New Zealand First deputy leader Ron Mark slammed the lack of parity and government's position.
"I find it sick. How hard is it? There's only 143 of them over there," Mark told the Herald on Sunday.
"The Minister of Defence has no intention to give them pay parity with our Anzac colleagues in Taji and he has no intention of utilising the clause within the Income Tax Act, which allows them to actually declare a warzone and give them a tax-free salary.
"Let's be really clear about this, the legislation is there and it's not that this government can't. It's that they won't."
The Australian Defence Force confirmed the daily allowance for its troops in Iraq is $150.75 (NZD$169.59) and troops do not pay tax on that or their normal salary.
New Zealand's Defence Minister Gerry Brownlee said the Kiwi allowance of $148.96 was tax-exempt, but soldiers' salaries were not.
"The payment of a non-taxable daily allowance standard to NZDF personnel serving in Iraq is seen as more equitable than a tax exemption on salary as it does not differentiate the benefit on the basis of rank," Brownlee said.
The Australian tax exemption has been in place since 1950.
But Mark says New Zealand governments have consistently refused to match their Anzac partner. "Under successive National and Labour governments I've never been able to get them to use that clause," he said.
"Are Kiwi troops getting a raw deal? Totally. As always. This case stands out very starkly, they are serving in what the Government itself promoted as an Anzac deployment alongside Australians doing exactly the same work under the same conditions facing the same risks. The difference is, our government's a cheapskate."
Brownlee rejected the accusation.
"NZDF remuneration is aligned to the market and reviewed annually. In addition, members may receive pay progression for additional skills or experience in rank," he said.
