• No income tax changes for 98% of Kiwis
• A new top rate of 39%, but only on income earned above $180,000
• No new taxes or any further increases to income tax next term
• Extra revenue raised used to protect health and education, control debt, support recovery plan
• Closing loopholes so multi-national corporations pay their fair share
Labour will protect services like health and education and help keep a lid on debt by introducing a new top tax rate for the 2% of New Zealanders earning income over $180,000.
“We know New Zealanders want certainty and stability at the moment. This policy is about maintaining investment in important services that are so crucial for New Zealanders like health and education, while keeping tax rates exactly the same as they are now for 98% of people,” Labour Finance Spokesperson Grant Robertson said.
“Our plan strikes a balance as we recover from COVID-19. It will avoid the cuts to services being suggested by the National Party, and also help keep a lid on debt as we support the economic recovery from a 1-in-100 year shock.
“The necessary borrowing for the COVID-19 response meant we could fund emergency measures like the wage subsidy, which protected 1.7 million jobs and gave businesses and workers confidence during lockdown. But we have to be careful about not running up more debt than necessary for our recovery.
“I have made it my focus over this term of government to manage our books carefully and bring down debt. That focus will continue. Generating extra revenue now will help keep debt under control.
“The new rate will cost $23 a week for an individual earning $200,000, but it will make a big difference to the country’s ability to maintain the investments needed for the economy to bounce back.
“Labour will not implement any new taxes or make any further increases to income tax next term. We have already committed to not raising fuel taxes in the Government transport plan that covers the next term.
“Our team of 5 million is doing an outstanding job in the fight against COVID-19. It’s important that peoples’ incomes and services are protected as we recover and rebuild,” Grant Robertson said.
Labour will introduce a new top income tax rate of 39% that will apply to any income earned above $180,000. This will apply only to the 2% of New Zealanders who are in that position and represents an extra six cents in the dollar on any income earned above $180,000 – with no impact on any income earned below that. The policy is forecast to generate $550 million of revenue a year.
“Australians earning over A$180,000 pay a much higher rate of 47% (including the 2% Medicare levy),” Labour Revenue Spokesperson Stuart Nash said.
“In these uncertain times we need stability in our tax system. Under our plan, 98% of New Zealanders won’t be affected by these changes. The company tax rate is not changing, giving businesses continuity and certainty.
“We know from the experience of other countries – like Australia, Canada and the UK – that their economies grow strongly when higher earners are paying tax rates above 39%. When New Zealand previously had a 39% top rate, it certainly didn’t stop GDP from growing at annual rates of 3% and 4%.”
Labour’s revenue policy is part of its plan for managing the books responsibly, as the world battles with COVID-19.
“New Zealand is not immune from the impact COVID-19 is having on the global economy. That’s why we ring-fenced the remaining $14 billion in the COVID Fund to help us fight a second wave and support the economic recovery, particularly if the global recession gets worse. Our position is still that if any of the $14 billion isn’t needed then it won’t be spent,” Grant Robertson said.
“My challenge today to the National Party is to explain exactly what they will cut to meet their spending promises and their extremely harsh debt policy. Their numbers simply do not add up unless there are tens of billions of dollars of cuts to services like health, education and police."
Labour is also committing to continue work with the OECD to find a solution to the issue of multi-national corporations not paying their share of tax.
“Labour will continue to work to get an international agreement that will see a comprehensive regime for multinational corporations to pay their fair share. But we also need to be prepared to put in place our own rules to ensure fairness, if that agreement is not possible,” Grant Robertson said.
“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, but rather to digital platforms which depend on a base of users for income from advertising or data.”