New Zealand’s main opposition Labour Party is proposing a new levy on capital gains and higher taxes for top income earners as it seeks to build support before the Sept. 20 general election.
A Labour-led government would impose a 15 percent tax on capital gains made from investments, excluding the family home, the party said in a fiscal plan released today. It would increase the levy on income of more than NZ$150,000 ($130,000) to 36 percent, from the current top rate of 33 percent.
Labour said the additional tax revenues will help fund its spending plans while ensuring the budget remains in surplus and debt is reduced. Support for the party dropped as low as 23.2 percent in a poll for Fairfax News conducted mid-June, while the governing National Party had 56.5 percent backing.
“We need solid and stable economic management,” finance spokesman David Parker said in the statement. “Measures to discourage property speculation will help to shift money into the productive economy.”
National has forecast the first budget surplus in seven years for 2014-15 as economic growth accelerates amid rising dairy exports and rebuilding in earthquake-damaged Christchurch. Labour forecasts higher surpluses than National from the 2015-16 fiscal year and also expects to reduce net debt more over the period to 2020-21.
Labour forecasts the capital gains tax will raise NZ$25 million in the first year, rising to NZ$1 billion by 2020-21.
Higher tax revenue “will create the fiscal headroom for the option of income-tax reductions” after 2017, Parker said. Labour will also clamp down on tax avoidance, particularly by multi-national companies, he said.
The higher income tax rate will raise NZ$198 million in the year through June 2016, Labour said. Currently, all income over NZ$70,000 is taxed at 33 percent. Labour would raise the trustee income tax rate to 36 percent to prevent trusts being used to avoid the new rate, it said.
Labour’s spending plans include the cost of making the KiwiSaver worker savings plan compulsory, payments for families with new babies and funding to build new, affordable homes. It will also resume funding the New Zealand Superannuation Fund, starting with NZ$750 million in 2015-16.
Overall, Labour projects its net additional spending will be NZ$1.69 billion in the year to June 2016. That’s less than the allowance for new spending built in by National in the May budget, Parker said.