Tax policy at the crossroads: Growth, simplicity and redistribution in Election 2026

On one side, the current National, ACT and New Zealand First coalition has focused on reducing tax compliance costs, encouraging investment and maintaining a relatively stable tax framework. On the other, Labour, the Greens, Te Pāti Māori and TOP have proposed varying degrees of new capital gains, wealth, inheritance and land taxes aimed at redistributing wealth and funding additional social programmes. 

The Government's growth and simplification agenda

The current Government's tax work programme has centred on four themes: attracting capital and talent, reducing compliance costs for businesses, strengthening tax integrity, and improving the administration of social support programmes. 

Budget 2026 introduced several measures specifically designed to reduce tax compliance burdens and improve cash flow. Proposed reforms to the Foreign Investment Fund (FIF) regime would increase the de minimis threshold from $50,000 to $100,000 and provide greater access to realised-gain taxation for qualifying foreign investments. These changes are intended to reduce complexity for investors, migrants and returning New Zealanders with offshore portfolios.

Business compliance initiatives include major simplification of motor vehicle fringe benefit tax rules, removing detailed logbook requirements in favour of category-based approaches. Research and development tax incentive reforms are expected to improve cash flow through earlier payments and simplified administration, while non-resident contractor withholding tax concessions would make it easier for New Zealand businesses to engage overseas expertise. 

The coalition's broader philosophy appears to be evolutionary rather than revolutionary. National, ACT and New Zealand First remain opposed to comprehensive capital gains taxes, wealth taxes and inheritance taxes, preferring targeted reforms designed to support investment and economic growth. Looking forward, both National and New Zealand First support higher KiwiSaver participation, while New Zealand First has also focused on family support measures including child payment initiatives. 

A notable long-term theme emerging from the coalition parties is encouraging greater domestic capital ownership through retirement savings. Higher KiwiSaver participation and balanced growth would, over time, create a larger pool of New Zealand-owned investment capital, somewhat mirroring the compulsory savings systems that have helped build substantial retirement funds in countries like Australia and Singapore. 

The opposition's alternative vision

Labour's headline tax proposal is a targeted capital gains tax on residential and commercial property, the removal of Investment Boost and the introduction of a more modest small business deduction measure. 

It’s fair to note capital gains tax features in many OECD member countries' tax systems. The proposed tax would apply 28% to gains arising after 1 July 2027, while exempting the family home, farms, shares, business assets and inherited property. Labour argues the policy targets investment property gains while protecting most owner-occupied assets and productive businesses. Revenue would help fund initiatives including expanded healthcare services. 

The Greens and Te Pāti Māori have moved much further toward wealth taxation, and their policies are increasingly aligned. The Green Party proposes a 2.5% annual wealth tax on net assets above $10 million for individuals or $20 million for couples, alongside a 33% inheritance and gift tax on transfers above $1 million. The party also proposes a 45% top personal tax rate above $160,000 and a 33% company tax rate for larger businesses. 

Te Pāti Māori also seeks a significant shift away from income taxation toward wealth and asset taxation. Its proposals include wealth tax, which is now aligned to match the Green Party wealth tax rate of 2.5%; this is down from their proposed 8% maximum wealth tax rate three years ago. There are other measures including the first $30,000 of personal income becoming tax free, an increase in the company tax rate to 33% and a top personal tax rate of 48%, and taxes on certain types of undeveloped land at 33% and untenanted homes taxed at 2%. On the wealth tax front, The Green Party and Te Pāti Māori now present an aligned tax negotiation view in any potential coalition talks with Labour and TOP. 

By international standards, a 2.5% annual wealth tax would represent a relatively strong approach. OECD experience shows recurring wealth taxes have become less common over time and now exist in less than a handful of member countries, with concerns emerging around administration, valuation complexity, avoidance and capital mobility (moving wealth to other tax jurisdictions, which would be devastating for the NZ economy). Several countries, including Sweden, abolished wealth taxes, while Norway remains one of the few developed countries retaining a broad annual net wealth tax but at a much-reduced rate to the one proposed here. 

TOP's tax reset

The Opportunities Party (TOP) proposes perhaps the most structurally different system. Instead of focusing primarily on wealth taxes, TOP seeks to shift taxation toward land values while significantly reducing taxation on work and savings. Its package includes a $19,400 annual citizen's income, tax-free KiwiSaver contributions eventually reaching 6% from employees and 6% from employers, tax free annual KiwiSaver earnings, and a land value tax of 1.75% on urban land and 0.5% on rural land. 

Supporters argue the policy would reduce land speculation, improve housing affordability and generate a retirement savings pool exceeding $1 trillion over time. Critics point to the potential burden on existing property owners, particularly retirees and superannuitants living on fixed incomes. 

The interesting feature of TOP's package is that winners and losers vary considerably depending on income and asset ownership. Students, younger workers and many renters may be attracted by the citizen's income and tax-free retirement savings. Higher-income employees earning more than $200,000 could potentially receive significant value from the citizen's income, tax-free KiwiSaver contributions (saving up to 39% tax on contributions) and tax-free KiwiSaver annual earnings (saving up to 28% annually). For many high earners with land holdings, these benefits will outweigh the additional land tax burden. 

However, landlords, property investors and many retirees with property assets but limited cash flow may see the policy very differently. While TOP expects land values to fall over time as future tax liabilities become capitalised into land prices, annual land tax obligations would continue regardless of market value movements. Superannuitants who own a home but are income-poor could therefore face particular challenges, particularly around funding land tax, and paying higher income tax rates due to the lowest personal income tax rate under TOP increasing by over 2.6 times the current rates, as the minimum tax rate shifts from 10.5% to 28%. The administration drag will be that every citizen from 18 years of age will need to register as a beneficiary for the Citizen Wage; compliance and handling costs will arise from the circularity of the give and take administration of the Citizen Wage hand out and Land Tax take back system. 

Coalition arithmetic may ultimately decide the outcome

For this election, the obvious reality is no party is likely to govern alone. As a result, coalition negotiations may prove more important than individual policy manifestos.

Under a Labour-led coalition with the Greens, Te Pāti Māori and possibly TOP, Labour's property capital gains tax appears to have the strongest prospect of surviving coalition negotiations because it overlaps with the objectives of its potential partners. 

The Greens and Te Pāti Māori have recently converged around stronger wealth taxation and higher taxes on capital. This alignment could significantly strengthen their negotiating position. Even if Labour secured around 29-31% of the vote, it would still require support from multiple smaller parties to govern. In practical coalition terms, that means minor parties may collectively hold 40% or more of the negotiating influence despite commanding a much smaller share of the overall vote. 

Consequently, the post-election tax landscape may bear only a partial resemblance to any single party's manifesto. A Labour-led coalition may be compelled to accommodate some combination of wealth taxation, higher top personal tax rates, expanded family support measures, bank levies, and targeted land taxes as part of any governing agreement. Likewise, a National-led coalition would likely maintain its focus on stability, investment and compliance simplification. 

For businesses, investors and families, the key message is not to focus solely on election promises but to understand how coalition negotiations may reshape those policies. In a closely contested election, the smaller parties could ultimately wield influence far beyond their vote share, making coalition mathematics just as important as tax policy itself.