In years to come, the Great Kiwisaver Fees Fiasco is going to be taught in schools as a lesson in political mis-management. To put it mildly, the government did not front foot the significant change it was making to require all Kiwisaver providers to pay GST on the fees they charge for their financial services.

The change envisaged would have delivered it an annual $225 million in extra GST from 2026 onwards and – if the GST component was passed on entirely to the public – the modelling indicated that this would reduce their savings by billions over the next 50 years. Given the gender pay imbalances and the time taken off work for the care of children that gets baked into the ability to save for retirement, much of the burden would fall unequally upon women.

Bizarrely, the government made no mention at all of its GST Kiwisaver fee intentions within the initial press release on the Bill in question, and talked instead about the implications for fringe benefit tax and other matters. This omission proved to be a tactical disaster. By not being upfront, the government handed all the messaging about a contentious and politically explosive issue on a plate to (a) the Aussie banks that own the GST-dodging big providers who were the real target of the change and (b) to the National Party, which gleefully framed the issue as a secretive tax raid upon the public’s Kiwisaver accounts.

It wasn’t. Yet having fatally handicapped itself, the government was forced into trying to play catch up and say hang on, that’s not right, and no, that’s not what we meant. Revenue Minister David Parker briefly tried to defend the action as an attempt to make the Aussie-owned banks play by the same rules as the small local Kiwisaver providers, before giving up the battle entirely.

The opportunity cost

Within the space of 24 hours, the government had not only botched a golden opportunity to portray the Aussie owned banks as freeloaders at the expense of small Kiwi firms. It had also confirmed many of the stereotypes about tax grabs by centre left Big Government, and revived ancient fears about its own managerial competence.

The government would have taken many New Zealanders along with it if it had lead from the front and defined this as a means of making the profiteering Aussie banks play by the same rules as everyone else. In an excess of political cleverness, it trusted instead that the small Kiwi providers would fight that battle in public on its behalf – and when they declined to do so, this left the government high and dry.

In the wake of the backdown, 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. Much of the miscalculation though was political, and the blame belongs squarely with Parker, Finance Minister Grant Robertson, and their teams of political advisers.

The government knew beforehand that this issue would be controversial. The omission of any mention of the change from the initial press release was not accidental. The real problem was that – once again – Labour was reluctant to lead from the front and command and control the messaging involved.

Parker - normally an astute political operator – was presumably distracted on this occasion by his finessing of the changes to the Resource Management Act. There is a wider concern. This fiasco has the potential to make an already risk-averse government even more gun shy than it is already. If this fiasco can happen, who knows what other initiative might blow up in the government’s face?

Footnote One. Supposedly, the original aim was to level the playing field. To repeat: on the charging of GST on Kiwisaver, it seems we have been living for years with an exemption whereby small local Kiwisaver providers pay GST on their fees, and the big providers (owned in Australia) do not. The government’s backdown now means that New Zealand is going to perpetuate this inconsistency.

Hold on though. Supposedly, it was the blazing need for consistency in the GST regime that ruled out us having any GST exemption on fruit and vegetables? The world, allegedly, was in awe of our zealous consistency on this point.

Yet lo and behold, we have apparently been living with a major GST exemption for Aussie-owned banking corporates for years, to the tune of $225 million annually. So… In the name of a bogus need for consistency, the public must be denied a GST exemption on their fruit and vegetables, while the hugely profitable Aussie-owned banks must continue to enjoy a GST exemption, because it is too politically dangerous to make them comply with the rules that everyone else has to observe. If we can live with his exemption, why not with one on fruit and vegetables – which at least serves a social need.

Footnote Two: National isn’t a credible champion of the public interest on anything to do with Kiwisaver. As the Greens’ Julie Anne Genter pointed out yesterday:

It was National that introduced a new tax on employer contributions to KiwiSaver in 2011. It was National that halved the annual maximum Government contribution to KiwiSaver accounts from $1,042 to $521. It was National that removed the $1,000 kick-start people were provided when they opened a KiwiSaver account.

All of which, a smarter Labour government could have used to guard its flank against National, which would have been forced to defend the freeloading on GST by the rapacious Aussie-owned banks. But that’s only if Labour had chosen to promote this policy openly from the outset.

Footnote Three: The final irony is that the Aussie-owned banks dutifully pay the GST component on fees for their retirement savings provision at home in Australia. Also – apparently – they do not pass this on to Aussie consumers, given that the fees they’re charging here for equivalent services are higher than they are in Australia. (Why did the modelling assume the fees would be passed on here?) In other words, this whole issue provides more evidence that the Aussie-owned banks are ripping us off, blind.

Parker knows it. As he said ruefully yesterday:

Parker said the Government had expected funds would absorb much of the increase through lower profits, although IRD had advised otherwise. Asked if all the $225m in extra taxes would be passed on to KiwiSavers, he said: "It depends what would be the competitive response to New Zealand fees. New Zealand fees are already higher than they are in Australia. Even though in Australia, they already have the GST treatment that we were proposing."

We lost. The Aussies-owned banks – with the National Party serving as their tag team accomplice - have once again found us to be pretty easy pickings.

Fun, in an anxious world

But hey, it's Spring. This 1990s style pop banger by Lowertown offers fun aplenty, although a darkening vibe makes itself evident soon enough. “Bucktooth” is an interesting track in that respect. In the carnival world it evokes fun co-exists these days alongside anxieties real enough to jangle anyone’s buzz. Like… Too many guns, for starters:

Give me some fun that isn’t trouble
Give me some words that don’t mean something double
Give me a job that doesn’t wear me down
To the bone
I come home at night and don’t want to be alone

I can’t handle any more…
Can’t handle any more guns

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