The great KiwiSaver U-turn
A day after saying GST would be applied to KiwiSaver fees the government has done a massive u-turn and reversed the plans.
Wednesday, August 31st 2022, 4:01PM 
4 Comments
by BusinessDesk
The government has swiftly abandoned plans to raise an extra $225 million a year by imposing GST on fees charged by KiwiSaver providers and other fund managers.
The move follows a ferocious political backlash against the proposals, which lasted less than 24 hours after their introduction without public notification in a routine ‘omnibus’ tax bill.
A statement from the revenue minister, David Parker, sought to place blame on the move getting as far as legislation on advice from the Treasury and Inland Revenue Department.
“Inland Revenue and Treasury advised this change be made to remove a loophole used by large financial companies, so they would have to align with how others in New Zealand pay GST.”
National party leader Christopher Luxon had immediately branded the move a “retirement tax”.
The regulatory impact statement accompanying the bill had warned that as much as $186 billion of KiwiSaver and non-KiwiSaver funds under management would be lost by 2070 because the policy would reduce overall returns and discourage retirement savings.
“Because of the importance of public confidence in KiwiSaver and the need to ensure nothing unduly affects New Zealanders’ willingness to save, the government will not go ahead with the proposal contained in the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Bill,” Parker announced.
During consultation, he said it had appeared that large KiwiSaver providers opposed such a change while smaller players, some of whom were already paying GST, supported it.
“However, since the announcement it has become clear that smaller providers now oppose it too,” said Parker, who has also been copping flak for the IRD’s handling of the cost-of-living payment, which has been paid to ineligible New Zealanders, such as those living overseas.
An auditor-general’s report this week was highly critical of the way the first tranche of payments was managed and this week’s second payment involved tighter criteria.
| « Wholesale investments in the regulator's sights | Tough times ahead for NZ economy: Nikko economist » |
Special Offers
Comments from our readers
The former National government axed the $1,000 kickstart, halved the tax credit and started taxing employer contributions, all of which have lead to much lower balances and less engagement with KiwiSaver generally. At the time there was barely a whimper, and yet those changes have had a bigger impact than the proposed, and axed GST tax changes.
All this current Labour government wanted to do was to apply an amendment to tax law to close a loophole being exploited by Australian banks (work that was started under the previous National government). The net effect for most KiwiSavers would be a reduction of approx. $15to $70 in contributions per year. The uproar was immediate and deafening.
My question is, how much will Nationals changes have cost KiwiSavers collectively by 2070?
People seem to get so caught up in headlines, sound bites and tribal politics they don't seem to be able to work out the numbers for themselves in the short term, or see what really matters in the long term.
So trimming the generous contributions to KS was broadly, if reluctantly, accepted. But I have never agreed with taxing employer contributions and salary sacrifices.
As to the kick start; it had worked - there were already over 1M members who had received it and KS had quickly achieved critical mass - clearly those who wanted it had got it.
The thing now is average balances have grown, so it is more interesting to the public. And they are sick of KS being a football subject to ideological forces, whims and changes.
Further, this govt was elected on a platform of "NO NEW TAXES" and this was yet another example of that promise being broken. The managers may not have publicly soap-boxed about it, but they will have been heard. Moreover the public's perception of it was what killed it.
Parker is a complete idiot for not seeing that coming.
First, when looking at policies, it is absolutely a fools game to immediately compare what has been done it the past to what is happening now. It’s effectively sunk cost fallacy at a policy level. We’re talking about a policy/bill introduced today, given the current regulatory political and economic climates. Not what someone else did years ago in a different environment. If a policy is a good idea it should rest on its own merits not because someone else had done something similar.
Second, you’d have to have been outside of the country with no reception/connection to not have heard ‘no new taxes’ parroted for weeks on end. Of course it hits media headlines when a party has a democratic mandate to not implement new taxes, then does so.
Third, removal of a benefit ($1,000 kickstarter) =\= implementing a negative. This is entirely a false equivalence. You question how much this change would cost kiwisavers - answer is simple. It cost them nothing. The money wasn’t theirs to begin with.
I’m not a National supporter, I’m just tired of Labour sycophants refusing to approach a situation logically. It’s all to easy to point to governments of yester-year.
Sign In to add your comment
|
|
Printable version |
|
Email to a friend |
