Prime Minister Luxon Considers New Taxes amidst Financial Pressures, Confirms Details in May Budget

Date Published: 19 March 2024

Key Facts

• Prime Minister Christopher Luxon hints at potential new taxes as the Coalition Government faces fiscal challenges.
• The government is reportedly over $5 billion short compared to the National’s draft fiscal plan from the election campaign.
• Restoring interest deductibility for landlords will cost $800m more than expected, while the online gambling tax revenue will bring in $500m less than estimated.
• Benefits indexed to inflation were predicted to save $2 billion, but that figure has been revised down to $670m.
• The bulk of the predicted deficit comes from the dropped plan to tax foreign buyers in the high-end housing market, which was supposed to generate $3 billion.
• Finance Minister Nicola Willis has warned that the economy’s weakening has significantly impacted Crown accounts.
• The Prime Minister did not rule out potential new taxes in the May budget.
• The Climate Change Commission doubts whether $2.3 billion revenue from the Emissions Trading Scheme for tax cuts is attainable.

Article Summary

Prime Minister Christopher Luxon has hinted at the possible introduction of new taxes in an effort to balance the coalition government’s budget. This is due to several fiscal challenges facing the government, creating a deficit of more than $5 billion when compared to the fiscal plan laid out by National during the election campaign.

The deficit includes unanticipated costs such as an additional $800m for restoring interest deductibility for landlords and a shortfall of $500m from the online gambling tax. Taxing foreign buyers in the upper-tier housing market, which was meant to generate $3 billion, was also debunked by the coalition talks. The Finance Minister, Nicola Willis, warned about the impact of the weakening economy on the Crown accounts, creating justification for potential revenue raising.

PM Luxon assured that the details would be clarified in the May budget and did not rule out the possibility of new taxes when asked. The Climate Change Commission’s doubt about the feasibility of $2.3 billion in revenue from the Emissions Trading Scheme for tax cuts adds to the financial pressure. The commission suggests that the oversupply of units in the market may limit the scheme’s revenue-generating potential.

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