Myth: John Key has said that New Zealand taxes consumption at a relatively low rate.
Reality: The rate of GST in New Zealand, at 12.5%, is relatively low, but the coverage of our GST system is particularly comprehensive. As a result, New Zealand has the sixth highest level of general consumption taxation, as a proportion of GDP, out of the 30 countries in the OECD.
The OECD stated in its 2007 edition of Revenue Statistics that: ” . . contrary to the expectations of some commentators, there has not been any general trend in OECD countries from direct to indirect taxation. Indeed, there has been a slight trend in the other direction over the last thirty years, following a sharper fall in the share of indirect taxes from 1965 to 1975. Over the past forty years, the general trend away from indirect taxes has been so strong that only six countries– Luxembourg, Mexico, the Netherlands, New Zealand, Poland and the Slovak Republic – escaped it.” (p. 38, emphasis added)
So despite some general trends in this direction, New Zealand has been an outlier. This reflects our late (1986) adoption of a GST but also its comprehensiveness.
