One of the wealthiest individuals in the nation expresses support for increased taxation but expresses concerns that the government may misuse the funds generated.
Bruce Plested, the billionaire co-founder of Mainfreight, voiced his backing for the concept of a wealth tax to help tackle societal inequities.
“I believe I do,” he shared with RNZ.
Plested is ranked among the country’s richest individuals, with an estimated fortune of $1.3 billion according to the 2024 NBR rich list.
His multinational logistics and transport company, Mainfreight, stands as one of New Zealand’s largest and most successful companies, currently valued at around $7.3 billion on the New Zealand Stock Exchange. Plested retains a 14 percent stake in the company.
While Plested expressed willingness to pay higher taxes personally, he expressed uncertainty about whether others in the super-rich bracket would share the same sentiment.
“The concern I think the wealthy have is that the government will squander it, and so there’s a certain resentment about paying more than you should,” he noted.
“If we had a competent government, they could make it work, and it could be accepted as part of the deal.”
He remarked that governments of all political affiliations have struggled to utilize public funds efficiently.
In the 2014 election, Plested made donations of $100,000 to Te Pāti Māori and $45,000 to National, the parties that were in a coalition at the time. In 2017, he again contributed $100,000 to Te Pāti Māori but made no donations to National. There is no recorded evidence of any political contributions by him since then, although he has supported various educational initiatives over the years.
The Debate on Wealth Tax
The debate surrounding a wealth or capital gains tax has been a contentious issue for years. Former Prime Ministers John Key and Jacinda Ardern both ruled out implementing a capital gains tax during their tenures, despite New Zealand being one of the few countries in the OECD without one.
In 2023, the prospect of a wealth tax on the super-rich gained traction after the then-Labour government commissioned an Inland Revenue study on the nation’s 311 wealthiest families. The study revealed that these families paid an effective tax rate of 9.4 percent, significantly lower than the 20.2 percent rate paid by the average New Zealander.
In response, the then-Revenue Minister David Parker spearheaded the development of a wealth tax proposal that would require couples with assets exceeding $10 million to pay a 1.5 percent annual levy. This tax was projected to generate $3.8 billion in revenue, which could have funded income tax reductions for a vast majority of the population, including a 0 percent rate for incomes below $10,000.
However, Prime Minister Chris Hipkins vetoed the proposal, leading to Parker’s resignation from his position, citing the situation as “untenable.”
Speaking to RNZ, Parker expressed respect for Hipkins’ decision.
“We didn’t see eye to eye on tax. There’s no hostility there, but yes, I suppose it was a matter of standing by my principles,” he explained.
After losing power in 2023, the Labour Party is revisiting the discussion on wealth and capital gains taxes.
“Internally, we are deliberating on whether we should pursue either of these options. Each has its advantages and disadvantages,” Parker stated.
Research indicated that a capital gains tax would not significantly impact the super-rich, failing to address the prevalent inequality in the country, he added.
“The wealthiest 1 percent of New Zealanders possess six times more wealth than the bottom 50 percent, and they pay a substantially lower tax rate. Resolving this issue necessitates a modification to the tax system. This is the ongoing debate within the Labour Party,” Parker elaborated.
Commerce Minister Andrew Bayly opposed the notion of imposing a capital gains tax, citing concerns that a wealth tax could prompt the super-rich and their assets to relocate elsewhere.
“Certain individuals may decide to move their businesses out of New Zealand,” Bayly cautioned.
He cautioned that such actions would result in decreased tax revenue and fewer opportunities for well-paying jobs.
“Ultimately, this would lead to a diminished financial position. This is the detriment that would arise from implementing such measures,” he warned.
“We must cultivate an environment that not only encourages New Zealanders to remain and thrive in this country but also attracts the right kind of investments from overseas,” Bayly emphasized.
On the other hand, Parker contested that a capital gains or wealth tax would not drive the super-rich away in large numbers.
“People have various reasons for staying in a country. Their ties are here – family, friends, business connections. They have an affinity for their homeland. They prefer to be prominent figures in a smaller pond rather than insignificant in a larger one,” Parker asserted.
According to Parker, the Treasury estimated that only 3 percent of capital would depart, with the remaining 97 percent staying within the country.
When asked if the super-rich were currently evading their fair share of taxes, Parker responded affirmatively.
“To a large extent, yes. This is not an indictment of the super-rich. I have a great deal of admiration for these individuals; I have interacted with many of them and collaborated with several,” Parker clarified.
Threat of Capital Flight Deemed Unsubstantiated
Max Rashbrooke, an expert in inequality, concurred that the threat of capital flight due to increased taxation on the wealthy was unsubstantiated.
“In reality, this is a hollow threat based on the data available,” remarked the senior research fellow at Victoria University.
“We are lenient on wealthy individuals in terms of tax obligations in this country,” he noted.
“Capital gains tax is a standard practice in nearly all developed nations. It is a conventional aspect of tax systems. It is peculiar that we lack such a tax,” Rashbrooke observed.
However, he cautioned that merely increasing taxes on the wealthy would not suffice to address inequality.
“Addressing wealth disparity is a complex task, more intricate than addressing income inequality,” he highlighted.
According to Rashbrooke, taxes, social benefits, housing policies, and wages are the primary factors influencing inequality.
“We need comprehensive measures in all these domains,” he emphasized.
“If you ask me, I would advocate for some form of wealth tax and allocate a portion of the proceeds towards a children’s KiwiSaver scheme to foster wealth creation for all, not just a select few,” he proposed.
