Bulldoze the playing field
The biggest blockage to the savings industry is tax policy, ANZ Funds Management general manager Anthony Quirk says.
Thursday, October 23rd 1997, 12:00AM
One of the country's biggest banks has hit out at the Government and its tax policies which disadvantage people saving for their retirement.ANZ Funds Management general manager Anthony Quirk says if the Government really wanted to encourage people to save for their retirement the best thing it could do would be to remove tax disadvantages.
"I have no doubt tax policy is the major blockage (for investors)," he told a recent conference on managed funds in a post superannuation referendum environment.
He says it is the investor who has to pay for the Government's approach to taxation on investment products, not the industry.
"Whatever tax bias hits the fund hits the investor. It is often forgotten in this debate that it is the average 'mums and dads' investors who suffer from the lower post-tax returns that a non-neutral tax policy produces."
Quirk says there are four main areas where tax policy impeded saving.
The first was the unevenly applied capital gains tax regime, where investors privately owning shares or owning units in a passively managed fund were not taxed on capital gains, whereas capital gains on unit trusts and managed funds are taxed.
"Despite all the attempts to distinguish between capital and revenue gains the line is still contrived. This has led to the bizarre outcome that capital gains in passive New Zealand equity funds can be tax free while active funds in the sector are taxed on such gains," he says.
Quirk says there is a tax bias toward property compared to other forms of investment.
This bias had steered savers to maximise the investment in their own home and it has helped to push the property market up to artificially high levels, especially in Auckland.
The big concern is that many New Zealand families have undiversified investment portfolios with their home being their only retirement asset.
A third tax blockage to saving is the blanket 33 percent tax charge which is made on all superannuation schemes, regardless of the marginal tax rate of the investor.
This problem is being addressed by the TOLIS report that has recommended a tax credit regime.
While this option has some merit Quirk was concerned about the high compliance costs it would place on the industry and, ultimately, the investor.
Quirk says the fourth major anomaly was that investors in United Kingdom authorised investment trusts gained a tax advantage over investors using the traditional New Zealand-based unit trust to invest offshore.
"The Government must recognise that if we are to have a voluntary regime that works it must remove the tax biases to ensure tax neutrality for the various forms of retirement savings - that is a level playing field," Quirk said.
Now that politicians had been clearly told a compulsory scheme is unacceptable the Government must get on with Plan B.
Quirk says Plan B must be the continuation of the current regime where a State provided pension is topped up by private savings.
"Plan B must also involve a resurrection of the Superannuation Accord so the issue remains non-politicised."
He said there was no time to muck around. "The time to implement Plan B is now."
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