Christopher Luxon criticises Government's investigation into top earners, says tax system is fair

Christopher Luxon is criticising the Government's investigation into how much tax top earners are paying, saying New Zealand already has a fair, progressive system. 

On Tuesday, Revenue Minister David Parker announced the Government is gathering information on tax intake, specifically for New Zealand's wealthiest people. 

As part of the investigation, Inland Revenue is assessing how much goods and services tax (GST) people pay across income and wealth bands because data is limited on the effective overall GST rate paid by New Zealanders.

Inland Revenue is also investigating what rate of tax is paid by top earners. The current information, based on the Household Economic Survey, has "severe limitations at the top end", Parker said, because questions don't delve into capital income, for instance.

Parker also announced a proposed law, the Tax Principles Act, that would include "principles" to assess tax policies against. 

But speaking with AM on Wednesday, Luxon said it's not clear what Parker is actually trying to achieve with the investigation. 

"To be honest it was a really confusing speech yesterday and it sort of felt like the Minister was musing about a bunch of issues and it was unclear what he actually wanted to get to. 

"My big take away is very clear - Labour actually wants to increase taxes, National wants to lessen taxes and the reason is very simple, this Government has spent a record amount of money with existing spending and spending to come and need to increase taxes ultimately. 

"But it just sort of felt like a fishing trip and I am not really sure where it's going to at the moment."

The National leader said if there's an issue with wealthy people not paying their taxes Inland Revenue has the power to go and audit them already. When AM co-host Ryan Bridge pointed out that's exactly what Parker is doing, Luxon said it still wasn't very clear. 

"It feels like he's [Parker] on a bit of an expedition to try and dream up new taxes and new things in order to get their taxes up so they can cover their high level of spending."

Labour is spending an extra $6 billion in this year's Budget. Despite criticising Labour for spending too much, National says it would also use the $6 billion spending allowance if it was in power.

Christopher Luxon speaks with AM.
Christopher Luxon speaks with AM. Photo credit: AM

Luxon said the tax system is already fair but if the Government is really worried it should implement National's proposed tax cuts instead.  

"What we support is a really fair tax system, it's important that wealthy people pay their fair share. We do think it's a fair, progressive system."

"If this is all about fairness why doesn't David Parker go to Parliament next week and actually pass our inflation-adjusted tax threshold because that would actually help the squeezed middle he's trying to talk to." 

National has proposed lifting tax brackets. Currently, each dollar you earn up to $14,000 is taxed at 10.5 percent, and then each dollar you earn between $14,000 and $48,000 is taxed at 17.5 percent. The next bracket is $48,000-$70,000, taxed at 30 percent. The next is $70,000-$180,000, taxed at 33 percent. Each dollar earned above $180,000 is taxed at 39 percent - the final bracket introduced by Labour after the 2020 election

National would lift almost all of the brackets by just over 11.5 percent, to match the 11.5 percent increase in the cost of living over the last four years. For example, the 10.5 percent tax rate would be applied to each dollar earned up to $15,600, instead of $14,000. The top tax bracket would be scrapped. 

The most typical salary in New Zealand is about $55,000, according to the Average Salary Survey. Those earning $55,000 would save about $800 a year if National's tax changes were applied. But someone earning $45,000 would only get about $112. Luxon would get an $18,000 tax cut under the package. 

In his speech announcing the investigation on Tuesday, Parker said the current tax system isn't truly progressive overall. 

"Currently many people look at our headline personal income tax rates and see a system that charges higher rates on higher taxable income - and they assume that the system is progressive overall. It isn't," he said. 

"What's hidden is that the effective marginal tax rate for middle-income Kiwis is generally higher than it is for their wealthier co-citizens. Indeed some of their wealthier Kiwi compatriots pay very low rates of tax on most of their income."

That's not to mention economic income that's currently untaxed, Parker added. 

"Many believe those better off than themselves can structure their affairs to pay lower taxes. But can they prove it? This is a worldwide problem, and that problem is compounding year upon year.

"The Labour Government believes it is the responsibility of government to shine light, and we will. Only IRD can gather the data needed, and now, for the first time in our history, they are."

ACT leader David Seymour also criticised the investigation saying he suspects the Government is "planting the seed for increased taxation". 

"ACT says there is nothing fair about taxing the life out of hardworking Kiwis who are already suffering from sky-high inflation created by Labour's out-of-control spending," Seymour said on Tuesday.

"While talking about how 'unfair' our tax system is, the minister failed to acknowledge the Government has taken in a massive $14 billion more in income tax revenue than expected due to record inflation. That, minister, is unfair.

"Introducing more legislation and regulations around our currently very simple tax system will only create more bureaucracy and have accountants licking their lips."

ACT has also pledged to remove the top tax rate.