Inland Revenue (IR) is asking questions about the future of the tax system - including whether New Zealand needs new types of tax, such as on capital gains and land.
The issue of whether the country needs a tax on capital gains surfaced again this week, with ANZ's chief executive Antonia Watson telling RNZ's 30' with Guyon Espiner she believed it was time for such a tax.
Labour says it is looking at its tax policy and is considering capital gains, wealth or capital income taxes.
IR is consulting on the future of the tax system as part of developing its next long-term insights briefing, which it produces in its role of providing advice to the ministers of revenue and finance.
In its consultation document, it said it wanted to open discussion on the challenges the tax system faced and possible options to address that.
"There are several trends that could have significant implications for our tax system in the future. The most relevant trend is that of increased fiscal pressures from superannuation and healthcare costs.
"Future governments will have the option to respond to these pressures by either changing legislative settings, managing expenditure growth, making greater use of user-pays mechanisms or increasing the amount of tax that is raised relative to GDP. We will have greater fiscal resilience if our tax system has flexibility to adapt to changing revenue needs over time."
It was considering the pros and cons of new tax bases.
"We will consider the pros and cons of taxes on payroll - including social security contributions, land, real property, wealth, inheritances or estates, turnover, and transactions, and what overlaps and differences there are in these bases versus our existing bases."
New Zealand's income tax base was broad but the lack of a capital gains tax was a clear gap.
"Future fiscal pressures mean that alternative tax bases are likely to be contemplated...Further, there is a question as to what mix of tax bases should form the stable core structure of our tax system, which is relevant at current revenue levels."
The lack of tax on income such as capital gains could mean it was harder for governments to increase tax revenue while still achieving equity goals, it said.
Tax expert Terry Baucher said it was notable that the department had chosen that consultation process to discuss the question of, if the country were to try to increase tax revenue, what the options would be.
He said there were a number of issues that were likely to require more tax revenue.
He expected Treasury chief economic adviser Dominick Stephens to use a speech on Thursday to reiterate the position that there were likely more demands coming in future than current revenue could cover.
"The Tax Working Group in 2019 recommend a capital gains tax because it could see the coming fiscal crunch."
As well as issues such as funding for the health system, the country needed to be able to cater for climate change costs, he said.
"We have a demographic crunch, we have superannuation costs to pay for, we have an ageing population, rising health costs all coming together."
New Zealand's demographic mix was changing but much of the country's wealth was held by the older pakeha population, he said.
"The older group will be expecting NZ Super, continued health care, and increasingly for those that have beachfront properties they'll also be wanting support - there are going to be areas we're going to have to abandon. That can't all be funded by the present tax base, there are uncomfortable tensions."
He said a capital gains tax (CGT) would be a simpler way to apply tax - at present there are a number of scenarios in which capital gains are taxed and there are different regimes applied, such as the foreign investment fund, which was a de facto wealth tax.
"People talk about the complexity of a CGT but I don't buy that."
Before 1949, land tax, gift duties and estate duties were 4% or 5% of the country's tax take, he said.
NZIER chief economist Christina Leung said a broad-based CGT would be sensible if it was administratively simple.
"This means there should be no exemptions from the CGT, that assets only enter the regime when it is purchased after the implementation of the scheme, and that it is taxed on a flat rate rather than the individual's marginal income tax rate. The implementation of a CGT should also be part of rebalancing of tax away from income tax, rather than as a way to increase the overall tax take."
Craig Renney, policy director at the Council of Trade Unions, said the country should look at what revenue was needed and then determine what taxes would be required to pay for it.
"What does a good housing system, look like? What does a good education system, look like? How much will that cost?
"Then we can have a conversation about how we pay for it, not the other way around. If we can work out what 'good' looks like it becomes so much easier to say this tax might help us get there.":
He pointed to OECD data showing New Zealanders have the second-lowest "tax wedge" - tax as a proportion of income, in the OECD. This includes the offsetting effect of Working for Families.
'Can't tax yourself to prosperity'
But Finance Minister Nicola Willis says "you can't tax yourself to prosperity", telling RNZ's Morning Report programme today that she felt New Zealanders "are taxed at a pretty normal level."
"The problem we have had in recent years is our spending as a country has increased out of control. It has been a dramatic increase in spending.
"We just keep spending more and we find new ways to tax people."
Willis believed a capital gains tax would deter people from investing.
"If you own a mechanics' business or an interior decorating business and you know that when you go to sell it, you will be slapped with a capital gains tax that would be pretty off-putting."
She said spending needed to be reined in and "you can't tax yourself to prosperity".
Businesses pay tax throughout their lifetime, she said.
"I do want people looking forward to the idea that if they build their business really well, one day they might be able to sell it and retire."
Many economists say too much money has gone toward housing in New Zealand.
Willis said housing prices have been high and damaged the economy.
"You have to get to the root cause of that problem, though, which in New Zealand has been extremely restrictive land use laws through the Resource Management Act - very high building costs and disincentives to see housing being built at the level it needs to be to sustain our population.
"Simply sticking on more taxes won't make it easier today for people that can't afford a home."
People who own properties would be still paying charges, taxes and rates, Willis maintained.
Responding to ANZ chief executive Antonia Watson's comments, Willis said she "welcomes political debate".
"I'm simply pointing out that if there are challenges with our economy, which I agree that there are, there are many ways to address it."
Willis said there are "wildly different views" from economists and experts on how a capital gains tax would work or if it is needed.
"Many of them would say you should only do it if you're taking away a tax elsewhere, that's the view of many, many economists. You don't often hear people really pointing out which tax that would be.
"Many people say you should only do it if you're going to do it in a neutral way. Many people say you should only do it if you include the family home. Others say you should only do it if you exclude the family home. Some say that you should do it with a valuation date.
"There is huge disagreement about the complexities and applications of the scheme. And the reality is: if you want to have a proposal like this you have to agree on all those things, and then I think that you wouldn't."
