The New Zealand sentiments are similar but less strong, possibly due to perceptions that our context is seen as less extreme than exists elsewhere. In terms of what’s driving our upward pressure, one summed it up, saying “there is no doubt during Covid our Government overdid it in its spending. Worse than that, the spending was just that - it certainly wasn’t investment.”
The broader theme is now that this needs to be addressed, including one commenting, “The real solution lies in restoring prudent fiscal management, focusing the Government on essential services, and reforming superannuation and welfare settings. Without that discipline, new taxes will fund waste rather than secure long-term sustainability.”
Consistent with this sentiment, the tax policy response overwhelmingly sought was to live within our current tax settings, to accept that we live in a world of limited resources and to make the trade-offs according. This was a consistent theme, with one also saying, “New Zealand’s fiscal challenge is not inadequate revenue but runaway expenditure.”
This sentiment to largely live within our current tax settings was most pronounced around a wealth tax, with 81% not supporting its introduction and only 9% somewhat supportive. Wealth tax, therefore, remains very unpopular, a sentiment that has existed from when it became part of our tax policy vernacular. Gift and estate duties similarly garner no support, with 76% not supportive and 10% somewhat.
In terms of existing tax-setting, a similar majority of 75% don’t support increasing the overall tax charged to businesses, including increasing the company tax rate. Looking at this through the other lens, only a minority of 19% fully support a drop in the corporate tax rate, 18% reasonably support it, and 21% somewhat supportive. However, 36% have no support for it at all. This contrasts with last year’s sentiments, where 67% considered that the Government should consider a reduction of the corporate headline rate with only 20% not supportive. A material sentiment shift over 12 months.
Juxtaposing this, there continues to be support for broadening the tax on asset gains, including the taxation of capital gains; with 61% fully, reasonably, or somewhat supportive. Only 37% were not supportive at all. One stated, “I don’t support a CGT on its own. Done by itself, it’s simply a tax grab. If it were part of a tax rebalancing, however, that lifted the economy and productivity, this could be worth considering.”
Wider than tax, the majority are either fully (38%), reasonably (30%) or somewhat (17%) supportive of targeting superannuation by increasing the age of eligibility, with a similar spread supportive of targeting the same to those in greater need.
And in terms of government expenditure that tax revenues are required to fund, 31% have a heightened concern around the efficacy of government spending, up from 16% last year, with that number peaking at 85% the year before (under the previous Government), which had one then stating that “it was out of control”. A similar sentiment this year was, “to quote Sir Brian Roche: we have got approximately 63,537 public servants, which is an increase of 30% over the last six years - our economy has not grown by that amount and it does not feel that we have had a 30% increase in service provision”. This theme has been articulated across the questions in a multitude of ways by many, as the reality of the recovery hits home.
In terms of wealth inequality, it continues to resonate as a material issue with only 14% feeling that the concern has reduced year on year, albeit housing values have softened. Similar to previous years, 66% feel ensuring suitable minimum levels of welfare and income (a heightened safety net) is the main response to the problem. When asked as part of solving wealth inequality, taxing wealth in addition to income continues to score poorly at 9%, but similar to sentiments already raised, taxing realised gains on assets in addition to income comes through more positively at 45%.
Ending on a more upbeat note for the Government, the vast majority (70%) believe that the Government’s goal to return to surplus in 2028/29, one year later than previously expected is about right, around the same 67% last year. With concerns around the ability to successfully compete in attracting capital and labour at 63%, only slightly raised from last year’s 55%.
The sentiments, therefore, again provide some well-trodden ground for the Labour opposition to differentiate itself on tax and some wider settings, which presumably need to become real in the foreseeable future. And for the current Government to differentiate itself more boldly – take the first mover advantage.
Stating the obvious however, the opposition is more than just Labour, and that in terms of Labour, when the taxation of capital has been fought and lost four times since 2011 (if you include the policy retreat in 2023 that caused David Parker to step down as the Minister of Revenue), it’s not intuitive that they would go for a fifth, either alone or with others, and even harder if it’s with a leader connected with the past. Even less intuitive is that they would lead with a Wealth Tax or include that in any policy package when they haven’t been able to get the taxation of capital gains over the line.
In terms of superannuation, politics and appeasing to political constituencies seem to drive the lack of progress in this area, or as a former politician once mentioned in a forum, “dishonest politicians are a function of dishonest voters”.
Moving from the survey, possibly our overarching challenges are a fragmented voter base that is capitalised on by fragmented political alternatives, some far from the centre, and a proportionate system that amplifies the fragmentation, in particular the sentiments far from the centre. This is an unenviable context in which to drive long-term policy decisions if “doing nothing” isn’t really an option.
Thomas Pippos chairs the Deloitte New Zealand board. Deloitte NZ is an advertising sponsor of the Herald’s Mood of the Boardroom report
