In an era of growing inequality, ballooning public debts, and concerns about financial market excesses, policymakers and economists continue to debate innovative ways to raise revenue without crippling the real economy. One idea that keeps resurfacing is the Financial Transaction Tax (FTT)—a small levy on trades in stocks, bonds, derivatives, currencies, and other financial instruments. Also known as a Tobin tax or “Robin Hood tax,” it promises substantial benefits compared to hiking income taxes, corporate taxes, VAT/sales taxes, or capital gains taxes.
But does it deliver? Let’s break down the key advantages, grounded in economic analysis and real-world proposals.
1. Massive Revenue at Tiny Rates
Financial markets move eye-watering volumes—far exceeding global GDP. A modest tax (think 0.1% on stocks or 0.01% on derivatives) can generate huge sums because the base is enormous.
Broadening the Tax Base: Smarter Ways to Collect Revenue with Less Hassle in New Zealand
As a writer and someone who’s spent years navigating business, publishing, and new ventures in New Zealand, I’ve become increasingly interested in how we fund our public services without strangling growth or creating mountains of paperwork. New Zealand’s GST is already one of the better tax systems out there—broad, flat at 15%, and relatively straightforward. But there’s a notable gap: financial transactions and services are largely exempt or treated specially. Could we broaden the base further while keeping collection simple and costs low? Absolutely—and it might be easier than you think.
The Goal: Wider Base, Lower Rates, Minimal Pain
A broad tax base allows lower rates, reduces avoidance incentives, and spreads the burden more fairly. The holy grail is revenue that’s stable and easy to collect—ideally automatically, with little admin burden on businesses or individuals. NZ is well-positioned here thanks to high digital adoption and a modern payments system.
Option 1: Fix the GST Treatment of Financial Services
The simplest step is addressing the exemption on banking, insurance, and many financial flows. Measuring “value added” in finance is tricky (interest margins aren’t like selling a widget), which is why exemptions exist worldwide. But we can do better:
- Apply GST to explicit fees and margins more consistently.
- Or introduce limited input tax credits for businesses.
Why this broadens the base effectively: It captures revenue from a sector that benefits from the current setup without taxing every everyday EFTPOS swipe. Collection stays within the existing GST framework—low added cost for IRD and businesses.
Collection advantages: Banks and payment providers already report data. Automation keeps compliance cheap. No need for a whole new tax bureaucracy.
This approach maintains GST’s strengths while plugging a leak.
Option 2: A Targeted Financial Transaction Tax (FTT) Alongside GST
For a bit more bite, add a small, narrow FTT focused on securities, bonds, derivatives, and high-volume trading—not routine personal or business banking.
- Rate example: Something like 0.1% or lower on relevant trades.
- Scope: Targeted at financial markets activity rather than every transfer.
Broadening benefits: Brings in progressive revenue (hits high-frequency traders and institutions more) and makes the financial sector contribute more visibly. It can discourage excessive speculation without broadly disrupting commerce.
Why collection stays low-cost: Levied at the point of trade through exchanges or clearing systems. Banks already handle similar reporting. Minimal impact on day-to-day EFTPOS, internet banking, or small payments.
This pairs well with GST—broadening overall without the cascading risks of taxing every transaction.
Why Not a Comprehensive Tax on All Bank Transactions?
A full “single tax” on every payment sounds appealing for ultimate simplicity (automatic deduction at source, potentially replacing multiple taxes). The base is massive, supporting tiny rates. However, it risks:
- Cascading costs through business supply chains.
- Avoidance via cash, crypto, or offshore routes.
- Higher effective burden on frequent small transactions.
Targeted enhancements to GST plus a narrow FTT achieve broadening with far less economic friction. Historical experiments elsewhere show supplemental transaction taxes can raise revenue efficiently, but full replacement is riskier.
Benefits for New Zealand
- Lower overall costs: Reduced compliance paperwork, fewer audits, and less economic distortion.
- Fairer system: Financial activity contributes without penalising everyday Kiwis or exporters.
- Revenue for priorities: Funds infrastructure, health, education—or even tax relief elsewhere.
- Growth-friendly: Keeps NZ competitive as a small open economy.
Any change needs careful modelling by Treasury to balance revenue, behaviour, and impacts on businesses like mine. But the direction—broader base, digital collection, simplicity—is one worth debating.
What do you think? Could refining GST and adding a smart FTT modernise our tax system without the headaches? Or do you favour bolder single-tax ideas? Drop your thoughts below—I’m genuinely interested as both a taxpayer and someone building ventures in Cambridge.
need a tax on every dollar that leaves nz, not high but certainly more then 0.1%. even 1-2% and capture all the tax dodgers like tech etc plus encourage investment of profits in nz rather then syphoning it off abroad.
You do realise that would open up another country taxing every dollar we earn, by selling stuff to them , a bit like your mate trumps tariffs but legit because we do it to them .
youre not taxing a country, youre taxing a certain transaction type at a bank.
zero tax on incoming transactions so thats your imaginary tariff gone 🙂
trumps just throwing his weight around with the tech tariff thing cuz he knows big tech are utter scum and tac dodgers… theyre also big doners and trump sucks cocks of big doners to keep them happy.
How about we don’t have any new taxes and stop wasting the tax that is already
collected.
If we dont fix the system first we will never see any benefits from increased taxation.
not gunna happen, the waste and rort are baked in.
Is it just another feather to be plucked from the very thankful Stalin’s chicken?
Will that “golden egg” be demanded by voters to be even more extracted in a greater % over time.
“Micawber Principle” from Charles Dickens’ David Copperfield is never in a politicians mind & much of the pretty ;much institutionilezed public. :—-
“Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness.
Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
Alongside this famous budgeting principle, Mr. Micawber is also known for his eternal, often blind, optimism about his own financial struggles, frequently stating that he was hourly expecting that “something will turn up.”
Like oil, gas, gold, tourism, etc.,
Then Muldoon’s PAYE income tax, which removed the feeling of a tax take.
Rogernomic’s GST tax, which did have some softeners like losing some duty taxes.
Now talking of capital gains tax, gift duty, inheritance tax, death duties, emission taxes, Georgian land taxes etc.,etc..
All of that is to be borrowed against, as if the gross will be the profit.
Governments spending other peoples money, the credit rating to borrow more for the so called experience, & the politicians always gainsay, rort for more important troughs, to be filled with gravy money on issues demanding a money flow.
Just like Rogernomics GST, so easy & simple & at 10% not worth trying to dodge, if you recall when it was bought in, so it would be governmentally self restraining. …. yeah right …
Now we have had 2 increases in %, & the ongoing talk that it should be much more, as they seek to “rat-shit” the take %.
In the continous what-aboutism, that NZ should emulate the likes of Scandanavian countries VAT = GST which is 25%, all to achieve their supposed success, “grass is greener for all, over the fence” with more complications of adjustments to lower levels like for food.
So much money flow, simply allows even more “no responsibility, no accountability” so dereliction of fiscal duty, neglicence, malfeasance to corruption.
“A democracy cannot exist as a permanent form of government.
It can only exist until the majority discovers it can vote itself largess out of the public treasury.
After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy.”
The above concept is more attributed to Alexander Fraser Tytler (15 October 1747 – 5 January 1813) an “obscure Scotsman.” than Benjamin Franklin.
Tytler was more questioning the concepts of “democracy” which is so acclaimed now as being the fairest way for all.
Understandably so, when NZ Bill of Rights, BORA seems to expediently ignored.
The what else, like the open borders being pushed & signed up by NZ government of the UN Global :Migration Pact.
Really with DEI, multiculture, selling the concepts the streets are paved with El Dorado gold, & accomodation & it should all be equitably shared.
A very good & successful thief on the open market, knows that is best to thieve in a way that the victim does not notice until much later, or even better still, never..
The reason they get caught is greed, in expanding their operation, so queries are eventually raised.
That way the victim does not increase security, making it more difficult, and the thief sort of learns of lessons learnt, & then goes onto fresh pasture, new concepts.
Curious Dougal10 seems to be on point, about just what money is demanded with devious menaces, with the so called right to spend as can be seen fit by the so called democratic representatives.
PS for Ed,
I will be going through Cambridge way, circa next week if all goes well in the late afternoon..
It seems that even Cambridge is full on farming houses in those new suburbs
etc..
Edit, to the Muldoon paragraph.
Then Muldoon’s PAYE income tax, which removed the feeling of a tax take.
That concept was so the employers would be made responsible, by fines, penalties to pay their employees tax.
Over time it is simply baked into the cost of employment.
Later the Government then bought in minimum wages, that is sort of hiding what the government takes from the worker,.
Then it cascaded to also the “Work For Families” rebates.
Many places have had to increase numbers of staff to be able to figure the payroll in just the private sector, with aspect of it becoming mandatory to survive.
Note the problems the Education system had in its payroll, then the Health system, with now the back pay for hospital staff.
One would think that nobody is supposed to profit off any one working for employer.
Is it getting to a stage where many will not employ staff, other than the government itself.?
How difficult can it be to implement?
Every time a transaction is done, the bank sends the tiny percentage to the IRD. With all transactions going digital, everyone pays the tax.
“…YEAH OHHH ””BRO””
CUZZIES INCHARGE OF LOTTO !!!!
OOOOO HOO HOO HOO
RUSSEL HARRISON SAYS NAHH BRO
PURE CHANCE ONLY MAORIS HAVE WON ALL JACK POTS and powerballs FOR LAST 15 YEARS BRO !!! ”
https://www.stuff.co.nz/nz-news/361001245/ex-lotto-presenter-suspended-full-taxpayer-funded-salary-five-years-after-global-fbi-sting-arrest
…. Uzz dum-ass honkys
What a fucking rort. I wonder if Arderns shag had anything to do with nothing to see here…