Tax Justice Aotearoa Welcomes IRD Discussion Document On Tax Reform
Tax Justice Aotearoa has welcomed the release of Inland Revenue's draft Long Term Insight Briefing, which looks at the possible future directions for New Zealand's tax system.
The discussion document suggests a stable core structure of main bases that 'comprehensively taxes the factors that are sought to be taxed', coupled with the ability to 'change rates on main bases to change the level of revenue.'
'We welcome the release of the draft LTIB as a useful contribution to the debate about what kind of tax system we want for the future,' says Glenn Barclay, Chair of Tax Justice Aotearoa.
'Tax has become a hot topic and this document demonstrates some of the challenges we face.'
'We look forward to hearing more from the IR officials and giving the public the opportunity to question their thinking at our upcoming briefing event*,' says Glenn Barclay. 'This is part of the consultation process so everyone who would like to make a submission on the LTIB should come along.'
The LTIB notes the fiscal challenge we face as a country as expenditure increases, largely as a result of an ageing population.
'Tax Justice Aotearoa agrees with this observation but an ageing population is just one of the many problems we have stored up for ourselves by failing to invest in both social and physical infrastructure - the challenges of poverty and inequality, as well as climate change adaptation and mitigation also come to mind', says Glenn Barclay.
The LTIB also demonstrates that New Zealand is an outlier in the extent to which it relies on tax revenue from labour income and GST and that we under tax capital income.
'These are the taxes that impact most on working people and the poor,' says Glenn Barclay.
'We need to address this imbalance by ensuring those who can afford to pay more are required to do so, and also that the regressive nature of GST can be addressed. The permanent GST-offset credit suggested by the LTIB, is a proposal worth considering.'
"There are limitations to the document, for example it does not address the interface between the tax system and the Working For Families tax credit, which is a fraught issue for those who are dependent upon WFF, but we look forward to the debate that the document will provoke,' says Glenn Barclay.
Note:
* Tax Justice Aotearoa will be hosting speakers from Inland Revenue at one of its 'Tax on Tuesdays' events on Tuesday 1 July at 12.30pm* - members of the public are welcome to attend.
It will be a hybrid event with an in person session at Rutherford House in Wellington, which will be live-streamed.
Where: Rutherford House Lecture Theatre 2 (RHLT2), 33 Bunny Street, Wellington.
When: 12.30-1.30 pm Tuesday, 1 July 2025
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
RNZ News
2 hours ago
- RNZ News
Taxes will have to increase in 2060 to cope with ageing population, government spending
The IRD has warned government spending needs to change or taxes will need to increase in the future. Photo: RNZ Inland Revenue is warning that unless what the government spends its money on changes, taxes will need to increase in the coming years to cope with an ageing population. It is currently seeking submissions on its latest long-term insights briefing. It notes that in the coming years, if the current settings are maintained, government spending as a proportion of the economy will rise. "A core driver of these fiscal pressures is that New Zealand's population is ageing." By 2060, a quarter of the population will be older than 65. "This means that the amount the government needs to spend on superannuation and health care will increase if the government maintains current policy settings. "In its last Long-term Fiscal Statement, the Treasury predicted that government expenditure will exceed government revenue by 13.3 percent of GDP by 2061 if the government takes no response to rising fiscal pressures," IRD said. That would mean either that existing taxes would need to be levied at a higher rate - such as higher levels of income tax or GST - or there would need to be new taxes implemented. It said New Zealand taxed a more limited set of capital gains than most other OECD countries. It could be possible to broaden that scope. "The absence of a general approach to taxing capital gains can provide an incentive for individuals to reduce their tax liability by undertaking activities that are not taxed rather than those that are taxed. "This can reduce government's ability to raise more revenue in a way that is progressive." It pointed to an estimate for a Tax Working Group report in 2019 that, if a capital gains tax took effect from the 2022 tax year, it would raise about $3 billion in the 2026 tax year. Revenue would increase over time. IRD said this was in line with revenue raised in other countries from capital gains taxes. "Revenue from capital gains could therefore make a meaningful contribution to addressing long-term fiscal challenges. "However [as noted above] the last Treasury LTFS projected an operating deficit of 13.3 percent of GDP by 2061 under current settings. "Therefore, even with more comprehensive taxation of capital gains other tax or expenditure measures would be needed in the longer term. "Therefore, Inland Revenue considers that it is also important to consider how to increase the flexibility of the tax system to changing revenue needs." It said capital gains taxes could also have relatively high compliance costs. Inland Revenue said GST was a substantial source of tax revenue. But if it were to be increased, there would be concerns about the effect on lower-income households. While wealthier households pay more GST overall, poorer households spend more of their money on GST. IRD said GST could be applied at a lower rate on some goods and services that were bought by lower-income households, or there could be assistance via the welfare system to help those households. "Several international and New Zealand-focused studies have shown that using cash transfers is a more cost-effective way to target assistance to lower-income groups compared to applying lower rates to certain goods and services. "Several countries have implemented permanent GST-offset schemes for this reason." The report used modelling of GST at 18 percent. It also considered how other taxes such as payroll tax, wealth tax, inheritance tax, land and property tax could be used to add further tax bases to the New Zealand system. But it said there were difficult trade-offs with each of these. "Payroll taxes provide a means of shifting the balance of taxation away from capital income and onto labour income, but they are likely to have some disadvantages relative to GST and income tax. "Wealth taxes are likely to impose higher distortionary costs than a broad-based income tax, and they face similar challenges to those that would make an idealised income tax that includes accrued capital gains impractical. "Inheritance taxes are likely to have similar distortionary costs to income taxes when people are intentional donors, but they will have much lower distortionary costs when people are unintentional donors. "Land taxes are widely seen as one of the least distortive taxes, and they impose fewer distortionary costs than property taxes or stamp duties. "However, they would have a significant impact on certain groups. As with any tax, providing preferential tax treatment to certain groups or in certain situations would tend to increase efficiency costs and reduce horizontal equity on some margins." IRD said this underscored the importance of income tax and GST being designed in a way that was as efficient and fair as possible while having the flexibility to adjust to changing revenue needs. "New Zealand faces difficult choices in designing a durable tax system in the face of long-term fiscal challenges. "In Inland Revenue's view, a priority for future work should be on how to make New Zealand's main bases of income tax and consumption tax more flexible to changing revenue needs over time." It said, with different personal and company tax rates there was an incentive for people to "shelter" their income in companies. "This incentive is likely to increase the wider gap between top personal tax rates and the company rate, however, in the context of rising fiscal pressures, a system that requires alignment of the company rate and top personal rate is unlikely to be a durable tax system." Economist Shamubeel Eaqub said IRD had a clear message that either tax rates would need to increase, or the tax base - or both. "There are some difficult choices to be had in the future, if spending choices don't change then our revenue choices have to. "And we can either tax more using the same instruments that we have on the same bases that we have or we can increase the bases, and there are no easy answers. "There are always trade-offs, there will be winners and losers. And we're going to have to make a considered decision of what we're going to do - no tax is easy. "No one likes paying tax. I think it's about finding the least disruptive system given the public services that we want." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
RNZ News
4 hours ago
- RNZ News
Taxes will have to increase in 2060 to cope with aging population, government spending
The IRD has warned government spending needs to change or taxes will need to increase in the future. Photo: RNZ Inland Revenue is warning that unless what the government spends its money on changes, taxes will need to increase in the coming years to cope with an ageing population. It is currently seeking submissions on its latest long-term insights briefing. It notes that in the coming years, if the current settings are maintained, government spending as a proportion of the economy will rise. "A core driver of these fiscal pressures is that New Zealand's population is ageing." By 2060, a quarter of the population will be older than 65. "This means that the amount the government needs to spend on superannuation and health care will increase if the government maintains current policy settings. "In its last Long-term Fiscal Statement, the Treasury predicted that government expenditure will exceed government revenue by 13.3 percent of GDP by 2061 if the government takes no response to rising fiscal pressures," IRD said. That would mean either that existing taxes would need to be levied at a higher rate - such as higher levels of income tax or GST - or there would need to be new taxes implemented. It said New Zealand taxed a more limited set of capital gains than most other OECD countries. It could be possible to broaden that scope. "The absence of a general approach to taxing capital gains can provide an incentive for individuals to reduce their tax liability by undertaking activities that are not taxed rather than those that are taxed. "This can reduce government's ability to raise more revenue in a way that is progressive." It pointed to an estimate for a Tax Working Group report in 2019 that, if a capital gains tax took effect from the 2022 tax year, it would raise about $3 billion in the 2026 tax year. Revenue would increase over time. IRD said this was in line with revenue raised in other countries from capital gains taxes. "Revenue from capital gains could therefore make a meaningful contribution to addressing long-term fiscal challenges. "However [as noted above] the last Treasury LTFS projected an operating deficit of 13.3 percent of GDP by 2061 under current settings. "Therefore, even with more comprehensive taxation of capital gains other tax or expenditure measures would be needed in the longer term. "Therefore, Inland Revenue considers that it is also important to consider how to increase the flexibility of the tax system to changing revenue needs." It said capital gains taxes could also have relatively high compliance costs. Inland Revenue said GST was a substantial source of tax revenue. But if it were to be increased, there would be concerns about the effect on lower-income households. While wealthier households pay more GST overall, poorer households spend more of their money on GST. IRD said GST could be applied at a lower rate on some goods and services that were bought by lower-income households, or there could be assistance via the welfare system to help those households. "Several international and New Zealand-focused studies have shown that using cash transfers is a more cost-effective way to target assistance to lower-income groups compared to applying lower rates to certain goods and services. "Several countries have implemented permanent GST-offset schemes for this reason." The report used modelling of GST at 18 percent. It also considered how other taxes such as payroll tax, wealth tax, inheritance tax, land and property tax could be used to add further tax bases to the New Zealand system. But it said there were difficult trade-offs with each of these. "Payroll taxes provide a means of shifting the balance of taxation away from capital income and onto labour income, but they are likely to have some disadvantages relative to GST and income tax. "Wealth taxes are likely to impose higher distortionary costs than a broad-based income tax, and they face similar challenges to those that would make an idealised income tax that includes accrued capital gains impractical. "Inheritance taxes are likely to have similar distortionary costs to income taxes when people are intentional donors, but they will have much lower distortionary costs when people are unintentional donors. "Land taxes are widely seen as one of the least distortive taxes, and they impose fewer distortionary costs than property taxes or stamp duties. "However, they would have a significant impact on certain groups. As with any tax, providing preferential tax treatment to certain groups or in certain situations would tend to increase efficiency costs and reduce horizontal equity on some margins." IRD said this underscored the importance of income tax and GST being designed in a way that was as efficient and fair as possible while having the flexibility to adjust to changing revenue needs. "New Zealand faces difficult choices in designing a durable tax system in the face of long-term fiscal challenges. "In Inland Revenue's view, a priority for future work should be on how to make New Zealand's main bases of income tax and consumption tax more flexible to changing revenue needs over time." It said, with different personal and company tax rates there was an incentive for people to "shelter" their income in companies. "This incentive is likely to increase the wider gap between top personal tax rates and the company rate, however, in the context of rising fiscal pressures, a system that requires alignment of the company rate and top personal rate is unlikely to be a durable tax system." Economist Shamubeel Eaqub said IRD had a clear message that either tax rates would need to increase, or the tax base - or both. "There are some difficult choices to be had in the future, if spending choices don't change then our revenue choices have to. "And we can either tax more using the same instruments that we have on the same bases that we have or we can increase the bases, and there are no easy answers. "There are always trade-offs, there will be winners and losers. And we're going to have to make a considered decision of what we're going to do - no tax is easy. "No one likes paying tax. I think it's about finding the least disruptive system given the public services that we want." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
Newsroom
7 hours ago
- Newsroom
Inland Revenue models GST hike, with credit for low-income households
Analysis: Once or twice a month on payday, most New Zealanders – all of those receiving wages or salaries – pay tax. Their income tax is deducted at source. But every day, every one of us pays tax at the dairy, at the coffee cart, at the supermarket, through our online purchases. That tax is GST. And indeed, supermarkets like to remind us when we complain about high food prices in this country, that includes a 15 percent goods and services tax that would be waived in countries like Australia, the UK and Ireland.
