Tax campaign called 'self-serving'

There’s scepticism about the Financial Services Council’s campaign for lower taxes on long-term savings.

Monday, August 11th 2014, 6:00AM 3 Comments

by Susan Edmunds

The FSC has launched a website and is running a campaign backed by Age Concern, Consumer NZ and the Taxpayers’ Union.

It aims to highlight and change what are described as some of the highest taxes on retirement savings to be found anywhere in the world.

The campaign says long-term savers, like those in KiwiSaver, are losing about half their KiwiSaver earnings to the impact of tax. It also claims people with term deposits are being over-taxed.

But Graeme Tee, of Private Asset Management, said it was not the place of the FSC to launch such a campaign. “They are a lobby group lobbying for their members.”

He said the campaign was a distraction from the issue of fees, which would have a much bigger impact on long-term savings than tax. “FSC members are all out saying the same thing, go for higher-risk funds, pay more fees. You’ve got to ask if that’s a sensible thing… this [campaign] is taking the heat off fees, who’s that benefitting?”

Barry Read, of IDS Ltd, said the aims of the campaign were good but the FSC was the wrong body to drive it. “It’s people who provide these products starting a campaign to say we should lower the tax so more people use the product, it’s coming from the wrong source.”

He said few investors gave much thought to the tax they paid on their savings. “This is more an industry issue.”

Chris Douglas, of research house Morningstar, said the tax system for managed funds in this country was not punitive by international standards. “But it’s always trying to push for these things.”

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Comments from our readers

On 11 August 2014 at 10:49 am Brent Sheather said:

The FSC’s call for tax to be applied just to real returns on savings will never fly because the tax system needs to be consistent. If it’s only going to tax real returns on KiwiSaver then just real increases in rents should be taxed, real increases in dividends, real increases in wages etc …

As Graeme says a far more realistic way of improving outcomes for savers is to reduce annual fees and the turnover within portfolios. In the US a recent paper recommends making investors who want to invest in high cost pension schemes sit an exam to prove they aren’t stupid. That is the sort of initiative that is required locally.

On 14 August 2014 at 11:52 am Informed said:

This is a poorly conceived campaign by Peter Neilson. Has it occurred to him that the Government of the day might turn around and say, ok, we'll look at the tax issue but we'll also look at the Government KS subsidy and whether it might no longer be needed?

On 14 August 2014 at 2:21 pm graemetee said:

Funny that Chris says NZ tax system is not punitive by international standards when the Morningstar 2013 Global Investor Experience Report puts NZ and Australia at the bottom of its international list on the basis of regulation & taxation and fees. But I suppose that is because the report was from an investors perspective , not the fund managers. Perhaps Chris can explain the report better than I can?

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