Kiwis taking longer to pay off nation's tax bill despite tax cuts

Tomorrow [May 23] is Tax Freedom Day (TFD) – which marks the day New Zealanders have paid off the nation’s tax bill and can start putting money into their own back pockets, according to leading independent accounting firm Staples Rodway.

The Staples Rodway-commissioned research shows that Tax Freedom Day falls a day later than in 2008, which means it has taken Kiwis longer this year to pay off their tax debts.

This is despite a cut in corporate and personal tax rates and changes to tax thresholds which were expected to help reduce the country’s tax liability, says Staples Rodway New Zealand Chairman Peter Guise.

“Last year was the first time in six years there had been an improvement in the amount of time taken to pay off the nation’s tax bill. It is disappointing that any positive impact of the tax cuts has been more than offset by a dramatic slowing in the rate of nominal GDP which has meant that trend has not continued.

“While the tax cuts are a step in the right direction to reducing our tax burden, the harsh economic conditions we are experiencing have mitigated any effect they may have had. This is likely to have an impact on Tax Freedom Day in 2010 as well,” says Mr Guise.

In previous years, New Zealand has lagged significantly behind Australia in the amount of time it takes to pay off our tax bill. This year Tax Freedom Day in Australia was expected to be May 12, 11 days earlier than in New Zealand.

“It is concerning there is no reduction in the gap between Australia and New Zealand this year but this is partly due to the fact tax rates have been trending lower in Australia for several years now.

“Looking forward, the tax cuts in New Zealand will be important in maintaining our competitiveness relative to Australia which is the single biggest destination for New Zealand businesses and workers,” says Mr Guise.

International Tax Freedom Day Results:

· UK – Tax Freedom Day is expected to be June 4 – two days earlier than in 2008.

· US – Tax Freedom Day was April 15 – 10 days earlier than in 2008.

· Australia – the date of Tax Freedom Day in 2009 was expected to be May 12 – the same day as the previous year and nearly two weeks earlier than in New Zealand.