New report reveals New Zealand's growing tax divide

New research finds New Zealand's wealthiest families pay less than half the effective tax rate of ordinary New Zealanders – and the gap is growing.

New Zealand is supposed to have a progressive tax system. The more you earn, the higher the rate of tax you're supposed to pay.

But for the country's wealthiest families, the opposite appears to be true.

New research published today finds that the very wealthy paid an effective tax rate of just 8.1 percent on their economic income between 2021 and 2024, compared with 17.4 percent for the median-wealth New Zealander. And despite changes intended to make the system fairer, the gap has grown wider.

The findings come from a new report by economist Tayla Forward, produced in collaboration with the World Inequality Lab and sponsored by Tax Justice Aotearoa and Better Taxes for a Better Future, which builds on Inland Revenue's landmark 2023 study of New Zealand's wealthiest families.

So why do the super-rich pay proportionally less tax than the rest of us?

The answer, Forward explains in the latest episode of In Brief, lies in what our tax system does – and doesn't – count as income, and how the wealthy can exploit gaps in the rules in ways the rest of us can't. As a result, she argues, New Zealand's tax settings don't just fail to reduce wealth inequality – they actively drive it.

The conversation also explores the extraordinary concentration of corporate ownership in New Zealand, how fiscal drag has increased the tax burden on ordinary wage earners, and why attempts at tax reform so often fall short.

Watch the full conversation below and subscribe to Public Interest for more discussions making sense of politics and power in Aotearoa.