Tax: What's Labour's plan?
For 98% of New Zealanders, there will be no changes to income tax.
Earn less than $180,000? No changes to your income tax.
Our policy on this won’t change over the term. We’re committing now to no new taxes and no further increases to income tax for the next three years.
That includes no fuel tax increases (more on this below).
A new top tax rate of 39% for income earned above $180,000 will be used to help control debt and protect vital services like health and education.
That change will affect just the top 2% of earners.
So what are the changes? Is Labour putting up taxes?
Our balanced plan protects vital services like education and health and keeps a lid on debt.
Our three tax policies are:
- A new top income tax rate of 39% - only affecting income over $180,000
- A freeze on fuel tax increases and no new taxes for the entire term
-
Closing tax loopholes to make multinational corporations pay their fair share
1. Under our plan, income tax won’t change for 98% of New Zealanders.
Under Labour’s COVID-19 revenue policy, the top 2% of earners will pay a higher rate (of 39%) on income they earn over $180,000. This additional revenue will support the COVID-19 recovery.
Labour’s plan: a new top income tax rate of 39% will apply to any income earned above $180,000. 98% of New Zealanders won’t be affected by these changes.
This new rate is based on individual income. It won’t apply to you if your household earns more than $180,000 combined, as long as your individual income is $180,000 or less. For example, a household with two people who both earn $120,000 will have no tax changes - even though their combined income is $240,000 - as both individuals are below the new top rate threshold of $180,000.
Under our plan, the top 2% of earners will contribute a little more - and even then, it’s still a lower rate than in other countries like Australia. Australians earning over this threshold pay a higher rate of 47% (including a 2% Medicare levy). Our increase takes our top rate to 39%.
Our policy is forecast to generate $550 million of revenue a year. The new tax rate for the top 2% of earners will help manage debt, while protecting public services like education and health.
2. A freeze on fuel tax increases AND no new taxes AND no further income tax increases, for the entire term
New Zealanders need certainty and stability right now, as we continue our fight against COVID-19 and its impacts on our economy.
That’s why, in our 2020 tax policy, we’ve made a commitment to no new taxes AND no further increases to income tax for the entire next term of Government. That’s including no fuel tax increases for the whole of next term.
3. Labour is closing tax loopholes to make sure multinational corporations pay their fair share.
We’ve already made major changes to target multinationals, and prevent them from using loopholes to avoid New Zealand’s tax and shift profits offshore. We’re committed to continuing our work to hold multinationals accountable and to make New Zealand a fairer place to do business for local Kiwi companies.
We’re improving the fairness of our tax system to make sure everyone is paying their fair share, including by:
- Ensuring companies who work multi-nationally pay their fair share of tax, through the Taxation (Neutralising Base Erosion and Profit Shifting) Act, which introduces a number of measures such as charging higher interest rates on loans that move profits out of New Zealand
- Addressing property speculation by extending the bright-line test
- Stopping property investors from being able to ring-fence rental property losses so they can't offset them against other taxable income
- Levelling the playing field for New Zealand companies by requiring foreign companies to collect GST on low-value goods sold into New Zealand
- Backing more than one million Kiwis by eliminating secondary tax and automating tax refunds through IR’s Business Transformation programme.
Local New Zealand companies deserve a level-playing field. Labour will continue to proactively work with the OECD in order to find a solution to multinationals not paying their fair share of tax. We want to get an international agreement that will see measures put in place to make multinational corporations pay their fair share.
However, we also need to be prepared to put in place our own rules to ensure fairness, if that agreement is not possible. We will be prepared to implement a Digital Services Tax (DST). Current projections from IRD estimate a DST will raise between $30 million and $80 million of revenue a year.
A DST would be very narrowly targeted and would not apply to sales of goods or services, rather to digital platforms which depend on a base of users for income from advertising or data.
Labour has kept debt under control in Government, and we will keep doing that as we recover and rebuild from the impacts of the COVID-19 pandemic. Even with the impact of COVID-19, New Zealand’s debt levels will remain lower than countries like the UK, US and Canada.
Our revenue policy balances Labour’s focus on keeping debt under control, while investing in critical services like health and education. The policy builds on our track record in Government, where Labour has run surpluses and brought net debt down below 20%, as we promised we would.
Want to know more about how Labour is keeping debt under control? Read more about our revenue policy here.
See if your income tax will change with our tax checker. (Hint: no change for 98% of Kiwis)
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