7.2.a Taxation and other economic strategies that affect sustainable management of forests


This indicator provides information on the economic strategies that affect the sustainable management of forests. Government policies and strategies on investment, taxation and trade may influence both forest management and the level of long term investment in forestry.

Current state


The main forms of taxation that affect forestry are income tax and goods and services tax (GST). The income tax rate for all companies in New Zealand was reduced from 30 percent to 28 percent from 1 April 2011 and applies to net income after allowable deductions.

The current income tax regime for forestry has applied since 1991. For taxation purposes, expenditure by a forestry business falls within three categories:

  • capital expenditure that is never deducted and depreciated for tax purposes, for example, land purchase
  • expenses of a capital nature expended on an asset with a limited life, for example, construction of fences, roads and firebreaks; these can be depreciated against income from any source
  • costs directly related to the tree crop or incurred in the maintenance of the forestry business, for example, for planting, tending, pest control and overheads; these are deductible in the year incurred from income from any source.

When standing timber is sold in conjunction with land or other assets, the portion of the sales value assigned to the tree crop is treated as part of the seller’s assessable income for taxation purposes. The purchaser needs to record the part of the sale price that is immature timber and is able to claim this as a deduction on the eventual sale of that timber.

All personal income, other than most capital gains, is taxed at varying rates that depend on the level of income (with the highest rate being 33 percent).

GST is a value-added tax that applies to goods and services supplied by GST-registered people. The GST rate was increased from 12.5 percent to 15 percent on 1 October 2010.


The New Zealand Government is open to foreign investment. Regulations governing foreign investment are liberal by international standards, with targeted investment restrictions in only a few areas of critical interest.

Historically secure property rights, an independent, transparent and efficient legal system and lack of corruption, all favour long-term investment in the New Zealand forest industries. General factors that influence investment decisions in forest growing and wood processing include:

  • operating costs, capital costs, size of margins and the return on capital
  • availability of labour with the required skills
  • taxation regimes
  • environmental legislation and performance requirements
  • infrastructure.

Investment in the forest growing and wood processing industries can be made in several ways, giving flexibility for investors. Mechanisms include:

  • direct investment, such as through the purchase of land, forestry cutting rights or processing facilities
  • joint ventures facilitated through the Forestry Rights Registration Act 1983
  • shares in forestry companies
  • investment companies
  • partnerships.

Foreign direct investment

The Overseas Investment Office administers the New Zealand Government’s foreign investment policies, the Overseas Investment Act 2005 and the Overseas Investment Regulations 2005. The Act regulates the acquisition by oversees entities of 25 percent or more ownership or control of interests in significant business assets, and sensitive New Zealand land, which includes:

  • non-urban land greater than 5 hectares
  • land on identified offshore islands greater than 0.4 of a hectare
  • land greater than 0.4 of a hectare that is held for conservation purposes under the Conservation Act 1987
  • land greater than 0.4 of a hectare subject to a heritage order
  • registered historic places, historic areas, wāhi tapu (sacred or sites of special cultural significance to local Māori) or wāhi tapu areas.

Consent to acquire sensitive land is only granted if the transaction will, or is likely to, benefit New Zealand, or the relevant overseas person intends to reside in New Zealand indefinitely.

Significant business assets arise where the value of the assets exceeds $100 million.

The Act identifies criteria for consents for overseas investments in land and in significant business assets.

There are no restrictions on the movement of funds into or out of New Zealand, or on repatriation of profits. No additional performance measures are imposed on foreign-owned enterprises.


Trade is critical to New Zealand’s economy, with exports contributing about 30 percent to gross domestic product (GDP). Primary products (agriculture, fisheries, forestry) contributed 73 percent of the value of all merchandise exports, and forestry products contributed 10.3 percent in the year ended December 2013 (Statistics New Zealand, 2014).

New Zealand operates a relatively open trade policy, having removed trade-distorting subsidies on primary products, and is promoting similar liberalisation in international trade.

Historically, forest products have not been subject to the same sensitivities in trade as agricultural products, but restrictions include:

  • tariff escalation, where tariffs rise in line with the amount of added-value processing of a traded product
  • non-tariff barriers that include a variety of trade restricting measures imposed by trading countries, such as biosecurity or product certification measures.

Forest products trade has increasingly been subject to requirements related to meeting environmental and social standards under several certification schemes, including chain of custody arrangements and third party audited certification. These measures are also aiming to provide assurances on the legality of timber management, harvest and associated trade.

Regional bilateral and plurilateral agreements

New Zealand is party to a number of regional bilateral and plurilateral agreements, and is negotiating further agreements. In general, these promote trade liberalisation and economic development. Agreements include those outlined below.

Asia–Pacific Economic Cooperation (APEC)

APEC, of which New Zealand is a foundation member, is a co-operative agreement that promotes trade liberalisation, facilitation and economic development. Fourteen of New Zealand’s top 20 export markets are APEC members. For the 2013 calendar year, the value of New Zealand’s total merchandise trade with
APEC members was NZ$68.5 billion, representing 73 percent of New Zealand’s total two-way goods trade (Statistics New Zealand, 2014).

APEC leaders agreed in 2010 to enhance co-operation to address concerns with illegal logging and associated trade. In 2011, APEC Ministers Responsible for Trade instructed officials to establish an Experts Group on Illegal Logging and Associated Trade (EGILAT) to:

  • promote trade in legally harvested forest products
  • combat illegal logging and associated trade
  • build capacity.

ASEAN, Australia and New Zealand Free Trade Agreement (AANZFTA)

AANZFTA was signed by New Zealand, Australian and ASEAN Trade Ministers in February 2009. The Agreement entered into force on 1 January 2010 for Australia, Brunei, Myanmar, Malaysia, New Zealand, Singapore, the Philippines and Viet Nam. It entered into force for Thailand on 12 March 2010 and Lao People’s Democratic Republic and Cambodia on 1 January and 4 January 2011 respectively. It will enter into force for Indonesia after it has notified completion of its internal ratification procedures. Tariffs on key forest products will be eliminated at various points between 2010 and 2020.

Australia–New Zealand Closer Economic Relations Trade Agreement (ANZCERTA)

Under ANZCERTA, all forestry trade between the two countries is free of tariffs. The Investment Protocol to the New Zealand–Australia Closer Economic Relations Trade Agreement was signed by New Zealand and Australia in February 2011 and entered into force on 1 March 2013. The Protocol maintains the status of closer economic relations as the highest quality free trade agreement that New Zealand or Australia has with any trading partner, widely recognised as the most comprehensive bilateral free trade agreement in the world.

Trans-Pacific Strategic Economic Partnership Agreement (Trans-Pacific Agreement or TPA, formerly P4)

The TPA was signed by New Zealand, Chile and Singapore on 18 July 2005, and by Brunei on 2 August 2005. A binding Environment Co-operation Agreement and a binding Labour Co-operation Memorandum of Understanding were signed concurrently. All forest products-related trade under the TPA is tariff free.

Trans-Pacific Partnership (TPP)

The TPP has developed from the expansion of the TPA and aims to create a regional free trade agreement involving 12 Asia Pacific countries: Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Viet Nam. Negotiations under the TPP include an ambition for free trade for forest products.

New Zealand and China Free Trade Agreement

The New Zealand–China Free Trade Agreement (FTA) was signed in April 2008 and entered into force on 1 October 2008. Under the FTA, the current tariff for logs, sawn timber and wood pulp is zero. These products represent 97 percent of New Zealand forest product exports to China (year ended December 2013) (Global Trade Information Services Inc, undated). The FTA binds these existing favourable conditions.

The agreement also secured immediate tariff elimination on a limited number of engineered wood products where tariffs were either 4 percent or 7.5 percent. The products include: wooden frames for painting, windows, French windows and their frames; pallets; tool and brush handles; and specific types of plywood, fibreboard and laminated panels. Paper and paperboard products with tariffs of either 5 percent or 7.5 percent, and other types of engineered wood products with tariffs of 4 percent or 7.5 percent, are excluded from tariff elimination. In total, these products account for 2.5 percent of current exports to China (year ended December 2013) (Global Trade Information Services Inc, undated).

Pacific Agreement on Closer Economic Relations (PACER)

New Zealand has ratified the PACER, which entered into force in 2002. PACER guides future trade relations in the Pacific region, and provides for the free trade agreement in goods among Pacific Island countries (the Pacific Island Countries Trade Agreement) now being implemented and later likely to be extended to services. PACER also provides for the development of a free trade agreement among the Forum Island Countries (FIC) and Australia and New Zealand, commonly referred to as PACER Plus. PACER Plus will supersede the South Pacific Regional Trade and Economic Co-operation Agreement (SPARTECA), under which Australia and New Zealand currently provide non-reciprocal duty-free access for FICs to their markets. For most products, including all forest products, SPARTECA entails duty-free access and this will be carried over into the new PACER Plus agreement.

New Zealand–Korea Free Trade Agreement
Negotiations have been completed on the New Zealand–Korea FTA, which will be signed in 2015. The FTA will eliminate tariffs and duties on exports, and facilitate industry co-operation between the countries.

World Trade Organization (WTO)
New Zealand is committed to the WTO, by ensuring its border protection operations and technical standards and regulations are consistent with the WTO Agreement on Sanitary and Phytosanitary Measures and the WTO Agreement on Technical Barriers to Trade.

Domestic policy

New Zealand does not restrict export of wood products (including logs) sourced from plantation forests.
However, under the sustainable indigenous forest management provisions of the Forests Act 1949, export of logs and woodchips, and sawn timber for most indigenous species, is prohibited. No restrictions are in place on the export of finished products manufactured from indigenous timbers. These restrictions reflect the Government’s goal of ensuring that the limited supply of slow-growing and valuable indigenous timber species is directed to high-value local finished products.


The commercial forestry taxation regime has been stable since 1991. The goods and services tax increased from 12.5 percent to 15 percent in 2010, while the general company income tax rate was reduced from 30 percent to 28 percent in 2011.

The New Zealand Government is open to foreign investment, and regulations are liberal by international standards. The Overseas Investment Act 2005 regulates overseas acquisitions in New Zealand land and significant business assets.

New Zealand has a liberal trade policy and engages in trade liberalisation forums. It is a party to several regional bilateral and plurilateral trade agreements.

Trend Status

Data Quality H

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