The Labour Government has passed into law its flagship election promise – slapping a new top tax rate on New Zealand’s highest earners.
The bill also gives the Commissioner of the IRD more powers to investigate trusts suspected of being used to dodge tax.
The legislation, which means those earning more than $180,000 a year would pay 39 cents tax on every dollar after that threshold, was supported by Labour and the Māori Party in the House.
National and Act all voted against it with the Greens abstaining.
The Māori Party voted for the legislation as it supported more taxes on the rich, but a spokesman said the policy was meaningless with other taxes, such as a capital gains tax.
Despite not having the support of the Greens, the law still passed in the House as Labour has 65 seats and a clear majority in Parliament.
The top tax rate policy was Labour’s flagship during the election.
“Our plan strikes a balance as we recover from Covid-19,” Finance Minister Grant Robertson said when announcing the policy.
It would impact only 2 per cent of New Zealanders and is expected to bring in more than $500 million a year.
The bill was introduced to the House earlier this week and has already gone through the first, second and third readings.
As it’s a bill going through under urgency, it skipped the select committee process – a process where a bill is further scrutinised by MPs.
But it did become a focus of debate during the committee of the whole house stage of the process as there was a human rights issue with part of the bill.
Under the legislation, the Commissioner of the IRD would be given more powers to look into trusts that the department suspects are being used to dodge tax.
But Attorney-General David Parker – who is also the Revenue Minister in charge of the bill – made a slight change so that any information obtained by IRD’s news power would not be able to be used in court against the person.
Before the bill got to its third reading, the Greens revealed that they would not vote with the Government on the legislation.
Rather, they chose to abstain.
Speaking on the third reading of the bill this morning, Greens finance spokeswoman Julie Anne Genter said her party could not, in good conscience, support this bill, “even though we very much support a progressive tax system and we support a more equal society”.
“Unfortunately, just lifting the top tax rate alone, without addressing the lack of a tax on capital gains and on wealth, will actually result in a less equal situation and exacerbate the current house-price crisis that we have, where in the past year house prices have increased by nearly 20 per cent.”
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