Richest families' effective tax rate is 9.5%

IRD study of 311 wealthiest families worth $85b finds just 7% of their income was taxed due to no CGT, meaning effective tax rate is 9.5%; That compares with 30% rate for PAYE earner on $80,000/year

Revenue Minister David Parker said the study showed the wealthiest Kiwis were actually much richer and paid a lower effective tax rate than most thought. Photo: Lynn Grieveson / The Kākā

TL;DR: An Inland Revenue Department study of Aotearoa’s 311 wealthiest families with combined wealth of $85 billion and annual income in 2020/21 of $14.6 billion has found just seven percent of their income was taxed as personal taxable income that year because of the lack of a capital gains tax.

That meant their effective tax rate was 9.5% across all their income, even after calculating their payments of GST, which compares with an effective tax rate of 30% for a PAYE salary earner of $80,000 per year. Those 311 families alone would have paid $3.4 billion more in tax in 2020/21 if they had paid the same tax rate as middle-income New Zealanders.

Revenue Minister David Parker ordered the study to find out if the tax system was fair. He said it showed the wealthiest were actually much richer and paid a lower effective tax rate than most thought, and much lower than middle-income New Zealand. However, he was quick to say he was recommending any changes in the tax system as that was something for the Cabinet and Labour’s caucus to do in any tax policy before the election.

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Wealthier and paying a third of the tax rate of those shouldering most of the tax burden