95bFM Government rules out new taxes on Aotearoa's wealthy despite ‘unfairness’
27 April, 2023
Interview by Spike Keith, adapted by Rawan Saadi
Author and journalist Mark Rashbrooke says Aotearoa is potentially missing out on more than a billion dollars in tax revenue due to the ineffective taxing of the country's wealthiest individuals. Photo: Canva.
In a speech to business leaders, Prime Minister Chris Hipkins announced that the government will not implement any capital gains tax (CGT), or wealth tax, in this year's budget.
“This will be an orthodox no-frills Budget focused on funding the things most important to New Zealanders, like support with the cost of living and cyclone recovery. There will also not be any major new tax changes like a wealth tax or CGT.”
Hipkins also ruled out an additional levy to pay for the recovery from Cyclone Gabrielle and the Auckland floods. The government will instead pay for the ongoing clean-up through the budget’s operating and capital allowances.
This comes after an Inland Revenue investigation, focusing on Aotearoa's 311 wealthiest individuals, found they pay tax less than half the amount of tax compared to the average New Zealander.
Untaxed capital gains from businesses, property, and other investments were found to skew the tax system in favour of the country's richest.
In a speech, revenue minister David Parker said it was clear from the data that the country’s tax system showed “fundamental unfairness”.
"Our citizens like tradies, nurses, school teachers, hospitality workers, hairdressers, cleaners, engineers, and small business owners all pay a much higher effective tax rate than their wealthier fellow Kiwis."
But the IRD investigation has not swayed the Labour Party, with no introduction of capital gains tax on the horizon.
Author and journalist Mark Rashbrooke told Spike Keith on 95bFM’s The Wire that for the country’s wealthiest, capital gains are their main source of income.
“Because capital gains have been virtually untaxed in New Zealand, these people are not paying tax on the vast bulk of their income, and that is a huge difference to ordinary New Zealanders who pay tax on every single cent.
Rashbrooke said Aotearoa is potentially missing out on more than a billion dollars in tax revenue due to the ineffective taxing of the country's most wealthy.
The Labour Party has previously suggested a capital gains tax to address this loss in tax revenue but ultimately shut the idea down after receiving backlash.
Rashbrooke said other parties had suggested a tax on land value, and the Green Party has pushed for a wealth tax, but he believes a capital gains tax would be the most obvious solution.
“What has been shown is that the discrepancy is down to people not paying tax on their capital gains, so the logical solution to that is a capital gains tax.”
Countries like Australia, the UK, and the US have all enforced capital gains tax, and Rashbrooke said we can learn from these countries.
“These very free market, conservative, individualistic countries have capital gains taxes, and they make them work.”
“Whatever issues come up in the implementation will be things that other countries have dealt with and found solutions for, for decades. It’s all totally doable.”
