Taxation in New Zealand
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'''Taxation in New Zealand''' is collected at a national level by the [[Inland Revenue Department (New Zealand)|Inland Revenue Department (IRD)]] on behalf of the [[Government of New Zealand]]. National taxes are levied on personal and business income, as well as on the supply of goods and services. There is no capital gains tax, although certain "gains" such as profits on the sale of patent rights are deemed to be income. Local property taxes ([[rates (tax)|rates]]) are managed and collected by councils. Some goods and services carry a specific tax, referred to as an [[Excise|excise or a duty]] eg Alcohol excise or gaming duty. These are collected by a range of government agencies such as the [[New Zealand Customs Service]].
New Zealand went through a major programme of [[tax reform]] in the 1980s. The top marginal rate of income tax was reduced from 66% to 33% (since increased to 39% in 2001) and corporate income tax rate from 48% to 33% (reduced to 30% in 2008). [[Value added tax|Goods and services tax]] was introduced, initially at a rate of 10% (now 12.5%). An [[OECD]] report in 2001 described the New Zealand tax system as one of the most neutral and efficient within its membership.<ref name="OECD">http://www.oecd.org/dataoecd/29/27/1891375.pdf The tax system in New Zealand: An appraisal and options for change </ref>
Tax reform continues in New Zealand with key issues being:
*business taxes and the effect on productivity and competitiveness of NZ companies<ref>http://www.taxpolicy.ird.govt.nz/publications/files/BTR2006.pdf NZ Government discussion document on business taxes</ref>
*differences in the treatment of various types of investment income<ref>http://www.taxpolicy.ird.govt.nz/publications/files/html/invincome/index.html NZ Government discussion document on taxation of investment income</ref>
*international tax rules <ref>http://www.taxpolicy.ird.govt.nz/index.php?view=461 NZ Government media release on forthcoming international tax review</ref>
==Individual income tax==
New Zealand residents are liable for tax on their worldwide [[taxable income]]. In 2005-06, 43% of the New Zealand Government's core revenue ($22.9bn) came from individuals' income taxes.<ref name="key facts">http://www.treasury.govt.nz/budget2005/taxpayers/ Key facts for taxpayers from the NZ Treasury website</ref>
===Types of taxable income===
*[[salary]] and [[wage]]s
*business and [[self-employment|self-employed]] income
*income from [[investments]] ([[interest]], [[dividends]] etc...)
*rental income
*overseas income (including income from an overseas [[pension]])
===Tax rates===
Income tax varies dependent on income levels in any specific tax year (personal tax years run from [[1 April]] to [[31 March]]).
{|class="wikitable"
!Income
!Tax Rate
|-
|$0 - $38,000
|19.5%
|-
|$38,001 - $60,000
|33%
|-
|Over $60,000
|39%
|-
|No declaration form (IR330)
|49%
|}
Rates are for the tax year [[1 April]], [[2006]] to [[31 March]], [[2007]].<ref name="income tax rates">http://www.ird.govt.nz/income-tax-individual/itaxsalaryandwage-incometaxrates.html Income tax rates for individuals from the IRD website</ref>
The New Zealand government has announced a change in tax rates and thresholds to take effect from 1 October 2008.
In New Zealand, the income is taxed by the amount that falls within each tax bracket. In other words, if a person earns $60,000, they will only pay 33% on the amount that falls between $38,001 and $60,000 rather than paying this on the full $60,000.
===Tax deducted at source===
In most cases employers deduct the relevant amount of income tax from salary and wages prior to these being paid to the individual. This system, known as Pay-as-you-earn, or [[PAYE]], was introduced in 1958, prior to which employees paid tax annually.
In addition, [[Bank]]s and other [[financial institutions]] deduct the relevant amount of income tax on [[interest]] and [[dividends]] as these are earned. This is known as Residents Withholding Tax.
At the end of each tax year individuals who may not have paid the correct amount of income tax are required to submit a personal tax summary, to allow the IRD to calculate any under or overpayment of tax made during the year.
===Double taxation agreements===
Where an individual is [[tax residence|tax resident]] in more than one country they may be liable to pay tax more than once on the same income. New Zealand has [[double taxation]] agreements with various countries that set out which country will tax specific types of income.<ref name="double tax treaty">http://www.ird.govt.nz/yoursituation-nonres/double-tax/ Double tax agreements from the IRD website</ref>
{|class="wikitable"
|+'''These countries have double tax agreements with New Zealand'''
|width="150pt"|Australia
|width="150pt"|Indonesia
|width="150pt"|Sweden
|-
|Belgium
|Ireland
|Switzerland
|-
|Canada
|Italy
|Taiwan
|-
|China
|Japan
|Thailand
|-
|Denmark
|Malaysia
|The Netherlands
|-
|Fiji
|Norway
|The Philippines
|-
|Finland
|Republic of Korea
|United Arab Emirates
|-
|France
|Russian Federation
|United Kingdom
|-
|Germany
|Singapore
|United States of America
|-
|India
|South Africa
|Mexico
|-
|Austria
|Poland
|Spain
|-
|Chile
|}
==ACC earners levy==
All employees pay an earners levy to cover the cost of non-work related injuries. It is collected by Inland Revenue on behalf of the [[Accident Compensation Corporation]] (ACC).
The earners levy is payable on salary and wages plus any other income that is subject to [[PAYE]], for example overtime, bonuses or holiday pay. The levy is 1.4% for the year from 1 April 2008 to 31 March 2009. It is payable on income up to a maximum amount. The amount for the tax year [[1 April]], [[2006]] to [[31 March]], [[2007]] was of $96,619).<ref name="income tax rates" />
==Business taxes==
===Business income tax===
Businesses in New Zealand pay income tax on their net profit earned in any specific tax year. For most businesses the tax year runs from [[1 April]] to [[31 March]] but businesses can apply to the IRD for this to be changed.
Payments are made in three installments through the year. These are known as provisional tax payments. At the end of the year the business files a tax return (due on the following [[7 July]] for businesses with a tax year ending [[31 March]]) and any under or overpayment is then calculated.
Companies pay income tax at 30% on profits.<ref name="company tax">http://www.ird.govt.nz/business-income-tax/paying-tax/tax-rates/bit-taxrates-companytax.html Taxing companies from the IRD website</ref> Tax rates for individuals operating as a business (that is, individuals who are [[self-employment|self-employed]]) are the same as for employees.<ref name="self employed">http://www.ird.govt.nz/business-income-tax/paying-tax/tax-rates/bit-taxrates-soletradertax.html Taxing sole traders from the IRD website</ref> (See [[Taxation in New Zealand#Tax Rates|individual tax rates]], above.)
===Goods and Services Tax===
{{main|Goods and Services Tax (New Zealand)}}
Goods and services tax (GST) is an [[indirect tax]] introduced in New Zealand in 1986. This represented a major change in New Zealand taxation policy as until this point almost all revenue had been raised via direct taxes. GST now makes up 19% of the New Zealand Government's core revenue.<ref name="key facts" />
Most [[products]] or [[Service (economics)|services]] sold in [[New Zealand]] incur GST at a rate of 12.5%.<ref>http://www.ird.govt.nz/gst/ GST from the IRD website</ref> The main exceptions are [[financial services]] (eg banking and life insurance) and the [[export]] of goods and services overseas.
All businesses are required to register for GST once their [[Revenue|turnover]] exceeds (or is likely to exceed) $40,000 per annum.<ref>http://www.ird.govt.nz/gst/gst-faq.html Common questions about GST from the IRD website</ref> Once registered, businesses charge GST on all goods and services they supply and can reclaim any GST they have been charged on goods and services they have purchased.
===Fringe Benefit Tax===
{{main|Fringe Benefits Tax (New Zealand)}}
Employers are liable to pay [[Employee benefit|Fringe benefit]] tax (FBT) on benefits given to employees in addition to their salary or wages (eg motor vehicles or low interest loans)<ref>http://www.ird.govt.nz/fbt/overview/fbt-attributedbenefit.html Fringe benefits overview from the IRD website</ref>
There are several methods available for calculating FBT liability, including an option of paying a flat rate of 64% on all benefits provided.<ref>http://www.ird.govt.nz/fbt/calculating/ Calculating FBT from the IRD website</ref>
==See also==
*[[Dividend tax]]
*[[Fiscal neutrality]]
*[[International taxation]]
*[[Laffer curve]] and the optimal tax rate argument
*[[Tax incidence]]
*[[Tax avoidance/evasion]]
*[[Tax resistance]]
*[[Tax haven]]
*[[Tax law]]
==References==
<references/>
==External links==
*[http://www.treasury.govt.nz/ Treasury homepage]
*[http://www.ird.govt.nz Inland Revenue Department homepage]
*[http://www.taxpolicy.ird.govt.nz/ Inland Revenue, Policy Advice Division]
*[http://www.acc.co.nz The Accident Compensation Corporation homepage]
[[Category:Taxation in New Zealand| ]]