Revenue strategy
A good tax system is one that:
- finances public expenditure in a fair and efficient way
- minimises bias in economic decisions
- limits the number of tax provisions that provide preferential treatment to certain activities or sectors
- rewards effort and individuals' investment in their own skills
- has low compliance and administrative costs, and
- minimises opportunities for tax avoidance and evasion.
The Government will operate a stable, predictable revenue system. The current main tax bases - personal income tax, company tax and a broad-based GST - will continue to raise the bulk of Crown revenue. With prudent control of spending, the Government does not see the need to seek major additional sources of revenue.
In Budget 2024, personal income tax thresholds have been increased to recognise, in part, the fiscal drag caused by growth in nominal incomes since 2010. Family incomes are also being increased through changes to the In-Work Tax Credit and Independent Earner Tax Credit, and through the introduction of FamilyBoost. Other immediate tax measures seek to improve housing affordability, address integrity risks and increase compliance and enforcement action.
Crown revenue is currently lower than expenses, as the operating balance is in deficit. In the medium term, however, revenue will have to exceed expenses to sustain surpluses and bring net core Crown debt below 40 per cent of GDP.
The Government will remain transparent and open in its tax policy processes. It is committed to public engagement in the design of tax policy including through the Generic Tax Policy Process. Public consultation ensures that the perspectives and expertise of those affected by proposals are considered, and plays an important role in sustaining a tax system that is durable and widely accepted by taxpayers.
Over time, the tax system must respond to longer-term needs in a planned and coherent way. The Government will continue an active tax policy work programme to ensure the tax system remains fit for purpose. It intends to be a good steward of the tax system by developing policy and designing administrative processes which take into account changing requirements.