New Zealanders slapped with world's second-largest tax hike, OECD data shows

  • 26/04/2024

New Zealanders faced the second-biggest tax raises in the developed world last year, the Organisation for Economic Cooperation and Development (OECD) says.

The intergovernmental agency said the average change in personal income tax in New Zealand was 4.5 percent higher last year compared with 2022. 

That was only behind Australia, where taxes rose 7.6 percent in the same period.

Single Kiwis earning the average wage were paying tax at a rate of 24.9 percent in 2023, up from 23.2 percent a year prior, according to the OECD data released on Thursday.

In comparison, those earning 167 percent of the average wage only faced a 0.5 percent increase in the same period (25.3-25.8 pct). 

New Zealand was also among countries with the highest percentage of labour costs paid in personal income tax. 

"The highest share was in Denmark (35.8 percent), with Australia, Belgium, Iceland, Ireland and New Zealand also above 20 percent," the OECD said. "The percentage of labour costs paid in employee SSCs (social security contributions) also varied widely, ranging from 0.0 percent in Australia, Colombia, Denmark and New Zealand to 19.0 percent in Slovenia and 19.2 percent in Lithuania." 

A subsequent social media post by Associate Finance Minister David Seymour said the Coalition was "cleaning up Labour's mess".

He said the Government would make tax relief possible and tackle the cost of living by controlling "wasteful" spending.

Prime Minister Christopher Luxon has pledged to cut income taxes this year. That election promise from Luxon and Finance Minister Nicola Willis comes despite warnings of a fiscal hole

Willis said earlier this week the Government was "sticking to our commitment, which is that we will not be borrowing additional funding... to provide tax relief". 

The tax cuts would be fully funded through reprioritisation and "a couple of targeted revenue measures", she told RNZ's First Up

"That means it's fiscally neutral, which means it's responsible," Willis said. "And rather than adding to inflation, [it] will actually take away from inflation - which is what we've always set out to do." 

Luxon, whose Coalition Government was elected last year, has said he wanted to provide tax relief as soon as possible. 

"We are going to deliver tax relief for lower-middle income, working New Zealanders," he told AM last month. "That is a big commitment of ours, we think that's entirely appropriate, in a cost-of-living crisis, that lower-middle-income workers who are paying their taxes, working incredibly hard... deserve to keep more of their own money."