Value Added Taxes (VATs or Goods and Services Taxes - GSTs) are being increasingly adopted globally, with VAT/GST revenues similarly increasing through higher contributions from indirect taxation to total tax revenues. Unsurprisingly, increased focus is being placed on the design of such taxes, encompassing policy choices and legislative drafting styles. New Zealand’s (NZ’s) GST, introduced in 1986, is held up as the ‘model’ VAT in a post-European VAT environment, especially when measured against the key tax principles of efficiency and simplicity. Importantly, the trade-off has been less equity within the tax itself, which necessitates forms of compensation elsewhere in the tax system. The vast majority of GSTs developed since 1986 have used the NZ GST model as a starting point, although no subsequent GST/VAT has been as ‘pure’ as the NZ model. A number of factors have been influential in resulting VAT/GSTs. This includes: the actual design, prevailing tax policy process; general economic environment; and jurisdictional political philosophies (at the time the VAT/GST is promulgated and implemented). Of particular importance in NZ is the Generic Tax Policy Process (GTPP) which encourages both early and widespread consultation over tax policy design and draft legislation.
This paper seeks to provide an overview of NZ’s GST (including the core concepts within the GTPP) as a case study for evaluation as a possible ‘initial model’ for adaptation in China as it seeks to reform its VAT. Through building on prior work reviewing the Hong Kong Special Administrative Region’s (the HKSAR’s) GST experience and policy development framework, this paper offers insights into why the author believes the NZ GST experience should be of both interest and relevance to the People’s Republic of China (the PRC). This is premised on the basis that NZ’s GST has been endorsed in subsequent tax system reviews, and survived notwithstanding major changes in the NZ political environment and prevailing economic conditions.