carrywood and Morning's podcast from News
Talk SEB.

Speaker 2 (00:12):
Is there any such thing as a completely fair tax system?
Surely the most you can hope for is a least
unfair tax system. I asked this because a UN report
is calling for countries to check taxes being applied proportionally
to the wealthiest individuals and questioning the fairness of GST.

(00:37):
The UN Committee for Economic, Social and Cultural Rights set
a tax policy that maintains low personal and corporate income
taxes without adequately addressing high income and equalities is an
example of a regressive and ineffective policy. And consumption taxes,

(00:57):
of which GST is one can have adverse impacts on
disadvantaged groups, such as low income families and single parent
households because they typically spend a higher percentage of their
income on everyday goods and services. They don't have the
option of withholding spending. They have to buy the basics.

(01:18):
In New Zealand, personal income tax rates went to a
high of sixty nine cents in the dollar in the
late seventies early eighties until the Fourth Labor Government came
crashing in with a hissin or and made changes that
are reverberating to this very day, one of them being
the major changes to our tax system. They standardized indirect

(01:41):
tax and introduced in across the board tax on goods
and services, that is GST. It started at ten percent
and went up to twelve and it's now fifteen percent.
Tax incentives were removed. Personal income tax rates were simplified.
At the time, there were just two personal income tax rates,
twenty four percent on income up to thirty thousand, thirty

(02:03):
three percent above that. The introduction of GST was sold
as a tax that would get those who didn't pay it.
It would collect those in the black economy, those who
took part in cashi's drug sales, that sort of thing.
You know, they might not pay tax, they might not
declare income, but they had to buy stuff they you know,

(02:25):
and once they bought food, and once they bought cars
that sort of thing, then they had to pay GST
on it. But even then, when it was introduced, it
was slammed as a regressive tax, hitting those who had
to buy the basics the hardest. It was interesting that

(02:46):
David Longi, towards the end of his life, had a
great deal of regret about how new Zealand had changed
with the introduction of his government. It wasn't him leading
the charge so much. He was the public face of
the changes. It was Roger Douglas and Roger Nomics that

(03:06):
caused the greatest change. And he said, for those who
wanted little personal involvement with government, those who did not
want government in their lives, it was a fantastic thing.
The Rogenomics policies absolutely brilliant. But for the uneducated, disabled,
the disadvantage, it was an absolute tragedy, he said. And

(03:29):
there was I think much regret towards the end of
his life as to the changes that he had been
a part of. So New Zealand's tax system is widely
regarded as a sensible one inasmuch as you have to
have taxes. That's how governments raise revenue, and that's how

(03:53):
they pay for the roads and the schools and the
hospitals and the police and the like. It's straightforward. There's
little room and little need for tax avoidance. The international
Tax competitive in rates thirty eight OECD countries on the
best tax environment for investment as well as for workers

(04:14):
and for businesses, and New Zealand ranks third in that
because it is so straightforward. But again it comes down
to the least unfair tax system. I think there are
always going to be people who feel that they are
hard done by when it comes to the taxes they pay.

(04:37):
They feel that they pay too much, They pay a
disproportionate amount of their income towards tax while others aren't
pulling their weight. And then you also look at the
way governments use your money. That was one thing that
rarely ripped MINETI during the Labor governments last six years.

(05:03):
We're getting up early, we're going to work, we're doing
it bit and they were squandering tax money, just burning
it at a rate of knots with very little to
show for it. You're always going to get people who say, no,
the government is spending money on projects I don't agree with.

(05:25):
I don't want my tax going to that. But I
think the last government, the last labor government, rarely took
it to the nth degree. And that's when you start
resenting paying taxes. You don't want that in a society.
Can you tax your way to affair a society? I
really don't think you can. You can certainly create an

(05:50):
environment where those who cannot work, who need assistance, get it.
You can create an environment where it's easier for people
to do business, to get work, for businesses to do well.

(06:12):
I think the more you make it complicated and try
and write iniquities, the more room there is to evade
text to avoid paying it all together. I'd love to
get your thoughts on this GST. Most countries have it

(06:32):
because it is a way of addressing the black economy.
Is that enough justification to maintain it?

Speaker 1 (06:41):
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