Feedback sought on the future of the New Zealand tax system

How can we design a durable tax system in the face of long-term fiscal pressures? This is one of the key questions facing all tax authorities and the central issue raised in a briefing released recently by Inland Revenue for public consultation.

The briefing is a future-focussed “think piece” that Inland Revenue is required to produce every three years under the Public Service Act 2020. The purpose of the briefing is to provide information on long-term trends, risks and opportunities and potential policy responses. It also provides an opportunity to look beyond the here and now and instead consider what challenges may be emerging so Inland Revenue can start preparing now.

One of the key considerations in the briefing is New Zealand’s ageing population, and how this may impact government revenue in the future. What happens when fewer workers are left to support a growing population of retirees? It’s not just a question for economists – it’s the fiscal tightrope New Zealand faces in coming decades. By 2040, nearly one in five New Zealanders will be over 65.

The briefing looks at how to make sure we can continue to bring in the revenue that is needed to fund public services.

A core element of the briefing is a tax system that has a stable core structure, but with the ability to flex and change to revenue needs. A flexible fiscal system means that gradual adjustments may be made without the requirement for large-scale reform. An example of this flexibility would be the ability to adjust rates on income tax or GST, in a way that is fair and imposes low economic cost, rather than adding a whole new tax base. 

After the consultation ends, the Policy team at Inland Revenue will then collate submissions and finalise the briefing. The final briefing will be presented to the New Zealand House of Representatives later in the year. 

John Nash |Strategic Advisor, International | Inland Revenue New Zealand