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Economy News

New Zealand puts in place new top tax rate

The New Zealand government on Wednesday kept its election promise to put in place a new top tax rate of 39 percent on income earned over 180,000 NZ dollars (127,186 U.S. dollars).

"This will only affect the top 2 percent of earners. It is a balanced measure that is about sharing the load so everyone is doing their bit to help our country rebuild after our fight against the COVID-19 virus," Deputy Prime Minister and Finance Minister Grant Robertson said in a statement.

"It is also about keeping a lid on debt while ensuring we can maintain our investment in health and education. For 98 percent of earners there won't be any change," Robertson said.

"It's important to remember too that this is for individual income," he said, adding if a couple together earn over 180,000 NZ dollars but individually earn less than that amount, then there is no change at all to the amount they have to pay.

The new rate will apply from April 1, 2021.

Revenue Minister David Parker said the government is aware that some people may seek to escape the higher tax rate and shelter their income in trusts, and commentators often make such comments when changes to the top tax rate are proposed.

"This bill includes powers to collect information from trustees to test compliance and the effective operation of the 39 percent tax rate and to further understand what trustees do with trust assets and income," Parker said.

"If trusts are used for the sole purpose of paying a lower tax rate, it is unfair to all those New Zealanders that pay the right amount of tax. If there is evidence of this type of behavior, we will move on it," he said.

New Zealand currently has four layers of progressive or gradual tax rates of 10.5 percent, 17.5 percent, 30 percent, and 33 percent. The rates increase as taxpayers' income increases.

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