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Labour is unconvinced (as reported earlier by Good Returns) that the present tax-tax-exempt (TTE) structure is the best long-term option for the economy.
Cullen told the Association of Superannuation Funds of New Zealand yesterday that the question would be included as part of a general review of the taxation system.
"I am not in the least an enthusiast for direct tax incentives. Nevertheless we have ended up with a regime which is inconsistent with those operating in what might increasingly be seen as New Zealand's wider labour market - countries such as Australia, USA, UK and Canada.
"Our exemption on pay-out is not, in effect, recognised in other tax jurisdictions, and the taxation of the earnings in funds distorts savings decisions compared with non-taxed options such as real estate.
"The TTE regime also represents a very large inter-generational tax grab at the expense of future generations. As such, it is almost the reverse of what would be suggested as the optimal position by the nature of future demographic changes.
"Yet again, we seem determined to pay less tax now with the near certainty this will mean higher tax rates in the future. " Dr Cullen said.
But he said any change would have to be handled carefully as the fiscal impact if all super funds were moved rapidly out of the present TTE framework would be very serious in the short to medium term.
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