Te Pāti Māori Tax Policy Would Ruin New Zealand
Responding to today’s tax policy announcement from Te Pāti Māori, Taxpayers’ Union Campaigns Manager, Callum Purves, said:
“The proposals laid out by Te Pāti Māori come from a place of fundamental misunderstanding of economics and incentives.
“Removing GST off food will make our world-leading consumption tax system more complex, open to abuse and is poorly targeted. Instead of making it cheaper for just those who struggle to put on the table, this tax reduction applies to all individuals whether they are buying caviar and eye fillet steak or fruit and bread. The wealthy spend a higher dollar amount on food and would therefore be the greatest beneficiaries of the policy.
“Shifting the tax brackets to have even higher marginal tax rates for those earning above $60,000 will ruin incentives for people to earn more money as the payoff for doing so is diminished. Anyone looking at taking on extra hours, up-skilling, gunning for a promotion or creating a side-hustle will have to consider the fact they will lose a significant amount of that money in tax. Many people will decide this isn’t worth it and either not try to increase their incomes or will simply go overseas where they can keep more of their own money.
“The tax free threshold, when paid for by higher tax rates elsewhere will also have significant impacts on incentives to work and encourage people to manipulate their income to get in under the threshold. Secondary earners in a household will likely cut back their hours to below the tax free mark, family owned businesses will pay non-working family members up to $30,000 to ensure that as much money as possible is not taxed.
“Our recent report on the Green’s wealth tax by Taxpayers’ Union research fellow, Jim Rose, highlighted how a wealth tax would be unlikely to generate much revenue, would discourage innovation, saving and investment and would see more highly-skilled New Zealanders heading offshore. The report also highlighted how the impact wealth taxes have on successful Māori who decide to go out on their own rather than operating within treaty governance entities.
“Taxes on foreign companies will raise costs for many everyday goods and services that are not produced in New Zealand. These costs will make products more expensive for New Zealanders while also discouraging overseas companies from investing in New Zealand, creating jobs and paying tax.
“The land-banking tax and vacant-house tax are solutions for the wrong problem. The policy proposal correctly identifies regulatory issues preventing the development of Māori land but similar issues apply to all land. Cutting red tape that prevents building, developing and renting properties would be a more effective and enduring solution for the housing crisis. By making it easier to build, the increased supply in the market will flatten the growth in property prices and will make it no longer worthwhile to speculate. Instead, these proposals will make it even risker to invest in creating more housing with the threat of a 33% tax on the market-value of a property for anyone unable to fill a property within 6 months.
“If money-hungry politicians were able to end tax evasion and get more money by simply spending more they would have done it already. These proposals in their totality will simply flood New Zealand with a tsunami of tax loopholes. If reducing tax avoidance is the goal, our tax system needs to be made simpler and flatter so that it becomes impossible to avoid."