TAXN 201 – Introduction to Taxation (Weeks 1-6)

Vocabulary flashcards cover core taxation terms, principles, tax types, NZ-specific features, comparative international facts and demographic challenges introduced in TAXN 201 Weeks 1-6.

Tax

A compulsory contribution levied by government on persons, property, income, commodities or transactions to finance public expenditure.

New Zealand Tax System

The structure of taxation in NZ, relying mainly on income tax, GST (15 %) and company tax (28 %), with no comprehensive capital gains tax, land tax or estate duty.

Income Tax

A direct tax on the earnings of individuals and entities; in NZ applied through progressive marginal rates inclusive of ACC Earner’s Levy.

Goods and Services Tax (GST)

A 15 % flat-rate consumption tax on most goods and services supplied in New Zealand.

Company Tax

A flat-rate income tax on corporate profits; 28 % in New Zealand.

Capital Gains Tax

A tax on profit from the sale of capital assets; New Zealand does not have a comprehensive version of this tax.

Land Tax

A levy on the unimproved value of land; not currently imposed in New Zealand.

Estate Duty

A tax on the transfer of a deceased person’s estate; abolished in New Zealand.

ACC Earner’s Levy

Additional levy included in NZ PAYE calculations to fund accident compensation for wage and salary earners.

Income Tax Thresholds

Bands of taxable income to which different marginal tax rates apply; revised thresholds take effect 31 July 2024.

Flat Rate

A single, uniform tax rate applied regardless of income level; e.g., NZ GST (15 %) or company tax (28 %).

Direct Tax

A tax collected directly from the person or entity legally liable, e.g., income tax or local rates.

Indirect Tax

A tax collected by an intermediary from the consumer, e.g., GST or customs duties.

Subject-Matter Classification

Grouping taxes by what is taxed—income, wealth, property versus transactions and events.

Provisional Tax

Pre-payments made by taxpayers to the IRD based on expected income tax liability for the year.

Inland Revenue Department (IRD)

New Zealand government agency responsible for tax collection and administration.

Adam Smith’s Canons of Taxation

Four foundational tax principles: Equity, Efficiency, Certainty and Convenience (1776).

Equity (Taxation)

Fairness in taxation—includes horizontal and vertical equity considerations.

Horizontal Equity

The principle that taxpayers in similar circumstances should be taxed similarly.

Vertical Equity

The principle that taxpayers in different circumstances (e.g., income levels) should be taxed differently, often progressively.

Efficiency (Tax Principle)

A tax should minimize economic distortions and not discourage productive activity.

Certainty

Tax obligations should be clear and predictable to taxpayers.

Convenience

Taxes should be collected at a time and manner most suitable for the taxpayer.

Tax Working Group Principles

NZ advisory group’s criteria for tax policy: Efficiency, Equity, Revenue Integrity, Fiscal Adequacy, Compliance & Administration Cost, Coherence.

Revenue Integrity

The degree to which the tax base is protected from avoidance and evasion.

Fiscal Adequacy

A tax system’s capacity to raise sufficient revenue to fund government expenditure.

Compliance and Administration Cost

The resources expended by taxpayers and the government to comply with and enforce tax laws.

Coherence

Consistency and integration of individual taxes within the overall tax system.

Progressive Tax

A tax where the average rate increases as the taxable base (e.g., income) rises.

Regressive Tax

A tax where the average rate decreases as the taxable base increases, placing proportionately higher burdens on lower incomes.

GST Flat Rate (15 %)

The single rate applied to taxable supplies of goods and services in New Zealand.

Company Tax Rate (NZ)

A flat 28 % rate charged on company profits irrespective of income level.

Medicare Levy (Australia)

A 2 % surcharge on taxable income to fund Australia’s public health system, collected alongside income tax.

Value Added Tax (VAT)

Multi-stage consumption tax; UK rate is 20 % on most items.

National Insurance (UK)

Earnings-based contributions (12-14 %) funding state benefits and healthcare alongside income tax.

OECD Corporate Tax Rates

Comparative list showing corporate income tax percentages across OECD member countries, ranging from 8.5 % (Switzerland) to 34 %+ (France).

KiwiSaver

New Zealand’s voluntary, work-based retirement savings scheme; assets ~NZ $100 billion (2025).

New Zealand Superannuation

Government-funded pension paid to residents aged 65+, raising sustainability concerns with an ageing population.

Population Ageing Challenge

Projected increase in the 65+ age group reducing the ratio of working-age taxpayers to retirees, pressuring future tax revenue.

Managed Funds (Australia)

Large pool of retirement and investment funds (~A$4.1 trillion, 2025) highlighting contrast with NZ savings levels.