Ani O’Brien
Like good faith disagreements and principled people. Dislike disingenuousness and Foucault. Care especially about women’s rights, justice, and democracy.
It is easy to shrug off new tax proposals meant to target the “Super Rich” as not something that will affect those of us who don’t have investment portfolios and who have to actually look at the price on the tray of mince before deciding if we buy it. Most New Zealanders don’t think of themselves as the “Super Rich” and most don’t own massive corporations. And this is what political parties count on when they propose vast new tax changes and frame them up as hitting the rich end of town.
The intended mental image is some ghastly multinational conglomerate, a handful of billionaires leaning on obnoxious sports cars and smoking cigars. Perhaps an old man with slicked-back hair and a second wife, a third of his age. This is who will be hit by the new taxes, we think, and good bloody job too. Greed oozes from the picture and the Greens, Opportunity, Te Pāti Māori, and Labour want us to think they are taking more than they are contributing. The parties justify their spending plans by imagining a huge amount of potential tax being left in the pockets of people we automatically do not like.
The picture is flawed in its perception of wealthy New Zealanders who already fund our income tax system. An OIA response from Inland Revenue shows the top decile tax breakdown from 2022 and found that the highest earning 10 per cent of New Zealanders paid 48 per cent of all individual income tax. The top one per cent alone paid 15 per cent. Once the taxable benefits and Working for Families payments captured by IRD are deducted, the top 10 per cent actually account for more than 100 per cent of net income tax collected because parts of the rest of the population are net recipients. In other words, they pay more than the government keeps in income tax from everyone combined. That’s possible because some people further down the income scale receive more back through benefits and Working for Families than they pay in income tax.
We rely on the top 10 per cent to keep our country going and driving them away to Australia and beyond is the biggest self-own imaginable. But that is not what this essay is about. This essay covers the unexpected way that these taxes pitched at the top actually hit all of us in the wallet in a way that is often looked over.
This election, the Greens and Te Pāti Māori are leaning particularly enthusiastically into this idea of an unfair tax system and the need for “transformative” change. Their tax policies include proposing increasing the company tax rate from 28 per cent to 33 per cent (though they have differing thresholds), specifically naming banks, supermarkets, and power companies among the businesses they think should cough up more (the choice of which also deserves its own essay). The Greens also want a new 0.06 per cent levy on the liabilities of the four big banks.
Both parties are proposing annual wealth taxes, although there is a considerable difference in how widely they would cast the net. The Greens propose a 2.5 per cent tax on net wealth above $10 million, excluding the family home, which they say would affect around 0.3 per cent of people. Te Pāti Māori would start considerably lower, taxing net wealth above $2 million at 1.5 per cent, rising to two per cent between $5 million and $10 million, and 2.5 per cent above $10 million. They estimate their version would capture the wealthiest three per cent of New Zealanders. In both cases, however, “wealth” does not mean a giant pile of cash sitting in a bank account waiting to be taxed. Much of it can be tied up in businesses, shares, farms, and other productive assets.
The political pitch is that we should not worry about their vast spending plans nor about the introduction of these new taxes because we aren’t paying for it. Super Rich people and greedy corporations are.
There is one small wrinkle in this plan and that is that they have either forgotten who owns these big, greedy corporations or they are hoping we never stop to reflect on this.
Well, I reflected and the answer rather spoils the simplicity of the left bloc’s sales pitch. Sure, some are owned by founders and wealthy investors and some by foreign investors. In fact, some are partly owned by the New Zealand Government and I will return this point later. But enormous quantities of corporate equity are also owned by institutional investors managing the retirement savings of perfectly ordinary people. That is you and me.
We contribute money to KiwiSaver, for example, and our KiwiSaver providers invest some of it in shares. Those shares represent ownership of companies, many of them the very same ones the left bloc want to tax the ever-loving crap out of. The returns generated by those companies help determine how much money we eventually have in our KiwiSaver accounts to retire on. We’ve all watched our KiwiSaver balances bounce around in tumultuous times like Covid-19 pandemic. That was because of uncertainty in the markets and the variable outcomes for the companies our funds are invested in. These funds are not immune to external forces like a new government deciding they want to up taxes.
The NZ Super Fund does much the same thing as KiwiSaver funds on an enormous scale on behalf of all of us, investing today to help meet the future cost of New Zealand Superannuation.
This creates an inconvenient problem for the rose-tinted promises to “make corporations pay” because corporations aren’t some separate species of economic life floating above the rest of society. They are part of our intricate economic ecosystem and every single one of us who saves for retirement is way more involved than the Greens and Te Pāti Māori would have us believe.
The power companies are a good illustration because the Greens specifically identify them as businesses they intend to subject to their higher corporate tax rate. I pulled up the March 2026 holdings of a New Zealand shares fund listed on Sorted’s Smart Investor. Mercury made up 4.92 per cent of the investment portfolio, Meridian 4.76 per cent, and Contact Energy 4.67 per cent. Added together, 14.35 per cent of the entire fund was invested in just those three electricity companies. In monetary terms, for every $10,000 invested in that portfolio, approximately $1,435 was invested in Mercury, Meridian, and Contact.
Perhaps, I thought, I had simply stumbled across an unusually power-company-heavy fund… so I checked another. Contact was 8.45 per cent, Meridian 4.39 per cent, and Mercury 3.28 per cent, for a combined 16.12 per cent. In another, the three accounted for 17.24 per cent and yet another, 16.14 per cent. Across several current New Zealand share funds, then, roughly $1 in every $6 is invested in just three power companies that the Greens have explicitly identified as targets for higher corporate taxation.
“Make the power companies pay,” they say. Well, hang on a minute, in part, the power companies are an investment owned on behalf of New Zealanders saving for retirement!
In the case of Meridian and Mercury things get more absurd because the Crown itself owns roughly 51 per cent of each, as it does Genesis Energy. The state is therefore also the majority shareholder receiving returns from these companies and, under the Greens’ proposal, would increase the tax it extracts from them. Those returns form part of wider Government revenue and contribute to funding the very public services the Greens and Te Pāti Māori lament are underfunded.
To some extent, money attributable to the Crown’s ownership is being shuffled from one pocket of the state into another and the remaining shareholders include institutional investors and ordinary investors, including our retirement funds.
Then there are the banks, which make particularly convenient political villains. Nobody marches down Queen Street demanding better returns for ANZ shareholders, and so promising to whack the banks is approximately as politically difficult to retail as promising to tax tobacco companies. But once again it is worth asking who actually owns them.
New Zealand’s four big banks are owned by Australian-listed banking groups, which again makes them perfect cannon fodder. ANZ Group owns ANZ New Zealand, Commonwealth Bank owns ASB, National Australia Bank owns BNZ, and Westpac Banking Corporation owns Westpac New Zealand. However, those Australian parent companies feature prominently in Australian equity portfolios available to New Zealand investors!
One current Australian shares fund I looked at had 10.03 per cent invested in Commonwealth Bank, 4.38 per cent in Westpac, 4.23 per cent in National Australia Bank, and 3.88 per cent in ANZ. Collectively, the four banking groups represented 22.52 per cent of the entire fund. Put $10,000 into that Australian share portfolio and $2,252 of it is invested in the parent companies of New Zealand’s big four banks. Other funds contained much the same thing.
There is an important qualification here, lest somebody start furiously composing a Bluesky thread about what a complete idiot I am before reaching the end of the essay. Owning shares in Commonwealth Bank does not mean the whole 10.03 per cent of that portfolio is exposed to a New Zealand tax on ASB. ASB is only part of Commonwealth Bank’s overall business and the Greens’ proposed taxes would apply to its New Zealand operation. But that isn’t the claim I am making. The point is simply that New Zealand retirement investments can and do own shares in the very banking groups whose New Zealand operations the left bloc are promising to tax more heavily.
Slogans about making corporations “pay their fair share” also often mask a much more significant impact than the “small” incremental changes they propose. Imagine a company makes $100 of taxable profit. At the current 28 per cent company tax rate it pays $28 in company tax, leaving $72 after tax. At 33 per cent it pays $33, leaving $67. Politicians will quite reasonably describe this as a five percentage point increase in the company tax rate, but viewed another way the amount of company tax collected on the same taxable profit has increased from $28 to $33, which is an increase of nearly 18 per cent.
This does not mean our KiwiSaver returns automatically fall by the corresponding amount. New Zealand’s system complicates the effect for domestic shareholders, companies change their behaviour in response to taxes, investors anticipate policy changes, and different shareholders have different tax positions. Economics is irritatingly resistant to being compressed into a single easy to understand narrative. What we can say is that the additional tax burden has to land somewhere, because a corporation cannot itself experience a reduction in living standards. It cannot cancel Netflix, buy cheaper mince or decide that Bali will have to wait another year. Taxes imposed on corporations are borne by people. Shareholders receive lower returns, customers pay higher prices, and workers may experience lower wages or fewer employment opportunities. The company may reduce investment elsewhere and foreign shareholders also absorb some of the cost. Usually the burden will be distributed between groups though the proportions are contestable. The point I am attempting to make here is that pretending that “the corporation will pay” is the end of the story is dishonest.
Other companies appearing prominently in New Zealand share portfolio include a2 Milk, Infratil, Auckland Airport, Chorus, Fisher & Paykel Healthcare, EBOS, and Mainfreight. These aren’t obscure Cayman Islands shell companies through which Elon Musk stores his emergency diamonds. They are some of New Zealand’s most significant businesses, and our retirement funds own them in part.
The NZ Super Fund publishes its listed-equity holdings every six months and has held very substantial investments in New Zealand companies including Contact, Meridian, Mercury, Fisher & Paykel Healthcare, and Auckland Airport. It periodically becomes such a significant shareholder in individual NZX companies that it crosses the five per cent threshold requiring substantial product holder disclosure. Again, this is capital being invested on behalf of New Zealanders for the purpose of generating returns to help fund our retirement. And my goodness, with an ageing population, we need every dollar these investments can generate.
We have spent decades encouraging ordinary people to accumulate savings. KiwiSaver exists because we want people to own financial assets rather than reaching retirement with nothing except whatever the government of the day can afford to give them. The NZ Super Fund exists because successive governments recognised that investing capital and earning returns on it would help meet the enormous future cost of an ageing population. So the Greens and Te Pāti Māori are simultaneously telling New Zealanders that owning productive assets is prudent and necessary, then conducting political arguments about returns to capital as though they are exclusively enjoyed by a tiny caste of plutocrats wearing top hats rather than part of the process of New Zealanders gaining capital.
The wealth taxes being proposed by these same parties would exacerbate these problems in slightly different ways. Again, there is a tendency to hear “$10 million of wealth” and imagine $10 million sitting in someone’s bank account waiting to be liberated by the state. Usually it isn’t.
Imagine somebody who founded a successful New Zealand business and still owns $20 million worth of shares in it. They are unquestionably wealthy, but the $20 million isn’t cash. It is the assessed value of their ownership of a productive business employing people, buying things, selling things, investing, and paying tax. An annual wealth tax, however, requires actual cash with which to pay the IRD. The owner might have sufficient income elsewhere, borrow against the asset, extract more money from the business through dividends, or sell part of their ownership. This all has knock on effects and can lead to them actually contributing less to the economy and in overall taxes.
I originally started looking at all of this because I was interested in the tax proposals being advanced by the Greens, Te Pāti Māori and Opportunity, but it isn’t fair to lump Opportunity into much of this. Sure, they are clearly another party seduced by the idea of taxing wealth, but their current proposal is structurally different. Opportunity wants a land value tax and explicitly argues that New Zealand has too much capital tied up in residential property rather than productive enterprise. It also proposes compulsory KiwiSaver with much higher eventual employee and employer contributions, with the aim of creating a much larger domestic pool of investment capital. There are plenty of arguments to have about whether their programme is desirable, affordable, or remotely achievable, but while they engage in similar narratives about the rich, “they’re attacking the companies your KiwiSaver owns” isn’t a fair criticism of what they’re proposing.
I want to be clear that none of what I have laid out here is an argument that corporations shouldn’t pay tax. They obviously should, and they do. Nor do I believe that New Zealand’s present 28 per cent company tax rate was delivered to Moses on a stone tablet and must remain unchanged for eternity. I personally think we should lower it to encourage more investment in New Zealand businesses like Ireland and Singapore did. But that is yet another essay for another day.
There are perfectly legitimate arguments about the appropriate level of company taxation, whether banks should face special levies, how capital should be taxed relative to labour, and how much revenue the state needs to provide the services New Zealanders expect. The Greens and Te Pāti Māori clearly examined the evidence and concluded that a 33 per cent company tax is worth the economic trade offs. What irritates me is the pretence that there are no trade offs because somebody called “the corporations” is picking up the tab. Cause and effect.
There is no magical pile of “corporate money” sitting outside the economy waiting to be confiscated without consequences. Corporations ultimately belong to shareholders, employ workers, sell things to customers, invest capital, and pay dividends. Taxing them more may be worthwhile if the benefits bought with the additional revenue outweigh those costs, but the costs do not disappear. They move through the economy, potentially appearing in returns, prices, wages, and investment. And eventually, they can end up hitting ordinary New Zealanders right in our retirement savings.
This article was originally published by Thought Crimes.
