It is common knowledge that individuals in New Zealand pay tax on all the various types of income that they earn. Direct taxation is compulsory for all Kiwis who earn a salary, wages, commissions or any other form of income. We also know that the New Zealand law requires almost all individuals to pay income tax to the Inland Revenue Department, on behalf of the government. New Zealand income tax is a compulsory payment that can be made directly or indirectly.
Taxes have been levied by the state throughout history, and New Zealand is no exception to the rule. Have you ever wondered when the taxation system started and when the people of this country first started paying income tax? Let us take a walk down history and discover some interesting facets of New Zealand income tax.
How did tax originate in New Zealand? The word “Taxes” is derived from the barbarous Latin word Tallia, or Tallium, which meant a piece of wood, squared and cut into two parts, on each of which they used to mark what was due and owing between debtor and creditor. The New Zealand system owes its origin to the British income tax of the 1850s. Back then, the income tax rate in Britain was 5%, which was to be paid by citizens only if their income was more than £100. According to historians, income taxes were initially raised to pay for armies during times of war. When the wars were over, the people stopped paying income tax. The US Constitution mentions that the Federal Government cannot impose income tax, except during wartime. Although the 16th Amendment to the US Constitution provides for Congress to tax people subject to its jurisdiction, the Supreme Court has ruled that citizens of the individual states are not necessarily subject to Federal jurisdiction. In the United States, income tax did not exist until World War 2. Back in New Zealand, citizens were charged income tax for the first time only 107 years ago. Until then, the government relied on their own traditional rights to impose customs duties and tariffs to raise money.
It is said that the Statute of Tallage passed into law by King Edward 1 in the year 1297 has been instrumental in sealing the constitutional legality of income tax. Although some portions of the 1297 Act were repealed in 1986 by the Labour Government, some crucial elements of the old law still hold significance. To conclude, the Statute may sufficiently prove that income tax laws have only existed for the past 100 years in New Zealand.