The government won't adopt a capital gains tax that would leave KiwiSavers worse off, the head of the Tax Working Group says.
Sir Michael Cullen. Photo: RNZ / Rebekah Parsons-King
Tax Working Group chairperson Sir Michael Cullen said claims that KiwiSavers' retirement funds would be reduced were part of a "hysterical" response to the report.
The working group in February recommended a broad extension of taxing capital gains and changes to personal income tax thresholds, retirement savings and charities. A capital gains tax (CGT) is a tax on the profit from the sale of an asset.
National says the proposed capital gains tax would reduce retirement savings for an average earner's KiwiSaver by $64,000 over the course of a 45-year working life, and by more for anyone making higher than the 3 percent minimum contributions.
National Party leader Simon Bridges said the party's figures had been checked out by a number of senior KiwiSaver providers and if anything it had been conservative on the numbers. "Most New Zealanders would be caught by the tax because almost three million of us have KiwiSaver and some will also be hit through owning a family bach or a lifestyle block," he said.
Sir Michael told Morning Report he was sure the government would not go into the final decision process where KiwiSavers were worse off as a result of the package.
"Mr Bridges hasn't really told us how he arrived at those numbers, and they are very very different from what appears on the face of the recommendations of the working group in relation to low- and middle-income workers.
"I'm quite sure the government would not be going into a final decision process where KiwiSavers are worse off" - Sir Michael Cullen
"Bluntly I'd be much more likely to believe Sam Stubbs, the people he'd be using to do the costings on a KiwiSaver scheme than Mr Bridges because this is all part of this rather hysterical, destroy-New-Zealand-way-of-life reaction to the report."
"There's a fundamental equity issue here, which is the issue that many of the critics - not all - are ignoring, but there's a long way to go on the details and certainly a lot of internal discussion in the government that I'm not privy to."
Simplicity KiwiSaver fund manager Sam Stubbs has said his fund's figures showed most people would benefit because the $64,000 would be offset by other changes proposed by the working group, including the impact on the personal tax rate, employer contribution tax rate and member tax credit.
He said those on about $40,000 over their life would be about $100,000 better off. Some people would stand to lose under the changes; those earning about $100,000 would be about $13,000 worse off.
Sir Michael said the government was considering the recommendations and any changes it made such as on how Australasian shares are treated would "completely change those numbers if the treatment was more concessionary."
The working group's recommendation to tax Australian and New Zealand shares has been criticised by some in the savings industry, but Sir Michael said the government had not decided whether it would adopt those proposals.
Under the current regime Australasian shares are not taxed, while offshore shares are taxed according to the 5 percent fair dividend rate, he said.
"It would not at all surprise me if there were some some changes to these proposals around Australasian shares."