By Corin Dann and Anusha Bradley of RNZ
One of the richest people in the country supports paying more tax, but says the super wealthy worry the Government will “squander” the money raised.
Bruce Plested, the billionaire co-founder of Mainfreight, said he supported the idea of a wealth tax to help address concerns about inequities in society.
“I believe I do,” he told RNZ in a new series on wealth launching on Monday.
Plested is among the wealthiest people in the country, according to the 2024 NBR rich list, with an estimated fortune of $1.3 billion.
His multinational logistics and transport company Mainfreight is one of the country’s biggest and most successful companies, currently valued at about $7.3b on the New Zealand Stock Exchange. Plested retains a 14% stake in the company.
While Plested said he would personally be happy to pay more tax, he was not sure others in the super-rich ranks would be so keen.
“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.
“If we had a good enough Government, they could get away with it and it could become part of the deal.”
He said governments of all stripes had failed to spend public money efficiently.
At the 2014 election, Plested donated $100,000 to Te Pāti Māori and $45,000 to National – the parties were governing together at the time. In 2017, he again gave $100,000 to Te Pāti Māori but nothing to National. There is no record of any political donations by him since, although he has given over many years to various education projects.
A wealth or capital gains tax has been a political hot potato for years. Former Prime Ministers Sir John Key and Dame Jacinda Ardern both ruled out introducing a capital gains tax on their watch, despite Aotearoa being one of the few countries in the OECD to not have one.
In 2023, it seemed a wealth tax on the super rich might get some cut-through after the then Labour Government commissioned an Inland Revenue study of the nation’s 311 wealthiest families. The study concluded the families paid an effective tax rate of 9.4% – less than half of the 20.2% rate the average New Zealander paid.
In response, then Revenue Minister David Parker led the design of a wealth tax requiring couples with more than $10 million in assets to pay an annual levy of 1.5%. It was estimated to raise $3.8b in revenue that could have funded income tax cuts for almost everyone, including a 0% rate for income under $10,000.
But then-Prime Minister Chris Hipkins vetoed the idea and Parker stepped down from his role, saying it had become “untenable” for him to continue.
Speaking to RNZ for RICH, Parker said he respected Hipkins’ decision.
“We didn’t agree on tax. There’s no animosity there, but yeah, I suppose it was me standing on my principles,” he said.
After losing office in 2023, the Labour Party is now giving a wealth and capital gains tax another look.
“It’s an internal discussion as to which, if either of those we should be pursuing. There are pluses and minuses for both,” Parker said.
Research suggested a capital gains tax did not really affect the super wealthy “so it won’t deal with the raging inequality that we’ve got at the moment”, he said.
“The richest 1% of New Zealanders own six times as much as the bottom 50%, and they pay a far lower rate of tax. You’re never going to be able to fix that problem without some change to the tax system. That’s the debate that we’re having within the Labour Party.”
Commerce Minister Andrew Bayly said the Government did not agree with imposing a capital gains tax, and a wealth tax would drive the super rich and their money to leave.
“You will have people who literally will go ‘I will take my business out of New Zealand’,” Bayly said.
That would result in less tax revenue and fewer opportunities for higher paying jobs, he said.
“What that will mean is ultimately we’re poorer in a financial sense. That is what will be so damaging if you start doing things like that.
“We’ve got to create an environment where not only do New Zealanders want to remain and be successful here in this country, but also how are we going to attract the right sort of capital from overseas?
“You start putting those types of things in place. No one’s gonna come from overseas.”
But Parker said neither a capital gains nor a wealth tax would make the super rich leave in droves.
“People stay in a country for lots of reasons. Their families are here. Their friends are here, their business contacts are here. They love their country. They like being a big fish in a small pond rather than a non-entity in a big pond.”
The Treasury estimated 3% of our capital would leave and 97% would stay, Parker said.
Asked if the super wealthy were currently getting a free ride, Parker said: “Largely, yes.
“Now this is not a criticism of the super wealthy. I really like these people, I know many of them and I’ve worked with lots of them.
“They’re not going to leave. But I do think some people have got a thin skin. Whenever I talk about tax some people say to me they feel like they’re being personally attacked. No, they’re not.”
Inequality expert Max Rashbrooke agreed capital flight was not a serious risk if wealthy people were made to pay more tax.
“That’s generally a hollow threat according to the data,” the Victoria University senior research fellow said.
“We let wealthy people off very lightly in this country when it comes to paying tax.
“Capital gains tax is just so standard virtually everywhere else in the developed world. It’s just part of the furniture. It’s totally normal. It is bizarre that we don’t have one.”
Making the wealthy pay more tax in whatever form would not be enough to reduce inequality, however.
“Redistributing wealth is really challenging, it’s much more challenging than redistributing income.”
Taxes, benefits, housing and wages were the four big forces driving inequality, he said.
“We need action in all those areas.
“If you’re asking me, I would have some kind of tax on wealth and I would funnel some of the proceeds of that into the kids KiwiSaver scheme so that you’re genuinely building wealth for everyone, not just for a select few.”
- RNZ
Demand for bonds may well stay strong, but there's a catch.