Abstract
This paper considers the implications for personal income tax and Goods and Services Tax (GST) revenues of population ageing in New Zealand. It considers ‘pure’ ageing effects; that is, population size is held constant but its age distribution changes over the next 40 years. With age-earnings profiles having a peak in the 45–54 age range, and the expected average age of the population over the next 40 years transiting this age range, younger individuals with increasing incomes are expected to approximately counteract the declining incomes of older individuals. However, ageing is expected to increase the dependence of income tax and GST revenues on pension choices. Without changes in New Zealand Superannuation (NZS), its cost is expected approximately to double over the next 40 years, with most of this occurring over the next 20 years.
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