FAQs

We believe that the majority of wealthy New Zealanders would like to live in a thriving and productive society where everybody has a fair go, and there’s more keeping them here than tax advantages.

Research shows that fears that wealthy people will leave if we tax wealth are overblown, and there are ways to design wealth taxes to mitigate this risk.

Where people have accumulated their wealth in New Zealand, using New Zealand infrastructure, human capital and resources, it is reasonable to expect that they contribute their fair share even if they choose to take their wealth offshore.

There is more tying people to New Zealand than their ability to minimise their tax obligations, like our environment, safety and security, culture, freedoms, personal and family connections, and whakapapa. That’s why almost 100 well-off New Zealanders have called on the government to tax wealth more, so that families can be lifted out of poverty, an “investment that would pay off many times over”.  Plus wealth is often held in immovable property that can’t be shifted offshow, like land and buildings.

Research in the UK has also found that 88% of millionaires would be happy to pay more tax, and that a majority of wealthy individuals would not choose to emigrate as a result of a wealth tax, due to a combination of factors including stigma and reputational risk, familial upheaval, administrative burden, and attachment to place. Conversely, we currently have a serious problem with skilled young people leaving the country, due in large part to the government’s failure to uphold the social contract by raising resources to invest in services and to arrest runaway inequality and housing costs.

There is mixed evidence internationally for wealth tax triggering residency changes or the movement of assets offshore (known as capital flight). For starters, in New Zealand quite a lot of wealth is held assets that can’t move, like land and buildings. Some evidence such as from a study of Denmark’s wealth tax suggests that wealthy people may alter their behaviour, including by reducing their overall wealth holdings (by consuming more and saving less) or by moving wealth offshore. Where wealthy people choose to consume more and save less, this can benefit the underlying productivity of the economy and serve to reduce wealth concentration. Where they choose to move wealth offshore, this primarily represents unproductive financial shuffling, which has little impact on economic productivity. While some may choose to change their residency and move all their business activities offshore, this would be a minority.

A well designed wealth tax, with robust, third-party data-driven enforcement and international cooperation can mitigate the risk of capital flight. There are levers available to policymakers which could address the issue of ‘expatriation’ or wealthy people leaving the country. For instance, government could levy an “exit tax”, or continue to levy a wealth tax for a defined period (for example 5 or 10 years) on persons who have emigrated. The US, Canada, France, Germany, Spain, the Netherlands and Australia all have some form of exit tax. Government could also reduce the threat of “tax competition” from other jurisdictions by continuing to levy the difference between tax paid in the new location and the tax rate that would be paid in New Zealand.

There is a pervasive myth that the wealthiest in our society are the “job creators” and that peoples’ ability to accumulate extreme levels of wealth is critical to investment, innovation and employment. This is essentially ‘trickle-down economics’, and it isn’t supported by the evidence.

On the contrary, studies overwhelmingly show that public spending and consumer demand, that is enabled through a more redistributive tax system (not wealth accumulation by the few), are critical to job creation and innovation.

Moreover, research shows that a net wealth tax and capital gains taxes can serve to shift investment from less productive to more productive assets, which supports economic growth and job creation.

Estimates suggest that across the world public spending supports about half of all jobs. Research by the IMF shows that every US$1 million of public spending on infrastructure in advanced economies directly creates 3-7 jobs directly, and many more indirectly. If we raise taxes on the wealthiest, which contribute to expanded public spending on infrastructure and services, this can have a powerful pro-employment and pro-productivity impact, in both the public and the private sectors.

Wealth inequality and growing poverty have a negative effect on consumer demand, which in turn depresses employment. Modelling has shown that redistributing wealth from those who save a larger proportion of their resources (highest deciles) to those who spend a larger proportion of their resources (lowest deciles) increases overall consumption, which increases employment. By contrast, cutting taxes for the wealthiest 10% does little to stimulate employment.

While we have good evidence that public spending and aggregate demand increases create jobs, the idea that we need very wealthy people to drive job creation is not supported by the evidence, and in fact the opposite is likely true—that wealth concentration is bad for productivity, innovation and employment. A large proportion of the wealth owned by New Zealanders at the top of the distribution is held in unproductive forms, like property or shares in offshore companies. Wealth taxes may shift investment into more productive assets. Research into Norway’s wealth tax found that when the wealth tax was increased, wealthy people who owned medium-sized businesses were more likely to shift their savings into their business, which resulted in a positive effect on employment—in other words the wealth tax stimulated job creation by penalising the hoarding of unproductive assets. 

It is important that the design of wealth and inheritance taxes take into account the circumstances of those who grow our food, those who have worked and saved over the course of a lifetime to fund their retirement, or small and medium sized businesses that power our economy.

Concerns about the impact on farmers, retirees and business owners would be largely addressed by the fact that primary residences or family homes are typically excluded from wealth and capital gains taxes. Other exemptions or deferrals can be built in the wealth taxes to address these concerns.

It is important to note also that farmers, retirees and small business owners would all reap benefits from our proposed tax reforms, in the form of increased government investment in infrastructure, climate adaptation, research and development and services including the restoration of our public health system, and rural health.

A common concern we hear is that, because the value of family farms can be substantial, but the incomes they provide modest, farming families may not have the ability to pay wealth and inheritance taxes without selling their farms. In addition, retirees who own valuable property but have relatively low incomes may face hardship as a result of wealth taxes. Moreover, small and medium-sized business owners who draw little profit or income from their businesses may face difficulties in meeting wealth tax obligations.

The UK Wealth Tax Commission found that liquidity constraints are a real concern though not as widespread as often thought—the proportion of wealth holders who would face the need to sell an illiquid asset like a farm or business to meet wealth tax obligations is low. Those with significant illiquid assets may be able to borrow against their assets to meet their tax obligations—but this should not be seen as a solution to liquidity constraints in and of itself.

In addition with regard to inheritance taxes, spouses would, in our proposal, be exempt from a wealth transfer (inheritance or gift) tax, and children would be able to inherit a higher amount, before the tax is applied, than other relatives and non-relatives. For example, Ireland’s capital acquisitions tax (CAT) has a €400,000 exemption threshold for children. Applying a similar threshold in Aotearoa New Zealand would encourage assets to be broken up and split between family members following the death of a wealth holder, which is critical for mitigating the concentration of wealth and increasing inequality across generations.

There will be specific factors that need to be taken into account regarding Māori collectively owned assets, which cannot be split up or sold. These should be exempt from a wealth transfer tax though many are likely to be below the threshold for an individual household in any case.

There may still be exceptions, whereby people could face hardship when wealth or wealth transfer taxes are due. This can also be mitigated through design. Our proposed wealth and wealth transfer taxes target large wealth holdings or transfers. By applying a high threshold before the taxes kick in, we can ensure they are primarily targeted at the ultra-wealthy. Further, liquidity concerns can be mitigated by stretching the payment periods for wealth and inheritance taxes over multiple years, without incurring additional fees or interest. Finally, for the small minority who would still face genuine hardship or the need to sell illiquid assets in order to pay, government could institute a deferral scheme, to allow these taxpayers to defer their liability until the asset is sold or passed on after death.

The New Zealand tax system has been found to be insufficiently progressive, meaning it does not do an adequate job of redistributing resources from the wealthiest to the least wealthy, and it does not adequately reflect people’s ability to pay.

This means that the wealthiest in New Zealand aren’t paying their fair share while working people carry more of the load. This is because our tax system predominantly taxes work and consumption, as opposed to capital gains and wealth.

The IRD’s high net worth individuals research project found that the wealthiest individuals pay a median effective tax rate of 9.4% including GST. By comparison, the median income earner  in New Zealand has an effective tax rate of around 20%—more than double the rate paid by the wealthiest. 80% of the economic income of high-wealth individuals comes from capital gains. This highlights the fact that untaxed capital gains are a significant contributor to wealth inequality in New Zealand and to the regressivity of our tax system at the top end (or the fact that the wealthiest pay proportionately less in tax compared to the typical wage/salary earner in New Zealand).

Because the majority of wage-earners in New Zealand consume, or spend, a high proportion of their income, they pay proportionately much more in GST than high-wealth individuals, who save more of their income. It’s not fair that most New Zealanders, who have to work for a living and are burdened by rising costs and rising GST, are paying almost double the tax rate of the very wealthy, who gain their income passively, from returns on investments.

Although there are inevitably implementation challenges with introducing new forms of taxation, these challenges are surmountable and do not outweigh the need to rebalance our tax system nor the benefits of doing so for all New Zealanders.

Other countries already have wealth taxes, more have had them in the past, and a number of jurisdictions are considering wealth taxes at the moment. In recent years, thanks to strengthened international cooperation, information sharing and anti-money laundering efforts, it has become much more feasible for authorities to identify the beneficial owners of companies and assets and to value their wealth (using, for instance, equivalent values for private companies as their publicly-listed counterparts, and insurance values for assets like art).

The IRD’s high-wealth individuals project found that the wealthiest people in New Zealand have a much lower effective tax rate than the median New Zealander. While median income earners pay around 20% of their income in tax, the wealthiest individuals pay 9.4%, including GST.

Although the wealthy contribute a greater amount of government revenue in dollar terms, working people still pay more than their fair share relative to their income, which compounds inequality over time.

This imbalance is because, while our tax system progressively taxes income earned from work (i.e. the highest-earning workers pay proportionally more), it does a poor job of taxing income received from assets. Wealthy people earn much more of their economic income from assets (like property, businesses, investments and shares), than they do from work. About 80% of the income of the wealthiest 311 New Zealanders came from untaxed capital gains. This is contributing to growing inequality as wealth becomes more and more concentrated at the top and passed between generations with no inheritance tax.

It’s not fair for those who have to work for a living to carry more of the load of funding our public goods and services than those whose income comes from their accumulated wealth. We can build an egalitarian Aotearoa, where everyone thrives, by making the wealthy pay their fair share.

People may have concerns about the impact a capital gains tax, specifically, would have on the value of their home or on housing affordability. 

In New Zealand, house prices have become less and less affordable over recent decades, with the market cooling recently following an uptick in construction and housing supply. A capital gains tax would extend the existing “brightline test” and help to stabilise the housing market for everyone.

Whilst a lack of supply has been the main driver of housing unaffordability in Aotearoa, speculation on the housing market by private investors, enticed by the lack of taxation on their gains, has also contributed. As such, a capital gains tax, which discourages housing market speculation, can help to ensure that house prices do not increase at an unsustainable rate, helping to make housing affordable for young people, who will have less competition from deep-pocketed investors.

However, a capital gains tax in New Zealand would not constitute a radical shock to the property market. We already have a bright-line test, whereby investors pay capital gains tax on properties that are "flipped" within two years. Instead, a capital gains tax could help to stabilise the property market, slowing down the kind of excessive house-price inflation that has served to lock so many out of the market and contributed to housing insecurity, unaffordable rentals, and homelessness.

The vast majority of savers in New Zealand will not be affected by a wealth tax.

Current proposals anticipate a threshold of between $2 and $10 million net wealth (that means after subtracting any debt), excluding the family home and Māori collective assets. Even for those who save above this threshold, a wealth tax set at 1-2% of net wealth will not discourage further saving because most wealth is retained.

However, for the ultra-wealthy, a wealth tax will discourage the hoarding of wealth in unproductive assets, like property or offshore investments.

The amount that landlords can charge tenants is primarily determined by market dynamics, specifically demand for rental housing compared to availability. Capital gains and wealth taxes can help to discourage speculative, investment in unproductive residential properties and generate revenue to build affordable housing, all of which would bring down housing prices.

If demand significantly outstrips supply, rentals will become less affordable as we have seen over a number of years in Aotearoa. Under such conditions, landlords have the ability to raise rents regardless of their costs. At the same time, a capital gains tax will discourage speculation on the housing market, and a wealth tax will discourage the hoarding of unproductive assets, including residential investment properties. This would have a gradual cooling effect on house prices, which in turn would make rentals more affordable while also helping renters into their first homes. In addition, the extra revenue raised through wealth and capital gains tax can help us to increase the supply of affordable housing and the stock of public housing. This will also help to stabilise rents while making it easier for renters to buy their first homes.

Alongside all of this, we still need protections for renters to achieve fairness in our housing system and realise the right to decent housing for everyone. This includes through measures like strengthening the security of tenure for renters and ensuring rental properties meet quality standards.

A regressive tax is when the least well-off contribute a greater proportion of their income than the most well-off.

GST is a regressive tax because those with the lowest incomes pay a greater proportion of their income in GST compared to those with higher incomes. This is because the GST rate (15%) is the same for everyone, but the least well-off spend a greater proportion of their income on things that are subject to GST than wealthiest people.

For example, suppose a person is earning $50,000 per year and saving $5000 per year. They spend 90% of their income and pay GST on all (or the majority of) this spending. This person pays approximately 13% of their whole income in GST. By contrast, a person earning $250,000 per year, and saving $100,000, spends 60% of their income on which they pay GST. This person pays 9% of their income in GST.

Those on the lowest incomes are much more adversely impacted by increases in the cost of living—particularly inflation in food and energy prices because they have no buffer in their income that would otherwise be allocated to savings. When the cost of living increases, so does GST.

GST is difficult to replace because it is spread across a very broad tax base (everyone who spends money in New Zealand) and is a reliable and significant source of revenue. However, if the tax mix is overly skewed towards regressive taxes, it can reinforce inequality and wealth concentration at the top and place too much pressure on working people particularly those on lower incomes. We need an overall tax system that is progressive—i.e. that requires the wealthiest to pay proportionally more than the least wealthy. It would be better to reduce the rate of GST and raise the lost revenue through more progressive taxes like income and wealth taxes and to provide a refund of the GST, which families on the lowest incomes pay. The Inland Revenue Department has shown how a “low-income GST offset” like this could be provided.

There has been a lot of scaremongering regarding the supposed unsustainability of New Zealand Super as our population ages. Much of this overlooks the facts. First, research has found that over 65s in New Zealand pay the same average amount of tax per person as the overall population—they keep contributing to the cost of NZ Super, rather than suddenly becoming dependent on taxes paid by younger workers.

Second, New Zealand Super is among the lowest-cost pension schemes in the OECD. Whilst the cost of Super is expected to rise by 2030, it will not rise as much as some have suggested. It will remain affordable within the country’s resources.

However, we must also confront the fact that NZ Super payments are becoming increasingly insufficient. We need to increase Super, rather than cut it. Capital gains tax, a wealth tax or a wealth transfer tax, all of which would tend to tax the older wealthy more are possible avenues to generate the revenue to ensure Super continues to support retirees properly.

Government has referenced a $10 billion projected increase in the cost of Super between 2023 and 2030. This does not take into account the tax paid by superannuitants nor the New Zealand Super Fund, which is New Zealand’s largest taxpayer. Accounting for this, as well as government contributions to the NZ Super Fund now and the non-tax contributions the NZ Super Fund will make to paying for NZ Super in the future, the projected rise is $6.1 billion. Over the same timeframe, our nominal GDP is expected to rise by over $150 billion.

Taking those factors into account, in 2023, NZ Super payments amounted to 4.7% of our GDP. In 2030, it is expected to amount to 4.5%, in other words, it will be more affordable in 2030 than it was in 2023, and, as a proportion of GDP, roughly in line with the average over the 2000s. In addition, government transfers, including pensions, help to boost the New Zealand economy as they are spent back into local businesses. Reserve Bank modelling indicates that every $1 of additional spending on transfers would create an extra $0.76 in GDP. By the same token, cutting spending on transfers and benefits would have a contractionary effect on the economy.

NZ Super has long done a good job of maintaining peoples’ wellbeing and enabling them to keep participating in the economy as they age. However, we must also confront the fact that NZ Super payments are becoming increasingly insufficient, particularly as people face higher housing costs and are still renting or paying off mortgages after 65. In light of this, we need to increase, rather than cut Super. To do so, there is a need to find additional revenue sources which are sustainable and redistributive—like a capital gains tax, a wealth tax or a wealth transfer tax, all of which would tend to tax the older wealthy more.

There is no conclusive evidence that public spending is more wasteful or less efficient than private sector spending. On the contrary, the government can benefit from economies of scale and coordinated procurement mechanisms that ensure greater value for money, than in the private sector. 

Public spending has direct and indirect benefits for all of us, including generating jobs and stimulating the economy. In addition, public spending is not driven by profit maximisation and governments are accountable to the public.

As residents of New Zealand, we all gain immensely from government spending. Tax-funded spending in areas like infrastructure, healthcare, education and social security make a material difference in all of our lives. Far from being wasted, this public spending is the foundation on which we can build meaningful lives. By increasing government revenue though a more equitable tax system, we can invest more into these critical areas and shift the public spending mix towards providing services and investing for the future, with a lower proportion going towards servicing debt.

Around the world, it is becoming increasingly clear that the push to privatise public services has funneled risk-free benefits to private investors, underwritten by the state, and resulted in degraded service delivery and higher costs to consumers. The reason for this is that the private sector has different incentives to government: it is concerned with profit maximisation first. By contrast, government does not seek to extract profits from service provision. It is also more accountable to the users of services, through democratic channels.

If increased government spending is funded by higher taxes on the wealthiest, this will not have an inflationary effect, because at the same time as spending more money in the economy, the government is slightly limiting the consumption of a particular group of taxpayers—the ultra wealthy. It has the added benefit of tackling inequality and increasing costs of living by limiting the extent to which the wealthy can buy up our assets.

Many economists see taxation as a key instrument for controlling inflation. The wealthy do not drive inflation by pushing up prices for basic goods like groceries, but they do contribute to inflation by driving up asset prices (and therefore rents, etc.), and the prices of scarce resources.

Therefore, if government slightly limits the spending power of the wealthy through taxation and invests in providing services and reducing inequality, the overall level of money circulating in the economy is not increasing, it is just being distributed more equitably and productively.

No. The Better Taxes for a Better Future campaign is non-partisan. 

While some of our tax policy proposals may in substance be similar to some political parties’ policies, we do not align with or endorse any particular party.

We are connected with the international Tax Justice Network, and the Global Alliance for Tax Justice. We are not formally affiliated to, and receive no funds from, these organisations.

The Better Taxes for a Better Future Campaign is completely independent from government or corporate interests and relies on contributions from our coalition organisations, philanthropic grants and donations from people like you.

We believe that the majority of New Zealanders recognise that it is past time that our tax system was made fairer, to tackle inequality and enable us to take care of our people and communities. And public opinion polling supports this!

The momentum is behind us, and together we can demand action from our government. Sign the better taxes pledge today to demonstrate your support: https://www.bettertaxes.nz/pledge

It is no longer possible for politicians to ignore growing inequalities and cost of living pressures, which are compounded by underfunded health and education systems and a social protection system under constant attack. Meanwhile, as most people in Aotearoa are being forced to tighten their belts, the wealth of the 150 wealthiest families grew by $26.9 billion in the last year alone (from $102.1b to $129b), and the number of billionaires increased from 18 to 26. Something has to give. Better Taxes’s message is clear: We don’t have to accept a rigged system and things continually getting worse. There is a clear, evidence-based and practical alternative, which has widespread support: Making sure the wealthiest pay their fair share, so we can provide excellent services and meet everybody’s needs. Around the world, policymakers are increasingly understanding that we need to tax wealth, at least as much as work, to build a decent future.