New Zealand Celebrates Tax Freedom Day

by Mary Swire, Tax-News.com, Hong Kong

26 April 2004

New Zealand’s taxpayers celebrated Tax Freedom Day on April 22, the New Zealand Business Roundtable announced last week, the earliest day it has ever fallen in the country.

"These calculations are of interest because of economic evidence that, beyond a certain point, government spending and taxation hamper economic growth”, observed Roger Kerr, director of the Business Roundatable.

“No country has achieved per capita growth rates of 4 percent or more a year on a sustained basis with general government spending approaching 40 percent or more of GDP,” he added.

According to the calculations, the level of government expenditure in New Zealand is the equivalent of 31% of GDP.

However, using a broader measure of government expenditure which takes into account other elements of spending such as at local government level, the NZBR states that Tax Freedom Day in New Zealand would fall much later, on May 26.

This is similar to the OECD average of May 29, although it compares unfavourably with many countries, including Ireland (May 8), Australia (May 10) and the United States (also May 10).

“Finance Minister Michael Cullen has said that it will be apparent by the middle of this year whether the government is on track to lifting New Zealand’s trend growth rate to a higher level. The Budget projections next month will almost certainly confirm that it is not,” commented Mr Kerr.

“It follows as a matter of logic that the share of government spending in the economy must be reduced (and the quality of spending improved) if the government is serious about its aim of restoring New Zealand to the top half of the OECD income rankings", he concluded.

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