Scrapping gift duty a tax cut by stealth for wealthy

The scrapping of gift duty, announced by the Government yesterday, represents a tax cut by stealth for the wealthiest New Zealanders, says Labour Leader Phil Goff.

“The reality is that this is yet another tax break for some of the 10 percent of people who have already received 40 percent of this year’s income tax cuts,” Phil Goff said.

“Politics is all about priorities, and scrapping gift duty underlines the fact that John Key’s government is focussed on delivering tax breaks for the wealthiest New Zealanders at a time when low- to middle-income Kiwi families are struggling.”

Phil Goff said the Government justified its decision by saying that gift duty only raised $1.5 million a year and cost half that amount to administer.

“But that’s being deliberately disingenuous,” Phil Goff said. “Gift duty actually exists to prevent tax avoidance and ‘structuring’. Scrapping gift duty actually opens the way to tax avoidance and ‘structuring’.

“The abolition allows the very wealthiest New Zealanders to structure their affairs by transferring income and assets into trusts and to their children to reduce their tax liability.

“The fact that people currently spend $70m on gift duty compliance to avoid paying their fair share of tax is no reason for removing it,” Phil Goff said. “It just shows potentially how valuable this ‘free lunch’ will be for the wealthiest Kiwis.

“They will now be able to transfer their property portfolio to their children. If, for example, a person earning $150,000 also earns a net $42,000 from their property portfolio and receives this personally, they pay $14,000 in tax on it (33 percent).

“But if they transfer this to their three children, the children then each have an income of $14,000 which is only taxed at 10.5 percent,” Phil Goff said. “That means the total tax paid is $ 4410. That is a tax cut by stealth of $10,000 in this case.

“The government’s decision also further concentrates wealth in the hands of a few while for most New Zealanders home ownership is declining. The Kiwi dream of owning your own home is becoming harder and harder to realise.

“Opposing the abolition of gift duty is not based on the politics of envy, as far as Labour is concerned. It is based on the politics of fairness.

“The Government has ruled out income splitting as unfair, but now they are introducing it by stealth.”

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