'Capital income tax' just an internal debate at this stage - Chris Hipkins

Labour leader Chris Hipkins says more focus should be on the government's plans to bring in "new taxes" than his party's discussions on a potential new "capital income tax" should it return to power.

A post shared by one of Labour's social media accounts last week outlined former revenue minister David Parker's vision of a "capital income tax" (CTI), which would target big earners whose incomes were not effectively captured by the present tax system.

An Inland Revenue probe in 2023 found New Zealand's wealthiest were paying tax at far lower rates than most others - effectively less than half what middle-income Kiwis were forced to cough up.

Their incomes mostly came from "increases in the value of businesses, property and financial portfolios they own or control" that were frequently not taxed, unlike people who earn their money through directly taxed means, such as work.

Parker quit the revenue role when Hipkins ruled out a wealth tax as part of his policy bonfire following the departure of Jacinda Ardern. New Zealand is an outlier among OECD countries in not having a comprehensive capital gains tax (CGT).

The post said the CTI was "neither a CGT nor a wealth tax really", but was scant on what detail - if any existed yet - or how it would work.

Hipkins told Morning Report on Wednesday Labour "haven't landed on a policy" yet.

"Within the party there'll be a variety of different members with different views on things. And, you know, that's what an internal debate about this policy is all about… Since the election, we've said that we've put all options back on the table."

He said there was "nothing particularly new" in what Parker was saying.

"I said after the election that all options regarding tax are on the table, and all options regarding everything are on the table. You know, when you lose an election, you do have to go back to the drawing board and look again at your policy - and that includes broader economic policy as well - a tax policy is just one subset."

National finance spokesperson and current finance minister Nicola Willis questioned why Parker was talking about tax when it was no longer officially his domain (revenue is Dr Deborah Russell, and finance Barbara Edmonds).

"What's harder to work out is why would David Parker be stepping in to comment on Dr Russell and Hon Edmond's portfolios: He hasn't held the revenue portfolio for more than a year?" she wrote on X (formerly Twitter).

She said Labour "loves talking about new taxes", which Hipkins found ironic.

"So [does] the current government. I mean, they've introduced a range of new taxes since the election, and Nicola Willis is constantly talking about new revenue measures. So she should be a bit more upfront about what new revenue measures the current government are considering."

Labour's previous wealth tax policy was planned to be fiscally neutral - changing the amounts of tax paid by different groups, but not overall increasing the amount collected by the government. It would have created a tax-free zone for up to $10,000 of earnings.

Hipkins said a "realistic conversation" was needed about whether the government needed to collect more tax to balance the Budget.

"Ultimately, we want to go into the next election campaign with a balanced Budget, a Budget that's going to be able to deliver on the public services that New Zealanders want, that's going to be able to make sure the government is balancing the government's books. Current government don't have a plan to do that. There's deficits as far as the eye can see under this current government."

He said it was a too soon to say whether Labour would go into the next election with a neutral or revenue-raising tax plan.

"We've got a long way to go and you know, Nicola Willis between now and the next election has already indicated she's going to be introducing new revenue measures. Well, that means new taxes. So how can we form a judgement on new taxes that may be introduced by the current government that we don't know about yet?"

Elsewhere in the interview, Hipkins said a future Labour-led government would reintroduce the oil and gas ban the coalition ditched, but honour contracts signed in the meantime.

"If you look at what we did last time when we banned further new oil and gas exploration, we honoured all of the existing permits and contracts that were in place. In fact, Labour governments have always been very responsible on honouring the words in a contract, even if that contract was written and entered into by the previous government.

"The only significant recent example I have seen of a government effectively creating sovereign risk by not honouring a contract entered into by a previous government was this government when they came into government terminating the Interisland ferry replacement contract, which did enormous damage to New Zealand internationally and our reputation as a trusted and reliable trading partner."

He would not commit to Labour breaking up the electricity gentailers, following a winter of spiking prices, but said it "certainly has to be an option that's on the table".

"If you look at the billions of dollars of dividends that have been extracted by the generating retailers over the last decade, and you compare that to how much money they've invested in new generation, it's very clear where their incentives lie. Their incentives lie in maximising profit by constraining electricity supply and keeping the price high.

"Actually, that's a sign that the market's failing. We should be aiming to increase supply and drive the price of electricity down. In a country that's got an abundance of renewable electricity, the prices that we're paying for electricity at the moment are absurd."