Labour has attracted a flurry of angry headlines over its just-revealed plans to charge GST on fees paid on KiwiSaver accounts, which could net the government millions a year in additional revenue. Associate Finance Minister Megan Woods told Newstalk ZB's Mike Hosking Breakfast the current legal situation relating to GST on Kiwi Saver fees is a mess that needs to be addressed ... "This is about correcting an anomaly that really has allowed some .. very large managed funds to get away with [paying no GST on fees]".
In this comedy that has become Kiwi economic policy, National couldn't refrain from piling in to take advantage of this opportunity to position the party's brand as being one of "low taxation". According to National Party Leader Chris Luxon, National has started a petition on its website to stop the "KiwiSaver tax". Luxon told Radio NZ that the party would not leave the GST levy on KiwiSaver fees in place if they came into Government. Well of course he wouldn't since it also means more money for National's banking mates.
So what's a good policy on Kiwi Saver that avoids the trouble that has been stirred up by Labour's plans and the shallow response of National? Kiwi Saver fees should be close to zero - yes zero - and the appalling managed funds that have sought to exploit Kiwis by extracting fee income driven out. Research has proved that few managed funds beat the market over long periods of time (i.e., earn "alpha") and, to the extent they do, the beneficiaries are the fund owners & managers, not the savers & investors. After expenses, managed funds yield lower-than-market returns.
Yes, those of us whose savings are in Kiwi Saver should simply only be given a choice of low cost diversified index funds in which to invest. If you want to pick winners or have others try for you, go do it outside the subsidized Kiwi Saver system. With this solution, Kiwis would be able to save more, get better returns and have no money taken away from their Kiwi Saver accounts due to service fees. Furthermore, this GST controversy would disappear.
Instead, Labour's policy has made the scandal of high Kiwi Saver fees worse, whilst National has highlighted how it has little interest in designing a GST / tax system based on principles whilst simultaneously exposing its dubious links with big financial businesses by lobbying for them to be given tax advantages.