Revenue Minister, David Parker has today announced the Government will not proceed with a proposal to standardise the application of GST to fees and services of managed fund providers, citing opposition to the plan by smaller providers.
The proposal would have forced managed funds and KiwiSaver providers to pay a flat 15% GST on fees.
Inland Revenue and Treasury advised the change be made to remove a loophole used by large financial companies, bringing them in line with how others in New Zealand pay GST.
The move would also have brought New Zealand fund managers more into line with the approach in Australia, Minister Parker said.
“Smaller fund management providers who were doing the right thing were at a competitive disadvantage compared to others, mostly larger providers, who were using the loophole,” he said.
“Generally it’s bad to have these sorts of distortions in the tax system as bigger players can exploit them, but if the sector as a whole is happy to operate with the status quo then we will leave them in place.
“During extensive consultation views were mixed on the merits of the technical change. The large companies profiting from the current set-up were opposed to the change, while smaller providers were more supportive of the change. This was because these providers who did charge the full GST on their service fees faced unfair competition from the bigger players.
“However since the announcement it has become clear that smaller providers now oppose it too.”
Mr Parker said it was important to clear up some “inaccurate representation” of the proposal.
“New Zealanders’ KiwiSaver contributions and balances were not going to be taxed under this legislation,” he clarified.
“However it is clear from the reaction to this proposal that it has caused concern for Kiwis.
“I am proud of Labour’s role in introducing KiwiSaver and its role in securing the future of New Zealanders. We will never do anything to undermine it.
“Because of the importance of public confidence in KiwiSaver and the need to ensure nothing unduly affects New Zealanders’ willingness to save, the Government will not to go ahead with the proposal contained in the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Bill.”