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Tax disincentives needed not tax incentives

Reaction to the Treasurer's comments on superannuation and tax incentives.

Thursday, June 11th 1998, 12:00AM

by Philip Macalister

Reaction to Winston Peters' comments on superannuation has been wide and varied. While it is unclear exactly what the Treasurer was proposing on Tuesday, it appears he was alluding to tax incentives, rather than a compulsory scheme as he personally supports.
Tax incentives have some support within the industry, however an intermediate step, and one which would met with a great deal of satisfaction, would be to remove the tax disincentives currently blocking savings.
"The Government must recognise that in order to encourage New Zealanders to change their savings habits, it must remove current tax biases," ANZ Funds Management general manager Anthony Quirk says.

"All I'm asking for is a level playing field," he says. "It has to be remembered that it is the investor who suffers from the lower after-tax returns that a non-neutral tax policy produces."
Spicers managing director Craig Dawson backs up that call, but says there is no need to introduce tax incentives to encourage savings.
Part of the enigma of the Peters' announcement was what triggered it. Since the referendum last year there has been a deathly silence on the superannuation issue and the Periodic Review Group report, which was released just prior to Christmas, has suffered the same fate as all the paper used to wrap presents.
Clearly the nation's current account deficit provided the platform to raise the savings issue.
Two other possible triggers for the event are the upcoming Investment Savings and Insurance Association's report on superannuation.
The association has commissioned actuary Jonathan Eriksen, economist Gareth Morgan and lawyer and former Labour MP David Caygill to produce a report which takes the PRG's efforts one step further. This report will be released next Thursday in Wellington.
On the political front Prime Minister Jenny Shipley has indicated superannuation is on the Government's agenda and changes need to be made.
Considering Peters and Shipley are at odds on how to tackle this issue, the Treasurer's announcement may have been politically motivated positioning.
While Peters' comments have created a great deal of discussion they don't appear to be Government policy.
Both Shipley and finance minister Bill Birch have said Peters' comments were personal comments, not those of the government.
Shipley says the coalition is not about to revisit the idea of compulsory savings and she has discounted suggestions the Government might restore tax breaks for savings.
« Peters places retirement savings on the agendaGet your tax questions answered online »

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