PM confirms tax cuts in July, but questions remain

Prime Minister Christopher Luxon has confirmed New Zealanders will see a tax cut in July – but how that will look, and whether the Government will need more ways to pay for it, is up in the air.

It comes after Deputy Prime Minister Winston Peters on Sunday highlighted a Sunday Star-Times column by Vernon Small, warning that policies campaigned on last year would likely cost $5.6 billion more than forecast.

Small highlighted that new revenue ideas from National were not likely to gather the money they expected. Other policies, such as the landlords’ interest deductibility change, would cost hundreds of millions of dollars more per year.

Luxon said New Zealanders would “absolutely” see tax cuts in July, with the details to be announced during May’s Budget.

“We will have a fully funded tax relief plan for low and middle income with New Zealanders. It'll be a combination of revenues. Those revenues may look slightly different than what it was before the election and they might look the same.”

Luxon said it was not the Government’s intention to introduce a new tax at the Budget.

“What we’re focused on is making sure that we can generate revenues, make sure we generate savings and therefore pass on tax relief.

“What we’re trying to signal is that yes, we’ve got some very challenging economic times ahead of us at the moment. It's going to be a pretty tough year, I suspect.”

Asked if the tax cuts would be different to the plan laid out by National during the election, Luxon said, “we are very comfortable that we can deliver fully funded tax relief”. He would not commit to delivering the same level as promised during the election campaign, saying it would be revealed in the Budget.

Opposition leader Chris Hipkins said the $5.6b costing was “very clear before the election”.

“The gambling tax isn't going to raise the revenue that they said it was going to raise. The tax breaks for landlords are significantly more expensive than they were talking about before the election.”

It follows the revelation the Government’s restoration of interest deductibility would cost more than campaigned on, despite it being scaled back. It would cost $2.9b over the four years, $800m more than National budgeted which was $2.1b.

From April, landlords will be able to claim for 80% of interest costs, and from April 2025 this will rise to 100%.

Originally, National and ACT had promised in their coalition agreement to also restore the ability to claim 60% of interest costs for the 2024 financial year, ending this month amounting to a retrospective tax break. But this is no longer going to occur.