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.