KiwiSaver a 3-4.5 billion dollar tax cut

Media statement Tuesday, July 3rd, 2007

KiwiSaver a 3-4.5 billion dollar tax cut by any other name

Government will pump an estimated $3 to 4.5 billion a year into KiwiSaver members' accounts, which is effectively a tax cut reserved only for those who can afford to take it up.

The chief executive of the Northern Employers & Manufacturers Association Alasdair Thompson says taxpayers who cannot afford to save in the scheme, and those ineligible like those 65 or older, will be contributing towards its costs.

"Anyone not joining KiwiSaver will, in effect, turn down a tax cut," Mr Thompson said.

"Strangely no commentators have bothered to cost the scheme's impact on Government's accounts.

"If only half the eligible workforce join KiwiSaver the cost will ultimately represent $3 to $4.5 billion charge each year against Government's accounts.

"On top of this are the costs of employing another 1200 public servants to administer the scheme, which runs into hundreds of millions of dollars.

"KiwiSaver could have been delivered far more efficiently. We said Dr Cullen could give personal tax cuts without inflation by directing tax cuts go into KiwiSaver (28/1/2007).

"Every income earner could have been automatically signed into the scheme.

"Instead the Government chose to launch an administration heavy money-go-round, and denied access to older people, those at work under 18 years and, in effect, low income people.

"The $1000 per person kick start will cost around $1.5 billion, and the Government's tax credit per person of $1040 will add another $1.5 billion or more, each year.

"The compulsory contribution from business could also reduce business taxable earnings on top of the cost of the tax rebates to businesses. These will add another $1.5 billion.

"No wonder so many fund providers are scrambling to register for KiwiSaver with all those fees at stake!

"The huge costs also raise other questions, such as what will happen to taxation adjustments in future.

"And how do the costs of KiwiSaver affect the National Party's position on tax cuts, and the ultimate reform of KiwiSaver, should they lead the next government."

ENDS

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