NZ Politics

Inland Revenue is warning that unless what the government spends its money on changes, taxes will need to increase in the coming years to cope with an ageing population.

"A core driver of these fiscal pressures is that New Zealand's population is ageing."

By 2060, a quarter of the population will be older than 65.

"This means that the amount the government needs to spend on superannuation and health care will increase if the government maintains current policy settings.

"In its last Long-term Fiscal Statement, the Treasury predicted that government expenditure will exceed government revenue by 13.3 percent of GDP by 2061 if the government takes no response to rising fiscal pressures," IRD said.

That would mean either that existing taxes would need to be levied at a higher rate - such as higher levels of income tax or GST - or there would need to be new taxes implemented.

It said New Zealand taxed a more limited set of capital gains than most other OECD countries. It could be possible to broaden that scope.

"The absence of a general approach to taxing capital gains can provide an incentive for individuals to reduce their tax liability by undertaking activities that are not taxed rather than those that are taxed.

"This can reduce government's ability to raise more revenue in a way that is progressive."