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More questions for the Government’s tax changes as costs grow

The Government should reconsider the delivery of their tax plan, as costs continue to escalate. Our latest analysis shows a $500 million increase in spending.* *From its pre-election fiscal plan

The Government should reconsider the delivery of their tax plan, as costs continue to escalate, said CTU Economist Craig Renney.

“Our analysis, using the latest data available from IRD and the Treasury, indicates that the cost of the income taxation changes is now half a billion dollars more than National indicated in its pre-election fiscal plan,” said Renney.

“All up, the modelling undertaken by the CTU shows that the cost of indexation is now likely to be $9.5bn over the next four years – against the $9bn budgeted by National.

“The CTU analysis should alarm New Zealanders. It should also worry anyone who genuinely believes in value for money or in social investment.

“The analysis does not consider any additional increases caused by a rising population, which will add to the costs. Over the next four years, if the population rose at the same rate as in the pre-COVID period, this would likely add a further $300m to the cost of the income tax package.

“These costs are in addition to the many problems already being faced by the plan. $3bn for landlords – up $800m. $1.3bn missing from cutting welfare payments. Casino taxes bring in only $150m instead of $750m. The Government is relying on more than $1bn of tobacco taxes, and not delivering promised Working for Families changes, to prop up the package.

“Overall, the tax plan is now likely to be billions of dollars short of its overall revenue target. The only way left to fill the gap is through even deeper cuts to public services and public investment. Already we are seeing investment in areas like disability support, free school lunches and pay for the Police suffering, while landlords are guaranteed a $3bn payday.

“These are just part of many damaging consequences that New Zealanders are now seeing from the Government’s reckless commitment to tax cuts.

“The Budget Policy Statement is on Wednesday, and the Government should use the opportunity to show New Zealanders how it is going to make its plans work, and what it is going to cut to deliver them. Better still it could use that opportunity to abandon its plan and invest in all New Zealanders, not just a few,” said Renney.

CostedNational Pre-Election EstimateRevisionsDifference in cost
New Analysis
Income Taxation – Direct $9bn $9.5bn $490m
Income Taxation – Population$0$300m $300m
Known Costings
Interest Deductions $2.1bn $2.9bn $800m
Foreign Buyer Tax $3bn$0$3bn 
Commercial Building Depreciation$2.1bn $2.3bn  -$200m
Gambling Tax $716m $151m $565m
Brightline Adjustment $200m $202m -$2m
Climate Dividend $2.36bn $2.05bn $315m
Close Labour Programmes$2.12bn $2.62bn  -$497m
Benefit Indexation$2.04bn $670m $1.37bn
Yet To be Costed
Immigration Savings$492m $492m$0
Public Service Cuts $2.38bn $2.38bn$0
Contractor Savings $1.6bn $1.6bn $0
Abandoned Policies
App Tax reversal$206m $0m  -$206m
Working for Families Changes$1.4bn $845m  -$555m
New Revenue
Tobacco Taxation$0$1.5bn $1.5bn
Total gap in tax plan$3.83bn