Election 2023: Tax expert questions where National will get 'billions of dollars from' to fund 'expensive' tax policy

Election 2023: Tax expert questions where National will get 'billions of dollars from' to fund 'expensive' tax policy
Photo credit: Newshub/Getty Images

A tax expert has questioned how National will fund its "expensive" tax policy, which leader Christopher Luxon says will help the "squeezed middle". 

The Opposition will lift the lid on its highly anticipated tax policy at 10.30am on Wednesday.

Without revealing the full plan, National has said families without children earning less than $120,000 a year could get an extra $100 in their pocket each fortnight, which extended to $250 every two weeks for those with children.

Support would also increase for superannuants and minimum wage workers.

Election 2023: Tax expert questions where National will get 'billions of dollars from' to fund 'expensive' tax policy

But tax experts still remain puzzled about how National will fund their highly anticipated tax policy.

Dentons Kensington Swan Tax Partner Bruce Bernacchi told AM on Wednesday brackets haven't been moved since 2010, so National will want to move the income levels where you hit higher tax brackets up. 

He told AM co-host Ryan Bridge while he does not yet know what the exact changes are, it will probably be quite expensive. 

"It's going to be fascinating to see how these get paid for but when you look at their previously announced policies, the brackets weren't going to move all that much. The $70,000 bracket where you move from the 30 percent rate to the 33, will probably move from about $70,000 to $78,000, that sort of level of change," he said. 

"Their previous policy is actually quite expensive. When you move these middle-income tax brackets you're affecting hundreds of thousands of New Zealanders. So their previous policy was going to cost around $2 billion a year and that's expensive. So you either need to have a significant amount of spending cuts or significant taxes to pay for it all." 

Newshub also understands a churches or charities tax is also off the table and Luxon on Wednesday morning ruled out a vape tax - for now.

"We haven't looked at that and actually considered that for this tax plan, we're very comfortable that we've actually got the mix right to deliver for the squeezed middle," he said.

Bernacchi told AM he's been giving this "a lot of thought" over the past 20 hours and believes a lot of the fiscal policy will be funded by spending cuts. 

"I wonder whether the Government stole some of their thunder yesterday by announcing a digital service tax. I was thinking that was something that could be announced," he said. 

"Look, there are other things you can tweak. There are exemptions in the fringe benefits tax (FBT) regime. You don't have FBT on carparks you could tweak that. You could look at sugar taxes, other things around the edges but my view is probably most of this will have to be funded by spending cuts.

"Nicola Willis has talked about four new revenue measures but when you've ruled out capital gains tax, ruled out inheritance tax, ruled out wealth tax, they're not going to increase GST rates, it doesn't leave you a lot." 

He told AM he's been doing tax for nearly 28 years and "nothing obvious sprung out", so wonders where National will get billions of dollars from. 

Bernacchi also believes National won't index tax brackets with inflation and will instead do a "one-off" because it locks them into "expensive tax reductions on an ongoing basis if they make it permanent feature".  

Labour leader Chris Hipkins also questioned how National will fund its tax policy. 

"The National Party are trying to tell New Zealanders that they can have all of the promises National is making and no one needs to pay for them," Hipkins said at Question Time on Tuesday.  

"Well, now the mask starts to slip and we see that there are at least four new taxes on the drawing board in order to pay for his unaffordable promises."

Watch the full interview with Bruce Bernacchi n the video above.