The group released its interim report last week. A final report is due in February.
It has been asked to come up with guidance for the future of tax policy, including a model for taxing capital gains from profits on shares, property and businesses.
The group identified problems with the New Zealand retirement savings environment.
It said there were few incentives to save, particularly for lower-income people.
"KiwiSaver is targeted at providing greater proportionate benefits to those on lower incomes, but those on the bottom two marginal tax rate do not benefit from the fact that the top PIE rate is 28%."
Taxing interest income on a nominal basis could have significant impact on the accumulation of retirement savings, the group said in its report.
It said it considered a range of of options to help, including increasing the KiwiSaver member tax credit to $1 and changing the often-criticised structure of KiwiSaver taxation.
It said while there was a case to consider additional concessions for retirement saving, it needed to be targeted at those who needed it.
The group recommended removing the employer superannuation contribution tax for people earning up to $48,000 a year and a five percentage point reduction in the lower PIE rates for savings in KiwiSaver accounts.
Chair Michael Cullen said the treatment of retirement savings was interlinked with the treatment of capital income and more thought was needed on the choices and trade-offs in the group's final report.
The Tax Working Group did not make a clear recommendation on how capital gains should be taxed, instead proposing two scenarios:
One in which investors would pay tax on any gain from the sale of their assets at about the marginal income tax rate, and the second through which investors would pay a percentage of the value of their portfolio each year in tax.
Pathfinder chief executive John Berry said that could cause concern.
"Clearly PIE funds at the moment have an advantage for savers in that there is no tax on capital gains - which can be a problem for direct investors. It would disadvantage savers, including those in KiwiSaver, if those rules changed."
Newton Ross AFA Drew Hoffman had lobbied the group to consider changes to the KiwiSaver tax structure, to encourage more saving.
He said its proposals did not go far enough.
"While I feel that it is important that the Tax Working Group made some effort to improve KiwiSaver for lower-income KiwiSaver members, I think they missed an opportunity to eliminate the government’s expense of funding the member tax credit while at the same time providing powerful incentive for most members to increase KiwiSaver contributions.
"My suggestion was to drop the member tax credit, which according to the Tax Working Group saves $960 million per annum and replace it with a TEE scheme, that according to the Tax Working Group costs $210m. That is a savings of $750m per year from the current situation. No other combination of alternatives provides such a great savings to the government and still dramatically improves the attractiveness of KiwiSaver. Instead the Tax Working Group’s proposal will cost an additional $215m for the government to fund KiwiSaver."
He said incentives to get people putting aside more than 3% of their income would help to offset concerns about the future affordability of NZ Super.
| « Pathfinder launches vegan fund offer | Mann on a mission to diversify financial advice » |
Special Offers
No comments yet
Sign In to add your comment
© Copyright 1997-2024 Tarawera Publishing Ltd. All Rights Reserved