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Population ageing and taxation in New Zealand

Author

Listed:
  • John Creedy
  • Jamas Enright
  • Norman Gemmell
  • Angela Mellish

Abstract

This paper considers the implications for personal income tax and Goods and Services Tax (GST) revenues of population ageing in New Zealand. It considers 'pure' ageing effects; that is, population size is held constant but its age distribution changes over the next 40 years. With age-earnings profiles having a peak in the 45-54 age range, and the expected average age of the population over the next 40 years transiting this age range, younger individuals with increasing incomes are expected to approximately counteract the declining incomes of older individuals. However, ageing is expected to increase the dependence of income tax and GST revenues on pension choices. Without changes in New Zealand Superannuation (NZS), its cost is expected approximately to double over the next 40 years, with most of this occurring over the next 20 years.

Suggested Citation

  • John Creedy & Jamas Enright & Norman Gemmell & Angela Mellish, 2010. "Population ageing and taxation in New Zealand," New Zealand Economic Papers, Taylor & Francis Journals, vol. 44(2), pages 137-158.
  • Handle: RePEc:taf:nzecpp:v:44:y:2010:i:2:p:137-158
    DOI: 10.1080/00779954.2010.492574
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    References listed on IDEAS

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    1. Lixin Cai & John Creedy & Guyonne Kalb, 2006. "Accounting For Population Ageing In Tax Microsimulation Modelling By Survey Reweighting ," Australian Economic Papers, Wiley Blackwell, vol. 45(1), pages 18-37, March.
    2. Guest, Ross, 2007. "Innovations in the macroeconomic modelling of population ageing," Economic Modelling, Elsevier, vol. 24(1), pages 101-119, January.
    3. Miles, David, 1999. "Modelling the Impact of Demographic Change upon the Economy," Economic Journal, Royal Economic Society, vol. 109(452), pages 1-36, January.
    4. José Alvardo & John Creedy, 998. "Population Ageing, Migration and Social Expenditure," Books, Edward Elgar Publishing, number 1396, April.
    5. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467-467.
    6. John Creedy & Grant M. Scobie, 2005. "Population Ageing and Social Expenditure in New Zealand," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 38(1), pages 19-39, March.
    7. Richard Disney, 1996. "Can We Afford to Grow Older?," MIT Press Books, The MIT Press, edition 1, volume 1, number 026204157x, January.
    8. Ross Guest, 2007. "Can OECD Countries Afford Demographic Change?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 40(2), pages 149-164, June.
    9. Guest, R, 2005. "A Potential Dividend from Workforce Ageing in Australia," Australian Bulletin of Labour, National Institute of Labour Studies, vol. 31(2), pages 135-154.
    10. John Creedy (ed.), 2007. "New Developments in the Economics of Population Ageing," Books, Edward Elgar Publishing, number 12568, April.
    11. John Creedy (ed.), 1995. "The Economics Of Ageing," Books, Edward Elgar Publishing, number 540, April.
    12. Ross Guest, 2006. "Population ageing, fiscal pressure and tax smoothing: a CGE application to Australia," Fiscal Studies, Institute for Fiscal Studies, vol. 27(2), pages 183-203, June.
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    Cited by:

    1. Robert A Buckle & Amy A Cruickshank, 2013. "The Requirements for Long-Run Fiscal Sustainability," Treasury Working Paper Series 13/20, New Zealand Treasury.
    2. Omar A Aziz & Christopher Ball & John Creedy & Jesse Eedrah, 2013. "The Distributional Impact of Population Ageing," Treasury Working Paper Series 13/13, New Zealand Treasury.

    More about this item

    Keywords

    population ageing; taxation; income tax; GST; pensions;

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