THE HAPS

Parliament goes into a much needed recess. ACT uncovers the Government is asleep at the wheel when it comes to ram raids.  Free Press salutes Gorbachev, a politician with the rare double talent of winning power and not abusing it.

OH DEAR 

The mighty AB’s are back on track for at least one week, but our country faces other challenges. Politicians take a third to a half of what we produce and we’ve learned to be grateful if they don’t make things worse with it.

The GST saga of the past week shows why we ask God to defend New Zealand. If the Labour Government, media, and National Party can’t work through an issue this simple without conniptions, bigger problems will be impossible to solve.

The actual policy made sense. It was not a tax on Kiwisaver contributions or balances. It was not a new tax, we’ve had GST since 1986. The only change was applying it to Kiwisaver fund managers. GST applies to the services rendered by plumbers and hairdressers, so why should fund managers be exempt, under a fair system?

The real problem we face is that Government spends too much money. $127 billion this year, up from ‘only’ $87 billion three years ago. Every one of those dollars has to be collected in taxes today, or borrowed and taxed off you and your children tomorrow.

Of course fund managers and hairdressers should be taxed equally. Doing so might collect an additional $225 million in 2026, according to Inland Revenue. The real problem is that the Government is currently spending about 500 times that amount. That’s making New Zealanders a lot poorer than any tax on Kiwisaver administration.

Nonetheless, due to a series of bad actions, New Zealand got nowhere last week. We still have a Government wasting money, an unfair wrinkle in GST, and even less confidence that our democracy can solve real problems.

Bad actor number one is the Labour Government. As Steven Joyce has pointed out in his *Herald* column, the Beehive is a giant wedding cake of bureaucracy. Each layer is a floor of Ministers and bureaucrats poring over policy announcements, checking them for political sensitivity.

It’s possible that nobody in the Labour Cabinet, or their burgeoning communications army, saw that taxing fees on managing people’s retirement savings might be a political issue. A much more likely scenario is that they saw it, but New Zealand’s most open and transparent Government thought they’d get away with hiding it.

Perhaps they thought the press wouldn’t care, or that the Prime Minister could explain it away by cocking her head to one side and smiling down the camera.

Bad actor number two is the press, who breathlessly reported that the Government was going to tax $103 billion from Kiwisaver. They deserve the credit for finding this information before any opposition politician, so take a bow, but the subsequent reporting was sensationalised beyond the edge of reason.

Yes, the Regulatory Impact Statement on the legislation says if GST was collected on Kiwisaver management fees, then Kiwisaver balances might be reduced by $103 billion, or 4.5 per cent. Here’s the important detail: that figure is in 2070, and is based on Kiwisaver balances being 2.2 trillion instead of 2.3 trillion that year. Last year they were $82 billion in total.

It’s not obvious how the $103 billion figure was calculated, but it’s not worth the paper it’s written on. Who knows what the sharemarket will be worth next year? Who can predict where it will be to within a 4.5 per cent margin of error by 2070?

Economist Robert MacCulloch points out that, if a 15 per cent tax on Kiwisaver fees will cost $103 billion, then how much are the fees? By the same logic, Kiwisaver fees must be costing New Zealanders about six times the GST paid, over half a trillion dollars. Nobody’s writing up that headline because it’s obviously misleading.

What’s more, if the Government taking $225 million of GST on Kiwisaver fees will make us $103 billion poorer, how much poorer will Labour’s extra $40 billion a year of Government spending make New Zealanders by 2070? *Free Press* calculates $18.3 trillion! It’s all silly stuff.

Enter the National Party, who could not have been more excited had they tried. It was Labour’s ‘day of shame,’ they screamed at the top of their lungs. The problem is a party on the right should be in favour of sensible changes to make taxes simpler and fairer. So long as they also reduce spending, and tax less overall, people are better off.

Last year, three million people paid about $650 million in Kiwisaver management fees. The average is about $220 each, a GST on that would be $33. ACT’s fully costed alternative budget, would leave someone on $70k with one child $2,303 better off by cutting spending and taxes. If you were worried about the $33 on your Kiwisaver fees, you could up your contributions and still be far better off now and in retirement under ACT’s plan.

In case you were wondering, ACT did say these things last week but they were scarcely reported amongst the pile on.

By the end of the week, New Zealand still had a small problem with GST being more complicated than it needs to be, a big problem with Government spending far too much, and a massive problem that New Zealand seems incapable of having a sensible conversation about what was a minor issue in the scheme of things.

If that’s how New Zealand’s mainstream parties and media handle an issue of this size, imagine if they had to problem solve their way through crime, the China relationship, productivity, declining educational standards, building infrastructure on time, and finding a workable vision of the Treaty. Lucky we have ACT.

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