Morgan: Tax burden falling on NZ's working class

Morgan: Tax burden falling on NZ's working class

Economist Gareth Morgan believes New Zealand could be missing out on up to 25 percent of total income tax because the rich aren't paying their fair share.

Morgan also told The Nation it is possible to get global corporations like Apple and Facebook to pay more tax on what they earn here.

The Government collects about $30 billion per year in income tax, but Mr Morgan says that take could be much bigger. The figures come from a soon-to-be-published report from the Morgan Foundation.

Dr Morgan says the report on New Zealand's current tax system shows that the burden is falling on middle- and working-class families.

"There's no free lunch here. If the rich aren't paying their fair share, someone else has to pay more than they otherwise need to," he says.

Dr Morgan proposes a tax on equity to level the playing field, meaning people could be taxed for owning a house or even an expensive car. His example is a house worth $500,000, which would attract a tax of $6000 a year.

But that idea has been criticised as being too broad.

"If you're going to tax Auckland homeowners, with a house value of about $1 million, why would you also tax homeowners in Whakatane or Gisborne or Hastings at the same rate, when they're not making as much money?" says First Union communications manager Morgan Godfrey.

Adding to the tax imbalance are the global corporations such as Google and Facebook paying comparatively low tax.

A recent New Zealand Herald investigation found a group of foreign companies with $10 billion in New Zealand sales paid just $1.8 million in tax.

"They're transferring their profits to other jurisdictions who are then able to transfer them to a third jurisdiction, which is a tax haven," says Dr Morgan.

He adds the solution is to not give companies like Apple deductions unless they can prove they're not transferring money offshore.

Fellow economist Shamubeel Eaqub agrees.

"We have a very complex tax code right now that has lots of caveats, lots of exemptions, lots of special cases, and we've got to get rid of those," he says. "[There are] too many loopholes and it's always rich, smart folk who get around those loopholes."

Dr Morgan believes the policies would be straightforward to introduce but accepts they would come with big political risks.