Tax grab to tax gone in 22 hours

The plan to add GST to Kiwisaver and managed fund fees was swiftly brought down in under 23 hours. Was it actually a bad plan or was it badly landed?

Mōrena and welcome to The Bulletin for Thursday, September 1, by Anna Rawhiti-Connell. Presented in partnership with Z Energy.

In today’s edition: firefighters agree to mediation; Labour likely to kill Green party donation cap bill; arts sector calls for overhaul of funding system; but first, the takedown of a tax plan.

David Parker confirmed the government would not proceed with the GST changes yesterday afternoon (Photo: RNZ / Angus Dreaver)

A backdown at breakneck speed

The government's proposed plan to levy GST on Kiwisaver and managed funds was ditched yesterday afternoon. I am kicking myself for squandering the headline “tax on, tax off” last month. I think it’s worth examining how it went from little-known to cancelled very fast, even by today’s social media standards. Quick timeline: the Speaker took the chair at 2pm on Tuesday where the bill in question was set down for its first reading. Stuff’s Rob Stock broke the story at 3.35pm that afternoon, it blew up very quickly with many detracting opinions ready to go. “Tax Grab” led the frontpage of the Herald yesterday morning. The opposition leader called it a retirement tax on Newshub’s AM and at 1.18pm yesterday I saw a screengrab of the statement that said the government wasn't proceeding with the plan.

Discussion document on the proposal first issued in February 2020

The NBR’s Hamish McNicol (paywalled) spoke to a couple of tax experts in the wake of the cancellation. PwC’s Geof Nightingale told him that a discussion document on the proposal had first been issued in February 2020. As a tax partner at a large firm, Nightingale is of course correct. Here it is. As a crack compiler of news, I deployed the PDF search tool to find the relevant references. In short there was consultation on the issue, identification of unfair competitive advantage with the status quo by favouring certain types of managed funds and business structures, a range of law change options and some handy questions for submitters. 

A chance to clean up “a mess” lost?

Nightingale also said the application of GST to fund management services was “a mess” and needed sorting. “There was complexity for the IRD to administer and complexity for people to comply.” That cost of compliance is noted in the discussion document as something that “can also add costs to managed funds products”. Nightingale also said that it would have been unlikely for pricing for Kiwisaver members to have been impacted by 15%. EY partner Aaron Quintal said there was no stronger argument to exempt Kiwisaver fees than there was for exempting GST on fresh fruit. Not all tax specialists are alike however. Deloitte tax specialist Allan Bullot told RNZ’s Checkpoint Kiwisaver members would save a lot less money as a result of the proposed tax.

An unforced handling error

A mere three hours before the u-turn, the Gone by Lunchtime team discussed the plan. Ben Thomas thought it was a bit mischievous to include the $103b tax take figure in the Herald’s headline as that’s over a 70-year time frame. Toby Manhire asked how is it, with the size of “the communications industrial complex and the government”, that the government seems to be playing into the hands of an opposition –“looking like this has been done on the hoof”. Stuff’s Tom Pullar-Strecker has written a fairly cool-headed assessment of what happened. Finally, BusinessDesk’s Pattrick Smellie lands a (paywalled) deathblow, writing: “The prime minister, and the finance and the revenue ministers must have been asleep at the wheel… There can be no other explanation for one of the most remarkable political blunders of recent times and for its almost instant demise.”

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Firefighters call off further strikes

After two strikes over the last fortnight, firefighters have called off further strikes and agreed to meditation with Fire and Emergency (FENZ). Minister of internal affairs Jan Tinetti said she had brought the two parties, FENZ and the New Zealand Professional Firefighters Union (NZPFU), together to discuss a way forward in the collective bargaining dispute. FENZ will also withdraw its request that bargaining be facilitated by the Employment Relations Authority. Probably a sensible and necessary intervention based on the amount of tooting in support of NZPFU members I heard while driving through Auckland last Friday. There will be no further communication from either party until at least September 30. 

Labour likely to vote down Green MP’s electoral law reform bill

A Member's bill from Green MP Golriz Ghahraman that seeks to put a cap on the amount of money people can donate to a political party is up for debate this morning. As the Herald’s Thomas Coughlan reports, Labour are unlikely to support it and likely to vote it down. Labour has been running its own electoral law reform programme and noted that they will consider implementing many of the changes Ghahraman has proposed. Ghahraman’s bill also included allowing more prisoners to vote, and lowering the voting age to 16.

In this week’s edition of Stocktake, The Spinoff’s business newsletter, we profiled social enterprise Will & Able, learned what makes the CEO of Electric Kiwi tick, explored the boom in meat made of mushrooms and fermented bio-waste, and the adoption of hydrogen by a New Zealand transport company. For insight, inspiration and news you can use if you’re in business, sign up to Stocktake. A new edition, fresh, every Tuesday.

Arts sector wants an arts funding overhaul

Newsroom’s Jean Bell has done a great job of picking up arts stories over the last year. Structural issues within the arts and creative sector issues are a bit neglected in the media which sometimes strikes me as odd as the sector contributes $10.8b to New Zealand’s GDP. Bell, a business reporter, looks at the results of a new survey of the arts sector. Asked what changes they would advocate for if they were getting coffee with the minister for arts, culture, and heritage (great question), there’s a strong desire to see the arts funding model in New Zealand changed. Arts funding is also the subject of the latest episode of The Fold. Duncan Grieve speaks to Elise Sterback, former executive director of The Basement in Auckland, who is currently partway through a PhD on the subject of arts funding.

Click and collect

• Midwives say legal action against the Ministry of Health is a last resort after seven years of broken promises.

• Founders and hosts of far-right media outlet Counterspin had to be forcibly moved into the dock in court yesterday. 

• Sir Tim Shadbolt feels his time as Invercargill mayor is probably coming to an end.

• 2022 APRA Silver Scroll Award | Kaitito Kaiaka finalists named.

• Wellington mayor Andy Foster distances himself from fellow contender, who claimed the Covid vaccine was "very unsafe".

Got some feedback about The Bulletin, or anything in the news? Get in touch with me at thebulletin@thespinoff.co.nz.

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