While the ability to divert income arising from business activities where the individual was instrumental in earning that income was now more difficult following Inland Revenue's success in the Penny and Hooper case, there was still flexibility to structure investments that earned passive income.
There could be good family and commercial reasons why shares in a company should be owned by a trust. Dividends received from that company that were retained in the trust were then taxed at 33%.
''Higher marginal tax rates also increase the motivation of people to enter into transactions that may reduce their taxable income.
For example, if a rental property is purchased that is negatively geared, the tax losses generated will save more tax and therefore increase the incentives to undertake the investment,'' Mr Truman said.
Finance Minister Bill English yesterday released a statement headed ''More progressive tax system since 2010 changes''.
In it he said lower-income households were paying a smaller proportion of net income tax than they did in 2008, indicating the tax system had become more progressive since the Government's tax changes in 2008.
''This should contribute to improvements in income equality in New Zealand, contrary to the Opposition's completely false claims lower-income households are disadvantaged by the tax changes.''
Households earning less than $60,000 a year, which were about half of all households, were generally expected to pay less in percentage terms towards total net tax in 2013-14 than they were paying in 2008-09, he said.
Conversely, households earning more than $150,000 a year - the top 12% of households by income - were generally expected to pay more of the total net tax than they were paying in 2009-09.
Only 6% of individual taxpayers earned more than $100,000 a year, yet they they paid 37% of total income tax.
In the 2010-11 year, those taxpayers paid 29% of total income tax. Mr English said those figures raised questions about Opposition calls for the top tax rate to be increased.
''They need to explain to New Zealanders why that should happen when higher-income households are already paying a larger share of total net tax since the Government's tax changes three years ago.
''At any particular time, a large number of households effectively don't pay tax,'' he said.
The income tax paid by those households was exceeded by the amount they received from welfare benefits, Working for Families, paid parental leave and accommodation subsidies. All those were appropriate for those families genuinely in need, Mr English said.
Mr Truman said higher income tax rates increased the motivation to split incomes.
Where there were other family members on lower marginal tax rates, there was an incentive to allocate income to those other family members to access lower tax rates.
''While Inland Revenue has various measures at its disposal to counter tax-motivated transactions, they do not have the resources to identify them all.''
Increasing the top marginal tax rate would increase the tax collected but it would come at the expense of the tax system losing some of its efficiency because of the increased incentive of people to navigate their way around the rules, he said.
