Under the proposals managed funds would pay taxes under a "fair dividend rate" based on 5% of the opening rate value, whether or not the investment made a profit, while direct investors would pay a maximum of 5% but only to the extent that the investment was profitable.
Hildyard believes that the proposed changes restore a tax-created disparity and may disadvantage managed-fund investors, and could compromise the objectives of KiwiSaver.
"The 5% rate is too high and will have other unintended consequences if it is not addressed," he says.
Hildyard remains positive about KiwiSaver and says for it to get off to a good start there needs to be equity between managed funds and direct investments.
"KiwiSaver is a managed fund, and as such it should provide investors with all the benefits that managed funds offer without having to jump an additional tax hurdle compared with direct investment."
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