It’s a case of good news and bad news for New Zealand taxpayers, who will be paying five days’ less tax than last year, but mainly because the economy is failing to fire. In this year’s Tax Freedom Day calculations, accounting and business advisory network Baker Tilly Staples Rodway found the estimated tax Kiwis pay has increased just 1.9 per cent on last year. While that might be good news for those who have advocated for fiscal prudence from the Government, it really shows that the economy and taxpayers are under pressure and profits are smaller.

Tax Freedom Day marks the hypothetical date New Zealanders have paid their tax bill for the year, meaning whatever they earn for the rest of the year is theirs. This year’s forecast date is May 10 – five days earlier than last year.

Trust 'sugar rush' is over, but next up is Investment Boost 

Baker Tilly Staples Rodway Auckland head of tax Mike Rudd says the trust tax rate increase in 2024 caused a "massive sugar rush" of trusts paying dividends ahead of the change, spiking the overall tax take in 2024 and 2025, but tax paid has since flattened out. The corporate tax take is just 1.2 per cent higher this year, less than the increase in GDP, illustrating businesses are struggling to grow.

"An optimist might say that corporates are managing their tax payments to take advantage of the new Investment Boost regime, which provides a 20 per cent year one tax deduction for new business assets purchased after May 2025. This is forecast to have a high initial cost to the tax take but the hope is these new assets will lead to an increase in GDP over time," he says.

Polling by Inland Revenue suggested around a quarter of businesses were intending to claim the Investment Boost deduction. Perhaps an even more influential factor in the lower tax take is the increase in business failures. The latest Centrix data showed 3023 liquidations in the year to March, with monthly liquidations the highest they’ve been for March since 2015. The cost of those failures is often borne by suppliers who never get paid, affecting their bottom line.

New Zealand's overall tax revenue well below previous annual increases

Meanwhile, hope that the 2024 cuts to personal income tax rates (adjusting for "bracket creep") would spur spending has not borne fruit, with the GST tax take increase of 3.7 per cent just ahead of inflation. With an overall tax take increase of just 1.9 per cent, revenues are well below the previous annual increases of 3.9 per cent in 2025, 5.4 per cent in 2024, 6.2 per cent in 2023 and a whopping 15.6 per cent in 2022.

It is notable that Kiwis are effectively spending one day less a year of their tax on core government services, the second year running of similar decreases. The Government has meanwhile increased spending in areas Kiwis have indicated are priorities, such as health (accounting for two extra days’ worth of tax this year), transport (one extra day), and surprisingly, environmental protections and welfare benefits (one extra day each).

"What we and our clients want to see is good value for big-ticket items. In the National Infrastructure Plan released late last year, the Infrastructure Commission noted that despite New Zealand investing around 5.8 per cent of GDP annually on infrastructure over the past 20 years, making us one of the top spending countries, we rank near the bottom for ‘bang for buck’. Whether we’re paying more tax or less, New Zealanders’ perception of how much value they’re getting back may be an especially big factor in this election after several years of doing it tough," Mike says.

Illegal markets may be affecting tobacco tax take

The other question of perception relates to tobacco duties, which were down 20 per cent year-on-year. Retail New Zealand’s April report, Time is Running Out to Quit Illicit Tobacco, indicates this may be a result of the growing illegal (untaxed) tobacco market as much as the rise of vaping or people quitting smoking. The report highlighted that thanks to high tobacco taxes, illegal tobacco sold by criminal gangs has risen to 50-75 per cent of the Australian market, and that New Zealand is beginning to follow suit.  

Meanwhile, the take from gambling was up 12.4 per cent on last year, which conveniently reflects the 12 per cent offshore gambling duty introduced in July 2024. Other tax changes, such as the introduction of road user charges (RUCs) for EVs in 2024, have had little effect so far. The RUC take is only up 2.4 per cent on last year, but this can be expected to increase as more Kiwis switch to EVs. In April, the overall EV market was up almost 20 per cent year-on-year. Battery electric vehicle sales were up 271 per cent, reflecting rising fuel costs, although the broader impact of the fuel crisis won’t be reflected in our tax take until next year.

Kiwis paying less tax – but Australians come out on top 

"New Zealanders paying less tax this year could be good or bad depending on your interpretation. But if you’re planning to improve your chances across the ditch, consider that Australians are paying three days more tax this year, not five days less," Mike says.

"Although, on April 18, their date is still three weeks earlier than ours."