The Salvation Army is keen to be involved in the work of the Tax Working Group (TWG) and welcomes the publication of its background paper The Future of Tax.
This background paper usefully frames some of the issues we face as a nation around tax and most likely remains true to the TWG’s brief and terms of reference. The Army believes however the failure of this review to include income transfers such as working age benefits and New Zealand Superannuation (NZS) as at least a related issue is a significant shortcoming.
We believe that this shortcoming should be addressed and will make reference to this in the topics we consider in this submission. This shortcoming, in our opinion arises around the interface between taxation and income support for those receiving working age benefits, supplementary benefits and Working for Families (WFF) payments.
The myriad and complex ways in which these payments interact with income and income tax mean that low income people can face very high effective marginal tax rates (EMTR) and this in turn can become a poverty trap.