Let’s get fiscal: Tax and the 2023 Election
Tax Alert - September 2023
By Viola Trnski & Robyn Walker
In the world of tax, 2023 has been an eventful year.
We kicked off with flood-related tax relief and FBT e-bike exemptions, before steering towards a debate around how much tax the wealthy pay, and more recently, whether chopped coriander or pre-cut frozen potato chips will fall within Labour’s proposed GST exemption.
Cost of living, inflation, and the economy remain front of mind for many New Zealanders, and tax ties into all of these issues by raising revenue,
redistributing wealth, and incentivising behaviour. Now, with less than six weeks to go before New Zealanders vote on their next government, the major political players have released their tax policies – and there’s a lot on the (tax) table.
Income
Labour will maintain the current income tax brackets, while National will adjust the brackets to account for inflation (which has not been done since 2010).
There is bipartisan support for increasing the In-Work Tax Credit by $25 per week, and the Working for Families abatement threshold to $50,000 in 2026, with both Labour and National announcing these changes. National proposes introducing a 25% childcare rebate for households earning under $180,000 – but will scrap Labour’s 20 hours of free ECE for two-year-olds, alongside free prescriptions and public transport subsidies.
ACT supports a two-rate system being phased in while the Greens propose a $10,000 tax-free threshold and a new 45% tax rate for personal income exceeding $180,000.
Earlier this year, Budget documents revealed that a “tax switch” introducing a tax-free threshold coupled with a wealth tax was contemplated by the current Government (ultimately vetoed at the last minute). Despite this, the idea of a tax-free threshold remains popular among minor parties, with the Greens, Te Pāti Māori, and The Opportunities Party (TOP) all advocating for a tax-free threshold of varying amounts.
The Greens and TOP have gone further, with both proposing some form of guaranteed income. The Greens package includes a Guaranteed Minimum Income of $385 per week (and eventually aligning all benefit payments to this amount), while TOP propose a Universal Basic Income of $16,500 annually ($317.31 per week) in the second phase of its two-part plan.
Wealth
The words “wealth tax” continue to circulate as we approach the Election, following the Inland Revenue and Treasury reports in May on how much tax the wealthiest pay (by contrast, its unpopular relative “capital gains tax” has barely been whispered). Te Pāti Māori and the Greens support a wealth tax (and more comprehensive capital gains taxes), while Labour, National, and ACT have all ruled one out.
GST
GST is in the spotlight with Labour’s recent election policy of removing GST from fresh and frozen fruit and vegetables. Te Pāti Māori goes further, with a bid to remove GST from all food, and New Zealand First proposes to remove GST from “basic” food items.
A GST levy on the platform economy (short-stay/visitor
accommodation providers, ride-sharing/ride-hailing providers and food/beverage delivery providers who operate through an online marketplace) was legislated in March 2023 to take effect in 2024. National have promised to repeal this if they are elected.
ACT is proposing to share 50% of GST revenue from the construction of new residential dwellings with the consenting local authority in a bid to encourage more infrastructure and houses to be built.
Company, land, and property taxes
Labour, National and ACT have not proposed changes to the company tax rate of 28%. Te Pāti Māori and the Greens want to increase the company tax rate to 33%, while Phase Two of TOP’s economic plan increases it to 35% (and also matching income and trust tax rates to 35%).
Both Labour and National will remove depreciation deductions for non-residential buildings.
National has promised to roll back the bright-line test to two years, repeal interest deductibility limitations by 2026, and allow foreign home buyers back into the property market for houses worth more than $2 million, which will be subject to a 15% charge.
TOP are campaigning on a 0.75% per annum Land Value Tax on all urban residential land.
Environmental taxes
Parties differ on whether it’s appropriate to tinker with tax to influence environmental behaviour. The Treasury chipped into this issue in April and an argument for Impact-Weighted Taxation won a recent tax policy prize. New Zealand hasn’t implemented a comprehensive suite of “green taxes”, but Clean Car rebates (and fees), petrol taxes, and the Emissions Trading Scheme (‘ETS’) are, to some extent, intended to change behaviour and put a price on pollution.
Support for these types of taxes falls along political lines. Labour introduced the Clean Car Discount in 2021 (dubbed the “ute tax” by the Opposition), introduced a fuel tax in Auckland to fund light rail, and established the Climate Emergency Response Fund which earmarks proceeds from the ETS to be spent on climate-change reduction. National and ACT will abolish the Clean Car Discount and redirect climate funds, with National also pledging to repeal Auckland’s Regional Fuel Tax.
What happens between now and the Election?
Parliament has dissolved and the campaign is now in full swing. In Parliament’s last sitting week there were a few final tax flurries, with the Digital Services Tax Bill introduced and the Taxation Principles Reporting Act receiving Royal assent.
All legislation that was passing through the House has lapsed. This includes the annual rates tax bill introduced at the Budget in May, which increased the trust tax rate to 39% (a change neither major party opposes), introduced the GloBE rules, announced rollover relief for assets damaged in the flooding events, and KiwiSaver contributions for paid parental leave recipients. The next government will decide what matters to continue with, and where to start afresh.
The pre-election economic and fiscal update (PREFU) will be released on 12 September 2023, and will provide insight into the Government’s books and, depending on the forecast, may trigger further political promises.
Tax is a hot topic this Election, with plenty of campaign proposals for tax nerds to get stuck into. So, strap in tight, don’t forget to cast your vote, and contact your usual Deloitte advisor if you’d like to discuss how any of these policies could affect you or your business.
September 2023 - Tax Alerts
