In this blog, we delve into the divisive topic of a proposed wealth tax in New Zealand, highlighting the public's mixed opinions and the government's stance on the matter, ultimately suggesting that such a tax may not be imminent in the country.
“To Do” or “Not to do”. That is the dilemma. Well, apparently not in an election year. In a recent Linked In poll, we asked: “Is the wealth tax as proposed by David Parker at 1.5% of accumulated wealth over $5 million reasonable? Of the 128 votes registered, 70% voted “No it isn’t”, with th, e balance being in favour with or without changes. Tax is such an emotive topic as it impacts most of us personally. To summarise the flavour of the LinkedIn comments that ensued:
Punishing the wealthy in favour of the poor is not in the best interests of NZ
It’s not practical to levy a tax on non-cash-producing assets
If they sorted wastage in expenditure, a wealth tax wouldn’t be necessary
If introduced there will be far-reaching implications to the detriment of the economy
It can’t be considered in isolation but part of a reset for a more equitable tax system
To recap, Prime Minister Chris Hipkins has ruled out the wealth tax which would have impacted about 46 thousand individuals. Tax would have been assessed on an individual basis and apply to all assets except the family home and some other exemptions such as cars and boats. It is estimated the tax take would collect $3.4 billion in the 2025 tax year. But only 3 of the OECD countries have some form of wealth tax – these being Norway, Spain and Switzerland. Which means that most of the developed world do not, including our closest neighbours Australia. Given the lead time required to refine the regime, implement, and resource it up, you can expect most of the individuals within the catchment would make the necessary adjustments to mitigate the impact on them personally. However, it would likely be expensive to administer and complicated with marginal benefit and the likely downside significant. Those in favour of a wealth tax point to an equitable system in which the tax burden is distributed in a way that is perceived as just and reasonable by society. They might point to investment in assets which will generate capital or downstream benefits not captured by the current tax regime. To summarise, we are not likely to see a wealth tax in the foreseeable future in NZ. So, for those of you with a penchant and finances for purchasing Monet can probably sleep safely at night.