Taxi Taxi

After ongoing speculation about Brian’s tax rate, we decided a graph was in order.

So, with a couple of home-brew beers and some salted nuts we settled into the couch.   Brian fired up excel, and I started preparing some data (for excel that is – regex was required).

A couple of hours later we had our answers.

Norway does indeed have a graduated tax system, much like New Zealand, but in accordance with their tax philosophy, is considerably higher, with both our top tax rates at over 50%.

However,  after a bit more research, what I even more found surprising, is not that Norway has a higher tax rate, but rather than New Zealand has one of the lowest personal income tax rates in the world (and one of the highest corporate rates).  So, if you want to start a business, Norway it seems,  is a pretty good place to be.

Income and corporate tax rates by country (courtesy of wikipedia)

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4 Responses to Taxi Taxi

  1. CeilingCat says:

    Your graph made me curious enough to read up a little bit on tax rates. (I know, it sounds jolly dull, the sort of thing odd people sidle up to you at parties to talk about. “Excuse me, do you know about tax rates?” But it’s not! )

    NZ had personal tax rates even higher than (Current-day) Norwegian ones back in the 1980’s (Under Muldoon). The top rate then was 66%, and inflation was stupidly high (in the order of 20%) which was migrating a lot of taxpayers onto that top 66% rate. (Rogernomics changed all this in 1984, back down to 33% max).

    Around then, something called supply side economics became trendy, and much research was done, proving that lowering the top rates (for example, we’ll say moving from the Norwegian tax rate you’ve graphed to the NZ one) can actually produce more revenue (In the medium term). It appears that when the tax rate is sufficiently high, people don’t bother starting new businesses, and instead spend their time trying to avoid taxes. The wins come with less tax avoidance, more growth, and more people participating in the workforce.
    (See article)
    http://www.econlib.org/library/Enc1/SupplySideEconomics.html

    So when you write “…if you want to start a business, Norway it seems, is a pretty good place to be.” I would argue that NZ is a better place to start a business, but Norway is a better place if you’re already a business. If you’re starting a business, then you’re less concerned about corporate tax, and more concerned about personal tax that you’ll pay on the money you take out. I suspect a huge number of small businesses are sole-trader type structures anyway, and hence don’t pay corporate tax at all.

    Sadly though, NZ has dropped the ball, as everyone knows it’s better to buy a house with your money than to start a business. Sigh.

  2. mikke mus says:

    My but things change fast in NZ. See http://www.nzherald.co.nz/residential-property/news/article.cfm?c_id=76&objectid=10770671 This was published 2 days before the bubble bursting forecast.

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