- Date published:
8:51 pm, August 31st, 2022 - 63 comments
Categories: david parker, jacinda ardern, kiwisaver, politicans, spin, tax - Tags:
Well this happened quickly.
Yesterday the Government introduced the Taxation (Annual Rates for 2022/23 Platform Economy and Remedial Matters Bill, a rather technical bill that among its provisions sought to ensure that all Kiwisaver account providers, not just some, charged GST for their services.
Then by lunchtime today the GST changes for Kiwisaver account providers was gone.
First of all the context.
Under the GST regime the provision of financial services is exempt. The definition is complex but in general terms it is meant to exempt banks from charging GST on bank services. Some small Kiwisaver providers as a matter of caution apply GST to the fees that they charge the accounts they manage. The big banks, less so.
Looking at my not large account which is close to the average and is with ASB Kiwisaver Scheme last year I paid $158.94 in Investment Management fees. If GST was charged then I would pay $23.81 more for that service per annum. This is less than 0.1% of the fund’s worth.
The Government expected that the change would raise $225 million on Kiwisaver accounts from 2026. This suggests, presuming that the current figure of 3.1 Kiwisaver accounts does not change and that the accounts which pay GST are very small in number that the increase in Investment Management Fees per account would be in the vicinity of $80 per year on average. There must be a few considerably larger and more complex and perhaps higher charged accounts than mine.
And thanks to the power of compound interest if you made various assumptions and looked deep into the future some pretty dramatic figures are revealed.
National and the big financial providers weighed in. From Interest.co.nz:
Luxon … told Newshub: “This is now a retirement tax on top of all the other taxes that we’ve had.”
“We’re going to stop it. I actually think the team of five million people needs to stand up this week and actually say to the Government, ‘Enough, stop’ and actually get the Government to withdraw it,” Luxon said.
“This is such a bad idea – a retirement tax when we’re trying to encourage people into KiwiSaver, it makes no sense.”
Financial Services Council CEO Richard Kilpin said the council was disappointed with the bill that was over-reaching.
“In the middle of a cost of living crisis, increasing taxes that are then likely to increase the fees that consumers pay to invest in KiwiSaver and managed funds, and potentially decrease returns, is a suboptimal outcome,” Kilpin said.
Deloitte tax specialist Allan Bullot told Newshub the move was a sledgehammer.
“Everybody that I’ve talked to that’s got a KiwiSaver fund and is talking and looking at this have told me that they consider it to be a brand new tax,” Bullot said.
“Technically, is there a new tax that someone’s invented? No. Are we coming and looking at something that hasn’t been subjected to tax since 1986 and saying, ‘We’re going to change the legislation’… [it] sounds like a new tax.”
Others called it a wealth tax. As if this was a bad thing.
The comments are deeply disingenuous. The charges do not start until 2026 and will have absolutely no effect on current cost of living pressures. And besides they affect the eventual amount paid out by Kiwisaver funds, not most people’s incomes for years to come. Financial Services Council CEO Richard Kilpin needs to go back to school and by the look of his comprehension back to primary school.
National’s attacks are really rich. Ever since its creation National has sought to undermine Kiwisaver. Do you remember when:
The GST change figures are miniscule in comparison. Let’s put figures on this, $80 a year in GST verses a loss of $520 a year in state contributions or $1,000 in the kickstart amount.
They have always been philosophically opposed to Kiwisaver. For them to prance around now and claim to be protectors is deeply, deeply disingenuous.
The Government has backed down. From a political standpoint I can understand this. But I wonder if with all of the noise thrown up recently that we have not instituted a rational change which would have meant that large Kiwisaver providers were treated the same as small Kiwisaver providers and which would have placed the Government in a better position to address poverty, Health sector pressures and climate change.
Labour on the other hand are never disingenuous.
When National reduced the state contribution to $520/year Labour objected.
When National cut out the kick start amount of $1,000 Labour objected.
Then, as soon as Labour regained the Treasury benchs they reintroduced the payments of up to $1,040/year and reintroduced the $1,000 starting payment.
Oh, they didn't? Surely they did?
Your comment itself is disingenuous. This, however, is good advice freely given:
An op piece from the Greens is now ‘advice’? Hilarious.
Yet, Libertyflibbet, the Govt has now followed the Greens' advice.
And as for alwyn, you are so unfailingly ingenuous that I find it hard to credit that you would accuse anyone of disingenuous conduct!
On the other hand – when Labour came in in 2017 there was a helluva lot of calls on the money! Underfunded hospitals and schools, cuts to the police budget, social housing disaster….. that MIGHT be a reason!
Quite right Jeff.
'Cooked-up PR stunt heads off GST move on KiwiSaver' is a very good read
“:http://National opposed the introduction of Kiwisaver and John Key famously called it a glorified Christmas Club. Maybe for merchant bankers but I can think of many first home buyers and retirees who have benefitted from it. And National opposed it all the way. National halved the state contributions to Kiwisaver accounts from $1,040 to $520 per year even though in 2008 they promised not to do this? National removed the $1,000 kickstart contribution and John Key said it would not make a blind bit of difference to the numbers joining?:”
Well it’s a damn shame labour didn’t do as good a job of killing an attack on kiwisaver as national did!!
the neo libs hate kiwisaver because it returns financial power to the government.
Interested to see 733 odd on Face Book, at least half telling Luxon he was exaggerating the facts.
Went to Ardern's page 1800 odd, mainly supportive. I think Kiwis are waking up to Luxon.
Love Genter's take. I see Waghorn has quoted that above.
Key used the GFC and making the costs manageable to do those cuts.
I still feel Parker should have sold the move and the why. Now he has lost that and has dented his and Labour's Cred.
Really don't think those are the metrics that Labour are reading. If they had significant levels of support, they would have had no reason to do a u-turn.
How does Parker still have a job?
High time this government put equal effort into helping drive up our prosperity, and less on bandaid subsidies and dumb tax moves like this one.
Hey what about an actual tax policy for example?
And what if you had half brain and some knowledge of history?
If Muldoon hadn't stymied the Rowling Scheme to enrich the money men we would have had a fully funded superannuation scheme with no taxes and wouldn't be shoving the counties wealth down the throats of the large Aussie banks who no doubt fueled Dome Head's cynical bullshit rush to the brain.\
[typo in e-mail address fixed]
No we wouldn't have. 1984 Labour or 1990 National would have flogged it off for peanuts, in the great fire sales.
Muldoon and Rowling were over 40 years ago.
Get over yourself.
Having a tax policy is a basic requirement of any progressive government, and this government doesn't have one.
Actually I fail to see the logic of exempting financial services from GST. The problem with charging GST on kiwisaver servicing is is that it seems to have picked on just one service, while other services like brokerage remained tax free. Labour might have been better off introducing the kiwisaver charge as part of legislation which removed the exemption from financial services generally.
Of course I think GST should be abolished altogether, but if one must have a GST, it should be applied to all services.
At this point there's so little coherence in Labour's approach to tax there's no need for a Minister at all.
They were going to do something maybe about GST on fruit and vegetables, and then apply GST more evenly on Kiwisaver. They know from the Cullen tax report that GST is our most regressive tax on the poor. It is now utterly incoherent.
They were going to do something about taxing capital gains, but stopped that.
They were going to use the renewed tax system they just spent nearly a billion dollars renewing, to distribute payments, yet the Office of the Auditor just roundly spanked them for poor preparation and essentially throwing the money to those who didn't deserve it.
They appear to have left their in-house tax specialist Dr Deborah Russel largely on the sideline doing makework, while Minister Parker is continuing to cost them politically.
They also allowed the sale of the Kiwibank Kiwisaver to foreign hands, and just spent $2.1 billion buying back Kiwibank, for no discernable policy benefit at all.
They have shown this week that they can be lobbied by the Australian banks and will fold like origami.
Ardern has handed the politics of tax and of banking to National leading into the 2023 election year.
" The Government has backed down. From a political standpoint I can understand this. But I wonder if with all of the noise thrown up recently that we have not instituted a rational change which would have meant that large Kiwisaver providers were treated the same as small Kiwisaver providers and which would have placed the Government in a better position to address poverty, Health sector pressures and climate change "
Well they mostly ignored the very expensive Working Tax Group's recommendations that could of created a lot more fair tax collection but I don't believe they were ever going to implement any of it and it was a ruse to help them around uncomfortable tax questions in the media to say we will let the TWG come back first so no further comment on tax and possible increases please.
Julie Anne Genter hit the nail on the head with her comments.
Green Party finance spokesperson Julie Anne Genter called for the government to now turn its attention to reversing the cuts to KiwiSaver brought in by the previous National government.
"Christopher Luxon has shown staggering hypocrisy over the last 24 hours. It was his party that systematically made it harder for people to save for their retirement," she said in a statement.
"It was National that introduced a new tax on employer contributions to KiwiSaver in 2011 … it was National that halved the annual maximum Government contribution to KiwiSaver accounts from $1042 to $521 … it was National that removed the $1000 kick-start people were provided when they opened a KiwiSaver account."
She said the government should incentivise New Zealanders to save through KiwiSaver by reversing those cuts.
It always amazes me that Labour led governments always claim that they can't put in progressive legislation to protect the climate or workers' and beneficiary rights because a National led administration will just reverse them.
But hardly ever reverse regressive National party legislation.
What's with that?
P.S. National has no such qualms.
The Ratchet effect?
There are those politicians who proudly call themselves 'Centrists' because they don't move things to the Right. But they also don't allow movement to the Left either. And after three years without movement, in either direction, a jaded electorate vote the Right back in, and the rachet moves forward a notch.
And so it goes.
But every now and then the rachet slips a cog.
And without meaning to, inadvertently imposes some radical Left policy like an FTT on financial transactions. Only to have the rachet slipped back into place after a huge cry of alarm from the Right alerts the Centre of their error.
Which is just what happened here.
But seriously folks, isn't it about time the Centrists got off their neo-liberal hobbyhorse and imposed some desperately needed Left wing policies like an FTT as a relief measure to lift the tax burden from struggling working families in the middle of a cost of living crisis? – while still meeting the increased costs of public health care, and education. t
To top up the depleted govt. coffers sucked dry by the covid crisis by transfering the tax burden to those who can easily afford it seems like a no brainer to me.
It has been instructional to me at how much the Right scream and protest at even the mildest form of an FTT and how easily the Centre give in to them.
If we are to ever have a more progressive tax system our political leaders will need to grow a spine to be able to stand up to these bullies and a brain to defeat their arguments. And the political will to do both.
At the same time national cut the govt contribution from $1,042.86 to $521.43 they also removed an exclusion for KiwiSaver from ESCT so the employer contribution was being taxed.
I wonder if someone should OIA the impact of that change on KiwiSaver valances by 2070 and see if the impact is greater or lesser than clarifying that fund management fees should attract GST.
I also seem to recall that ACT opposed the compulsory employer contribution, although I might be wrong on that.
Perhaps someone can elaborate.
It is also appropriate to remember that Winston Peters originally proposed a similar scheme some years before. However it was put to a national referendum which resulted in a fairly decisive “no” vote.
Thanks for that, MS. Some sanity restored.
The government take noise from the opposition far too seriously.
I'd pick National going full Chicken Little (note Seymour was breathing through his nose and supporting the government for defending the integrity of the tax system) had more to do with trying to claim the credit for a very heavy, and out of public view, attack by the banks.
Government would take the banks very seriously, Luxon and Willis making fools of themselves, not so much.
Yeah. Noise from the Welfare Advisory Group not so much.
The whole idea of “saving” for retirement, and the privatisation of super inherent in Kiwi saver, is fundamentally flawed.
KJT. Random musings on all sorts of things.: The myth of "Retirement Savings" (kjt-kt.blogspot.com)
“Saving” for retirement relies on three assumptions.
One. That an ever increasing amount of money equals a similar supply of real wealth and real capital.
Two. That an exponentially increasing wealth per person is possible in a finite world reaching resource limits.
Three. That putting money into increasing land prices and increasing derivative prices in the USA, a failing State, will somehow, “magically” mean more money (Healthcare, food, Housing etc) to support you or me in our retirement.
“Retirement income, real income as opposed to monetary income, as does schooling healthcare, infrastructure supply and food, always comes from current production. If I do not eat my dinner today, it does not mean there is someone who can give me my dinner in my eighties”.
It's always concerned me that because, (unlike Australia), New Zealand's Super is a voluntary scheme, if it fails, just like any private investment scheme, it will be on investors to wear the loss.
The Australian scheme is compulsory, Australian workers have no choice in having to make contributions
During the GFC and share market collapse the Australian Superannuation fund lost $200 billion in one year. Because the scheme was compulsory the Australian government were morally bound to honour the scheme and were forced to bail it out.
Makes me wonder, if we have another GFC event, will our government feel morally bound to bail out my Kiwisaver account?
Or will I be left high and dry like any other investor who loses their investment?
With OBR rules, your Kiwi saver is more than likely going to take a haircut, along with other bank accounts.
The political and economic effects, of a lot of people suddenly becoming poorer, may make a future Government bail out failing Kiwi saver accounts, however.
Another example of "privatising profits", in this case fund manager profits, and "socialising losses".
How did the Govt bailout in Oz work?
Within 24months the market recovered…was there a…clawback?
'During the GFC and share market collapse the Australian Superannuation fund lost $200 billion in one year. Because the scheme was compulsory the Australian government were morally bound to honour the scheme and were forced to bail it out.'
Where is your evidence to back this statement?
Interesting take on Labours cluster yesterday … it’s all nationals fault!
Who is really calling the shots in the Ardern administration?
Bradbury argues, that the Ardern administration was bent to the will of the bankers and financiers.
If this really is an example of the government caving in corporate power, as Bradbury argues.
Then no wonder this government can make no real progress on climate change or social justice.
Instead of the banks reining in the government. The government need to be reining in the banks.
400$ per every person in nz PROFIT
It was just a bit sloppy.
National and the media will jump on any new tax, so the government needs to be better prepared to front foot these types of announcements in the future.
So will any one remember the actions of Tuesday and how Labour attempted to siphon off $100 BILLION out of KiwiSaver accounts ?? Now we hear the PM trying to defend the intregitiy of KiwiSaver as it was. Where were you on Tuesday and early when this was being discussed and then passed to be included in the introduced bill ??
”And besides they affect the eventual amount paid out by Kiwisaver funds, not most people’s incomes for years to come.“ 🤢🤬are you for real with this comment ?? You maybe wealthy enough not to be concerned but most of us are not as fortunate as yourself and the labour MP’s that $20k will make a difference in my and many others retirement. Leave your ivory office and see what is happening outside, that to me is the problem with this Out Of Touch government they don’t know what it is like in the real world where $20,000 is a shit load of $$ for most of us.
How about you "Leave your office and see what is happening outside".
Instead of mindlessly repeating right wing propaganda
When over half the Kiwisaver balances are less than 20k, how the hell are most people going to lose 20k?
Meanwhile most Kiwisaver balances are less than half of what they could of been, due to the last National Governments meddling.
As i read it you are following left wing, this government and its BLIND supporters will do anything to deflect and spin.
"When over half the Kiwisaver balances are less than 20k, how the hell are most people going to lose 20k?" well that comment just tells me that your financial literacy is lacking, and you should reframe from commenting on matters that display lack of knowledge or ignorance !!!. The $20k cost is the total cost that the govt was stealing, not based on todays kiwisaver balances.
There were 4 options made available for the govt to choose, 1 was eliminate GST on those providers that are charging cost $20m p.a BUT the govt went for the screw Kiwisavers and attempt to grab from their investments.
Someone who cannot count, like most right wingers, commenting on financial literacy. LOL.
Your exaggeration would only hold some water if Labour were to be and stay in Government until 2070. That said, I admire your optimism, but I do wonder if it might be a little misplaced. Keep up the
nonsensical commentsgood work!
Horus doltus is suffering from a pathological hatred of all things Labour.
So tell me then why did Robertson on the 6:00 news deflect when asked about A labour promise to reinstate $1,000 kick start ?? "One day I would HOPE to bring it back" And you support this government and its broken promises .. But it has to stack up. " How you can look in a mirror with your blind obedience to all and anything this government represents. Perhaps I have standards that many here don't have in pointing out that the Labour party should start keeping their election promises. "2015 Robertson PROMISED to bring it back". And how is your support to Labour in accepting what Robertson said ?? I know that Labour can lie openly and you support that ?? “But in a live chat on Stuff.co.nz on Friday afternoon, Robertson was asked directly: “Would Labour reinstate the $1000 kickstarter for KiwiSaver?”
Robertson responded: “Yep”.
Cannot trust a senior Labour Minister . Now try and spin that ????
Good attempt at deflection from your own mathematical incompetence.
An aspiring National/ACT MP?
Gordon Campbell on Labour’s self-inflicted Kiwisaver disaster – werewolf
"Footnote Three: The final irony is that the Aussie-owned banks dutifully pay the GST component on fees for their retirement savings provision at home in Australia. Also – apparently – they do not pass this on to Aussie consumers, given that the fees they’re charging here for equivalent services are higher than they are in Australia. (Why did the modelling assume the fees would be passed on here?) In other words, this whole issue provides more evidence that the Aussie-owned banks are ripping us off, blind.
Parker knows it. As he said ruefully yesterday:
Parker said the Government had expected funds would absorb much of the increase through lower profits, although IRD had advised otherwise. Asked if all the $225m in extra taxes would be passed on to KiwiSavers, he said: “It depends what would be the competitive response to New Zealand fees. New Zealand fees are already higher than they are in Australia. Even though in Australia, they already have the GST treatment that we were proposing.”
We lost. The Aussies-owned banks – with the National Party serving as their tag team accomplice – have once again found us to be pretty easy pickings.""
Interesting link KJT, thanks for sharing it.
Gordon Campbell makes some interesting observations.
Labour was reluctant to lead from the front and control the messaging involved?
What's that all about?
Gordon Campbell notes that David Parker is normally an astute political operator
Why did Parker drop the ball on this one?
Is it because what we are talking about here is in essence a Financial Transaction Tax? An issue that Labour have been chary of and steered all conversation away from?
Trade Unionist Jill Ovens doesn't beat around the bush. And says what Parker should have.
No wonder why Aussie banks give their puppet rulers of NZ, National party politicians, directorships when they leave politics.
This illustrates exactly who rules New Zealand.
Bankers and their patsy politicians and media.
Herodotus… Reasonable attitudes to changing circumstances not blind faith leads us to accept that with the inspection of services showing huge gaps after the election, coupled with the handbrake of Winston, followed by the Pandemic……
But you know that… you are just deflecting big time.
It was totally predictable that the Nats would jump on this – so how did the strategy/comms people in Labour let this happen?
Actually not predictable, what Nats and media will lie about next.
And what if you had half brain and some knowledge of history?
If Muldoon hadn't stymied the Rowling Scheme to enrich the money men we would have had a fully funded superannuation scheme with no taxes and wouldn't be shoving the counties wealth down the throats of the large Aussie banks who no doubt fueled Dome Head's cynical bullshit rush to the brain.
[typo in e-mail address fixed again]
The thing here was that some (larger, offshore based) funds are able to avoid paying GST on some of their costs – my guess is that they are offshoring some of their costs (GST doesn't attach to offshore transactions) – this legislation was intended to level the playing field for all KS funds.
So – we now know that there are some funds that are structuring their businesses to avoid paying taxes – probably now is a good time to boycott companies that are avoiding taxes in this way – choosing NZ based funds that are investing more in our local economy is probably a good thing anyway.
Dear Paul, after the Government dropped some Kiwi Saver funds from the default scheme…. Kiwis moved more than 3.2billion from ANZ BNZ et al Australian so called NZ banks.. We are not silly.
Dear Discovery Inc,
AM cohost Ryan Bridge stated on Am, Thursday 1st September 2022 that the NZ Government Cabinet made the decision to introduce a tax on your retirement savings.
Clearly that is a false statement because Cabinet did not agree to introduce a tax on any New Zealander's retirement savings.
Instead Cabinet agreed to propose a law change that would "even up the playing field" so that all Fund Management Providers would play GST on their service fees.
An increase to service fees is not a tax on retirement savings or contributions.
Instead a Fund Management company may choose NOT to pass on the costs so it is wrong for Ryan Bridge to refer to a tax on retirement savings.
It's important Discovery Inc do not conflate an optional fee increase by Fund Managers with a Cabinet decision to introduce a tax on retirement savings but this is exactly what Mr Ryan Bridge has done on AM today.
Clear distinctions exist between a tax on KiwiSaver contributions ( retirement savings ) versus – applying GST to the service fees of Managed Fund companies.
Such distinctions were made in NZ Parliament by the Prime Minister and by other media on Wednesday 31 August 2022, the day before Ryan Bridge chose to make these misleading and false statements.
Therefore the remarks made by Ryan Bridge on AM are likely to be deliberate misinformation ( disinformation ) because there was an abundance of awareness in the public domain in the 24 hours before Mr Bridge made his misleading statements.
The Broadcasting standard breached is accuracy.
This was clearly misinformation and probably disinformation.
I object to Ryan Bridge making false misleading claims on AM that the NZ Government Cabinet introduced a tax on the retirement savings of New Zealanders and I wish to take this matter to the BSA if it is not addressed satisfactorily by Discovery Inc in the first instance.
Time a few reporters got into the habit of getting the facts before going troppo.
I hope you do take this complaint to the BSA. It is a clear breach of the standards and letting it pass without an investigation is tantamount to normalising mis and disinformation. The outcome of the complaint is less important than the publicity created by taking the matter to the BSA in the first instance.
Look on the bright side. Yesterday Gaurav Sharma stood up and asked a question to Jacinda in Parliament and absolutely nobody noticed or cared. Not news any more.
I admit that releasing and then rejecting a tax proposal in 24 hours was a surprisingly bold ploy to knock Sharma out of the headlines, but it certainly worked.
One could argue that the furore over GST on Kiwisaver fund fees would not have been an issue if the original NZ Super scheme of the Third Labour Government had been allowed to continue. There would have been no private "fund managers" as the scheme was entirely government run and the money would have been used to fund infrastructure projects in NZ, not going into foreign-owned mega banks.
But oh no!
That was communism!
Once again we should remember that it was National that dumped a savings scheme that was ahead of its time and substituted it with a politically expedient but ultimately unaffordable scheme. National once again unable to look past the next electoral cycle.
And if National was truly the "low tax party" wouldn't it be pledging to dump RWT on kid's bank accounts?
Not a murmur on that one.
So when National starts trying to portray itself as the defender of the ordinary person in the street they speak with forked tongue.
John Key's original description of Kiwisaver being "a glorified Christmas Club" is funny considering that is exactly what National tried to turn it into.