It seems the idea was first created in the US in 1948 with
the purpose of advising Jo Public when the entire nation had earned enough income
to cover the total tax bill for the year.
There is some argument over whether the hard grafting Kiwi
nation can put its feet up for the year yet, or whether we still have to keep
on trucking for a couple more weeks.
Taxpayers’ Union Executive director Jordan Williams says, the
method used doesn’t factor in public spending funded by borrowing and other
revenue means.
“According to the OECD figures, this year tax freedom day is
Monday 22 May, representing the 39.1% of the economy that is spent by the
government. For comparison, Australia’s is only 36.1%."
Imagine a world
without income tax…
Could New Zealand be some sort of utopia without tax?
Some nations with little or no income tax have the good
fortune to have oil and mega-wealthy populations so the locals probably don’t
need to worry too much about waiting lists for hip or knee replacements.
Obviously, New Zealand needs a big oil strike or lots of
sheiks to move into the suburbs to give us true freedom from tax.
When we stop paying income tax, those who are seriously
loaded would spend up large and here’s the trick – they would pay GST on all of
those goods.
See… the Government would still get its tax coffers to cover
the cost of developing infrastructure and providing social services and
education.
Developing countries with no or low income tax don’t have
populations living in luxury.
For example, Vanuatu has no personal income tax but you
could expect to live about 10 years less than the average Kiwi if you reside in
the Pacific nation.
According to the World Health Organisation, Vanuatu’s annual
expenditure on health is $150 per person per annum, in comparison to $4,018 per
person per annum in New Zealand.
Short of moving to Dubai or Mauritius all of us are still
going to pay tax in some form or another and if we want schools, hospitals and
roads – it’s probably a good idea.
Keeping tax fair
As business advisors and accountants BUSINESS buddy often sees the palpitations
clients experience when they fear a mammoth or even small tax account.
Here’s the thing – we aim to minimise every client’s tax
obligation by:
·
Structuring businesses for optimal tax
advantages
·
Using Xero
to prevent any leakage of expenses
·
Teaching businesses what they can or can’t claim
·
Sending reminders to prevent missing
that tax payment and getting fined
·
Claiming depreciation on assets
·
Including expenses for that office at home
The IRD
smart business guide has some handy information for people wanting to learn
more about tax obligations.
We feel your pain when you pay tax and we also celebrate
that your business is doing well enough to be earning a profit that requires a
contribution to the Government piggy bank.
Saving for the tax
bill
So, have you got enough stashed away to cover your tax bill
for 2017?
Apparently, you must have if New Zealand celebrated its Tax
Freedom Day on May 8.
Call your BUSINESS buddy
now, if you need a strategy to ensure tax obligations don’t cause cash flow
causalities.