International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

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 & bottom lb ros

More from across our site

The German government unveils plans to implement pillar two, while EY is reportedly still divided over ‘Project Everest’.
With the M&A market booming, ITR has partnered with correspondents from firms around the globe to provide a guide to the deal structures being employed and tax authorities' responses.
Xing Hu, partner at Hui Ye Law Firm in Shanghai, looks at the implications of the US Uyghur Forced Labor Protection Act for TP comparability analysis of China.
Karl Berlin talks to Josh White about meeting the Fair Tax standard, the changing burden of country-by-country reporting, and how windfall taxes may hit renewable energy.
Sandy Markwick, head of the Tax Director Network (TDN) at Winmark, looks at the challenges of global mobility for tax management.
Taxpayers should look beyond the headline criteria of the simplification regime to ensure that their arrangements meet the arm’s-length standard, say Alejandro Ces and Mark Seddon of the EY New Zealand transfer pricing team.
In a recent webinar hosted by law firms Greenberg Traurig and Clayton Utz, officials at the IRS and ATO outlined their visions for 2023.
The Asia-Pacific awards research cycle has now begun – don’t miss on this opportunity be recognised in 2023
An intense period of lobbying and persuasion is under way as the UN secretary-general’s report on the future of international tax cooperation begins to take shape. Ralph Cunningham reports.
Fresh details of the European Commission’s state aid case against Amazon emerge, while a pension fund is suing Amgen over its tax dispute with the Internal Revenue Service.