NZ Super off-limits for working group

The existing New Zealand Superannuation scheme and broad taxation of capital gains and land have been declared no-go zones for the Government's new Savings Working Group, but it will consider a "dual" tax system that would tax labour and investments at different rates.

Finance Minister Bill English this morning announced the make-up and terms of reference for the group, which will be chaired by company director Kerry McDonald.

It is expected to prepare options that could form the centre piece of next year's Budget and feed into the Government's 2011 election platform.

Mr English said the group would have a wide brief to consider how to improve national savings.

"Improving the level of national savings is the next step in the Government's programme for tilting the economy towards savings and exports,'' he said.
 
"The only exclusions are New Zealand Superannuation, which this Government will not change, and broad taxation of capital gains or land, which we have previously said we will not introduce. Otherwise, we are not ruling anything in or out.''

He said the group would look at the impact of the tax system, particularly the taxation of income from savings and investment on the level and composition of national savings and investment decisions.

In particular, it would consider the case for moving to a dual income tax system, where labour and savings and investment income might be taxed at different rates. It will also look at indexation or part indexation of the tax system so that real, rather than nominal, savings and investment income is taxed.

The group will be supported by Treasury, which will shortly publish a discussion paper setting out savings and investment issues and trends.

Mr English said the group would not focus solely on options for retirement savings, and would canvass a range of options for improving New Zealand's overall savings performance, including government savings.

"The Government has an open mind about what might be required and we don't want to prejudge the outcome,'' Mr English said.

"We also hope this exercise stimulates constructive public debate and discussion along the way.

"Increasing our national savings and investment levels is a critical issue for New Zealand, because of our heavy reliance on foreign capital. This has produced high and rising debt to the rest of the world, which cannot continue. New Zealand's challenges around savings and investment are stark,'' Mr English said.

The group's other members are:
Dr Craig Ansley - Capital Markets Research director.
Dr Andrew Coleman - Motu Economic and Public Policy Research senior fellow.
Mary Holm - financial columnist, Auckland University senior lecturer.
Dr John McDermott - Reserve Bank assistant governor.
Paul Mersi - PricewaterhouseCoopers partner.
Stephen Toplis - Bank of New Zealand head of research.

Members will be paid about $70,000 in total, which will come from within Treasury's existing budget, with staff support from the Reserve Bank, Inland Revenue and Statistics New Zealand.

It will hold its first meeting this month and plans to hold six meetings, before a final working session in December. It will issue interim papers along the way.

It is scheduled to make its final report to Mr English in January 2011.

- © Fairfax NZ News