Nick Mills: IRD says we need to change our tax system - and I agree

EDITORIAL: We know there’s a growing gap in this country—and it’s not just between the rich and the poor.  

It’s between what we say we want, and what we’re actually prepared to do to pay for. 

Because right now, the numbers are starting to bite. 

Treasury is warning—loudly—that we are heading into a future where fewer workers supporting more retirees. We know that - it’s fact. 

And now, Inland Revenue is backing that up, saying quite clearly: if we don’t change course, the books don’t stack up. Debt will grow. Pressure will build. Something will have to give. 

And here’s the uncomfortable truth—there are only two levers you can pull. 

You either spend less… or you tax more.  

Now look around.  

We’ve got around 165,000 people on an unemployment benefit. 

We’ve come through COVID with a massive debt hangover.  

Infrastructure costs are blowing out. Health, pensions, everything—up, up, up. 

So I’ll ask the obvious question: are we really going to save our way out of this? 

I don’t think so. 

And that’s why this conversation that politicians keep avoiding—we need to have it properly. 

Because Inland Revenue has already laid it out.  

They say GST should go up. Now think about that for a minute and don’t let it shock you too much. 

They say capital gains should be looked at. They say the system needs to be more flexible so governments can pull in more revenue when they need it – like now. 

And whether we like it or not… they’re probably right. 

Let’s take GST.  

We are at 15% in New Zealand.  

Now compare that to Europe—where consumption taxes are often higher.  

The United Kingdom runs a VAT of 20%. Germany? 19%. France? 20%.  

The Nordic countries—Denmark, Sweden—around 25%. 

So, the idea of moving GST from 15% to 17% or 17.5% here—it’s not radical internationally.  

It’s actually pretty modest. 

Yes, it hurts and it hurts everyone. But it’s simple. It’s efficient.  

And if you pair it with targeted support—cash transfers or tax relief—for low-income earners, you can soften the blow where it matters most. 

Then there’s the old capital gains tax. 

Nobody wants to talk about the horrible old capital gains tax. 

And I know—people hate hearing it. But Inland Revenue is blunt: not taxing capital gains creates distortions. It lets people shift income into areas that aren’t taxed, and that weakens the system. 

So why not be surgical about it? 

You don’t touch the family home. We don’t want to hit ordinary Kiwis.  

But if you’re dealing in assets—property, investments—worth over $2 million, $2.5 million… then yes, maybe you should be paying capital gains tax. 

Because here’s the reality—we’re in a hole. 

And when you’re in a hole, you don’t get out by pretending everything’s fine. 

Some people have done extremely well, even through COVID, even through recession. Meanwhile, others are barely hanging on. 

So yes—maybe company tax edge up. Maybe high-end capital gains are taxed.  

Maybe GST nudges higher. 

None of it is popular. 

But this is the point—there is no pain-free option anymore. 

The real question is: are we prepared to take a bit of pain now, and alot of us have had that pain… to avoid a much bigger one later? 

It’s coming, we can’t afford it, and we can’t get our spending down. 

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Episode Transcript

Speaker 1 (00:07):
You're listening to the Wellington Mornings podcast with Nick Mills
from News Talks.

Speaker 2 (00:11):
At b We know there's a growing gap in this country.
And it's not just between the rich and a port.
It's between what we say we want and what we're
actually prepared to pay for. Because right now the numbers
are starting to bite. Treasury is warning loudly that we're
heading into our future where fewer workers are supporting more

(00:35):
people who are retired. We know that it's a fact,
and now in Land Revenue is backing that up, saying
quite clearly, if we don't change course, the books don't
stack up, debt will grow, pressure will build and something
will have to give. And here's the uncomfortable truth. There

(00:58):
are only two levers you can pull. You either spend
less or you tax more. The other facts and we've
got around what once one hundred and sixty five thousand
people on an unemployment benefit. We've come through COVID with
massive debt hangover, Infrastructure costs are blowing out, health pensions, unemployed,

(01:22):
everything is up up. So I'm going to ask you
the obvious question, are we really going to be able
to save our way out of this? I don't think so.
And that's why this conversation that the politicians, they just
keep avoiding it. We need to have properly because in

(01:45):
Land revenue was already laid it out. They say GST
should go up. Now, think about that for a minute,
and don't let it shock you too much, because I'll
give you some more facts. They say capital gains should
be looked at. They say the system needs to be
more flexible so governments can pull in more revenue when

(02:08):
they need it, like now, and whether we like it
or not, they're probably right. Let's take GST. We are
at fifteen percent in New Zealand. We all know that. Now,
let's compare that to Europe, where their consumption taxes are
often higher. United Kingdom runs a VAT of twenty percent.

(02:32):
Same deal, call it what you want, but same GSD
twenty percent, Germany nineteen percent, France twenty percent, the Nordic
countries Denmark, Sweden around twenty five percent. So the idea
of moving GST from fifteen to seventeen percent or seventeen
point five percent here, it's not radically, it's not radical

(02:55):
when you compare it to our international countries. It's actually
pretty modest. Yes, it hurts, and it hurts everyone, but
it's simple, it's effective, and if you pair it with
target support tax transferred or transfers, or tax really for
low income earners, you can soften the blow where it

(03:17):
matters most. Then there is the old capital gains tax.
Nobody wants to talk about capital gains tax. Not even
the Labor Party wants to talk about it. They just
always avoid the horrible old capital gainstack. And I know
people hate hearing it, but even inland revenue is blunt.

(03:39):
Not taxing capital gains creates distortions, It lets people shift
income from areas that aren't tax and weakens the system.
So why are we not being surgical about it now?
Nobody wants to touch the family home with capital gains.
We don't want to hit ordinary kiwis. But if you're

(04:00):
dealing with assets property investments worth over two two and
a half million, then maybe yes you should be paying
capital gains tax. Because the reality is we as a
country are in a hole, and when you're in a hole,
you do not get out of the whole pretending everything's fine.
Some people have done extremely well even through COVID, even

(04:22):
through the recession. Meanwhile, others are barely hanging on. So yes,
maybe company taxes edge up, high end capital gains are taxed,
maybe GST nudge is higher. None of it's popular. But
the point is there is no pain free options anymore.

(04:44):
The real question is are we prepared to take a
bit of pain now? And a lot of us have
had that pain. Don't not trying to question that to
avoid a much bigger pain a little bit later, because
it's coming. We can't afford it and we can't get
our spending down.

Speaker 1 (05:05):
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