New Zealand’s rich are getting richer and poor are getting poorer and the gap between the two is increasing at a rate faster than anywhere else in the world
New Zealand’s rich are getting richer and poor are getting poorer and the gap between the two is increasing at a rate faster than anywhere else in the world.
Prepared for Treasury by economist Des O’Dea, the a recently released report shows the inflation-adjusted incomes of the top 10 per cent of households rose significantly between 1986 and 1996 while incomes fell for lower and middle groups.
Average household income after tax grew by 0.4 per cent per year between 1986 and 1996 but O’Dea says the median household income over the same period fell by 0.7 per cent per year.
“That is a better indicator of how the typical household fared,” O’Dea says.
The study strengthens the finding of last year’s Statistics New Zealand’s household eco-nomic survey with further research based on tax and census information.
O’Dea says that while some of the increase in income equality can be explained by changes in the structure of households and population factors, at least half of the increase is due to other reasons. He says while income inequality rose fastest in the late 1980s, it continued to increase during the mid-1990s boom suggesting the growing gap is caused by structural changes in society or the economy.
The Investment Savings and Insurance Association (ISI) is confident its submission to alter the proposed superannuation fund withdrawals tax legislation will be accepted.
The superannuation withdrawal tax proposal was introduced to counter any possible abuse of a loophole created last year when the highest income tax rate was raised to 39 cents in the dollar while tax in super funds remained at 33 cents.
At the time he introduced the changes, finance minister Michael Cullen said high income earners could avoid tax by diverting income to a super fund but would not be allowed to use it as an ‘eftpos’ fund.
Head of the ISI, Vance Arkinstall, says the original proposal for the super fund with-drawal tax (currently before the Finance and Expenditure Committee (FEC)) created problems for super fund trustees and employers.
“The bill imposed a liability on fund trustees to tax members withdrawing funds but the information needed to determine that was held by employers,” Arkinstall says.
He says the ISI has proposed a system where the employer would provide a certificate for any employee wishing to withdraw from their fund which the trustees could use to cal-culate payment and any possible tax. This would remove the need for the super fund to keep income information on each of its members.
“We’re reasonably optimistic that the FEC will accept some of these quite major changes that will make the bill more acceptable to the industry,” Arkinstall says.
He also says the Inland Revenue Department (IRD) has appointed an in-house actuary to assist with its investigation into the tax liabilities of life insurance companies.
The investigation, which has been a source of concern to the industry, is not due for com-pletion for several months but Arkinstall says the appointment of the IRD actuary (re-placing a previous consulting actuary) is a relief to many in the life business.
“The IRD actuary should help the investigators see that the industry has acted responsi-ble,” Arkinstall says. “We’re confident there should be no concerns.”
Colonial First State Investment (CFSI) has shifted management of its Australasian shares from Wellington to Sydney.
CFSI chief, Bruce Abraham, says the move reflects the growing proportion of Australian companies in its Australasian equity portfolios.
“Future management of Australasian equities will be the responsibility of CFSI’s equity specialists based in Sydney,” Abraham says.
“While the portfolio will continue to invest in New Zealand listed companies as part of the overall mix, it is likely that Australian investments may represent a larger part of our Australasian portfolios going forward.”
However, despite the move Abraham says CSFI will continue to keep an investment management structure in New Zealand.
