There will be no capital gains or wealth tax in the Budget, Prime Minister Chris Hipkins says in his first speech ahead of the Budget on May 18.
Today’s speech, which will begin almost three weeks of Budget speeches and announcements, was used to rule out any taxes following an explosive report from IRD that found the wealthiest New Zealanders were paying tax at half the rate of everyone else.
Speaking to the Employers and Manufacturers Association in Auckland, Hipkins also revealed Treasury’s costing of the damage from Cyclone Gabrielle and the Auckland floods: “between $9 billion and $14.5b”.
“This is more than the Kaikōura earthquake but significantly less than the Canterbury quakes,” Hipkins said.
Hipkins said the Government would not be using a cyclone levy of another kind of tax to pay for this cost.
Instead, the money would be met from reprioritising existing spending, existing funding, and debt.
Hipkins said this approach would help avoid exacerbating inflation pressure, which might be the case were the government to simply add the rebuild to its current programme.
“The Government has taken the decision to fund the recovery from here on through a combination of the annual operating and capital allowances we set each year for the Budget, savings and reprioritisations, and some debt as we invest in infrastructure repairs and build back stronger.
“I say again, there will be no new tax everyone would have had to pay, such as a cyclone levy, to fund the recovery.
“I think of it like this; when you have to do major repairs to your house you usually have to borrow a little and cut back on expenses elsewhere.
“Households generally can’t increase their income to pay for repairs and it is not the right time for the Government to either,” Hipkins said.
Hipkins teased the fact the Government would have “more to say about the investments we will be making to rebuild with greater resilience after Cyclone Gabrielle as well as measures to support New Zealanders with the cost of living”.
Hipkins also pitched the Government’s economic management credentials, noting it was alleviating labour shortages by making it easier for migrants to come to New Zealand.
“The changes we have made, plus the positivity migrants have for us, is starting to show in our immigration figures.
“In March the number of arrivals on work visas exceeded pre-pandemic levels for the first time. It was also the most arrivals on work visas in the month of March since MBIE began collating the current data series in 2012,” Hipkins said.
Hipkins said that provisional net migration for the past twelve months was 52,000, which was " up there with pre-Covid levels”.
He said that if net migration over the past four months was annualised, New Zealand would be " looking at a net migration gain of around 100,000 for the year”.
The speech came after an IRD study into the effective tax rate paid by a sample of 311 New Zealanders found they paid a median effective tax rate of 9.4 per cent.
Treasury reckons a comparable tax rate for a “middle wealth” Kiwi was 20.2 per cent - that rate includes GST they pay and any benefits someone might receive like Working for Families. If those are left out, their tax rate is even higher.
The median wealth of the families was $106 million - but a handful of extremely wealthy people meant the mean wealth of those families was $276m. for taxing wealth fairly, through a capital gains tax or a wealth tax.
“The evidence today continues to make the case crystal clear,” she said.