The Tax Unfairness Paradox in Aotearoa New Zealand

In 2023, a tax unfairness paradox is evident in Aotearoa New Zealand. Never before has so much empirical evidence existed to demonstrate unfairness in the tax system, and yet, in an election year, neither of the two major political parties has proposed substantive changes that might address that unfairness. Prime Minister Jacinda Ardern, who had ruled out a capital gains tax (CGT) under her premiership, unexpectedly resigned in January 2023. Her successor, Chris Hipkins, followed her lead, even though Labour would need the support of the progressive Green Party and Te Pāti Māori, to form a centre-left coalition government. Both minor parties support a comprehensive CGT and a wealth tax. National, the other major party, would need the support of the libertarian ACT party to govern, and so could face different pressures to engage in radical tax cuts, beyond its own conservative plans for tax rate realignment and reducing government reach. Into the mix, at the time writing, National would need the support of the policy diverse New Zealand First to govern. The return of significant rates of inflation has brought increased attention to fiscal drag. Income tax bands, which, save for the re-introduction of the highest marginal rate of 39% in 2021, have not changed since 2010. Inflation has also focussed attention on the country’s ‘pure’ goods and services tax, which does not exempt basic food items. Three reports on the amount of tax the wealthy pay were issued in quick succession in April 2023. The report by Sapere, a private consultancy, appears to have been aimed at anticipating and muting the messages of the reports of the Inland Revenue Department and the Treasury, which concluded that the wealthiest pay a disproportionately low amount of tax. Adding to the debate, almost 100 of New Zealand’s wealthiest people issued a public letter calling on government to ensure that the wealthy should pay a fair amount of – that is more – tax. This article maps issues of tax unfairness in Aotearoa for readers who may not be familiar with the New Zealand political and social context and unpacks this country’s tax unfairness paradox.