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Terry Baucher, Tax Expert NZ, Fiscal Drag

TVNZ interview on Fiscal Drag

Terry Baucher, Tax Expert NZ, Fiscal Drag

Terry Baucher interviewed on Breakfast on 1

Summary of points made by Terry during this 5 minute interview [link to watch].

  • The trouble with Fiscal Drag as you cross a tax bracket and it’s not adjusted for inflation and so  reduces your take home pay.

  • All the tax brackets need to move up as they haven’t changed since 2010. On an inflationary basis the top tax bracket should be nearer $80,000.

  • The real painpoint is below $48k – it’s a very big jump up in percentage tax payable.

  • The government is setting up a big problem for themselves as they will have to deal with this in the future.

  • Historically as brackets increase – average earnings always keep ahead of tax brackets – but we’re running surpluses and so this is a good time to adjust it.

  • I think that NZ rely a lot on the taxation of labour for tax receipts and the taxation of capital is haphazard.  This would re-balance the way the tax take comes into the Treasury.

  • The interaction between tax and social policy is also important – Working For Families Credits get abated at 25% and so effectively it jumps to 42% for some groups of people.  Who are being taxed at 100% at the margin when ACC and other taxes are added up.

  • The big change from 1 April 2019 the new IRD system will give more real-time accuracy about people’s earnings it will adjust your PAYE rate during the year.

Terry Baucher Terry Baucher is an Auckland-based tax specialist with 20 years experience. He works almost exclusively with high net worth individuals and owners of medium sized and emerging businesses. Prior to starting his own business, he spent six years with one of the "Big Four' accountancy firms including a period advising Australian businesses how to do business in New Zealand.
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