Tax Freedom Day spells bad news

New Zealanders have little reason to celebrate "Tax Freedom Day" tomorrow if they compare things across the Tasman or over in the United States.

The latest day figures from Staples Rodway showed New Zealand was struggling to make significant gains on Australia with its Tax Freedom Day on April 19 and the United States' becoming "tax free" on April 13.

However, in the United Kingdom, the burden of paying the Government's tax remains until June 2, three days later than last year.

The Government's overall tax take increased by almost 3% in the past year but the time it took New Zealanders to pay off their tax burden continued to reduce.

Staples Rodway Auckland managing director Roger Thompson said this year's Tax Freedom Day, the day we paid off our tax take for the year and began working for ourselves, would fall on May 3, two days earlier than in 2010 and more than two weeks earlier than in 2009.

"In fact, the annual figures shows New Zealanders now work 16 fewer days than they did in 1985, when the annual survey began, to pay off the country's taxes." The figures showed that lower tax rates for both corporate and wage and salary earners still led to increased tax takes, while the effect of an increase in GST was also highlighted through the year.

Although top tax rates dropped, corporate New Zealand paid 1.6% more tax in the year ended March 31, 2011. In the same period, personal tax revenue dropped by about 1.8%, Mr Thompson said.

That increased corporate tax take came at a time when companies were experiencing a tough year.

The data used was complete up to February 2011 with estimates used for March to determine the date of Tax Freedom Day.

Those estimates showed an increase in the GST tax take of 11.8% to the end of February and that figure was expected to stay above 10% on the estimates used to calculate the March 31 tax cut-off date for 2011, Mr Thompson saidThis year, about 33% of New Zealand's total output would go to the Government, with the estimated total tax revenue for both central and local government having increased by about 3.2%, as opposed to the previous year's decline in the tax take of 8.7%.

Part of the reason for the higher tax take was "reasonable growth" in GDP of about 1.5% until December 2010 with GDP easing back to just under 1% overall growth in the final quarter of the tax year, he said.

In the near term, the double-whammy of tax cuts and slower economic growth, plus the hit provided by the Christchurch earthquake, would put a lid on tax revenue growth in the short-term, the recent tax cuts also still affecting tax revenues.

"However, we do expect the Rugby World Cup to provide a spike in revenues while we also expect construction activity, particularly in Christchurch, to provide a boost late in the year." Mr Thompson said.