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Tax Policy Reform and Economic Performance in New Zealand

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  • Iris Claus

    (Inland Revenue and Centre for Applied Macroeconomic Analysis Policy Advice Division, P.O. Box 2198, Wellington, New Zealand)

Abstract

New Zealand's tax system is relatively simple and transparent by international standards. But there may still be scope for reducing the costs of taxation. This paper develops a stylized model for New Zealand to evaluate the effects of reducing higher-income tax rates. The results suggest that a reduction in higher-income tax rates would improve New Zealand's long-run economic performance if it were financed by a decline in (non-productive) government spending and/or increases in revenue from other less distortional taxes. Despite the reductions in the higher-income tax rates, higher-income taxpayers would continue to pay a larger proportion of the tax burden than lower-income taxpayers. (c) 2007 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Suggested Citation

  • Iris Claus, 2007. "Tax Policy Reform and Economic Performance in New Zealand," Asian Economic Papers, MIT Press, vol. 6(2), pages 79-108, Spring/Su.
    • Handle: RePEc:tpr:asiaec:v:6:y:2007:i:2:p:79-108
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