On the Tiles: Ruth Richardson on fiscal policy, the Budget and IRD tax report

Prime Minister Jim Bolger and Finance Minister Ruth Richardson making their way to the House of Representatives for the presentation of the 1991 Budget. Photo: Te Ara / Public Domain

Former National Party finance minister Ruth Richardson – best remembered for 1991′s “Mother of All Budgets” – has criticised the Inland Revenue Department’s new tax report as a “vanity project” for Revenue Minister David Parker.

The IRD study into the tax rate paid by a sample of 311 wealthy New Zealanders found they paid a median effective tax rate of 9.4 per cent, compared to 20.2 per cent for the average rate paid by a “middle wealth” New Zealander.

The report was commissioned by Parker, who said after its release that “tradies, nurses, school teachers, hospitality workers, hairdressers, cleaners, engineers and small business owners all pay much higher effective tax rates than their wealthier fellow Kiwis”.

Speaking to deputy political editor Thomas Coughlan for On the Tiles, the Herald’s politics podcast, Richardson – who was finance minister from 1990-93 – described the study as the “nosy Parker” report and as “a hymn of hate against those who dare to have any wealth”.

“I think the methodology is flawed. The thinking is flawed. I mean, just take the big bulk of the so-called economic income that this report says ought to be on the table to be taxed. It’s business entity income. It’s building businesses.”

Revenue Minister David Parker commissioned the IRD report into the tax rate paid by a sample of wealthy New Zealanders. Photo / Mark Mitchell

Richardson questioned the origins of the report and the political management of its release. “Within a day you get the report, you get the shock horror, you get David Parker bathing in the afterglow of [economist] Thomas Piketty saying this is a wonderful report – and then it’s dumped on from a great height by the prime minister the next day.”

The day after the report’s release, Prime Minister Chris Hipkins gave a pre-Budget speech in which he said no taxes would be introduced in May’s Budget. Labour has not released the tax policy on which it will campaign for October’s general election.

Richardson said the report was either a “vanity project” for Parker owed to him by the Cabinet, or a “stalking horse” for Labour’s tax intentions for the election.

“It’s just lunacy and it’s completely out of kilter with the kind of economic story we should be building in New Zealand, which is we don’t have enough capital so why tax? We don’t have enough business building, so why attribute some fictional value to it?

“And we don’t have enough in this country of – if you look at just us compared to Australia – where our productivity levels and therefore our earning levels are so demonstrably behind our neighbour, that we’ve got this huge big risk of losing our best talent to a more agreeable economic climate. It’s just boneheaded to me.”

Listen to the full episode of the On the Tiles podcast for more from Richardson on spearheading the Fiscal Responsibility Act, her memories of monetary policy from Opposition and in Cabinet, current Reserve Bank policy- and her nickname for this year’s Budget.

On the Tiles is available on iHeartRadio, Apple Podcasts, Spotify or wherever you get your podcasts. New episodes are available on Fridays.