Changes to KiwiSaver and portfolio investment entity (PIE) rules remain on the table despite the government’s rejection of a broad capital gains tax (CGT) today.
In its detailed response to the 90-odd Tax Working Group (TWG) proposals released this afternoon, the government has slated the KiwiSaver and PIE reforms for further consideration.
“This [KiwiSaver] work would sit alongside the Government’s broader work on KiwiSaver, which includes the default provider review and a consideration of options to increase KiwiSaver uptake and contributions,” the TWG response paper says.
The TWG final report recommended lowering the prescribed investor rate (PIR) by 5 per cent for KiwiSaver members currently taxed at 10.5 per cent and 17.5 per cent.
Under the proposal, those lower-income members would receive the same tax discount as KiwiSavers on the top marginal rate of 33 per cent.
The top PIE rate is 28 per cent. However, as reported here, the move would discriminate against KiwiSaver members on a 30 per cent marginal rate who would receive only a 2 per cent tax savings.
Meanwhile, the TWG’s vague plan to “simplify the determination of PIE rates” was up for further consideration by the government’s tax policy work programme.
The government also left the door slightly ajar for a further TWG proposal to exempt the NZ Superannuation Fund (NZS) from tax.
In its response, the government says the NZS exemption plan could be added to the tax work programme but notes “the significant economic and fiscal implications associated with this proposal”.
The Finance and Expenditure Committee expressed “scepticism” about the NZS tax cut in its annual review of the $41 billion fund published last week.
Prime Minister Jacinda Ardern scuppered the CGT proposal this afternoon after failing to garner consensus from the government’s coalition partners – the NZ First Party and the Greens. Ardern also ruled out resurrecting the CGT under her watch.
She said it proved too difficult to broker a compromise deal that neither “watered down” the CGT too much or sacrificed the “simplicity of the [tax] system” in NZ.