Tax inequity in New Zealand

Interestingly, in Aotearoa New Zealand, the very rich don't pay much tax. 

Why do I say that? Because reports show that 19.5% is the average tax paid  and that most of us are in this tax bracket (Rashbrooke, 2023); yet the very rich ONLY pay 8.9% tax (Rashbrooke, 2023), or 9.5% (Inland Revenue Department, 2023a).  And worse, the poorest amongst us, those of us who are an income of under $14k who MUST be struggling to keep the lights on, keep enough petrol in the car, and feed the family, pay 10.5% tax (Inland Revenue Department, 2023b)... still a higher rate than the richest (Rashbrooke, 2023). 

Hell's teeth, that doesn't sound equitable, does it?! Our collective and successive governments could work harder much harder for the average Kiwi to shut tax loopholes for the very rich, and tax high income citizens the same amount as those of us who earn so very much less. 

And the bulk of our tax take "comes from individuals paying income tax - in the 2024 financial year, that was 51 percent of tax revenues. That was followed by GST, which was 25 percent of revenue, corporate tax at 16 percent and 'other' at 8 percent" (Edmunds, 2024).

Further, our richest citizens have many assets which are insufficiently taxed, such as property transactions; they can pay for the expertise and instruments to shift wealth offshore in order to avoid tax. They are also able to influence - threaten - governments to dump policy changes they see as unwelcome, in order to protect their incomes (Inland Revenue Department, 2023a; Rashbrooke, 2023). 

What rubs salt even more in that wound is it seems the wealthy in the US are taxed at roughly 23% (Loe, 2024) (though I must admit, I was pretty sure I had seen a 10% income tax for the USA wealthiest, but cannot find that source at present, so will go with the evidence). We tend to think of the US billionaires as being 'fat cats' who pay few taxes, yet they contribute more to their society than wealthy Kiwis.

Not something for us to be proud of. 

Sam

References:

Edmunds, S. (2025, March 22). Who is actually paying the tax in NZ? - Ask Susan. Radio New Zealand. https://www.rnz.co.nz/news/business/545634/who-is-actually-paying-the-tax-in-nz-ask-susan

Inland Revenue Department. (2023a). High-Wealth Individuals Research Project [Report]. Te Tari Take. https://www.ird.govt.nz/-/media/project/ir/home/documents/about-us/high-wealth-research-project/hwi-research-project/final-report-april-2023/report-high-wealth-individuals-research-project.pdf?modified=20230423203807

Inland Revenue Department. (2023b). Tax rates for individuals | Ngā pāpātanga tāke mō te tangata. Te Tari Take. https://www.ird.govt.nz/income-tax/income-tax-for-individuals/tax-codes-and-tax-rates-for-individuals/tax-rates-for-individuals

Loe, M. (2024, March 13). No, billionaires don’t pay average of 8.2% in federal taxes. Verify. https://www.verifythis.com/article/news/verify/joe-biden/biden-billionaire-tax-rate-fact-check/536-75be1f9b-d40f-45b3-9201-82b161a4e61b

Rashbrooke, M. (2023, April 27). New Zealand’s millionaires pay lower tax rates than cashiers – it’s time to fix the system. The Guardian. https://www.theguardian.com/world/2023/apr/27/new-zealands-millionaires-pay-lower-tax-rates-than-cashiers-its-time-to-fix-the-system#:~:text=The%20report%20shows%20that%20New,the%20average%20Kiwi%20(19.7%25).

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The secondary teaching pay gap

Once upon a time, New Zealand society saw teaching as a valuable profession, and our teachers were paid a living wage. Bryan Bruce, in his 2017 documentary, "Who Owns New Zealand Now" explained that in 1979, teachers and MPs had roughly pay parity (Bruce, 2017). 

However, between 1979 and 2017, New Zealand's "market-driven economic system [...] created huge income inequalities" (Bruce, 2017, 7:34), noting that "back in 1979" a new teacher "would have been earning $17,360 a year while our back bench MP was on $18,000, so [the salaries were] roughly equivalent". Seven years ago, in 2017, a new teacher "earns around $78,000 a year" (7:58), which, when compared to "a back bencher" MP's salary, who earns "$160,000 or twice as much" (8:00) there appears a lack of parity. Teaching salaries begin at just under $58,000 to specialist educators at just over $95,000 (Taunton, 2024), with an average of $79,000 (Glassdoor, 2024). Meanwhile a base level MP earns $164,000 (Sadler, 2023). Secondary school teachers still earn half of what an MP without portfolio earns.

I would not have thought that MPs do twice the work that secondary school teachers do; nor would I have thought that the value provided to the country by back bench MPs is twice that of a secondary school teacher. MPs do not require a degree to go into Parliament or to stand for office, yet almost all secondary school teachers possess a degree as well as a graduate certificate or diploma in teaching. They have all done close on four years tertiary training in order to teach. I cannot understand why this gulf exists... or how it got that way. 

The mechanisms for this reduction in pay parity are annoyingly opaque. Is it because we have devalued teaching? Is it because more women have moved into the field, and would accept less? Is it a conflation of the two? Or is there something else going on?

Irrespective of why, there appears to be a looming crisis in New Zealand secondary teacher recruitment because more are leaving the profession, and fewer are applying. In the six months from October of 2022 through to the end of March 2023, the PPTA reported that teaching "vacancies attracted an average of 1.6 New Zealand applicants [per ad;] less than half the pre-Covid figure of 3.4, and much lower than 10 years ago when schools received an average 9.9 New Zealand applicants for every position advertised" (Gerritsen, 2023). 

While a proposed secondary school teacher pay rise of 14.5% was accepted by Government in 2023 (Neilson, 2023), pay alone is not the only issue for a lack of applicants. Long hours, heavy administration, having to work within the confines of NCEA with few teaching resources, working with old technology and infrastructure, being a behavioural psychologist, dealing with disruptive students, and helicopter parents (Kitchin, 2023) all take their toll; particularly the sixty hour weeks for an average of $90k per annum.

It will be interesting to see what - if anything - changes. 

Sam

References:

Bruce, B. (Director). (2017). Who Owns New Zealand Now [documentary film]. Vimeo. https://vimeo.com/233433126

Gerritsen, J. (2023, May 5). Secondary Principals report ‘unprecedented shortages’ of teacher across New Zealand. New Zealand Herald. https://www.nzherald.co.nz/nz/secondary-principals-report-unprecedented-shortages-of-teachers-across-new-zealand/XNU6HN7G3JEXRI5QRDOZPCVYTY/

Glassdoor. (2024,March 6). How much does a Teachers make in New Zealand?. https://www.glassdoor.com/Salaries/new-zealand-teachers-salary-SRCH_IL.0,11_IN186_KO12,20.htm

Kitchin, T. (2023, June 20). What life is like for high school teachers in New Zealand amid ongoing industrial action. Radio New Zealand. https://www.rnz.co.nz/programmes/the-detail/story/2018894967/what-it-s-like-to-be-a-high-school-teacher-in-new-zealand

Ministry of Education. (2022, June 16). The Statement of National Education and Learning Priorities (NELP) and the Tertiary Education Strategy (TES). https://www.education.govt.nz/our-work/overall-strategies-and-policies/the-statement-of-national-education-and-learning-priorities-nelp-and-the-tertiary-education-strategy-tes/

Neilson, M. (2023, August 2). Teacher pay rise: Education Minister Jan Tinetti on Government response to secondary school proposal of 14.5 per cent increase. New Zealand Herald. https://www.nzherald.co.nz/nz/politics/teacher-pay-rise-education-minister-jan-tinneti-on-government-response-to-secondary-school-proposal-of-145-per-cent-increase/BAGNPSN4DZAHHGNU3CZ2IPDFWM/

Sadler, R. (2023, January 8). How Jacinda Ardern's and New Zealand MPs' salaries compare to overseas politicians. Newshub. https://www.newshub.co.nz/home/politics/2023/01/how-jacinda-ardern-s-and-new-zealand-mps-salaries-compare-to-overseas-politicians.html

Taunton, E. (2024, March 13). Here’s how much police officers get paid. Stuff. https://www.stuff.co.nz/money/350209423/heres-how-much-police-officers-get-paid

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The issue of pay parity

Pay parity across genders is an issue which is proving very 'stubborn' to shift in our societies - our progress in Aotearoa New Zealand is glacially slow, having moved something like 2 percentage points in a decade from 89% parity in 2011, to 91% today (Statistics New Zealand, 2021).

Let's look at a professional example: accounting. Historically all accounting firms in New Zealand and internationally have worked with the exact same career progression stages and pay band. Typically, an accountant starts with a low-paying graduate role, and then slowly moves up the ranks until they are at the top. This type of career progression fits with Levinson's season theory (1978) where individuals pass through a series of predictable and sequential stages in their career development (Inkson et al., 2015). 

However, Levinson's theory (1978) may not account for the experiences of women who take time off for childcare or parental leave. A survey completed in 2021 by the Chartered Accountant’s Association in Australia and New Zealand (CA ANZ) found that women make more career sacrifices for their families, with almost 50% of women taking career breaks for parental care or care for others, compared to just 20% of men. Women - on average - take only two years off work, but find this has a significant impact on their career progression (CA ANZ 2021b).

Accounting profession gender biases appear to be an issue in both New Zealand and Australia, as more women than men enter the profession, yet a significant gender pay gap remains. In Australia, female accountants earn 27% less than their male peers, while in New Zealand the gender differential is a shocking 34% less (CA ANZ 2021b). This differential is attributed to 'care' duties. The survey highlights that within the profession, the dual burden which women have - caring and career - does not appear to be acknowledged (CA ANZ 2021b).

Since the survey, an report highlighting these systemic inequalities has been published, recommending that employers provide a supportive and inclusive work (CA ANZ, 2021a). What I find even more interesting is how many men 'see' that there is a pay gap - 30% - compared to women: 70% (CA ANZ, 2021a, p. 5; image illustrating this post). Those in power are unable to see that there is actually a problem.

The career breaks we take to have our families - which are so societally important - really come with a sting in the tail, pay-wise. It is clear that we understand the barriers. It is now a matter of getting those who have decision-making power to enact them.

Eman & Sam

References:

CA ANZ. (2021a). Narrowing Your Gender Pay Gap: An Agenda for Action for the Accounting Profession [report]. Chartered Accountant’s Association in Australia and New Zealand. https://www.charteredaccountantsanz.com/-/media/68d8813f25cf45aba9a8cc2967503797.ashx

CA ANZ. (2 June 2021b). Survey reveals widening gender pay gap for chartered accountants. https://www.charteredaccountantsanz.com/news-and-analysis/media-centre/press-releases/survey-reveals-widening-gender-pay-gap-for-chartered-accountants

Inkson, K., Dries, N., & Arnold, J. (2015). Understanding Careers (2nd ed.). SAGE Publications Ltd.

Levinson, D. J. with Darrow, C., Klein, E., Levinson, M. & McKee, B. (1978). The Seasons of a Mans Life. Knopf.

Statistics New Zealand. (2021). Gender pay gap unchanged. https://www.stats.govt.nz/news/gender-pay-gap-unchanged

* Eman Ghadour kindly prepared much of the material for this post

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