Ahead of the 2023 election, it was clear there was to benefit the least well off. Nothing has happened over the first 100 days of government to change this assessment.
Authors
Lisa Marriott
Professor of Taxation, Te Herenga Waka — Victoria University of Wellington
Jonathan Barrett
Associate Professor in Commercial Law and Taxation, Te Herenga Waka — Victoria University of Wellington
From a progressive perspective, it is clear New Zealand has elected an austerity government. The ³Ô¹ÏÍøÕ¾-ACT-NZ First coalition is prepared to impose and to meet its 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 ³Ô¹ÏÍøÕ¾’s voting base.
What did (and didn’t) survive negotiations
The did not survive coalition negotiations with NZ First. We have also heard little more about . Perhaps the government has realised this is .
was another proposed revenue source. Strictly speaking, this wasn’t a new idea. A 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 ³Ô¹ÏÍøÕ¾’s tax proposals was on commercial property. This was an unusual idea for ³Ô¹ÏÍøÕ¾ and we suspect it will not become law.
The phased-in return of owners is included in the ³Ô¹ÏÍøÕ¾-ACT coalition agreement. However, the provisions are more generous than those originally proposed by ³Ô¹ÏÍøÕ¾ 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 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 from vehicle and fuel efficiency standards were low-income ones. Despite , the clean car discount scheme was repealed in December 2023 as well.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 (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 to fund a massive road-building programme is not being considered a .
The government has also announced – scheduled to start in 2027. ³Ô¹ÏÍøÕ¾ ministers have responded to criticism by saying the eventual tax increase will not be in this political term.
The Budget should provide clarity
The 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.
The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.
