Govt extends GST to KiwiSaver fees, which is forecast to raise $225m/year & cut funds under management by 2070 by $186b; GST being applied to Uber & Airbnb; FBT to be exempted for public transport
Isn’t this exhausting? It feels like we are destined to be on this path forever, with no way out in sight.
Inexplicable, does Labour actually wish to lose the election?
Please open this one up, so freaking infuriating
I have no problem with the Government putting taxes in place ... but not for Kiwisaver. We're a nation trying to encourage savings and investment, thats why the Government is giving a subsidy to kiwisavers. Reclaiming some of this subsidy back via GST is a complete nonsense.
I do not for one second buy the arguement that it's about fairness across the tax system. Kiwisasver doesn't really have a competing product, the nations goal here is universal use of Kiwisaver. This feels more like an own goal.
If the Government thinks the fund managers won't pass it on, they have their heads in the sand.
There are 3 reasons to impose a tax. First, to reduce private demand( ie fight inflation), second to discourage activities (eg alcohol), third to take money from those who have too much (address inequality). Funding the governments spending is not a reason, the government doesnt need this money, as it is not funded by taxes or borrowing. Surely this tax is in direct opposition to the second reason, as is the justification of leveling the playing field. This is economic illiteracy of the worst kind.
Thanks for this analysis Bernard! I was very surprised to read about this and frustrated that Labour isn’t following the recommendations of its own TWG. Please open this up so that more people can be informed!
This sickens me. It's pathetic. There is no good reason for this, and it will hurt tens of thousands of young kiwis the most - the longer anyone has to go in their Kiwisaver investment prospective 'term' the more this will sting. I can't express how disgusted I am at this. Thank you for the clear concise write up. Perhaps Labour is sick of governing?
This is gutting. I'm wondering which parties are the best alternatives to this sort of policy. I wonder if this would have happened if Labour wasn't governing alone. Thanks for you analysis - I doubt it would have ever seen the light of day unless you hadn't picked it up.
I wouldn’t have an issue with GST being applied on fund management fees for KiwiSaver if they removed the tax on contributions. NZ is one of the only jurisdictions that taxes you when you contribute rather than withdraw, and the effect on compound interest is much more negative with this approach leaving retirees worse off in the end.
I’m sure they won’t, but a savvy move for labour to counter this would be to remove taxes on contributions, but given the whole 30/30 BS they’ve committed too I won’t be holding my breath.
Agree with the other commenters here, I was mixed about labour dooming itself to defeat next year, but this I think changes that. Not that I think National will repeal it when elected - they’ll probably let it slip quietly into obscurity unchanged.
It feels like the Govt is in it's dying throes, trying to ram through everything it can before it's heart stops. I just don't get any sense of a positive future to look forward to, which I know is challenging in this omnicrisis world. If politicians talked about enduring pain now for a more equitable future, where we are investing so all families can live free of poverty, in warm dry houses close to free public transport, I could really get behind that. Hell, I would pay a land tax for that. But no one is painting that positive picture here which is why the mood is so damn gloomy, even among those of us who could bathe in a bath tub of hundred dollar notes of untaxed capital gain.
What a zinger
Please open this up
I agree with the principle and this will prevent inconsistency within the managed fund space, however the change should be net neutral as to not adversely impact young New Zealanders who are forced to save for their retirement. For example, the increase in crown revenue should be offset by an increase in the government’s annual contribution to an individual’s KiwiSaver account. If David Parker is in search of tax technical purity, he would be wise to consider NZ’s current tax treatment (or lack of treatment) on capital gains and land.
Thanks for this Bernard, good analysis looking beyond the initial emotional reaction of the big outlets (which is of course hard to do in cases like this). Couple of questions for the uninitiated - is it unusual to not provide the impact statement when a proposal like this gets announced? Trying to get a feeling of how transparent this has tried to be. Secondly, this 30/30 anchor that we are currently tied to, how implicit is it within the beehive? Like are all MP's aware of this? How do we break out of this dated thinking? (looking through the local election bios does not inspire much hope of a grassroots change anytime in my lifetime).
There is an assumption here that the Kiwisaver fund managers will pass this GST on to the account holders, i.e. instead of charging, say, 1% annually they will now charge 1.15%.
Fund managers currently rake in billions of dollars in fees and make (I was going to say 'earn' but they don't really have to work very hard) mega profits. Maybe, depending on the whole ecosystem of Kiwisaver fund managing when the GST comes into effect, the fund managers will just absorb the GST. There's a marketing angle: - "We will pay your fees GST for you".
And slightly off subject; the government needs to annually drop the highest fee charging default manager and replace it with one with lower fees. Each year there are more funds being managed but the marginal cost of managing those new funds is very close to zero.
Like, if you are going to break an election promise of no new taxes, why not make it a new tax that will actually better society?