Govt botched a golden opportunity
GORDON CAMPBELL
Clearly, the Government didn’t expect that a technical fix to something called the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Bill had the potential to blow up in its face. Yet from the outset, the Government had not broadcast its plans to make every KiwiSaver provider pay GST on the fees they charge for their financial services.
The Government should have known better. The proposed change was significant. Supposedly, it would have delivered an extra $225 million annually in GST from 2026 onwards and – if the GST fee component was passed on entirely to the public – the modelling indicated this might reduce savings by billions of dollars over the next 50 years.
Yet bizarrely, the Government had made no mention at all of its moves on KiwiSaver fees in its initial press release on the bill. That omission proved to be a tactical disaster. In effect, the
OPINION:
government handed the initial messaging about a politically explosive issue on a plate to the Aussie-owned banks that own the big KiwiSaver providers being targeted by the change. For its part, the National Party was able to gleefully frame the issue as a secretive tax raid on the public’s KiwiSaver accounts.
It wasn’t. Yet by not frontfooting its plans, the Government forced itself into playing catch-up and into saying ‘‘hang on, that’s not right’’, and ‘‘no, that’s not what wemeant’’. Briefly, Revenue Minister David Parker tried to defend the action as an attempt to make the Aussieowned banks play by the same rules as the small local
KiwiSaver providers, before giving up the battle entirely.
Within the space of 24 hours, the Government had botched a golden opportunity to portray the mega-profitable Aussie-owned banks as freeloaders, at the expense of small Kiwi firms.
In an excess of political cleverness, Labour had trusted that the small Kiwi providers would fight the battle against the big banks on its behalf. When they declined to do so, this left the Government high and dry. Ultimately, Labour managed to confirm the negative stereotypes about tax grabs by Big Government, while reviving ancient fears about its own managerial competence.
Briefly, Parker tried to blame the IRD for the quality of its advice, the media for conveying National’s attempts at panicking the public, and the small providers for not coming to the Government’s rescue. However, the basic miscalculation had been political. The blame belonged squarely with Parker,
Finance Minister Grant Robertson, and with their highly paid teams of political advisers.
Parker – normally an astute political operator – had presumably been distracted by his finessing of the changes to the Resource Management Act.
The fiasco has the potential to make a risk-averse administration even more skittish than it is already. In the light of this episode, what other initiative might suddenly blow up in the Government’s face?
Ironically, the same big banks reportedly pay GST on their retirement offerings in Australia without a murmur, and do so without passing this normal business expense on to their customers.
The backdown here now means that New Zealanders will continue to have to live with, and pay for, the reported GST inconsistencies on KiwiSaver fees.