Energy levy bills are being rushed into law while NZ focuses on the Budget – “fair” taxing bills are given first readings, too

Buzz from the Beehive

While journalists have been feverishly informing us about the Budget over the  past 24 hours, they have paid scant heed to other matters on the Parliamentary agenda. This includes the Government’s introduction of four bills under urgency.

The Order Paper shows a motion to accord urgency to the following business was agreed to: –

The first of those bills changes the Energy Resources Levy Act “to clarify who is exempt from this levy. This would clarify that production from deposits within pre-1986 licences operating on low royalty rates cannot be exempt and must pay the top-up levy on all gas that is produced.”

An extension of the levy to reach energy operators who previously were exempt, by the sound of it.

It was set down for its first reading immediately after the Budget debate while the remaining bills in the urgency motion were set down for first readings later in the day.

Inland Revenue Minister David Parker drew attention to the two taxation bills when he broke the flow of press statements related to Budget announcements and release two statements on the government’s official website:

Latest from the Beehive

Bill ensures ongoing reporting on tax system fairness

A Bill requiring facts about the fairness and efficiency of New Zealand’s tax system to be reported and published annually has been tabled in Parliament today.

Tax bill improves fairness at home and abroad

Several measures in a tax bill introduced today will lead to fairer outcomes for taxpayers here and overseas, Revenue Minister David Parker said today.

With regard to the Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Bill, David Parker highlighted these points:

  • NZ joins global effort to ensure multinationals pay a minimum rate of tax
  • Tax on ACC, MSD lump sum payments changed to reduce amounts owing for some
  • KiwiSaver topups for child carers taking paid parental leave
  • Implementing changes to trustee tax and tax relief for flood-hit businesses

The bill commits New Zealand to an OECD-led global tax initiative aimed at ensuring large multinationals pay a minimum tax rate of 15 per cent in participating countries.

The aim is to stop a global “race to the bottom” among countries trying to entice the mobile capital of multinationals by slashing their tax rates.

“The GloBE tax measure is expected to raise only minimal revenue in New Zealand, where we have a 28 per cent corporate tax rate and a relatively robust international tax regime. This is about our country playing its part in this worthy global effort,” David Parker said.

“It also reduces the overseas compliance costs of New Zealand-based multinationals. When asked, they said they prefer to deal with Inland Revenue alone, rather than multiple overseas tax jurisdictions.”

Another initiative, taking effect from 1 April next year, deals with a fairness problem around the tax treatment of backdated lump sum payments from ACC and MSD.

The tax system now treats such payments as income in the year they receive it.

This means recipients might have to pay more tax than if they had received the payment in smaller instalments over a longer period.

The change in the bill smooths the tax treatment of ACC lump sums, so that the recipient pays the average of their applicable tax rate over the previous four years. This may be a considerable saving for some people.

“This has been a long-standing concern, and I am pleased to be able to announce a remedy today,” David Parker said.

A further change aims to help the savings rates of women in the main, who typically retire with a smaller savings nest egg than their male counterparts.

Child carers often take paid parental leave, but this can put the brakes on their KiwiSaver contributions, Parker said.

“Recognising this, the Government will pay a three per cent contribution to the KiwiSaver accounts of paid parental leave recipients, provided they continue to make their own contributions to KiwiSaver while on leave.

“Good childcare is important, but it is often unpaid. This small top-up helps redress the imbalance with others, normally males, who do not take extended childcare leave.”

The bill also gives effect to the trustee tax change announced in the Budget, and to tax relief for flood-hit businesses that I announced last month.

The trustee tax change intends to align the trustee tax rate with the top personal tax rate of 39 per cent. There is evidence that high income earners have shifted their income to trusts to avoid the top personal rate.

“This change will mainly affect the super-trusts of the super-wealthy,” Parker said.

“In the 2021 tax year, 5 per cent of all trusts that earned some income earned 78 per cent of all trustee income. The change does not ordinarily target smaller family trusts, who can continue to use existing rules to allocate trust income to beneficiaries to be taxed at their personal rates.”

The bill also implements a measure allowing businesses who receive insurance or compensation for their flood-damaged assets to have tax on those payments deferred.

There are “a number of other small tidy-up measures” in the Bill, Parker said.

“Taken together, the underlying theme of the measure in this bill is adjusting the system to achieve fairer results for taxpayers,” he said.

The Taxation Principles Reporting Bill is designed to ensure tax information is reported against a set of fundamental tax principles.

Inland Revenue’s recent High-Wealth Individuals Research Project revealed a startling disparity between the effective tax rates paid by the super-wealthy compared with other New Zealanders,” Parker said.

“This bill continues the good work of shining a light on the fairness of our tax system. The public deserves to have this information, so people can use it to assess claims made by politicians about tax fairness.”

Successive governments had made changes to the tax system in the name of fairness – but without facts, the idea of fairness could be subjective, and manipulated to suit political arguments, Parker said.

“So today, the Government is cutting that away. Collecting and publishing information on tax system fairness will allow New Zealanders to make their own judgements based on facts, rather than opinions.”

The Bill sets out principles to be reported on annually. They include

  • horizontal equity (people with similar income should pay similar amounts of tax), and
  • vertical equity (the system should be progressive – people on higher incomes pay a higher proportion of their income in tax).

The other principles are revenue collection efficiency; minimising compliance and administration costs; revenue integrity, certainty and predictability; and flexibility and adaptability. Inland Revenue will collect any information that it does not already hold to enable accurate reporting on the principles.

Parker said he had written to all political parties inviting them to sign up to this principles-based approach to reporting tax information.

“We are willing to work with other parties on refining the wording of the reporting principles.

“New Zealanders deserve to know that this will endure through successive governments. I challenge all parties to support this Bill,” David Parker said.

Point of Order awaits the press statements from Megan Woods on the two energy-related bills that explain why it was essential to by-pass select committee consideration.

2 thoughts on “Energy levy bills are being rushed into law while NZ focuses on the Budget – “fair” taxing bills are given first readings, too

  1. Right. So not a “new tax”, just a “levy”. What this means is that if you have an existing field that was discovered before 1986 (Kapuni, Maui, TAWN, McKee), and you discover new gas in it, you have to pay this levy, whereas previously you didn’t. So any players trying to develop their assets and make us less reliant on coal imports will have their costs increased. Because “fair”.


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