The Government is looking at whether banks in New Zealand are taxed appropriately.
Finance Minister Nicola Willis said she is continuing to receive advice from IRD on how income tax laws applied to the major banks in New Zealand, particularly compared with Australia.
Willis asked for the advice last year, but said no announcements would be made until Budget next year.
The key issues were around how the “parent banks” and branch banks in New Zealand interacted for tax purposes.
She said there was some “very arcane and complex tax law” in that area where the OECD had guidance, but New Zealand operated slightly differently.
Willis was also looking at the Australian “major bank levy” which New Zealand did not have. This forced banks with more than $100 billion in liabilities to pay a levy to the government, raising significant sums a year.
Willis would not rule out applying something similar here, but she did confirm the Government was not looking at a windfall tax.
“There’s a range of highly technical, highly complex issues with the way that banks are taxed, and we’re just doing a check in to make sure that it’s resulting in an overall fair system.”
Willis said it was possible more revenue could be generated for the Crown if the Government found banks were not paying the full amount of tax expected.
Acting Prime Minister David Seymour was asked about the issue on Monday and said he believed banks were being fairly taxed.
“Some of the biggest taxpayers in New Zealanders are banks,” he said, and stated they were all paying the 28% average tax rate as their company tax.
“There’s nothing to suggest that they are not paying the same share that they would if they were any other kind of business.”
Asked about Willis’ work, Seymour said, like most ministers, she was “always asking for advice, always tossing around the ideas”. He suspected the result of that work would show banks were fairly taxed.
Seymour said, from what he saw, there seemed to be a “consistent pattern” in terms of what banks paid, and the question around any proposals to change the settings would need to be based on “fairness”.
He pointed to a dairy, retail or manufacturing company that were doing “pretty much the same stuff, making the same profit and paying the same tax, would you treat them differently”?
“One of the core principles of taxation is that ‘like taxpayers pay tax alike’, and ‘unlike, taxpayers pay tax un-alike’ based on the size of the difference.
“So you’d start with fairness as your principle.”
He acknowledged there may be more information he was not aware of. He also wanted more information on the major bank levy.
“I’ve seen the argument for that, and it goes something like this: Banks inevitably get bailed out.
“If they’re so big that their failure would affect the entire economy, maybe they should be putting something aside for that rainy day, if it happens one day. That’s the argument.
“It’s, in a way, a form of de facto deposit insurance.”
He said it was an interesting argument, but would need to see the detail before deciding on supporting a proposal or not as ACT leader.
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