New Zealand's ruling party plans higher tax for top earners if re-elected

Reuters

Published Sep 08, 2020 10:43PM ET

By Praveen Menon

WELLINGTON (Reuters) - Jacinda Ardern's ruling Labour Party said it would raise taxes for top income earners if it is returned to power in the polls next month, as the government looks to pay off debt accumulated due to its COVID-19 pandemic response.

Ardern's Labour Party, comfortably ahead in the election contest according to opinion polls, said it plans a new higher tax rate of 39% for people earning over NZ$180,000 ($118,908), which would only affect 2% of New Zealanders.

“Our plan strikes a balance as we recover from COVID-19," Finance Minister Grant Robertson said in Wellington. The new policy is forecast to generate annual revenue of NZ$550 million, he said.

But it still puts New Zealand at the bottom third of income tax rates within OECD countries, and Robertson said the tax is lower than neighbouring Australia which has a tax rate of 47% for income above A$180,000, including a 2% Medicare levy.

The highest tax rate in New Zealand is currently 33% for income over NZ$70,000.

Ardern, who leads a centre-left coalition government, is riding a wave of popularity after successfully limiting the spread of COVID-19, and is predicted to win a second term in the Oct. 17 election.

But economic challenges loom as the virus restrictions brought the economy to a grinding halt.

"No country in the world has ever taxed itself out of recession, but Labour’s first instinct is to raise your taxes," said opposition National Party spokesman Paul Goldsmith.

The government earmarked NZ$62 billion for its COVID response plan, and has spent billions on wage subsidy schemes and other measures to protect jobs.

Ardern defended the new tax saying it was needed to ensure the government could continue funding health and education projects.