Christopher Luxon and Nicola Willis speak ahead of Budget 2025

The Government has set aside $75 million in the Budget for tax changes it hopes will spark investment and productivity growth.

Of the funding, $65m has been set aside to change the rules around the amount of tax-deductible debt that foreign investors can put into New Zealand investments.

The rules as they stand are designed to “prevent income being shifted offshore and to protect New Zealand’s tax base,” Willis said.

However, she said there was a risk that the rules as they stand risk “deterring investment, particularly in capital-intensive infrastructure projects that are typically funded by large amounts of debt”

“We need to strike a balance,” Willis said.

The Government is consulting on ways to change the rules and has set aside $65m to fund whatever regime emerges out the other side.

“Low capital intensity and low rates of foreign direct investment are key contributors to New Zealand’s relatively low rates of productivity.

“To generate growth, New Zealand needs more foreign investment and the international know-how it brings with it,” Willis said.

A further $10 million will be put aside to defer tax liability of some employee share schemes to help startups and unlisted companies.

“Currently, problems arise if tax bills for share income arrive when employees are unable to realise the value of their shares,” Willis said.

Under the new, changed regime, the tax will be deferred until a “liquidity event” such as the sale of the shares, occurs.

The final Budget will be delivered on May 22.