The Green Party is confident their proposed wealth tax will still be able to raise billions, enough to fulfil their policy promises, even with the possibility of avoidance and capital flight.
That's also despite co-leader James Shaw telling Q+A he still needed to work with IRD officials to figure out how to calculate people's wealth and how to enforce wealth tax compliance.
The party is proposing a wealth tax on the assets – minus mortgages and other debt – of individuals above $2 million. They propose that all net assets above that threshold will be subject to a 2.5% tax.
The Green Party also wants to introduce a 1.5% tax on all assets held in a trust, even those worth under $2 million, to stop people from moving their money into a trust to avoid the wealth tax.
Shaw said New Zealand's lack of the likes of stamp duties and capital gains taxes – which Australia has – "is one of the reasons why they are able to afford some of the things we have not been able to afford", such as more social services.
The Greens' latest available tax policy document estimates the combined revenue of the wealth and trust tax would raise $2.4 billion in 2024/25, rising to $2.6 billion in 2025/26 amid the taxes being in place.
The party has said it would release further details of its fiscal plans this afternoon.
This revenue underpins most of how the Greens say they will fund their election promises such as an income guarantee, free dental care for all, and more free lunches in schools.
However, the policy document notes "modelling the behavioural response to a change in the tax system is beyond the scope of these models". Instead, the party assumes a 25% avoidance rate.
When asked on Q+A, Shaw said that assumption also covered the possibility of capital flight, a phenomenon that sees money and assets flow out of a country.
"We have made quite a conservative assumption about avoidance for this… even with quite a high level of avoidance, if you assume a high level of avoidance, we still have the revenue to cover the costs of [Green Party] policy," he said.
For businesses, the party is promising to restore the corporate tax rate to 33%. The current rate of 28% was cut to 28% in 2010 by then-Finance Minister Bill English, in an attempt to make local companies more competitive overseas.
"Since the tax rate was lowered, what has happened is you have seen a significant increase in corporate taxes," Shaw said.
"That hasn't necessarily flowed through into the kinds of benefits we want to see in our economy in terms of the number of people lifted out of poverty, in terms of things like being able to provide dental care for people, [and] in terms ensuring we've got enough houses for people to live in."
As for calculating people's wealth, Shaw said that was something the Green Party needed to work with officials on, if it was in Government.
He said this work would build on the information IRD and Treasury gathered in its research into wealthy families' effective tax rates.
In the case of family trusts, Shaw said because the trust tax was individualised, it would need to be applied to beneficiaries.
"So we would require changes to trust law to say who are the beneficiaries. So you've got to look through beneficiaries of trusts."
Unlike Te Pāti Māori who has promised to put $500 million extra into resourcing the Serious Fraud Office and IRD to catch more cases of tax avoidance, the Green Party has not indicated how much extra money they will give those organisations.
Shaw agreed the agencies needed a funding boost, however.
He said any costs of compliance would be small compared to the revenue wealth taxes could earn.
Labour Party leader Chris Hipkins says no government he leads will have a wealth or capital gains tax.
Q+A with Jack Tame is Public Interest Journalism funded by NZ On Air.
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