A former New Zealand finance minister is pushing tax reform in our nearest neighbour, which may give Australian policy makers pause for thought.
Sir Roger Douglas, who controlled the Shaky Isles purse strings in the 1970s, has teamed up with the University of Auckland to push a plan which would see income tax being paid to an individual and not the government.
In a research paper, Sir Roger has suggested that income tax on earnings up to $60,000 should be redirected into individual savings accounts.
He said these accounts would fund each person’s healthcare, pension and risk cover, replacing much of the current public system with private provision.
“By 2060, 26 percent of New Zealanders will be over 65, up from 16 percent in 2021, which will intensify the strain on superannuation and healthcare.
“We need to change the way we’re doing things so government costs can be reduced, quality of outcomes increased, and the plight of low earners, who are most vulnerable to public cuts, improved.”
Sir Roger said the reform would harness the “miracle of compound interest” that governments were not taking proper advantage of.
Co-author of the research paper Professor Robert MacCulloch said the reform would maintain total welfare funding from both public and private sources, while opening up more choice and competition in the supply of healthcare services.
“We need to adjust the tax system so the vast majority of New Zealanders of working age can provide for themselves,” Professor MacCulloch.
“The first step is to build mandatory savings accounts for health, pensions and risk cover via the transfer into them of current taxes paid on income up to $60,000.”
He said according to their model, an individual could save around $21,000 annually: $9450 into a health account, $7350 for superannuation, and $4200 for risk cover.
Read the research paper: How to change the welfare state from a Taxation to a Savings-based model.
