Government called on to tax wealth after landmark report, but David Parkers remains quiet on what Labour could do

The Government is being called upon to fix New Zealand's tax system so the wealthiest Kiwis pay their fair share of tax - and David Parker reckons he's courageous enough to do it.

But, despite being peppered with questions on what he could do to improve the system or what options he prefers, the Revenue Minister isn't making any announcements yet about what steps Labour could take.

Instead, he says Labour will announce its tax policy before the election and it's current position of no new taxes - outside the new 39 percent tax rate - this term continues to stand.

It follows the release of two new reports from IRD and Treasury revealing New Zealand's richest families are paying an effective tax rate of less than half that of middle New Zealand.

Personal taxable income - things like salary, wages, dividends - only make up 7 percent of the wealthiest Kiwis' incomes. Much of the rest comes from property and business income, though capital gains are mostly not taxed.

For IRD's research, data was collected from 311 of New Zealand's wealthiest families. The department found that the mean estimated net worth of these families in 2021 was $276 million, a number that the minister admits being surprised by.

Parker said on Wednesday that the data confirmed "fundamental unfairness in our tax system"

"The data shows beyond doubt that the wealthiest New Zealanders pay tax on their economic income at a rate well below what most New Zealanders pay on theirs," he said. 

The separate Treasury report also found the top 10 richest New Zealand in 2018 held about 67.2 percent of individual net wealth, which is significantly higher than the 59.3 percent previously estimated through the Household Economic Survey (HES)

The results have led the Green Party to call on politicians to address the issue by taxing wealth. 

"New Zealanders have long felt what has today been confirmed by Government research: our tax system is unfair. The wealthiest pay less than half the effective tax of the average family," said Green Party revenue spokesperson Chlöe Swarbrick.

"Rules put in place by successive Governments privilege wealth hoarding. Not only are these rules unfair, they're counterproductive and starve our health, education, transport and social services. They privatise profit and socialise cost.

She said wealth could be fairly taxed through either a capital gains tax or a wealth tax. At the 2020 election, the Greens had a policy of introducing a new tax on individuals' net worth over $1m.

"The only barrier to a fair tax system, well-funded public services and ensuring everyone has what they need to survive is political willpower," Swarbrick said. 

"Let's be clear: to allow millionaires to continue to not pay their fair share after this explosive evidence is a political choice. Poverty is a political choice."

The Greens' Chlöe Swarbrick.
The Greens' Chlöe Swarbrick. Photo credit: Getty Images.

Speaking at Victoria University on Wednesday, Parker was asked whether he had the courage to fix an unfair tax system.

"Yes," he replied. "But we have made it clear that we are not making significant tax changes today."

"Of course, during a term of Government, those decisions are for Cabinet and at election time they are for political parties. The electorate will know the answer to that question, what's our future tax policy, by the time we get to the election."

Throughout a Q+A session at the university, as well as during media questions afterwards, Parker repeatedly refused to say what tax options he preferred. 

That included whether the Government was paving the way for a wealth tax or if he thought a capital gains tax (excluding the family home) would be fairer than the current brightline test.

"No actually look, I am not going to go there because if I start getting into the detail of which tax remedy is the best one, you will say this or that and I am just not going there today," he said to the latter.

Former Prime Minister Jacinda Ardern ruled out a capital gains tax under her leadership, saying that while she believed it could help resolve some inequities in the system, it was clear many New Zealanders didn't believe in it.

Parker been involved in Labour's previous (and unsuccessful) attempts to campaign for a capital gains tax. 

"It's not necessarily the best or only solution. I again make the point that I am not announcing any tax policy here today nor pre-empting what the Labour Party may or may not do in the election."

He said one of the problems with addressing the inequities in the tax system in the past is that decision-makes haven't had "inarguable data".

"We now do," Parker said. 

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

The National Party's reaction to the research has been to highlight the large increase in the income of the surveyed families over recent years.

The IRD report said the surveyed group's economic income varied over the time period analysed, from $1 billion in 2017 to $14.6 billion in 2021. 

The particularly high income in the year to March 2021 was "largely due to high capital gains being generated on assets", IRD said. 

Incomes could have dropped somewhat since then considering the decrease in asset prices since late 2021. However, that's not captured by this IRD report.

"These reports highlight the impact of Labour's sugar-hit economics," finance spokesperson Nicola Willis said.

"The Government's decision to embark on a money-printing, borrowing and spending frenzy has led to massive capital gains for some, at the expense of everyday workers. That's not a result of tax policies, it's the result of Labour's deliberate monetary and fiscal policy decisions."

Willis referred to Parker as the "Minister for More Tax".

"The practical issues with imposing a capital gains tax have not changed. National continues to oppose a capital gains tax."

Parker was asked if he was comfortable with the growth in income the richest have seen while Labour has been in office.

"In some ways it says that the economy has been growing very strongly under a Labour Government," he said. "I am on record as saying we need a fair tax system."

ACT Party leader David Seymour earlier said he expected the Government to try and leverage the results "into a reason to take more money from Kiwis".

"We tell kids to listen to their teacher, work hard, get good grades so they can get good jobs, save their money and invest wisely. Labour says if you do all that we'll tax you harder. It is tall poppy syndrome in the tax code," he said.