Money, banking and taxes

The currency in New Zealand is called dollars, and the ATM machines look similar (except I do like the curved shape of the ATMs at our bank). Sometimes I think those are the only two similarities in the area of banks and money between the US and New Zealand.

We have three accounts at a bank called Westpac. Here's a photo of the small branch near our house. There are bigger branches downtown.

Here are the differences. New Zealand has the highest interest rates in the developed world, a strategy adopted by the central bank to slow inflation. One of our savings accounts pays 8.3% interest if you don't take any funds out during the month. The other account, which we take money in and out of, pays 7.4%. Our checking account pays 5% interest. But "checking" account is an inaccurate name, because we don't have checks (and I'm not saying that as a joke because they are cheques here.) There's no almost no identity theft in New Zealand, so people give out their bank account numbers easily. For example, we bought a quarter of a cow and the farmer gave me their bank account number, and I did a transfer online into their account to pay for the beef. (Our house came with a big freezer.) When we had a plumber fix something in our house, the invoice had their bank account number printed at the bottom, and I went online and did a transfer to pay them. The transfers are free, and you can set them up to be recurring, like for rent payments. Utility bills can be set up to pay by direct debit, so I guess that's another thing that's like the US.

Mortgages are 9.5% interest and the longest period for which you can fix the interest is five years. After that, the interest rate floats. Scary.

More shops take debit cards than credit cards. No one pays with checks, in fact stores don't take them. One of the little craft shops where Dave buys art supplies takes only cash, but every other store here I've been in, big or small, takes debit cards. Only they're called EFTPOS cards here (electronic funds transfer at point of service). Checks are so rare that we get charged 35 cents to deposit a check in our bank account.

Then there's the way taxes work, almost unimaginable to Americans because of the simplicity. Every person pays 19.5% tax on every penny they earn up to NZ$38,000 (which is US$30,400), and 33% on every penny between $38,000 and $60,000, and 39% on every penny over $60,000. Every penny. No deductions, exemptions, or minimum amount at which taxes start. No different rate for married couples, or couples with children. So the vast majority of New Zealanders don't even fill out a tax return -- the tax is deducted at work and at the bank on interest. The tax year is April 1 to March 31, and I'll have to fill out a tax return by mid June because I got paid in cash a few times and will need to declare that income. Having just paid an accountant in the US to do our taxes there, and having read over all the pages and pages of forms, the system here seems almost miraculous in its simplicity.

Charitable contributions are handled separately from taxes, as a rebate. I hear that sometime in August or September we will fill out a form and attach our charitable giving receipts and send them off, and we'll get back the taxes we paid on that amount. There is also a tax rebate for people who make less than $9,500 in a year. They get back about three quarters of the tax they paid.

It's been interesting to go to a smaller country, with a significantly lower GDP per capita, and find that more money transactions are handled electronically than in the US. And it's amazing to live in a place with such an uncomplicated tax system.