New Tax Debate for NZ

August 20, 2009 New Zealand Taxation  No comments

Debate has yet again arisen in New Zealand over the issue of taxes, this time in regards to the option of raising GST.

In an effort to cheer the ever worsening prognosis regarding the Government’s decreasing revenues and balances, the idea of raising GST has been raised. The concept was put forward by the Government set up Tax Working Group, a group of experts tasked with advising on issues regarding taxation in New Zealand.

GST in New Zealand is currently set to 12.5%, the Tax Working Group has suggested raising this to 15%. This could potentially raise an extra NZ$2.1 billion annually. The idea of a 7.5% rise, to 20%, could yield a GST collection of an extra NZ$6.2 billion. These extra funds could be used to fund the Government’s previously promised personal tax cuts or corporate tax cuts.

Strong opposition has arisen to the proposal. Primarily it is argued that the nature of GST would hit low income earners harder as it would consume a proportionally higher section of their income, as opposed to high income earners. Opposition to this idea claims that over a lifetime, increased GST would not be as regressive as some claim, and that the increased higher earning margin taxation is harmful to the economic growth of New Zealand.

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