Will the government impose a wealth tax to raise capital?

What could it potentially look like?and what is the best way to protect yourself from this?

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Originally Posted by Playa

What could it potentially look like?and what is the best way to protect yourself from this?

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1) NZ by comparison to our larger OECD nations are not so wealthy. The only aspect I could think of if they want more taxes is a) raise GST to 18% or 20% and or b) a Land Tax on real estate properties (as if property rates aren't already high enough).

2) To protect yourself and the best way? That would depend how far would you go in terms of sending your funds abroad. For as long as the wealth is on NZ soil AND as long as you are a NZ tax resident, then there's no real way of protection from NZ taxes. NZ like many places imposes taxes on a "World Wide Basis" so you have to report what you make abroad. To get around this is to consider setting up offshore "foreign trusts" and 'gift' the money to it. But I highly doubt most Kiwis would feel comfortable sending their $ aboard to be held and managed by some overseas broker and lawyer; as the possibility during the lifetime of the trust could come with mismanage and embezzlement of the funds. I often hear of tax haven places in the Carribean Islands and Cook Islands, etc. where clients have sent large sums there, but had difficulties getting the funds back to the country where they live. I mean we're talking decades of unknown situations ; people's circumstances change and so do their investments.

Perhaps New Zealanders will have to thank their lucky stars and pay up their share if the government imposes higher/additional taxes. Either that, or emigrate if one has the necessary skills to persuade some other "more desirable" country to welcome them!

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Originally Posted by SBQ

1) NZ by comparison to our larger OECD nations are not so wealthy. The only aspect I could think of if they want more taxes is a) raise GST to 18% or 20% and or b) a Land Tax on real estate properties (as if property rates aren't already high enough).
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According to this table in 2018 the net financial wealth per person is similar in Australia, NZ, the UK and Canada https://en.wikipedia.org/wiki/List_o...ets_per_capita

Property Rates, like fuel tax, are a user-pays charge. Rates pay for local government services and all households end up paying them, whether directly by owner occupiers or indirectly through rent paid to the landlord.

GST is a regressive tax insofar as it places a greater percentage burden on those with lower incomes. It should really have been levied in conjunction with a income tax 0% band and a CGT and/or financial transaction tax/stamp duties. So NZ has scope to broaden the tax base without increasing the burden on GST and lower income groups.

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Originally Posted by Bjauck

According to this table in 2018 the net financial wealth per person is similar in Australia, NZ, the UK and Canada https://en.wikipedia.org/wiki/List_o...ets_per_capita

Property Rates, like fuel tax, are a user-pays charge. Rates pay for local government services and all households end up paying them, whether directly by owner occupiers or indirectly through rent paid to the landlord.

GST is a regressive tax insofar as it places a greater percentage burden on those with lower incomes. It should really have been levied in conjunction with a income tax 0% band and a CGT and/or financial transaction tax/stamp duties. So NZ has scope to broaden the tax base without increasing the burden on GST and lower income groups.

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You need to compare averages of the middle class (or the bulk of the people that pay taxes). When you look at Elon Musk, Jeff Bezo, Bill Gates, etc (who vastly pay a lot less tax as a %). their enormous wealth will distort the figure in that 'asset per capita wealth' Wiki link. It's really pointless. There will be 1% outliars that distort the majority that get slammed to pay more taxes as % of income.

I look at the kind of house the middle class person in Auckland lives in and what type of vehicle they own. Then I look at in America or Canada and see the size and comfort of middle class homes and their ability to afford vehicles like a Tesla Model 3 car or a Ford F150 ute (compared that a Ford Ranger cost wise and size?). There is a remarkable difference.

and since taxation is directly responsible for the level of disposable income left, this Wiki link will give you the better picture:

https://en.wikipedia.org/wiki/Dispos..._capita_income

NZ is way down at 17th place below the EU averages. Again, the outliars of the 1% wealthiest will overshadow the whole figures so this should only be taken as a grain of salt. I prefer to look with my own eyes.

Around 15 years ago NZ looked at broadening taxes. I could not the believe the input from advisors saying it was better to raise GST from 12.5% to 15%. I met accountants that said the same thing. It was like the gov't didn't pay attention how a 'consumption tax' hits the poor the hardest but who cares? Oh and the idea of removing GST on essentials and food was "too complicated of a system for NZ to use" (while Australia and Canada have managed to exempt GST on essential items ; needlessly I must say their accountants and financial advisors must be smarter).

The bigger issue is, at what level of taxation does NZ need to do before the wealth leaves the country? It's clear the NZ gov't won't touch real estate by taxing it because that is the only asset left going for the country. If they slam taxes on real estate like other nations, then perhaps we will see a much greater movement of NZ wealth to abroad. Also, there's no need to verify the difference. All one has to do is look at the foreign exchange rates. If more $ leaves the country than coming in, then you're going to see a weaker NZD.

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Originally Posted by Bjauck

According to this table in 2018 the net financial wealth per person is similar in Australia, NZ, the UK and Canada https://en.wikipedia.org/wiki/List_o...ets_per_capita

Property Rates, like fuel tax, are a user-pays charge. Rates pay for local government services and all households end up paying them, whether directly by owner occupiers or indirectly through rent paid to the landlord.

GST is a regressive tax insofar as it places a greater percentage burden on those with lower incomes. It should really have been levied in conjunction with a income tax 0% band and a CGT and/or financial transaction tax/stamp duties. So NZ has scope to broaden the tax base without increasing the burden on GST and lower income groups.

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The tables here are a few years old, but show that just 10% of households pay most of the income tax. It's still around that, but can't find a later chart at present. Higher earners also tend to be bigger spenders, so pay more GST as well.

https://www.kiwiblog.co.nz/2011/07/net_taxpayers.html

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Originally Posted by SBQ

You need to compare averages of the middle class (or the bulk of the people that pay taxes). When you look at Elon Musk, Jeff Bezo, Bill Gates, etc (who vastly pay a lot less tax as a %). their enormous wealth will distort the figure in that 'asset per capita wealth' Wiki link. It's really pointless. There will be 1% outliars that distort the majority that get slammed to pay more taxes as % of income.

I look at the kind of house the middle class person in Auckland lives in and what type of vehicle they own. Then I look at in America or Canada and see the size and comfort of middle class homes and their ability to afford vehicles like a Tesla Model 3 car or a Ford F150 ute (compared that a Ford Ranger cost wise and size?). There is a remarkable difference.

and since taxation is directly responsible for the level of disposable income left, this Wiki link will give you the better picture:

https://en.wikipedia.org/wiki/Dispos..._capita_income

NZ is way down at 17th place below the EU averages. Again, the outliars of the 1% wealthiest will overshadow the whole figures so this should only be taken as a grain of salt. I prefer to look with my own eyes.

Around 15 years ago NZ looked at broadening taxes. I could not the believe the input from advisors saying it was better to raise GST from 12.5% to 15%. I met accountants that said the same thing. It was like the gov't didn't pay attention how a 'consumption tax' hits the poor the hardest but who cares? Oh and the idea of removing GST on essentials and food was "too complicated of a system for NZ to use" (while Australia and Canada have managed to exempt GST on essential items ; needlessly I must say their accountants and financial advisors must be smarter).

The bigger issue is, at what level of taxation does NZ need to do before the wealth leaves the country? It's clear the NZ gov't won't touch real estate by taxing it because that is the only asset left going for the country. If they slam taxes on real estate like other nations, then perhaps we will see a much greater movement of NZ wealth to abroad. Also, there's no need to verify the difference. All one has to do is look at the foreign exchange rates. If more $ leaves the country than coming in, then you're going to see a weaker NZD.

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SBQ i agree that simply comparing incomes or wealth will not give you a complete picture, better to try find purchasing power parity numbers but even these are probably a little off but the best yardstick.

in economics you will find GST is one of the most efficient possible taxes which is probably why it was so highly recommended and for good reason. If you try to create exceptions and ringfence certain catagories, you remove a lot of economic efficiency.

i get what you’re saying about it being regressive and you’re correct but tobacco taxes are also regressive and yet still a very good idea.

Anecdotally if I compare my household with that of extended family in Germany who I visit around once a year I would say we are very much on equal footing living standard wise and they pay significantly more in tax than we do.

I would really like to see more environmental based taxes and congestion traffic charging.

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Originally Posted by Mr Slothbear

SBQ i agree that simply comparing incomes or wealth will not give you a complete picture, better to try find purchasing power parity numbers but even these are probably a little off but the best yardstick.

in economics you will find GST is one of the most efficient possible taxes which is probably why it was so highly recommended and for good reason. If you try to create exceptions and ringfence certain catagories, you remove a lot of economic efficiency.

i get what you’re saying about it being regressive and you’re correct but tobacco taxes are also regressive and yet still a very good idea.

Anecdotally if I compare my household with that of extended family in Germany who I visit around once a year I would say we are very much on equal footing living standard wise and they pay significantly more in tax than we do.

I would really like to see more environmental based taxes and congestion traffic charging.

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GST is only effective if there are people that can pay the tax - when disposable incomes are low, so will the GST intake. NZ citizens are frugal so the only added benefit I see with GST is it catches a portion of the underground untaxed income. I do feel there's more resentment in the way NZ wants to tax things differently, I mean the excuses I hear are weak when they don't question and LOOK how larger nations have become effective at exempting GST on ie essentials foods. While on the same hand, we have importation of goods in NZ that is subjected to all different rates of taxes and fees (excise tax, zero rated items, GST, MAF, Biosecurity, you name it). A whole lot of excuses if you ask me.

When Obama thought of bringing in VAT to the US, where were the economists saying "how effective and efficient GST is? From what I read, the problem with consumption base taxation is it deters wealth elsewhere as the initial tax take from GST will be large and then over time, the amount of GST collected erodes as the cost of the compliance and tax enforcement businesses make it inefficient.

You may not be comparing apples with apples with your inlaws in Germany. The living standards are clearly different. I mean if you want to compare the cost of living in both places, try looking at the quality of houses. Germany, like Canada experience cold winters so their homes would have comfortable central heating. The problem in NZ is what a person that pays $500/month in electricity is not the same $500/equivalent spent in Germany. In Canada, people heat large 4000sft size McMansion homes and do not pay $500/month for that constant whole house comfort. My friend in Chch was paying over $1,000 a month trying to central heat his home because his elderly parents needed constant healthy room temperatures through winter. There's an issue with this scenario ; the person in Canada is not worried about a $500/month heating bill in their large home because that's considered.. 'middle class' while in NZ, it seems the people are ever so frugal when it comes to home comfort. Heating 1 room at a time in conservation. This tells me middle class Kiwis don't have that disposable income.

Just keep in mind if the gov't goes on the path in raking more taxes, they need to be sure about the exodus of wealth that would leave NZ. We had a time where there was "Gift Duty" and at the end, the gov't couldn't manage it and neither could the lawyers. If the current gov't goes in a step in that direction, dictating those where they could give their after-tax money to (such as a foreign trust), then I would see a more gradual erosion of NZ's standard of living. From where I grew up, the Canadians that wonder about Carbon Taxes ask their gov't, has a carbon tax done anything to change the climate? and here's the irony, the whole world is in shutdown because of COVID19 and gov'ts are printing money like crazy by handing out $$ to everyone in need. LOL.. I mean that's the exact opposite of what 'carbon tax' was suppose to achieve. They wanted reductions in CO2 emissions... and the whole world did that.. but gov'ts didn't expect paying trillions of $ to keep people alive and out of anarchy.

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Originally Posted by Playa

What could it potentially look like?and what is the best way to protect yourself from this?

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That would depend on your ability to move. I recently moved from Australia to NZ post selling a company and shifting assets. That legally saved me 25% in capital gains on a large portion of shares due to trust structures so a) optimise your tax structure b) be willing and able to move to a "lower cost" jurisdiction. There is an overhead however... tax audits are going to come your way because the tax authority will want to validate that what your advisor told you stacks up. That brings me to another point... have a good tax lawyer/advisor and do what they say. You may receive a ruling against you ie "pay the tax they reckon you owe" but you will not get hit with penalties and interest.
Nomad Capitalist on youtube has some interesting idea's on being a 'global citizen'. I have friends in the Philipines that run all funds through Singapore and pay basic wages to his staff in Cebu which by they way is a great lifestyle. Like most things, what do you want from life? 183 days in a foreign jurisdication makes you a non-resident. Most countries have flexible citizenship options for the right level of investment.

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Originally Posted by jr1973

That would depend on your ability to move. I recently moved from Australia to NZ post selling a company and shifting assets. That legally saved me 25% in capital gains on a large portion of shares due to trust structures so a) optimise your tax structure b) be willing and able to move to a "lower cost" jurisdiction. There is an overhead however... tax audits are going to come your way because the tax authority will want to validate that what your advisor told you stacks up. That brings me to another point... have a good tax lawyer/advisor and do what they say. You may receive a ruling against you ie "pay the tax they reckon you owe" but you will not get hit with penalties and interest.
Nomad Capitalist on youtube has some interesting idea's on being a 'global citizen'. I have friends in the Philipines that run all funds through Singapore and pay basic wages to his staff in Cebu which by they way is a great lifestyle. Like most things, what do you want from life? 183 days in a foreign jurisdication makes you a non-resident. Most countries have flexible citizenship options for the right level of investment.

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Bravo! yes as i've been hard hitting this forum, taxation is the key but no one seems to question it.

The reason why the wealth tax has not been taken seriously is more to do with NZ's trust structure - any wiff of a wealth tax and you'll see all the lawyers rubbing their hands forming trust left / right / & centre. As I recently conveyed with my accountant, after a long hassle dealing with NZ's FMA, AML, & police checks ; the law does not prevent a person from 'GIFTING' their assets away. However! if the gifting can be proven intentional for the sole purpose of avoiding taxes, then IRD would have a go at you. But as you say, lawyers and tax accountants are much more smarter than that and no one in NZ should get's hit by IRD as long as they DO what they say (equally important, DON'T do the things that gets you in trouble).

I'm quite familiar with Canada's tax residency laws and during my studies, Canada has a well proven reputation internationally at taxing non-residents living abroad. One can not assume 183 days is a rule; it's 'just ONE' of the requirements. In recent years, have a look at the real estate market in Vancouver and question why so many of the rich Chinese have essentially laundered their $ through Vancouver real estate? When Trudeau was elected, he allocated a significant budget to go after these 'tax cheats' and liars claiming tax free capital gains owning Vancouver real estate when they don't live in the country nor, some even claim social benefits, medical care, education, the list goes on. You are correct! it all depends on the person's "ability to move" and for most, they won't meet that criteria of being truly non-resident. You only need a few 'ties' on a list of 20 things the CRA goes after to deem a person a tax resident in Canada. I'm am 100% certain, NZ's IRD follows a similar rule. Dependents like children are usually the easy ones they use to deem a wealthy non-resident to be a tax resident. (it's quite common for Asian families to send their children abroad for schooling, but easily cross the line when they buy a house instead of renting, when the student obtains a driver's license, medical care access, member of a church organisation, various bank accounts, and so many ticks on the list that would 'deem' a person a tax resident.

When I left Canada some 20+ years ago, all that was required was to fill out a 2 page form declaration of non-residency, the date when I would leave Canada, and a check list of things that would deem me still a resident ; they never bothered to take the time to verify things and you just filled it and away you go. Typically, giving up a driver's license, medical care card, local memberships, were usually difficult for those wanting to make that declaration. I'm quite certain today, these 'ties' are enforced more closely than ever. Especially with the recent introduction of the CRS (Common Reporting Standard) put out by the OECD where some 110 nations around the world have forced their banks to implemented it. Ironically the USA is not part of the CRS so any non-resident holding a bank account there will have no concerns of their bank sharing information to relevant tax authorities.

As for how will the NZ gov't shore up more funds? My guess would be a rise in GST from 15% to say 18% or even as high as 20%. CGT has been tried last year and because of the 3 way coalition party in gov't, there was no way CGT would pass. Jacinda Ardern even specifically said, "There will be no CGT for as long I am in gov't" Yet her election platform originally said she would bring in CGT.