Tuesday, December 01, 2020

Raise trust taxes too!

The government today will introduce a bill to create a new top tax rate for those earning over $180,000 a year. This is good, but there are concerns that a large number of those affected will cheat, and funnel their income through trusts and other vehicles in order to evade taxes. And weirdly, the government is not planning to close this obvious loophole:

Revenue Minister David Parker says the Government will be watching trusts closely to see if people are using them to dodge the new 39 per cent income tax rate.

At present, income from trusts is subject to a tax rate of 33 per cent – the same rate that applies to income earned in the top tax bracket.

But the Government will this week pass legislation lifting the top income tax rate to 39 per cent. Opening a gap between the income tax rate and the trust rate creates an incentive to funnel income through a trust to reduce the amount of tax paid.

Parker said that if there was evidence of this, the Government could increase the trust rate to 39 per cent as well.

So they won't close the stable door until after the rich have rorted. Why not? Apparently, "there are legitimate reasons for people to use trusts". Like what? Because what they primarily seem to be used for is tax evasion, avoiding asset tests, hiding assets from bankruptcy or divorce, and other criminal or rich person stuff. And if they're basicly only used by criminals and rich people, why should they have a tax advantage which is an open invitation to evasion?

But I forget: while normal people don't have trusts, MP's have a lot of them. As with housing, normal people would recognise that as a conflict of interest. And as with housing, it seems a little weird that our "representatives" don't.