The Government's tax haul has topped $100b, powered by a lift in corporate profits, wage growth and low unemployment.
Tax revenue of $107.9b was up from $97.4 billion in 2021 and is one of the reasons the yearly deficit was far below what was projected in May. There were increases across most of the tax types, including that paid by employees, corporates, and through the Goods and Services Tax (GST).
But Finance Minister Grant Robertson said the lower-than-expected deficit shouldn't lead political parties to yell out for cuts as there was still a deficit and New Zealand faces "choppy waters ahead". He's ruled out tax cuts that "disproportionately support the wealthiest New Zealanders". National said a "careful" minister would produce "prudent tax relief" and still invest in public services.
The colossal tax figures were revealed in the Financial Statements of the Government (FSG) on Wednesday. They're a breakdown of the country's financial books - how much revenue the Government received, how much was spent and if that means a deficit or surplus.
No one expected a surplus as the Government's had to channel a significant amount of money into COVID-19 spending. But the final result still ended up much better than expected. In May, at the Budget, a $19b deficit was forecast, but Wednesday's figure was a $9.7b deficit - nearly $10b better than expected.
That's been put down to stronger than expected economic conditions and less expenditure. For example, some of the money the Government allocated to COVID spending wasn't needed and has been pushed to the next year.
Of the overall $142b Crown revenue, $107.9b of it came from tax. That's higher than the $97.4b in 2021 and greater than the projected $103.2b.
Source deductions - the tax everyday Kiwis pay from their incomes - was $4.3b (11.2 percent) higher than in 2021 at $42.2b.
Treasury said $3.3b of this increase was down to wage increase and growth in employment. There's currently near-record unemployment at 3.3 percent, while StatsNZ said in August that wage inflation jumped 3.4 percent in the June quarter. Though that's below annual inflation of 7.3 percent.
"In addition, additional tax as individuals moved into higher tax brackets and the impact of the first full year of the 39 percent personal income tax rate for income over $180,000 per year also contributed to this increase," said the FSG document.
There's also been a whopping 26.2 percent increase in corporate tax revenue. The $4.1b jump was "mainly owning to growth in taxable profits".
GST was up 2.2 percent (or $0.6b) on 2021 due to a jump in consumption and residential investment. Other individual tax rose $2.4b or 31.3 percent. Some tax types saw drops, such as due to the Government temporarily cutting Fuel Excise Duty and Road User Charges.
Robertson said on Wednesday he was "proud" of New Zealand's financial state, pointing to our net debt which compares well to other countries, low unemployment, GDP growth and a lower than expected deficit.
However, he also warned against thinking the smaller deficit ($9.3b below the forecast) means the Government should be offering tax cuts as National has proposed. Christopher Luxon's party wants to adjust tax thresholds to inflation and also slash new taxes Labour has imposed, such as the 39 percent tax rate.
"I think it's worth saying to anyone who thinks that because we ran smaller deficits than National did, or who is eyeing up $9.3b of fiscal space created against the forecast… and thinks this money is available to be spent, whether it is on tax cuts or anything else, my answer is simple: no. It has already been banked, accounted for and we have moved on from it."
Robertson repeatedly took aim at National and any tax cuts intended for those "who need it the least". The United Kingdom's recent market chaos, prompted by the Liz Truss government's tax cut plan, was also mentioned as a warning to National - though National's said its plan is very different and at a far smaller scale.
Robertson said it was the wrong time for tax cuts for three reasons; there's still "some way to go to see ourselves return to a more stable fiscal position", there's still "need" in society and that requires investment, and thirdly, the volatile global environment.
"We do know that that will have an impact. We have high levels of corporate profit here which turns into tax returns. They won't all last in all sectors. This is a time for balance and caution, not for frittering away things through tax cuts to the wealthiest."
Considering the rise in tax revenue, Robertson was asked whether he was open to making changes for lower-income New Zealanders. He wouldn't rule out tax cuts for low or middle-income Kiwis in the future, but did rule out tax cuts that "disproportionately support the wealthiest New Zealanders".
"We've been clear that we are not making major tax changes this term… each political party going into the next election will have a tax policy to discuss and the Labour Party will have a tax policy to discuss. I am not in a position to disclose it today.
"What I would say though is anybody thinking about significant changes to the tax system needs to be able to make it add up. There is still a job of work to do here to make sure we bring debt down to more sustainable levels and continue to invest."
He also denied his attacks on National were a response to the centre-right party rising in the polls, while Labour has been falling.
National reacted to the accounts on Wednesday by saying "Kiwis deserve relief from record tax take".
"In just five years, tax revenue has skyrocketed 43 percent from $76 billion to $108 billion – an average of $15,000 more in tax for every household in the country," National's finance spokesperson Nicola Willis said.
"But even though the Government's coffers are awash in incoming cash, Grant Robertson won't make room for tax relief because his Government is addicted to spending."
She said a "careful Finance Minister would find room for prudent tax relief while investing in public services".
"But Labour's spending addiction means the Government can't – or won't – find the room to just let Kiwis keep more of what they earn. It has its priorities all wrong."
Luxon discussed National's tax plans on AM on Wednesday morning. He said he would cut some spending, such as on Three Waters, and would also have a "very efficient public service". He wouldn't say what public services roles he could axe. The party will provide a fully-cost fiscal plan before the next election, he said.
The Public Service Association responded to Luxon's interview by calling on him to clarify what public services or jobs he might cut.
"Most of the growth in FTEs over this period has been in the jobs that deliver services that improve the wellbeing of New Zealanders, provide support to businesses and cater for our growing population," said national secretary Kerry Davies.
"Is Mr Luxon saying we need fewer Corrections officers who keep our prisons secure? Is he saying we can do with fewer social workers who support our most vulnerable? Is he saying we should cut the number of scientists who protect New Zealand from biosecurity threats?"
ACT leader David Seymour said with the Government spending more than they received in tax, despite the record tax intake, "the Government has abandoned any pretence of being a careful economic manager".
"Labour constantly tells us what a good job they did of COVID management, quarantining an island nation from COVID, but now the costs are stacking up for all to see. In truth, we had very expensive COVID mismanagement, and New Zealand taxpayers will feel it for a long time to come."
The Greens' finance spokesperson Julie Anne Genter said what happened in the United Kingdom should be a "cautionary tale" for National. She rejected National saying the two plans are different.
"For a start, when costs are rising for most families, throwing tax cuts into the mix could push inflation up even higher," she said.
"This would put pressure on the Reserve Bank to raise interest rates further, which would mean unemployment would likely increase and our economy harmed. People also get the fact that it is impossible to cut taxes without taking a hammer to our public services."