New Zealand: Tax policies to feature in general election

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

New Zealand: Tax policies to feature in general election

brown.jpg

Brendan Brown

Debate over tax policy will feature in the run-up to New Zealand's general election to be held on September 20 2014. New Zealand has a parliamentary system of government, under which members of the legislature are elected every three years. The electoral system is a mixed member proportional system, under which a political party's representation in the legislature is intended broadly to reflect the proportion of votes cast nationwide for that party. One consequence of that system is that the party with the highest level of support will not necessarily win government, since other parties may combine to form a coalition government or to support a smaller party in minority government. Further, the policies of smaller parties may have a greater prospect of being implemented than would be the case in a two-party system.

The party governing now (the centre-right National party) has been in power for almost six years, and implemented a package of reforms in 2010 which included an increase in the goods and services tax rate (from 12.5% to 15%) and a reduction in the corporate tax rate to 28% and in the top personal tax rate to 33%. In its 2014 Budget, the government projected a return to modest surpluses over the coming years, following a period of large deficits. While the return to surplus has raised the possibility of tax cuts, any tax cuts foreshadowed by the National party in the run-up to the election will likely be modest.

On the other side of the political divide, the left-leaning Labour party (the largest of the opposition parties) is campaigning on a plan to introduce a comprehensive capital gains tax (at a flat rate of 15% but with no indexation, and with an exemption for the family home). Labour would also increase (from 33% to 36%) the top personal tax rate for income exceeding NZ$150,000 ($125,000) a year. The tax rate for income earned by trusts and retained as trustee income would likewise be increased from 33% to 36%.

The Labour party also promises to "clamp down on tax avoidance". One proposed initiative to achieve this goal is for the Inland Revenue to 'embed' auditors within certain corporations that are thought to pose a high risk of tax avoidance.

The Green Party, the largest of the Labour Party's possible coalition partners, is also calling for a comprehensive capital gains tax. The Greens also propose an income tax-free threshold for individuals, and "a suite of ecological taxes on waste, pollution, and scarce resources".

Based on opinion polls, most commentators predict the return of the incumbent government as the most likely outcome of the election. This should see the continuation of existing tax policy settings, and in particular, no capital gains tax in the short term. But increased public acceptance (albeit from a very low base) of the merits of a capital gains tax, along with long term fiscal challenges, mean that the question of whether New Zealand introduces a capital gains tax increasingly appears to be a question of when, rather than if.

Brendan Brown (brendan.brown@russellmcveagh.com)

Russell McVeagh

Tel: +64 4 819 7748

Website: www.russellmcveagh.com

more across site & shared bottom lb ros

More from across our site

New French legislation should create a more consistent legal environment for taxing gains from management packages, say Bruno Knadjian and Sylvain Piémont of Herbert Smith Freehills Kramer
The South Africa vs SC ruling may embolden the tax authority to take a more aggressive approach to TP assessments, an adviser tells ITR
Indirect tax professionals now rate compliance as a bigger obstacle than technology and automation; in other news, Italy approved a VAT cut on art sales
AI-powered tax agents are likely to be the next big development in tax technology, says Russell Gammon of Tax Systems
FTI Consulting’s EMEA head of employment tax and reward tells ITR about celebrating diversity in the profession, his love of musicals, and what makes tax cool
Canadian Prime Minister Mark Carney and US President Donald Trump have agreed that the countries will look to conclude a deal by July 21, 2025
The firm’s lack of transparency regarding its tax leaks scandal should see the ban extended beyond June 30, senators Deborah O’Neill and Barbara Pocock tell ITR
Despite posing significant administrative hurdles, digital services taxes remain ‘the best way forward’ for emerging economies, says Neil Kelley, COO of Ascoria
A ‘joint understanding’ among G7 countries that ‘defends American interests’ is set to be announced, Scott Bessent claimed
The ‘big four’ firm’s inaugural annual report unveiled a sharp drop in profits for 2024; in other news, Baker McKenzie and Perkins Coie expanded their US tax benches
Gift this article