The Green Party says New Zealand should consider a windfall tax, but critics say it could mean less money is invested in New Zealand. Photo: 123RF
A proposal to introduce a windfall tax on large corporate profits carries risks it could detract investment from New Zealand and is unlikely to find support with businesses, two industry figures say.
The Green Party has introduced a plan for for a special windfall tax on excessive corporate profits during periods when people struggle to make ends meet, such as a scheme put in place after the World Wars.
It published a discussion document laying out options it says could be used to improve the financial position of people struggling amid rising living costs.
The tax would target the top 20 companies operating in the supermarket, banking, construction, energy and petroleum sectors, which had benefited from external factors like global inflation and the government's pandemic response.
It said concerns about reduced business investment could be addressed using tax incentives to encourage investment in important emissions reducing infrastructure or public benefit research and technology.
Green Party finance spokesperson Julie Anne Genter said other countries had windfall taxes, and the party did not think it would affect foreign investment in New Zealand companies.
"When we put the corporate tax rate down to 28 percent, direct foreign investment actually went down. So I think there is some question about whether corporate tax rate is a big disincentive to investment," Genter said.
New Zealand's corporate tax rate is 28 percent, which is well down on 1987, when it was above 40 percent before being steadily reduced to 33 percent in the 1990s and 2000s and then to 30 percent in 2008, before dropping to the current level in 2010.
That compared to Australia's corporate tax rate of 30 percent, 21 percent in the United States, 17 percent in Singapore and 12.5 percent in Ireland.
BusinessNZ chief executive Kirk Hope said windfall taxes were difficult to administer and did not raise much revenue.
"I think [it] would be more harmful than good," Hope said.
"Those taxes which were used in New Zealand after the World Wars weren't popular and they didn't make much revenue, and the companies simply had to pass the costs on to consumers."
New Zealand would need to be competitive with Australia to continue to attract foreign investment, he said.
Chartered Accountants Australia and New Zealand (CAANZ) tax leader for New Zealand John Cuthbertson said a piecemeal approach to tax policy was problematic.
"You don't discount anything out of hand, but I think you'd want to work it up properly and we would favour certainly looking at it from a whole-of-tax system perspective, rather than trying to single out a few taxpayers because it can be quite subjective, quite ad hoc, and I think fraught with some difficulties on occasion," Cuthbertson said.
"Businesses crave certainty and understanding - both the tax system and also the system in terms of how we operate as a country.
"I think once you start floating some of these ideas, that has the potential to impact foreign investment because you know, people do take notice of these things."
