Why Australia??

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I have to ask, where do they get these “comment morons” for hire at The Herald?

"Quite frankly, if you give me a tax cut I'm probably going to have another nice brunch at a cafe," Rachel Wike added. "If you make some improvements to health and roading, that is absolutely needed. "I don't think you can really trust people to spend that money wisely and invest it and put it into super."

Thank you Rachel for applying the “I am an irresponsible idiot so everyone else must be as well” technique of Herald commenting.

The mentality of New Zealanders has been exposed again over the recent Budget. Every commentator and “honest kiwi bloke” appears to be comparing living in New Zealand to Australia.

Don’t get me wrong, I love Australia. I particularly love Sydney and absolutely adore their weather and general attitude towards life. I love that half Australia’s networked news is taken up with sports. I do. But Australia is still a highly taxed country. It is a wealthy country and it can actually afford to cut tax more than it has.

You have to take a world view on such matters.

If you want to legally dodge tax and save loads of money you have to move to Asia, United Kingdom or tax-haven countries. Of course most New Zealanders not reaching the top tax bracket of $NZ60,000 would not qualify to receive a work permit in these countries as you have to be professionally qualified or have a special skill set that your destination country’s workforce does not have. That is why most cannot look past Australia. The other country simply does not want them as an immigrant as they are not desirable enough.

Plenty of commentators and politicians who have never lived overseas at all, claim loudly that New Zealand has a lower tax rate than country x. They then trot out Parliamentary research prepared “official” tax rates of each country in nice neat little tables and give examples of people earning $40,000 with children, $100,000 with children and compare how better off they will be under a New Zealand Labour government. It is a waste of time and misleading.

What they fail to mention because they are not trained and do not have any practical experience in taxation matters, is that outside of America, New Zealand has some of the strictest and most archaic income source rules on the planet. There simply is no way that particularly the New Zealand wage earner can minimilise their tax.

There are plenty of ways to legally minimilise your tax when working in Asia, United Kingdom or tax-haven countries. This makes any “official” revenue authority produced tax rate completely misleading. None of these methods are at all secret or morally forbidden. In fact they are designed so people will continue to find it attractive to work and add value to the country. An expatriate package is not a pre-tax one we all look at the post-tax valuation. Someone can literally be earning $100,000 more than you and because they cannot structure the package right, you are better off after taxes.

One way of achieving this is using your vagabond expatriate status to structure your employment contract so you are actually not sourcing all your income in the country you are living in. New Zealand taxes its tax residents on worldwide income so this is not possible. In pretty much every other country most New Zealanders would choose to work beyond Australia, you can including your bonus. Those commentators and politicians with extensive union backgrounds would not know how this works as they have never negotiated flexible individual contracts.

Another way is to make use of various allowances that these countries give to workers. For example the first $20,000NZD earned here is tax free, increasing to $40,000NZD if you are married and have a dependent spouse then again if you have children. It is the Asian equivalent of “Working for Families”, only in Asia they don’t steal the money off you in the first instance and then give it back to you expecting a tick at the ballot box in three years time. They are more polite than that.

Then there is a rental allowance. You can deduct a proportion of your rent off your salary that lowers your taxable income further. If you have a mortgage you can deduct up to $20,000NZD a year in interest. It is the Asian way of apologising for the high cost of housing.

If you contribute to the savings scheme here all your contributions are tax deductible. Because an Asian investor loves nothing more than long term wealth growth, it has huge cultural significance to them. It would be sacrilegious to tax that. There would be riots in the streets. Leading the charge would be the elderly who have penny pinched their families to wealth over many years. The elderly Chinese do not waste money on brunches at cafes because they have amazing self discipline with the little income they have.

Many countries have a maximum tax rate, in effect a progressive rising to ceiling flat tax. No one here pays more than 16% of their income in tax. You have to be on a Theresa Gattung salary package to get anywhere near it or show absolutely no head for completing your tax form. My rate this year should be just over double digits, no PAYE either just a bill after a year working here for the past year and the next in advance, and you get six months to pay it.

Of course Rachel Wike would have already spent the money set aside to pay this tax and would rather have the government deduct it at source or her accountant do it all for her.

The prize though for the most irrelevant (and confusing) then relevant Herald comment on the subject comes from semi-groovy Ardijah musician Betty-Anne Monga.

"Yes, I'd like to have tax cuts, who wouldn't?" she said. "But I suppose it's where are they giving those tax cuts, when you have a 10-year plan and you have a family and it's like it's nice that the Government isn't always taking, taking, so that we can build as a country.

Say what?

She does though represent a common attitude that is National’s worst nightmare in trying to make tax rates an important election winning issue and differentiation from Labour.

"Myself and Ryan do our thing. We just love Aotearoa”

I love New Zealand too Betty-Anne.

But I would love it more and respect it in the morning, if the tax rates were lower.