‘I want to be bold’: Willis puts corporate tax on the Budget table

Wednesday, 5 February 2025

Finance Minister Nicola Willis gives an overview of the Half Yearly Economic and Fiscal Update at The Treasury.

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Tax reform is “on the table” for the May Budget Nicola Willis has declared, giving the strongest indication yet that the Government is ready to make serious moves to attract foreign capital to get the economy growing.

“When you look at New Zealand compared to other countries in the developed world, over time, our tax settings have become less competitive, and what we want businesses here and around the world to know is that we want you growing, and we want tax settings that support that,” Willis told The Post in an interview.

She said New Zealand’s tax system had become a laggard compared with other countries; especially the 28% corporate tax rate. Ireland’s is 12.5% while Singapore’s is 17%. Australia has a two tier company tax system with 25% rate for companies with less than $A50 million turnover and 30% for companies generating more than that.

Finance Minister Nicola Willis says New Zealand's government accounts are 'sobering.' She emphasized the requirement for fiscal restraint and the cleaning up of the country's finances in order for the government to live within its means.

“So in that context, we do need to look at tax. New Zealand's corporate tax rate is now 28 cents….That compares to an average around the developed world of more like 24 cents in many countries who have much lower rates.”

After an election campaign fought on income tax cuts and a first year in office fought on government spending cuts, the finance minister now appears poised to propose a major shift in policy and dive back into tax reform - but this time aimed at businesses.

“New Zealanders are feeling poorer, so let's get real about confronting the things that have held us back, and any honest conversation about that needs to include our tax,” Willis said.

“We also want to be able to attract international investors who will bring technology, great jobs, investments for our communities. So with those goals in mind, we have to put everything on the table, and one of those areas is tax.”

Finance minister Nicola Willis at an end of year interview in her office in 2024.

December’s Budget Policy Statement said that since September 2024, the New Zealand economy had shrunk by 4.6% per person.

Willis, who is now also Minister for Economic Growth, was at pains to say that Cabinet has not yet made “deliberations of specific policies in the Budget.” She said that it would be a matter of balancing near term priorities with those “over time”.

“Those are the deliberations that Cabinet will be making in the lead up to Budget and as we engage on our economic growth plan with New Zealanders, it seems important to me that we put tax on the table and consider what kind of a country do we want this to be.”

Apart from 3.4% growth forecast for next year, Treasury is estimating a sub 3% growth rate out until 2029.

And there are plenty of priorities to balance. There is no Budget surplus in sight on the traditional operating balance before gains and losses measurement (OBEGAL).

On the Government’s new OBEGALx measure, a budget surplus is not expected to be delivered before 2029, while borrowing over the next four years was ramped up by $20 billion in the last Treasury update in December.

“I'm very conscious that we also have a responsibility to ensure that we do that in a way that's consistent with our ongoing objective to reduce the gaping deficits and the Government books left to us by the last Government and ensure that we're on a stable debt trajectory.”

Willis said that a “deficit mentality” was one of the first things the Government had to shake if growth was to be achieved.

“I think it really is as simple as starting … from a mentality that says we've got capacity for growth. How do we convert that potential into actuality, and realising that when we drive more growth, even if it's just a few basis points of GDP, the impact of that is so much more significant for New Zealand than a very small efficiency in a particular government department.”

Willis cited Singapore and Ireland, which Prime Minister Christopher Luxon has consistently held up as nations good at attracting foreign capital.

“Both of those countries said we want our people to be wealthier. So we need to attract investment from around the world. We need to have competitive tax settings. We need to have supercharged education system. We need to make the most of our science and innovation system. So we're looking to those countries.”

Willis also said that many of the questions around the tax were not just a question of the headline rates, but how the tax was actually applied. She also said it was a matter of being future-focussed.

“I don't want our thinking to be limited by a sense that some things are off the table because they may not be immediately affordable. I want to be bold. I'm hearing from New Zealanders. They want our Government to be bold, to give them a sense of what's around the corner, how things can get better reasons for hope.”