A bold prediction

Thursday, August 3rd 2006, 7:23AM

I'll stick my head out here and make a bold prediction: The government will back down on its proposed changes to tax on investments. They won't go through Parliament in their present form.

This view has been percolating along in my mind for a little while now as it becomes apparent that the government is starting to realise that the changes are hugely unpopular.

This is clearly borne out by the unprecedented number of submissions (more than 3600) which have been made to the select committee. The government has clearly misread this one.

The more people I talk to the more I realise this issue is big and the anti-feeling is right down at the grass roots level - the Mum and Dad investors.

Plenty of organisations have been talking about it and it appears fund management/investment firms have engaged their clients on the proposals, and motivated them to find out more and take a position.

On the other hand it has been the government's job to champion the changes, and promote their benefits. To my mind they haven't done this at all well or with any conviction.

In terms of support it is worth observing that some fund managers have said they are in favour of the changes, but none of them have come out strongly in support of the proposals. Likewise their representative association, the Investment Savings and Insurance Association, has been quiet. If they support the proposals they should be alongside the government barracking them on.

There has been none of that.

Assuming I am right there needs to be a Plan B as these changes are critical to Kiwisaver. It doesn't seem like there is one at the moment, which leaves the government in a right pickle, and investors less certain about what might happen to their money.

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