A U-turn by New Zealand First in Parliament yesterday has torpedoed the Government's plans to introduce a tax credit scheme aimed at helping low and middle income earning New Zealanders who save.
A U-turn by New Zealand First in Parliament yesterday has torpedoed the Government's plans to introduce a tax credit scheme aimed at helping low and middle income earning New Zealanders who save.
The proposed legislation, which stems from the Taxation of Life Insurance and Superannuation (TOLIS) taskforce, enabled people on personal tax rates of less than 33 per cent to have their savings taxed at their own tax rate, rather than the company rate.
Currently many New Zealanders are being over-taxed as all super funds and life schemes pay tax at the company rate of 33 per cent.
The legislation, contained in the Taxation (Tax Credit, Trading Stock and Other Remedial Matters) Bill had been stalled on Parliament's order paper as ACT, Labour and the Alliance all opposed it.
It bumped the bill up the list after NZ First (as recently as last week) said it would support the legislation. However, the Government was forced to withdraw the bill when NZ First did a U-turn and unexpectedly withdrew its support.
The bill's demise has caused mixed reactions within the savings industry. The Investment Savings and Insurance Association (ISI) is "bitterly disappointed" that NZ First failed to support the legislation.
Others who have been vehemently opposed to the TOLIS proposals are delighted.
Their concerns centre on the cost and complexity of the tax credit scheme, plus they point out it would not be universally implemented by fund managers and life offices.
An irony of NZ First's withdrawal of support is that its leader Winston Peters was partly responsible for introducing the legislation when he was Treasurer in the Coalition government.
On withdrawing support he says: "On closer examination TOLIS reveals that nothing like 600,000 low and middle income savers will be positively affected by the legislation. Treasury research confirms that."
"As well, TOLIS was a poor option at best and a real impediment to sound future policy at worst."
While the ISI was supportive of the bill and is urging the Government "to find a way to introduce this legislation", it acknowledges it's a second best solution.
Peters says NZ First is preparing a long term Savings and Retirement Strategy "which taxes all retirement savings at a lower rate in the dollar and excludes any tax on capital gains".
A U-turn by New Zealand First in Parliament yesterday has torpedoed the Government's plans to introduce a tax credit scheme aimed at helping low and middle income earning New Zealanders who save.