Tax Freedom Day 2010 estimated to be May 17

Initial research* indicates that May 17, 2010 will be Tax Freedom Dayä (TFD) – the day New Zealanders will 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.

Managing Director of Staples Rodway Auckland, Roger Thompson, says while TFD falls one day earlier than in 2009, meaning it has taken Kiwis less time this year to pay off their tax debts, New Zealand lags behind the US, Australia and the UK.

“Staples Rodway has commissioned research into TFD for the past decade. This is the first time New Zealand’s TFD will fall later than all three countries we measure against.”

In 2009, Australia TFD fell on April 29, almost three weeks earlier than New Zealand’s 2009 Tax Freedom Day. This year in the UK it will fall on May 16 and in the US it fell on April 11.

Mr Thompson says the deterioration against Australia is most concerning as its improvement in TFD is more likely to be sustained than that of the US and UK.

“In 2009, Australia’s TFD came almost three weeks earlier than in New Zealand. Thousands of New Zealanders are already lured across the Tasman every year because of higher income and better job opportunities. While the outlook for New Zealand is positive, this gap with Australia shows no signs of closing.

“The Australian government has cut tax rates significantly and its economy is now recovering strongly. While the New Zealand government is committed to personal tax cuts, the deficit is large enough to warrant a cautious approach. The rise in unemployment rate has been more severe here than in Australia and the rebound in economy will be less rapid.”

Mr Thompson says this year an estimated 37 per cent of the nation’s output will go to the government.

“The slowing pace of economic activity has had a significant effect on both corporate and personal tax revenue. Corporate tax revenue was down 13 per cent on the previous year as a result of deteriorating corporate profitability.

“In addition, declining employment, slower wages growth, adjustments in tax thresholds and the cut in the top marginal tax rate from 39 to 38 per cent has impacted revenue from personal tax.”

He says the research indicates that the outlook for 2011 is positive with GDP growth expected to recover strongly.

“This is likely to result in bringing TFD forward next year.”

* The estimate of 2010 Tax Freedom Day is not based on final data. It includes an estimate of tax revenue in March 2010 and an estimate of March GDP growth. Final figures will be available next month.

About Staples Rodway

Staples Rodway is New Zealand’s leading network of independently-owned accounting firms that provide a full range of intelligent business services to successful New Zealand businesses. It has independent offices in Auckland, Hamilton, Christchurch, Hawke’s Bay, New Plymouth and Tauranga and employs more than 400 staff nationwide. Its service offerings include taxation, auditing, client advisory services.