In the last decade, billionaires around the world have more than doubled their wealth, from $5.6 to $11.8 trillion. We need a global push to increase taxes on the richest citizens back to past levels that most people believe were fairer and more useful for society. Without this adjustment, extreme wealth and inequality will continue to skyrocket.
A report released in April 2023 by the Inland Revenue Department found that the effective tax rate of the wealthiest families in New Zealand is 9.4%. This is less than half the rate of middle wealth New Zealanders which is at 20.2%.1 One of the main reasons for this disparity is the fact that a large proportion of the income earned by these wealthy individuals stems from capital gains, which is not taxed in New Zealand.2 The report focused on the tax rates of 311 families in Aotearoa with a net worth of over $50 million, and highlighted the glaring inequality in wealth distribution which is being exacerbated by the current tax system.
These findings reiterate the findings in Oxfam International’s 2022 Commitment to Reducing Inequality Index where New Zealand had a very low ranking of 136 out of 161 countries in terms of the tax system’s contribution towards inequality.3 This means that the tax system in Aotearoa is among the world’s least effective in reducing inequality.
Following the release of the IRD report, over 230 wealthy New Zealanders signed an open letter calling on the politicians of New Zealand to tax them more. They stated “We would willingly pay more tax to help lift families out of poverty and ensure everyone thrives – an investment that would pay off many times over.”4 This letter was coordinated by Oxfam Aotearoa and Tax Justice Aotearoa.
Shalomi Daniel, Economic and Gender Justice Lead for Oxfam Aotearoa explained, “the people of Aotearoa need a better tax system that alleviates, and does not perpetuate inequalities. We need a tax system that reduces poverty and inequality and ensures that everyone, and not just a wealthy few, has access to nutritious food, warm housing, quality healthcare and education for their children”
In an open letter to the G20, close to 300 millionaires, economists, and political representatives from almost all G20 countries call for a new international agreement on wealth taxes to “stop extreme wealth from corroding our collective future”. It says that people all over the world are “desperate for change”.
“Much work has already been done. There is an abundance of policy proposals on wealth taxation from some of the world’s leading economists. The public wants it. We want it. Now all that’s missing is the political will to deliver it. It’s time for you to find it.”
“The findings in these reports on income and tax inequality in Aotearoa are deeply concerning. But despite public polling showing clear support for decisive tax interventions to address this crisis, in the lead up to the election this year we’ve seen very little appetite from the main political parties to address this issue” says Rachel Dobric from Oxfam Aotearoa.
Morris Pearl, Chair of the Patriotic Millionaires and former Managing Director at BlackRock, said: “The leaders of the world’s largest economies must coordinate swift and decisive action to reduce dangerous levels of inequality; if they fail to tax extreme wealth, the results will be a perpetually weakened global economy, the decline of democratic institutions, and worsening social unrest. The G20 must act.”
Tax and wealth facts⁵
- Only 4 cents in every dollar of tax revenue comes from wealth taxes.
- Since 2020, the richest 1% have captured almost two-thirds of all new wealth. Billionaire fortunes are increasing by $2.7bn a day.
- For every dollar of new wealth gained by someone in the bottom 90%, one of the world’s billionaires has gained $1.7m.
- Half of all millionaires will not pay any inheritance tax and will pass on $5 trillion tax-free to the next generation.
- The average tax rate on the richest has fallen from 58% in 1980 to 42% in OECD countries.
Tax on capital gains – typically the most important source of income for the top 1% – are only 18% on average across more than 100 countries.
1 Inland Revenue, Tax and the Economic Income of the Wealthy, (April 2023) https://www.ird.govt.nz/-/media/project/ir/home/documents/about-us/high-wealth-research-project/hwi-research-project/factsheets-supporting-hwi-report/tax-and-the-economic-income-of-the-wealthy.pdf?modified=20230420234159 accessed on 31 August 2023
2 Max Rashbrooke, New Zealand’s millionaires pay lower tax rates than millionaires – it’s time to fix the system, (April 2023) https://www.theguardian.com/world/2023/apr/27/new-zealands-millionaires-pay-lower-tax-rates-than-cashiers-its-time-to-fix-the-system accessed on 31 August 2023
3 Oxfam Aotearoa, Aotearoa top 10 in global inequality index, but tax system’s inequality impact 136th, (October 2022)
Rachel Schaevitz/ Oxfam Aotearoa Communications Manager / email@example.com