The National Party's announced intention to introduce tax incentives for retirement saving is nothing more than middle
class welfare, according to Michael Littlewood, a commentator on retirement income policies.
The international evidence is that tax incentives don’t work, are expensive to introduce and administer, favour the rich
at the expense of the poor and don’t improve saving levels.
In fact, said Mr Littlewood, it’s difficult to imagine any objective measure as the basis for thinking that a return to
the failed policies of the past might be part of the way forward. Mr Littlewood challenged National to produce evidence
that incentives might work on any measure it cares to name.
“I understand why National wants them” said Mr Littlewood “it’s the same reason that Michael Cullen was looking
seriously at paying people to save. They both want to win the next election. Bribing taxpayers with their own money has
worked in the past and National is hoping to repeat the medicine we have been given in the past. However, it’s got
nothing to do with the ageing population and the increasing cost of retirement incomes over the next 50 years.”
The Treasury recently poured cold water on Michael Cullen’s own proposals for a capped, up-front incentive of the kind
that Bill English described today. The cost is large, the effects are small to negligible and the progress towards
consensus on retirement income policies would be retrograde.
Michael Littlewood said that we can expect the retirement savings industry to come out in support of National’s
proposal. The sellers of saving products are, of course, deeply self-interested in tax incentives. New Zealand will go
back to the days when the life insurance industry raced around before 31 March each year selling expensive,
commission-laden products because of the tax breaks. That’s what happens in other countries and it’s what will happen
here.
No government can offer a tax incentive without either reducing spending elsewhere or increasing tax. Michael Littlewood
said that he will be interested to see who will be paying more tax or which government programme will be cut back to pay
for National’s new initiative.
For further information, contact
Michael Littlewood Ph +64 9 375 9800
Planit Services Limited Fax +64 9 375 9801
Box 8811 DDI +64 9 375 9802
Symonds Street
Auckland 1035