Leading independent accounting firm, Staples Rodway, has revealed that Thursday June 1, is Tax Freedom Day for 2006. This is the day New Zealanders will have officially paid off their tax debts and can start putting money into their own back pockets.

The company’s research shows that the average Kiwi has had to work 151 days to pay off all their taxes. This is six days longer than last year.

Roger Thompson, Staples Rodway’s Tax Director in Auckland, says the results of the research are dismal.

“This year we are experiencing the combined effect of a marked slowdown in the economy, together with continued strong growth in tax collections. It takes some time before a decline in economic growth feeds through to slower tax revenue growth.”

Staples Rodway’s Tax Freedom Day research is the only internationally benchmarked research to compare New Zealanders directly with taxpayers in Australia, the United Kingdom and the US.

Last year it took the average New Zealander 145 days to pay off his or her income tax, local body rates, and indirect taxes on items such as petrol, cigarettes and alcohol.

The research shows that the tax taken by the government is growing faster than the economy. Revenue from direct taxes increased this year by almost 15 per cent and indirect taxes by three per cent. The country’s GDP for the period grew less than five per cent.

“This increase in personal tax revenue reflects a combination of employment growth and wages growth and probably some tax creep as higher wages take people into higher marginal tax brackets,” says Mr Thompson.

He says during the 1990s, considerable progress was made in reducing the tax burden on New Zealand taxpayers.

“By 2002, Tax Freedom Day was almost four weeks earlier than it was in the early 1990s. However, New Zealand has progressively slipped backwards during the last four years.”

The research shows the estimated date for Australia’s Tax Freedom Day was May 10.

This means that Australians, from a tax perspective, are better off financially than New Zealanders by a full three weeks.

“Given tax cuts announced in the recent Australian budget, it is likely the gap between New Zealand’s Tax Freedom Day and Australia’s will continue to deteriorate,” says Mr Thompson.

But we are still better off than the UK, whose citizens will have to work a week longer than us to account for their tax debts. In the US, Tax Freedom Day fell on April 27, three days later than last year, however New Zealand has a more comprehensive social welfare system than the US and this needs to be considered when making comparisons with the US.

International Comparison

International Annual Comparison

Tax History