By Lisa Marriott & Jonathan Barrett*
Ahead of the 2023 election, it was clear there was not a lot in National’s tax policies to benefit the least well off. Nothing has happened over the first 100 days of government to change this assessment.
From a progressive perspective, it is clear New Zealand has elected an austerity government. The National-ACT-NZ First coalition is prepared to impose swingeing cuts in the public service and curtail welfare to meet its promises of income tax relief for some.
We won’t know what the tax cuts will be until the Budget on May 30. But early indicators are they will be squarely aimed at National’s voting base.
What did (and didn’t) survive negotiations
The foreign buyer’s tax proposal did not survive coalition negotiations with NZ First. We have also heard little more about taxing offshore gambling. Perhaps the government has realised this is easier said than done.
Cost recovery from immigrants was another proposed revenue source. Strictly speaking, this wasn’t a new idea. A review of immigration fees and levies commissioned by the Labour government in 2022 identified several ways to increase the price of some immigration services, many of which have been implemented. All is quiet on this policy as well.
Another component of National’s tax proposals was removing the depreciation allowance on commercial property. This was an unusual idea for National and we suspect it will not become law.
The phased-in return of mortgage interest deductibility for residential rental property owners is included in the National-ACT coalition agreement. However, the provisions are more generous than those originally proposed by National and are now retrospective, with a 60% reduction in 2023-24, 80% in 2024-25 and 100% in 2025-26.
This will reduce government revenue and potentially result in tax refunds for residential rental property owners in 2023-24, who will be allowed a 60% interest deduction, rather than 50% under the existing legislation. The announcement in December 2023 that the bright-line test will be reduced to two years from July 1 2024 will further reduce tax revenue.
The Clean Car Standard was an initiative of the previous government to address vehicle emissions. Research suggested households that would benefit the most from vehicle and fuel efficiency standards were low-income ones. Despite strong support, the clean car discount scheme was repealed in December 2023 as well.
The scheme provided rebates for zero- or low-emission vehicles, and additional fees for high-emission vehicles. New Zealand was already late to the party when this policy was introduced in April 2022.
In 2022, electric and hybrid vehicles accounted for around one-third of all new car registrations, which increased to 41% in 2023 (26.5% hybrid and 14.5% electric). Sales of electric vehicles in December 2023 (before the removal of the discount) were nearly 14 times higher than those in January 2024.
Electric or hybrid vehicle owners will also start paying road user charges from April 1, 2024. While the government campaigned on no new taxes, extending the tax base does not appear to qualify as a new tax.
Likewise, the recently announced increase in car registration fees to fund a massive road-building programme is not being considered a tax increase by the government.
The government has also announced fuel tax increases – scheduled to start in 2027. National ministers have responded to criticism by saying the eventual tax increase will not be in this political term.
Nicola Willis is continuing to walk back National’s pre-election promise to get the books back in surplus by 2026-27, as the the Crown's tax take underwhelms and tax cuts remain on the cards.
— Jenée Tibshraeny (@JeneeTibshraeny) March 5, 2024
The corporate tax take is down 11% from last year.https://t.co/g0gxQ8Bf7f
The Budget should provide clarity
The Taxation Principles Reporting Act 2023 mandated reporting based on specified principles. While there is never full consensus on what good tax principles are, this act would (or should) have resulted in greater transparency on at least some tax measures. However, it was repealed in December 2023.
To reiterate, until the Budget, we won’t gain a full understanding of the government’s tax objectives.
Action taken in the first 100 days of the government has given us a reduction in tax transparency, beneficial tax treatment for residential landlords, reduced incentives for consumption of low-emission vehicles, some clear areas where expenditure will be slashed, but little clarity on how tax cuts will be funded.
While we can’t yet know the full details of tax policy, the expenditure side indicates the poor and the environment will be worst affected, while residential rental property owners will benefit.
*Lisa Marriott, Professor of Taxation, Te Herenga Waka — Victoria University of Wellington and Jonathan Barrett, Associate Professor in Commercial Law and Taxation, Te Herenga Waka — Victoria University of Wellington.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
89 Comments
I give the coalition 6 months. 12 months on the outside.
As each coalition partners starts to measure the huge anger that they have evoked in their bases they will want to distance themselves from key policies of the other partners... leading to division, and ulimately collapse.
i dont know anyone who is happy with them - even mum and dad landlords arent keen on smoking, environmental damage from development without due process and encouraging climate change via fossil fuels. Its like the 3 parties wanted power so badly they lost perspective and each accepted all the evil and stone age policies of the others..
You are never going to make everyone happy, not in 2024 anyway.
What I will say is National are way lighter in talent than I was expecting. Not only that, Winston has far more presence and looks more statesmanlike than Luxon. National never bothered to understand the national accounts and made commitments they simply cannot keep as a result. Willis looks and sounds way out of her depth and seems incapable of answering a question. I can see her getting reshuffled to another portfolio.
OSE, you obviously read and accept too much of what the left leaning media spouts to get an accurate view of what middle NZ thinks of this government. They will be around for at least two terms, unlike some of the media outlets it would seem.
Speaking of the media (particularly TV and print); I believe that the bulk of New Zealand's media are just far too obsessed with NZ politics and, in particular, their totally blinkered attacks against right wing parties. The election result showed that the bulk of New Zealand voters do not go along with this anti-right wing bias at this time and probably would prefer their news to be free of a political focus altogether. The result of this left wing political media crusade which has little support outside those left wing die-hards, is that the silent majority simply turn off from "the news" whilst the businesses that provide advertising revenue do the same. Ergo, the outlets are struggling to survive and in my opinion it is a demise of their own making. TVNZ, GIVE US NEWS, NOT POLITICS!
Couple of issues: 1) New Zealand doesn't really have a right wing per se, just different favourites for welfare, and 2) there are plenty of folk out there who believe the media here lean right and were very mean to their favourite politicians too.
Point two can be a matter of perceptions of bias being inversely proportional to depth of engagement with content. And subject to confirmation bias too.
Virtually every poll has the coalition winning.
Labour is down to almost its lowest EVER.
Many polls show the coalition gaining support.
This is fanciful sorry.
"even mum and dad landlords arent keen on smoking" - so what? Don't smoke then. Young people don't smoke anyway, they vape which is a different issue.
Certainly not always positive, but I would guess largely over 50%, I would hope 80%, but maybe I'm fooling myself.
I just find it tiring, that no matter the subject, the vast majority of comments is always negative and extremely critical, as if the commenters believe they would do so much better.
The report says landlords win and the poor and the environment loses, and you think people should look on the positive side that the landlords win? Otherwise the posters are just nasty negative people? Landlords by definition do not need help from the government, they are already wealthy. Helping poor people and protecting the environment are core to what governments are there for, as the market doesn't fill those needs.
I'm inclined to ignore the article
Is that not a reflection of you rather than the content of the article?
Ahead of the 2023 election, it was clear there was not a lot in National’s tax policies to benefit the least well off. Nothing has happened over the first 100 days of government to change this assessment.
From a progressive perspective, it is clear New Zealand has elected an austerity government. The National-ACT-NZ First coalition is prepared to impose swingeing cuts in the public service and curtail welfare to meet its promises of income tax relief for some.
Which part is anti government bias and political affiliation?
Who are the Beneficiaries...
The heart of the question, really.
Cuts to services to fund tax cuts for property speculators and tobacco/polluters while working Kiwis disproportionately carry the tax load. And wanting to remove school lunches for the poorer to help fund them.
All while also deliberately reducing transparency in taxation.
Morally, those look a bit disappointing. Especially when MPs involved benefit so much personally.
Im thinking media should avoid them like the plague ....lol . Why give airtime to the crew thats putting your fellow man on the chopping block...lol. Landlords have a tiny burnt offering that wont amount too much in a stagnant/declining market . I have yet to see anything significant that will lead us all to the promised land...lol
I noticed that the first 20 minutes of last night's 6pm News was given over to the repeal of the anti-smoking legislation. One expert after another saying how many people will die as a result. It was a lot of prime time tv given to what would normally be a 60 second story. And I thought to myself "the media is not very happy with the new government ".
With the NACTF keeping all the tax changes secret - so that only insiders ... and their chosen friends & supporters ... know anything about them, they run the risk of corruption sneaking in. Not impressed.
I'd prefer a steady set of announcements as previous governments have done.
Why isn't the NACTF doing this? Probably because they were completely unprepared to govern and their policies, as we already know, were 'half-baked'.
I prefer some actual change rather than announcements, but that's just me (and the majority of voters).
As regards corruption... https://www.scoop.co.nz/stories/PO2007/S00275/dodgy-as-hell-tender-quot…
The tax changes benefit the rich - those with capital.
ACT & National are waging class warfare which will further extend inequality and the neoliberalism lite system we run.
The NZ tax system is not fair. It's biased towards property investment over other forms of investment, there is no comprehensive capital gains tax, no wealth tax for the very rich, and no inheritance tax.
Inheritance tax is great - I'd love to pay more tax after I'm dead and less when I'm alive.
Plus it moves us one small step closer to equality of opportunity (don't worry rich parents - your children still get the enormous head start from expensive education, tutors, and a stable home life, they can look after themselves).
The problems of a broken system arent fixed though poorly conceived laws and taxes. The system needs to be planned and implemented in context. Second and third order effects need consideration.
Adding a tax because of a populist perception of someone getting money for jam helps no one.
Arguably feeding tax to a system too broken to properly spend it further compounds the problem.
"Adding a tax because of a populist perception of someone getting money for jam helps no one."
Estate Duty is still on the books, the rate was reduced to zero in 1993. The Key government removed Gift Duty in 2011. Both enjoyed broad political support and it was widely regarded as obvious that a significant part of every large estate ought to go to the state.
I agree Kiwi Overseas (name checks out) the NZ tax system is not fair at all. 9% of NZ Taxpayers pay 42% of the net tax. Completely unfair.
https://www.treasury.govt.nz/information-and-services/financial-managem…
I'm happy about the property changes, which are simply reversals to how the result of the world works. Happy about he removal of the Maori health authority (I got called up for a surgery after 2 years waiting the week it was announced) and the push for improving education standards, particularly more consistency at primary school level. There are a lot of primary classrooms where maths either isn't taught, or it's taught at a bare minimum, because the teachers don't like maths so avoid it. Also happy about some of the changes for building: such as materials approved in Oz being approved here etc. Happy about gas exploration because we don't generate enough electricity, while being annoyed because climate change is not a woke conspiracy.
I'm annoyed at the smoking ban change, that the RUC isn't simply a blanket cost on all cars, and all of this needling around the treaty. I believe in climate change so I'm annoyed an incentive to go electric has been removed, but I'm not sure if it was the best way to incentivise. While being generally pleased at intensification, I am displeased that it's blanket "all at once everywhere" and I think more nuanced zoning around public transport corridors would be better. You can raise taxes on those properties as they are worth more and while there will be some hand-wringing, they will find themselves in the hands of people who will turn 1 house into 8 and the proximity to rail reduces the need for more than one carpark.
I'm unclear if 3 waters was a good idea. It seems like it might have been but Labour added co-governance and then completely lost control of the dialogue.
I think Labour went about tax reform backwards. If they had allowed for inflation adjustments to their GCT back when they came into office it would have gone through and by now it would be baked in. Cullen let ideology take over, which set the tone for the following 6 years, sadly. Everything else after was a workaround.
Most of that is a pretty good summation of my own views: thank-you.
My big remaining question is who will the innovation, transparency and ability to learn come from to remedy, or even try to remedy, where we find ourselves. I don't see anything really new from anyone.
Easy to forget that the Left is determined to bring in a wealth tax at some point, which will deter investment in NZ and cause many of those who currently pay the most in tax to go offshore. This is already happening in California, where those who pay the most in income tax are leaving in the thousands for low-tax states. California can only pay for social services by borrowing at an unsustainable rate. Whatever shortcomings the current government in NZ may have, they are way better qualified to manage the economy than a green/Labour coalition.
We're drifting down the income curve as a country and have to live within our means while we try and build a diverse economy, but there's no real innovation here that says we can do either of those things without making life worse for a lot of people.
Been voting for who I dislike least since forever.
Poor analysis. David Seymour has already stated the 60% interest deduction for 31/3/24 will not happen. Labour's 50% deduction will remain. The reductions in interest deductibility have severely impacted the supply of rental houses as rental homes have been sold to happy FHBs, but causing rapid rent rises. Cause and effect.
by the same token, investors compete with FHB for the lower priced housing using the advantage of deductions to offset personal income, and leverage, thus turning those FHB into renters. i have no problem if they were adding to the supply of housing ie new builds but they are not instead they are reducing the stock available to FHB and competing with them to drive up prices.
I see several errors in the article. Tax refunds for residential landlords? Have they not heard about ring fencing. It is still not possible to off set losses on residential investments against other income so sorry still not tax refund. The losses have be carried forward till some time in the future when rents increase enough to make a profit. Depreciation on commercial properties was an unfair illogical tax introduced by an earlier National government. Land never depreciates but commercial building structures sure do.
I don't know if it's a straight up error, but this statement seems to go against all logic:
"The Clean Car Standard was an initiative of the previous government to address vehicle emissions. Research suggested households that would benefit the most from vehicle and fuel efficiency standards were low-income ones. Despite strong support, the clean car discount scheme was repealed in December 2023 as well."
The clean car discount benefited people buying brand new electric vehicles (mainly Tesla's). I don't think many low-income individuals would have been buying EVs. I would count myself as quite well off, but even I couldn't afford a $70,000 brand new Tesla.
The link in the article goes to a page that says "Requested page not found"...
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