With the general election coming in September, Prime Minister Jacinda Ardern and new National Party leader Judith Collins have both been rather quiet on the subject of tax increases.
But economist Cameron Bagrie says that New Zealanders should not expect tax cuts, as the coronavirus crisis has forced the government to borrow and spend huge amounts of money. The Treasury is forecasting $200 billion in government debt by 2024. “We’re going to be talking about tax hikes in 2021 to pay for it all,” Bagrie said.
Taxes, targeted spending cuts, and asset sales are likely on the horizon, as long-term fiscal models from the Treasury indicate that “doing nothing is not an option,” he added.
According to Treasury projections, the country is facing a tax revenue hole of $49.2 billion between 2020 and 2024.
“With the rising cost of superannuation, an underfunded health service, and barely keeping up with the growth in population, more money will need to go into that,” said tax expert Terry Baucher. “And that’s separate to dealing with the pandemic issues.”
While no plans to raise income taxes have been announced, the government has raised fuel taxes. But in response to a recent fuel market study from the Ministry of Energy and Resources, which showed that consumers are paying inflated prices for petrol, the government has also proposed a new law that would force major fuel suppliers to be more transparent about their pricing.
The government intends for the bill to be passed before general election.