VAT Reform in China: Can New Zealand’s Goods and services tax Provide helpful Guidance?


  • SAWYER Adrian


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

Author Biography


Dr Adrian Sawyer is Professor of Taxation and Research Director for the School of Business and Economics in the College
of Business and Law, University of Canterbury, Private Bag 4800, Christchurch NZ. Email:
I would like to thank my colleague, Associate Professor Andrew Maples, for his valuable comments on an earlier version of
this paper. This paper is to be presented at the International Conference of Chinese Tax and Policy, Xiamen University,
Xiamen, China, December 13-14, 2014. I am grateful for the conference organisers for this opportunity to discuss NZ’s GST
and tax policy experience.