The overall tax Kiwis pay has increased 4.66 per cent on last year, while local government taxes have gone up nearly 11 per cent – the third consecutive year of more than 10 per cent increases.

Tax Freedom Day marks the hypothetical date New Zealanders have paid their tax bill for the year and can pocket the rest of their earnings. The expected date for this year is Friday 16 May – a day later than last year’s date, once the final financial results were known.

It’s clear that economic heavy weather has more than cancelled out the impact of the Government’s tax cuts and attempts to trim public sector spending.

"Despite last year’s adjustment to personal income tax brackets being well overdue, the relatively small extent of the changes was perhaps wise given the overall financial picture. It’s kept the Government coffers in a healthier state than they would otherwise have been,” says Baker Tilly Staples Rodway Auckland head of tax Mike Rudd.  

"However, despite the huge rush on dividend payments we saw at the end of the 2024 financial year to beat the new 39 per cent trust tax rate, the benefit of higher trust taxes on Government revenues next year is likely to be cancelled out by the individual tax changes."

Despite well-publicised redundancies and budget cuts in the public sector, New Zealanders paid just one day less in taxes for core government services over the past year. In fact, even though the rate of inflation has slowed, core Crown expenses rose from $139b to an estimated $144.6b, and the Government’s new operating spending added three days to Kiwis’ tax burden.

Meanwhile, welfare spending has continued to increase from $26.6b pre-Covid in 2020 to an estimated $47.8b in 2025, with benefits adding three days to last year’s tax freedom date. However, spend on health has remained flat and education, transport and communications only slightly higher.

"Balance in public spending has always been an important issue, and it’s likely that the Government’s focus on reducing spend has helped bring inflation down over the past year. However, the current international trade wars, their impact on the whole supply chain and how central banks respond could potentially see inflation go up again," says Mike.

"The Government is therefore taking a cautious approach to increasing spending, despite recent small signs of improvement in the economy.  We are unlikely to see any change in Tax Freedom Day in the next year as a result."

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