Tax, Inequality and the Way Forward
- tracey2203
- Nov 17
- 3 min read
New Zealanders care deeply about fairness. We’re a country built on the belief that everyone should have a real chance to build a good life — supported by strong public health, decent education, affordable homes, and a social safety net we can trust. And yet the gap between those ideals and people’s lived reality is widening.
Right now, families struggling with rising rents, rising food costs, and rising mortgage stress are also dealing with under-funded services. The health system is stretched. Education is struggling. Too many whānau are forced to make trade-offs no one should have to make.
And all of this is happening at the same time as wealth inequality continues to deepen.
Why the system feels unfair — and why tax is at the heart of it
One big reason New Zealand feels out of balance is that we rely on one of the narrowest tax bases in the developed world. Yes — compared to Australia, our overall tax take as a percentage of GDP is roughly similar, sometimes even slightly higher. But here’s the catch: we collect that revenue from a much smaller set of taxes, and overwhelmingly from wages and consumption.
That means ordinary workers carry a disproportionate share of the load, while large pools of wealth — including investment property gains — sit untouched.
How we compare to Australia, Denmark, Finland and others
Most of the countries we like to compare ourselves to — nations with high wellbeing, strong social systems, and less entrenched inequality — tax wealth more broadly and more fairly.
Australia taxes capital gains.
Denmark, Finland, Norway, the UK, Canada — all tax capital gains.
We do not.
We’re one of only a handful of OECD countries choosing not to tax gains on investment property, even as house prices climb far beyond what incomes can match.
Labour’s promised capital gains tax — and why it matters
Labour has signalled a move toward a more comprehensive approach to taxing wealth, including a capital gains tax or something functionally similar. This would bring us closer to countries like Australia and the Nordic nations, where taxing capital gains is a normal part of a balanced tax system.
A well-designed CGT could:
broaden our narrow tax base
reduce pressure on wage earners
fund better health and education
help redirect investment away from speculative property and toward productive parts of the economy
This isn’t a radical idea — it’s the norm in most wealthy, stable democracies.
What about the “mum and dad investor” argument?
One common concern is that a capital gains tax would unfairly target small investors — the “mum and dad” Kiwi with one extra house they’re relying on for retirement.
But the data tells a more nuanced story:
A large portion of investment properties in New Zealand are owned by people with multiple houses.
Many significant gains are made by highly leveraged, often very wealthy investors.
Average homeowners — especially those owning a single family home — are usually not the ones paying CGT in countries that have it.
Most international systems exempt the family home entirely and often include thresholds or rollover provisions to protect small-scale investors.
A CGT, if introduced here, can be designed with the same protections.
Where we could go from here
We have choices. We can keep relying on increasingly stretched wage earners to fund the hospitals, schools, infrastructure and community supports we all rely on.
Or we can broaden our tax base in line with other successful countries — so the load is shared more fairly, and so we can properly fund the things that make Aotearoa a great place to live.
This isn’t about punishing success — it’s about designing a system that works for everyone.
Tracey S
Closing the Gap
Want to dive deeper?
Tax Working Group Why should we tax more capital gains?
Facing the debate: Evidence & Inaction: Inequality and Tax in NZ
Better Taxes for a Better Future: We need a capital gains tax that delivers for New Zealanders
Tax Working Group - Why should New Zealand tax more capital gains?