The minimum wage up slightly from NZ$9.50 to $10 (around US$6) on 1 July. Photo: 123RF
A Cook Islands MP is accusing the government of taxing low-wage earners more by not adjusting the tax-free threshold with a minimum wage increase.
The changes came into effect on 1 July, pushing the minimum wage up slightly from NZ$9.50 to $10 (around US$6).
In Rarotonga, the tax system includes a zero percent threshold of up to $16,500 earned income per year. Now, more income sits above that threshold.
Opposition leader Teariki Heather told RNZ Pacific this could harm the people the minimum wage policy is supposed to help.
"You can't increase the threshold when the minimum wage increases, because then the government doesn't get any benefit from it, no tax," he said.
Teariki Heather Photo: Caleb Fotheringham
Responding to a question about the tax threshold in Parliament, Prime Minister Mark Brown said he would look into it.
Local media has reported that Brown told parliament on 25 July that it was never his intention to increase the tax burden for workers.
"It should always be below so if it needs to increase the tax free threshold, then that is something that we need to do,"
More than two weeks later, there is yet to be an announcement on threshold changes.
Heather said that the minimum wage increase is not enough, given the fast-rising cost of living increase on the islands.
"There's not enough money to go around... and I still believe the minimum wage is too low.
"It should be at $12 to $12.50, most private businesses actually say more than that than that, around $15. Across the board, it still won't benefit the families. Everything now has increased."
Businesses happy
Cook Islands Chamber of Commerce director Steve Anderson told RNZ Pacific that businesses are happy with the changes, given most of them pay above the minimum wage as it is.
"Only 2.5 percent of these private sector employees earn the current $9.50 per hour minimum wage, with 52 percent earning above $12.5 per hour, indicating many businesses already pay competitive wages."
"A 'little and often' approach is seen as achieving incremental gains for employees. This avoids unnecessary inflationary pressures, or a drain on the tax-take (noting that most minimum wage earners are public servants),"
Anderson said he has been assured by the government that the tax-free threshold will be increased soon.
