Surprise tax cut? Government getting advice on dumping tariffs to reduce costs

The Government has sought advice on removing tariffs. Photo / Georgina Campbell

Commerce Minister Andrew Bayly will soon get advice on dropping New Zealand’s few remaining tariffs, allowing vastly more goods to enter the country without paying a fee.

A Briefing to the Incoming Minister of Commerce (BIM) hinted the Government was receiving advice on dropping remaining tariffs, which was an Act Party election policy. Bayly’s office confirmed in a statement that the minister was getting advice in the near future.

Most of New Zealand’s trade is covered by fair trade agreements, which means countries whose imports are covered under those agreements pay low or no tariffs.

However, Act leader David Seymour said that dumping tariffs entirely might not be something the Government actually does any time soon.

“Act has long raised the point that the tariffs that remain almost cost more to collect than they are worth and make no difference other than to add cost to the things that New Zealanders buy, such as school uniforms,” Seymour said.

He said that despite being Act policy, the idea had not made it into the Government’s “coalition agreement, 100-day plan or speech from the throne”, meaning the three governing parties were not bound to implement it.

“It may be something that ministers will bring up in the Budget, but I would also note the Budget is very tight with various pressures we have been left with so we can’t say the Government is looking at it,” Seymour said.

He said he was not aware the Government was looking at dropping tariffs, although he said that Bayly might have requested advice on the topic off his own bat.

“Of all the things we’ve prioritised, we think it’s a good policy but it’s not in the coalition agreement,” Seymour said.

Bayly’s BIM made the consumer case for dumping tariffs.

“New Zealand retains five and sometimes ten per cent tariffs on imported goods. Although free trade agreements greatly reduce these, consumers can still face higher prices because of tariffs that apply to goods such as cosmetics (including sunscreen, make-up, perfume, and skin care), motorhomes and caravans, frozen pork, t-shirts and sweatshirts, leather shoes and jewellery,” the BIM said.

These tariffs earned the Government $180 million last year, meaning that getting rid of them would cost the Government roughly that amount of money.

However, the BIM said the cost to the total economy was greater than what the Government earned in revenue.

“Costs include the administrative costs for government in maintaining the system and compliance costs for businesses in demonstrating that their imported goods come from a country that qualifies for lower tariffs under a Free Trade Agreement. A recent study estimated these add another $90-260 million in costs to consumers, businesses, and government,” the BIM said.

There is a view that New Zealand’s relatively light tariffs exist so that trade negotiations have something to trade away when negotiating trade deals. Unilaterally dropping them could weaken New Zealand’s negotiating position.

Seymour said it was “hard to believe that any country is going to decide to change the stance on trade with New Zealand because we get rid of 5 or 10 per cent tariff on t-shirts”.

“It doesn’t pass the sniff test,” Seymour said.

Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.