Tax Debates Follow NZ Earthquake

August 31, 2011 Taxation in New Zealand

New Zealand Earthquake LevyTaxes are coming under the spotlight in New Zealand, as the recovery bills following the country’s recent earthquakes are revised upwards.

The possibility of a temporary earthquake relief tax is back on the table in New Zealand, as the costs of rebuilding private housing alone in the quake struck areas alone are revised from NZD 4 billion to NZD 7.1 billion.

On August 30th the Finance Minister of New Zealand Bill English revealed the newly recalculated costs for the New Zealand earthquakes, saying that initial estimates were far below reality, and it is estimated that the cumulative costs for the government could now run as high as NZD 12.1 billion.

The Minister said that the government had not prepared for such high recovery costs, and efforts would now be expanded to find new and viable revenue streams to pay for the aftermath of the earthquake. Currently the primary considerations for extra revenues were an overhaul and redesign of the already instated national Earthquake Commission levy, proposed by the ruling National Party, and introduction of a temporary earthquake levy, as proposed by the New Zealand Green Party.

The National Party has not yet finalized any estimates regarding potential revenue increase from their proposed changes. However, the Green Party co-leader Russel Norman has already said that an extra NZD 1 billion in tax revenues could be raised by introducing a temporary levy on personal incomes. According to Russel Norman the new tax would be charged at a rate of 1.5 percent on personal incomes between NZD 48 000 and NZD 70 000, and increased to a rate of 3 percent on all earnings in excess of NZD 70 000.

On the same day, Labour party leader Phil Goff came forward to say that the rising costs of the earthquake should be addressed with a capital gains tax on second homes and investment properties, in line with his party’s previous plan to introduce a capital gains tax in New Zealand.

Since September 2010 the city of Christchurch in New Zealand has experienced three major earthquakes and continued aftershocks. The death toll from the earthquakes has reached 185 people.

Photo by Mike-Campbell