“We currently have issues with productivity in New Zealand, and with labour shortages constantly being in the news these days, a question I have is whether the tax system is playing a role in this.” An effective marginal tax rate includes not only a person’s tax rate but also how a rise in wages meant they missed out on means-tested Government assistance, like Working For Families.
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When you earn more, your Working for Families credits reduce and that can be a disincentive to taking more hours. The advisory group recommended increases to the level at which Working For Families credits were abated, and a reduction in the rate at which they were removed.
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The major review undertaken by IRD, Treasury and MSD is taking place behind closed doors. There are no published terms of reference, no timeline and no public consultations at this stage.
In the meantime, one-off policies such as the recent improvements to abatement for those on benefits are clearly causing anxiety as to how they will interact with the big picture, 10 year vision.
Working for Families (WFF) is a $3 billion dollar programme of child-related payments, so complex few understand them. The 38 page treasury report, released this week and disarmingly titled ,”
Increasing main benefit abatement thresholds on 1 April 2021 and consequential adjustments to the Minimum Family Tax Credit”
Its interaction with the wider welfare benefit system is complex, and some complain its abatement rates unfairly penalise poorer people for working more. There have also been calls to greatly expand it – the Government s Welfare Expert Advisory Group suggested it should be given to couples without children. Social Development Minister Carmel Sepuloni said the Cabinet agreed to the review in 2019 but “a lot happened in 2020” that stopped it going forward then. She was not willing to commit to the new review starting within 2021 or to speak at length about the terms of reference.
BRADEN FASTIER Revenue Minister David Parker said he doubted that root-and-branch reform was needed.
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