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Budget 2023: Tax Principles Act off to an unprincipled start

Auckland, 18 May 2023 – As part of today’s Budget 2023 announcements, the Tax Principles Act is expected to be tabled and swiftly proceed through Parliamentary processes, with the potential to bypass a select committee.

Inland Revenue has long been working on the development of a Tax Principles Act, referenced by the Minister of Revenue during his 2022 speech on tax fairness. The tax community was met with surprise today with the Government seemingly making the decision to bypass seeking public feedback on a proposed tax law and has instead gone straight to legislation, in the form of the Tax Principles Bill.

The Generic Tax Policy Process (GTPP) has been in place since 1994 and is designed to ensure that tax laws are well thought through, and stakeholders have the opportunity to contribute to the design of laws.

“The decision to bypass consultation on the Tax Principles Bill goes counter to the GTPP and is yet another example from this Government, having also introduced trust disclosure rules and extensive information gathering powers after the 2020 Election without consultation. The irony of the lack of GTPP on tax principles will not be lost on the tax community,” says Deloitte Tax Partner, Robyn Walker.

In terms of the tax principles which should be adhered to, it can be speculated based on the Minister’s previously mentioned principles, that they may cover horizontal equity, vertical equity, administrative efficiency and the minimisation of tax induced distortions to investment and the economy.

Aside from having principles to comply with, the Tax Principles Bill is expected to include information collection and monitoring requirements. It can be expected that many tax proposals will not satisfy all of the principles.

“Given the possibility that this legislation will be pushed through under urgency, it sets the scene for an election period where all political party policies will be debated against these principles,” continues Walker.

With little consultation on what the tax principles might be, it gives a glimpse into what might be coming from the Labour Party Tax Policy.

For Deloitte’s full Budget 2023 commentary visit: Striking a balance | New Zealand Government Budget 2023

For spokesperson comments please contact Deloitte Tax Partner Robyn Walker:
M: +64 211315413