Central government levies sharply increased personal income taxes

According to Crown accounts for the period up to October 2021, which were released by the Treasury on December 1, 2021, personal income taxes accounted for 48% of all taxes collected (excluding levies and fees). Corporate tax added an additional 17% and GST some 25%. (These proportions are for the twelve months up to October.)

It peaked during the year through March 2021 at just over 49%, but the latest levels are at the top of the data over the past decade.

Corporate taxes generate taxes based on profitability that have been delayed since the start of the pandemic.

It is the reliance on personal taxes that constitutes the core of the Crown’s “revenues”. With the GST, this now represents almost three-quarters of all income taxes.

Public expenditure essentially depends on the taxation of citizens.

While this is not “news,” what might impress readers is the rate at which these taxes are increasing, especially income taxes.

Income taxes have “never” increased so rapidly (our upload of the file dates back to 2003).

Here is a summary of recent data:

2017/18->2018/19->2019/20->2020/21
billions of dollars%billions of dollars%billions of dollars%billions of dollars
Nov3,1929.8%3.5058.9%3.816-7.6%3,527
Dec3.081-2.5%3.0043.9%3,12131.2%4,095
Jan3,52711.5%3.9322.2%4,017-12.1%3,529
Feb2,8653.0%2.9525.1%3.10413.8%3,533
Tue2.9997.5%3.2237.0%3,44931.5%4,534
Apr3.272-9.8%2.95117.5%3,46612.0%3.882
Can3.3327.8%3,593-22.8%2.77344.3%4,002
June2.47730.0%3.21916.9%3,76416.5%4.384
Jul3.1094.2%3,24010.5%3,58211.6%3.999
August3.1094.2%3,24010.5%3,58211.6%3.999
Sep3.1094.2%3,24010.5%3,58211.6%3.999
Oct2.99215.1%3,4434.5%3,5988.9%3.917
———-——–———-——–———-——–———-
12 months$ 37,0646.7%$ 39,5435.8%$ 41,85313.3%$ 47,399

Two effects are at the origin of this situation: more people employed in the active population and the sliding of the age groups. With closed borders and correspondingly higher pay levels, the slice drift effect is supercharged.

The detail of this data is not the point; the point is the recent unprecedented growth. But the detail shows that the growth is not due to weak base effects. This growth is in addition to the growth in personal taxes which has been much faster than the expansion of economic activity.

What is underway is a steady, relentless and accelerated redistribution of income from taxpayers to government. In turn, they redistribute “part” of this sum to those they deem in need, although Data from the State Services Commission shows a growing share continues to expand the public sector where salary increases has been increasing faster than private sector for a long time.

Whatever the reason, the proportion of New Zealand’s economy needed to support central government activity is increasing. In the year ending September 2021, nominal GDP was $ 343.5 billion and income taxes transferred $ 99.4 billion to the central government, or 28.9%. In the year ending September 2011, nominal GDP was $ 208.4 billion, with income taxes transferred $ 51.6 billion, or 24.8%. The surplus transferred from individual taxpayers in 2021 over 2011 levels was $ 14.2 billion.

About Andrew Estofan

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