Government tax principles plan held up as David Parker says policy work not finished

The Government's plan to enshrine "tax principles" in law may not happen before the election as the minister initially hoped as he says officials are still developing the policy.

Revenue Minister David Parker denied delay to public consultation is because Labour has political concerns about discussing tax as it campaigns to hold onto power.

Speaking at Victoria University in Wellington in April, Parker proposed introducing legislation that set out agreed-upon tax principles. It would require officials to regularly report on the tax system using those principles as the basis. 

"An important stage of the project will be wide public consultation on the proposed principles and reporting framework," he said. "We'll be [doing] that around the middle of the year, and hope you will share your views."

However, despite it being nearly the end of the year, no public consultation has occurred.

"We've done internal work," Parker told Newshub on Wednesday. "We haven't yet landed, but we continue to be interested in progressing it. We haven't finished the policy work."

It's still not decided whether consultation will take place before Christmas, he said. 

Parker said he intended to have the legislation introduced to the House before the 2023 election, but didn't commit to it having passed before MPs head off to campaign.

The minister had said in April he would "like to see these principles enacted in a Bill before the end of the current Parliamentary term".

The minister on Wednesday wouldn't say what specific policy issues were causing the delay, but denied Labour was trying to avoid opening the tax can of worms. 

"Oh no. We'll certainly be talking about tax before the election. We do every election. I'm sure this won't be any different… I still believe in the importance of having clear tax principles."

Revenue Minister David Parker.
Revenue Minister David Parker. Photo credit: Newshub.

In his April speech, Parker said reviews both in New Zealand and internationally had found the main settled tax principles include that there should be some degree of progressivity in tax rates and that those in similar economic positions should pay the same amount.

"As to how these, or other, principles are expressed, we seek something that New Zealanders of all stripes see value in retaining and protecting. They need them to be clear enough to avoid ambiguity, without determining outcomes which are political."

Once the principles were decided, officials could then use them to report on how the tax system is operating, Parker said. 

"For example, it could require officials to report on the progressivity of the tax system."

The minister said Labour had no plan to introduce new taxes, but Inland Revenue was researching the level of tax paid by the wealthiest of New Zealand.

ACT leader David Seymour criticised the speech at the time, saying Labour was "planting the seed for increased taxation". 

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

While it's likely another year until the election, tax attacks by political parties have already begun.

Labour's finance spokesperson Grant Robertson spent much of his party conference speech on Saturday lashing National for its tax cut proposal, including making comparisons between leader Christopher Luxon and failed UK Prime Minister Liz Truss.

National wants to adjust tax thresholds to inflation and also slash new taxes Labour has imposed, such as the 39 percent tax rate. The party believes the changes would help take pressure off Kiwis during the current cost of living crisis, but some analysis suggests it would benefit the wealthy far more than the poor. 

A Newshub-Reid Research poll this week found 84.5 percent of New Zealanders support creating a tax-free threshold. That means not taxing income below a certain threshold.

When asked about it on Monday, Prime Minister Jacinda Ardern said: "I would just say it is quite a different proposal than what we've seen coming from the Opposition at present because it's inverse, it focuses on those on the lowest incomes."

Last month, Treasury opened the Government's books. It showed tax revenue in the year to June 2021 was $107.9b, up from $97.4b. There were increases across most of the tax types, including that paid by employees, corporates, and through the Goods and Services Tax (GST).