Treasury raised concerns about reform
Papers released under the Official Information Act showed that in March, Treasury had many criticisms about the handling of the breakup of mega-polytechnic Te Pukenga.
Among the risks were the potential financial and educational cost of the reforms, the lack of monetary support for the reconstituted polytechnics, the untested "federation model" and the lack of communication between Vocational Education Minister Simmonds and various stakeholders.
In the break up of Te Pukenga last month, Otago Polytechnic was named as one of the 10 regional polytechs (ITPs) to be returned to regional control, but it will be part of a "federation model" alongside the Open Polytechnic and Universal College of Learning (Ucol).
Treasury cast doubt over the model's financial stability.
"Particularly given the narrow focus on ITP viability, we think [Ms Simmonds] could more clearly articulate the package of changes being made to support ITPs' financial viability, and their cumulative impacts.
"This is because the proposed future state for ITPs appears to be similar, if not worse, than the situation faced by ITPs pre-Te Pūkenga."
It described the federation model as "untested".
The scale of changes, the short timelines for implementation and the complexity of changes "with limited implementation resource" all increased the risk for successfully completing the reform, Treasury said.
Green MP Francisco Hernandez said the report reinforced what he had been saying about the whole process.
"This is a risky reform which has been jeopardised by the minister's haphazard decision-making processes, short timeframes for implementation, and the lack of support for polytechs to undergo the transition.
"It is damning that, despite such a difficult and disruptive transition, Treasury advises the future for polytechnics 'appears to be similar, if not worse' than what they were before Te Pūkenga."
Otago Polytechnic executive director Dr Megan Potiki was unsurprised.
"We note the concerns raised about the scale and short timelines for implementing the changes — establishing 10 ITPs on January 1, 2026 — and the complexity of the changes.
"This underscores some of the reasons Otago Polytechnic has requested a meeting [with Ms Simmonds], to explain her recent decisions in more detail and to discuss how we might come to a constructive resolution for the benefit of the Otago community."
Ms Simmonds said the government was taking a responsible approach to re-establishing regionally governed polytechnics.
The federation model had been clearly communicated, she said.
"The federation does not dilute academic achievement or autonomy — it preserves local governance while enabling collaboration, anchored by the Open Polytechnic, on shared services such as online learning resources and academic board.'
She said a $157 million contingency was put in place in Budget 2024 to support the transition, if needed.
"We expect to use some or all of the contingency, depending on the level of debt and transition costs involved in re-establishing the polytechnics."
matthew.littlewood@odt.co.nz
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
1News
4 hours ago
- 1News
How New Zealand's tax system compares with other countries
In recent months, Treasury, Inland Revenue and an organisation representing accountants have suggested New Zealand needs a rethink of its tax settings. Inland Revenue said taxes would have to increase to cope with an ageing population and CPA Australia said a capital gains tax should be considered. But do you know how much the average person in New Zealand pays, and how that compares to other countries? Infometrics calculated the average tax bill of a household with two median income earners, earning $72,900 per person before tax, not including any Working for Families credits. Chief executive Brad Olsen calculated that they would pay $39,800 to the government, made up about $14,100 in income tax each, and $11,600 in GST. They might pay another $3800 a year in local government rates. ADVERTISEMENT Infometrics principal economist Brad Olsen. (Source: 1News) "Central government still collects the vast majority of money from households - at still over 90% of total funds collected by central or local government going to the Beehive coffers. The proportions have shifted slightly, in 2023 when we ran this same exercise, around 93% of tax or rates collected went to central government, and 7% to local government. "In dollar terms, we estimate that our median household scenario would be paying around $985 more a year in rates than in 2023, but $3182 more in income tax and GST." Rates rises were more noticeable because households received a direct notice in the mail telling them what they had to pay, Olsen said. "In contrast, most households don't track — or get a demand for — their taxes from central government. For income taxes, PAYE workers never see their income tax as their employer withholds the tax and pays it to IRD. For GST, you don't directly tally up your GST and pay it to the government — it's all part of your daily spending. The difference in how you pay — and how noticeable that payment demand is or not — does behaviourally contribute to how we talk about these various increases. "We spend a lot of time, fairly, on rates increases. That's reasonable scrutiny. But we spend a lot less time on tax payments than rates payments, even though tax payments are 10 times larger than rates payments. "That's also true, in my mind, around current discussions on rates capping. Presumably if it's good enough for central government to impose on local government, it would be good enough for central government to tax-cap itself? For every dollar of additional rates paid in the last three years, tax paid by a household has increased by $3.23." ADVERTISEMENT As people earn more through the PAYE system, their income tax bill increases. A report by consultancy OliverShaw in 2023 said those in the top two tax brackets at the time made up 21.2% of taxpayers and paid 68.5% of income tax in the 2021 tax year. Those earning $180,000 to $300,000 constituted less than 2% of taxpayers, but paid 9.3% of income tax. But while the dollar value of GST paid is higher for wealthier people, it may make up a smaller proportion of their income because they may save more, or put money into financial assets that do not incur GST. The morning's headlines in 90 seconds, including the West Auckland builder sentenced over massive meth haul, fire on a commuter train, and how Bluey could teach kids about resilience. (Source: 1News) Some wealthier people may also be able to earn income in ways that does not attract as much tax. Simplicity chief economist Shamubeel Eaqub said people might be surprised to see that New Zealand is among the lower-taxed countries in the OECD. On a measure of tax-to-GDP, in 2023, New Zealand had a ratio of 34% compared to the OECD average of 33.9%. ADVERTISEMENT He said the country was only on the higher side of average because many countries had some significantly lower taxes on specific things, such as Ireland's low corporate tax rate. On an income tax wedge basis, New Zealand was third-lowest in 2024, behind Chile and Colombia on a comparison of total tax as a percentage of labour costs. Shamubeel Eaqub says there will still be some shocks, especially for those with mortgages. (Source: Breakfast) "There is no right or wrong number when it comes to taxes," Eaqub said. "If we want less public service, we pay less tax, if we want more public services, we pay more." He said many countries had much higher tax bills — France has tax at almost 44% of GDP, Denmark at 43.4% and Italy at 42.8%. "Italy has to but that's why younger people are leaving. There's a cost — if you tax a lot and make younger people poor they might go somewhere else. You can't arbitrarily increase taxes if you're not giving the value people are looking for. You need to maintain the legitimacy of the tax system." New Zealand workers tend to shoulder more of the tax bill than those in other countries, because income tax on individuals makes up such a large proportion of the total tax take. ADVERTISEMENT "We have big areas where we don't have any tax," said Council of Trade Unions policy director and economist Craig Renney. "There are no capital taxes, no social security taxes. It means New Zealand's taxation structure looks very different to the majority of developed economies around the Western world. We tend to over-emphasise GST and PAYE. Labour is a smaller share of tax in other jurisdictions." Any conversation about tax changes needed to get away from winners and losers and instead encourage people to consider what outcomes could be gained from higher revenue, he said. "The way we historically structure tax conversations does not help." New Zealand's corporate tax rate is now one of the highest in the OECD, at 28%. NZ Initiative chief economist Eric Crampton said reducing the government's structural deficit would require a mix of reducing spending, boosting economic growth and increasing taxes. "I would focus on spending before looking at taxes. Increasing revenue to cover the cost of current spending should depend on decent evidence that current spending delivers substantial value. ADVERTISEMENT "If the government demonstrated that higher tax revenue was needed, increasing GST while shifting income tax rates and thresholds to compensate could make sense. Inland Revenue has been looking at different options for ensuring lower-income households would not be made worse off if GST increased. GST captures spending that comes from income that is harder to tax when it is earned, including income from capital gains, as well as spending by tourists. "But first priority ought to be ensuring value-for-money in spending, especially where an ageing population increases fiscal pressure."
Otago Daily Times
9 hours ago
- Otago Daily Times
How NZ's tax system compares with other countries
By Susan Edmunds of RNZ In recent months, Treasury, Inland Revenue and an organisation representing accountants have suggested New Zealand needs a rethink of its tax settings. Inland Revenue said taxes would have to increase to cope with an ageing population and CPA Australia said a capital gains tax should be considered. But do you know how much the average person in New Zealand pays, and how that compares to other countries? Infometrics calculated the average tax bill of a household with two median income earners, earning $72,900 per person before tax, not including any Working for Families credits. Chief executive Brad Olsen calculated that they would pay $39,800 to the government, made up about $14,100 in income tax each, and $11,600 in GST. They might pay another $3800 a year in local government rates. "Central government still collects the vast majority of money from households - at still over 90 percent of total funds collected by central or local government going to the Beehive coffers. The proportions have shifted slightly, in 2023 when we ran this same exercise, around 93 percent of tax or rates collected went to central government, and 7 percent to local government. "In dollar terms, we estimate that our median household scenario would be paying around $985 more a year in rates than in 2023, but $3182 more in income tax and GST." Rates rises were more noticeable because households received a direct notice in the mail telling them what they had to pay, Olsen said. "In contrast, most households don't track - or get a demand for - their taxes from central government. For income taxes, PAYE workers never see their income tax as their employer withholds the tax and pays it to IRD. For GST, you don't directly tally up your GST and pay it to the government - it's all part of your daily spending. The difference in how you pay - and how noticeable that payment demand is or not - does behaviourally contribute to how we talk about these various increases. "We spend a lot of time, fairly, on rates increases. That's reasonable scrutiny. But we spend a lot less time on tax payments than rates payments, even though tax payments are 10 times larger than rates payments. "That's also true, in my mind, around current discussions on rates capping. Presumably if it's good enough for central government to impose on local government, it would be good enough for central government to tax-cap itself? For every dollar of additional rates paid in the last three years, tax paid by a household has increased by $3.23." As people earn more through the PAYE system, their income tax bill increases. A report by consultancy OliverShaw in 2023 said those in the top two tax brackets at the time made up 21.2 percent of taxpayers and paid 68.5 percent of income tax in the 2021 tax year. Those earning $180,000 to $300,000 constituted less than 2 percent of taxpayers, but paid 9.3 percent of income tax. But while the dollar value of GST paid is higher for wealthier people, it may make up a smaller proportion of their income because they may save more, or put money into financial assets that do not incur GST. Some wealthier people may also be able to earn income in ways that does not attract as much tax. Simplicity chief economist Shamubeel Eaqub said people might be surprised to see that New Zealand is among the lower-taxed countries in the OECD. On a measure of tax-to-GDP, in 2023, New Zealand had a ratio of 34 percent compared to the OECD average of 33.9 percent. He said the country was only on the higher side of average because many countries had some significantly lower taxes on specific things, such as Ireland's low corporate tax rate. On an income tax wedge basis, New Zealand was third-lowest in 2024, behind Chile and Colombia on a comparison of total tax as a percentage of labour costs. This reflects the impact of Working for Families credits. "There is no right or wrong number when it comes to taxes," Eaqub said. "If we want less public service, we pay less tax, if we want more public services, we pay more." He said many countries had much higher tax bills - France has tax at almost 44 percent of GDP, Denmark at 43.4 percent and Italy at 42.8 percent. "Italy has to but that's why younger people are leaving. There's a cost - if you tax a lot and make younger people poor they might go somewhere else. You can't arbitrarily increase taxes if you're not giving the value people are looking for. You need to maintain the legitimacy of the tax system." New Zealand workers tend to shoulder more of the tax bill than those in other countries, because income tax on individuals makes up such a large proportion of the total tax take. "We have big areas where we don't have any tax," said Council of Trade Unions policy director and economist Craig Renney. "There are no capital taxes, no social security taxes. It means New Zealand's taxation structure looks very different to the majority of developed economies around the Western world. We tend to over-emphasise GST and PAYE. Labour is a smaller share of tax in other jurisdictions." Any conversation about tax changes needed to get away from winners and losers and instead encourage people to consider what outcomes could be gained from higher revenue, he said. "The way we historically structure tax conversations does not help." New Zealand's corporate tax rate is now one of the highest in the OECD, at 28 percent. NZ Initiative chief economist Eric Crampton said reducing the government's structural deficit would require a mix of reducing spending, boosting economic growth and increasing taxes. "I would focus on spending before looking at taxes. Increasing revenue to cover the cost of current spending should depend on decent evidence that current spending delivers substantial value. "If the government demonstrated that higher tax revenue was needed, increasing GST while shifting income tax rates and thresholds to compensate could make sense. Inland Revenue has been looking at different options for ensuring lower-income households would not be made worse off if GST increased. GST captures spending that comes from income that is harder to tax when it is earned, including income from capital gains, as well as spending by tourists. "But first priority ought to be ensuring value-for-money in spending, especially where an ageing population increases fiscal pressure."
RNZ News
11 hours ago
- RNZ News
How does NZ's tax bill stack up?
In recent months, everyone from Treasury to Inland Revenue and an organisation representing accountants has suggested New Zealand needs a rethink of its tax settings. Money correspondent Susan Edmunds spoke to Corin Dann. Tags: To embed this content on your own webpage, cut and paste the following: See terms of use.
