New Zealand government has shelved its proposal to impose the goods and services tax (GST) on KiwiSaver, New Zealand’s pension fund, less than 24 hours after it was put forward, following strong backlash from the public, the opposition party, and the fund sector.
Introduced to parliament on Tuesday evening, the tax was intended to “even the playing field” by standardising the tax on fees that are paid to KiwiSaver providers, which are not subject to GST. Currently, New Zealand’s GST stands at 15 percent.
Revenue Minister David Parker said the Treasury and Inland Revenue had advised the change to “remove a loophole” used by large financial companies.
The tax proposal, estimated to bring in a potential $225 million (US$138 million) a year in tax from 2026, would also have brought New Zealand fund managers more in line with the approach in Australia, Parker said.
Government Surprised at Small Fund Manager BacklashPrime Minister Jacinda Ardern dismissed the idea that the proposal was withdrawn due to public backlash, saying it was due to feedback from the sector.
Parker said they originally expected small fund managers to be more supportive of the change.
“However, since the announcement, it has become clear that smaller providers now oppose it too,” he said.
The revenue minister said the government scrapped the tax proposal because it was important to uphold public confidence in KiwiSaver and ensure nothing affected New Zealanders’ willingness to save.
“I am proud of Labour’s role in introducing KiwiSaver and its role in securing the future of New Zealanders. We will never do anything to undermine it,” Parker said.
National Party Leader Christopher Luxon welcomed the government’s “U-turn” on what he dubbed the “retirement tax.”