NZ Has 24th Highest Personal Tax Rate In The World

Media Release: 21 August 2009

NZ Has 24th Highest Personal Tax Rate In The World: KPMG Study

New Zealand has the 24th highest top personal tax rate in the world, according to the latest survey by KPMG measuring global individual income tax and social security rates.

New Zealand’s top personal income tax rate was compared against 83 countries listed in the 2009 Individual Income Tax and Social Security Rate Survey. Last year New Zealand was ranked as having the 18th highest top personal tax rate. However that was when the top personal tax rate in New Zealand was 39 per cent. Subsequent to the introduction of the National Government, New Zealand’s top personal tax rate decreased to 38 per cent.

Globally, personal income tax rates have declined over the past seven years since the study began. Average rates in Asia Pacific have declined from 36.1 per cent in 2003 to 33.9 per cent in 2009 with a 0.7 per cent drop in 2009. In 2009 the top average personal income tax rate dropped 0.3 percent worldwide from 29.2 percent in 2008 to 28.9 percent in 2009.

“The big notable difference in New Zealand is that our top tax rate applies from just $70,000 income as opposed to many other countries where the level of income needs to be far higher for the top rate to apply. For example in Australia you need to earn over $180,000* in order pay the top rate,” says Paul Dunne, tax Partner at KPMG.

“The concern is that this is one of the factors contributing to overseas migration and the big OE which impacts New Zealand’s workforce and Government revenue,” he says.

Added to this, some countries are already making plans to implement personal income tax rate increases for top earners due to the need for new sources of budgetary and stimulus funding recently implemented by governments.

“In the current economic environment where countries face increasing budget deficits and need funding for various economic stimulus packages, it is becoming clear that some are turning to those in the highest income brackets amongst their current tax bases to increase revenue,” says Dunne.

The global study recorded a general decline in top personal income rates over the past seven years, but in 2010 there are indications that a reversal may be on the way. Some countries in the European Union, including Ireland and the United Kingdom specifically, are already proposing rate increases for its top earners.

According to the KPMG study, the highest personal income taxes in the world are still paid by the citizens of the European Union (EU). But with the introduction of flat rate taxes in a number of Eastern European countries – including Latvia and Poland, which reduced their top rates to 23 and 32 percent respectively for 2009 – average rates have fallen from 41.1 percent in 2003 to 36 percent in 2009.

KPMG’s 2009 Individual Income Tax and Social Security Rate Survey is a cross-border survey of personal tax and social security rates with historical data from 2003-2009. The report covers 86 countries, concentrating on the highest level of personal tax payable to the central government. For ease of comparison, the survey has excluded, where possible, other taxes such as state and municipal taxes.

The study was commissioned by the global International Executive Services practice, comprising professionals from several KPMG International member firms.

A copy of the survey is available here: http://www.kpmg.com/Global/IssuesAndInsights/ArticlesAndPublications/Pages/income-tax-social-security-survey-2009.aspx.

*(AUD – Tax rates 2009-10)

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