The media is getting it wrong: Tax dodging is a national sport

Gareth MorganTax and Welfare

This morning I was on Breakfast TV talking about how our tax regime is unfair and how many Kiwis get around paying their fair share of tax.

The media likes to paint these tax loopholes as the preserve of the mega-rich. But the fact is that most Kiwis use these loopholes. Anyone that owns property, farm or other lifestyle business is benefiting.

There are three loopholes at play here. We don’t pay tax on the non-cash benefits we receive from the assets we own (known as imputed income). We also don’t pay tax on capital gains. Finally many business owners write off personal expenses through their business.

Don’t be envious and angry – take a look in the mirror because most of us are all doing it. The rich can just afford to do it more than everyone else. People using these loopholes just make chumps out of the ones paying PAYE – income tax – on all their income. Currently they can’t get around paying tax.

If you want to make the tax system fairer then we all have to question the tax loopholes that we all hold dear. The most efficient way of dealing to this issue is through a Comprehensive Capital Income Tax. This would assume that all major assets earn a 5% return, and pay income tax on that accordingly (so a 30% tax rate would mean a tax of 1.5% of capital value). If assets are already generating a cash return above 5% (which would get taxed currently), then there would be no additional tax to pay.

If you want to see how much tax Gareth pays – read this post.

If you want to understand more about how a Comprehensive Capital Income Tax would close the loopholes, Geoff has made this video.

The media is getting it wrong: Tax dodging is a national sport was last modified: December 15th, 2015 by Gareth Morgan
About the Author

Gareth Morgan

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Gareth Morgan is a New Zealand economist and commentator on public policy who in previous lives has been in business as an economic consultant, funds manager, and professional company director. He is also a motorcycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment.