Too Many New Zealanders Are Victims Of Fiscal Drag, Says Tax Expert

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

29 July 2003

Many New Zealanders are finding themselves the victims of the phenomenon known as 'fiscal drag', where inflation-linked salary increases drag more taxpayers into higher tax brackets. One tax expert believes the government is benefiting to the tune of $350 million as a result.

According to John Sherwan, tax expert with accountants PricewaterhouseCoopers, there are now twice as many New Zealanders paying the top rate of income tax than the current government intended during its 1999 election campaign. Consequently, Mr Sherwan announced whilst talking to the Dominion Post, he believes that legislation should be introduced to adjust the margins once every three years to remedy this situation.

Currently, once a taxpayer's salary reaches the $38,000 mark the individual is pushed into the 33% tax bracket, and those with incomes of $60,000 are subject to the top rate of 39%. Sherwan claims that an additional $225 million in revenues is being raised by the government from wage earners whose income has risen over the $38,000 level.

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