David Parker is surrounded by media at Parliament as he explains the widely criticised tax plan is being pulled. Photo: RNZ / Angus Dreaver
Analysis - The government's KiwiSaver tax debacle is 'manna from heaven' for National, there will be extra checks on people who receive the cost of living allowance to make sure they're actually living here, and Gaurav Sharma may have made his last play for attention.
It isn't known exactly when the government realised it was in big trouble this week but the Herald's headline on Wednesday morning would have given it a clue: KiwiSaver 'Tax Grab'.
National's leader Christopher Luxon would have dispelled any doubt on Morning Report the same day.
"We need to stop this right now," he said. "They're addicted to spending and need to dream up whole new tax grabs and that's what this is."
He managed to say "addicted to spending" three times during the interview.
The previous day the government had introduced an omnibus bill that included a provision to put GST on the fees charged by KiwiSaver fund providers.
It wasn't proposing a tax on actual savings but the effect would have been the same and the regulatory impact report issued with the bill gave the opposition all it needed.
The government would reap $225 million a year in extra tax and by 2070 the law change could have reduced KiwiSaver fund balances by a massive $103 billion.
Luxon said the government could call it what it liked but it was a tax on retirement savings.
Throughout Wednesday morning a horde of other critics piled in.
Chief executive of KiwiSaver fund Simplicity Sam Stubbs told Stuff the scheme's creator, Michael Cullen, deliberately chose not to tax provider fees.
"So why now?" he asked. "Is this simply an easy way to raise revenue without it being obvious to the public?"
Stubbs thought that perhaps it was "because this significant deviation from the previous policy was not highlighted by Revenue Minister David Parker when he introduced the bill".
He described it as "in a sense, a stealth wealth tax".
The founder of the Koura KiwiSaver fund, Rupert Carlyon, said the change wasn't noted in the media release about the bill and then made a very good point: "If the government had been more proactive about informing the public about the change there might not have been the same level of misinformation circulating."
"They completely hid it, that's the big problem."
National also picked up on that, saying the government had tried to sneak it through.
So it wasn't just being accused of taxing retirement savings, it was being accused of trying to slip it past the public.
The government by then knew the situation was totally out of control and rather than face what would have been an appalling Question Time in Parliament it announced it was scrapping the change.
RNZ's political editor Jane Patterson said the decision was made in the hour before ministers filed down for the regular media run into the House.
Parker told reporters there had been media "misrepresentation" that led people to believe it was a new tax on KiwiSaver contributions, and took aim at some fund managers he said had wanted the change but then came out publicly against it.
This combination, Parker said, had caused the "furore" around the government's intentions.
"The clarion call against it risks undermining public confidence in KiwiSaver," he said.
As Patterson put it, all this was manna from heaven for the opposition.
National had its best day in Parliament since Luxon and his deputy Nicola Willis took over the leadership.
The issue allowed Christopher Luxon and Nicola Willis plenty of opportunity to criticise the government. Photo: RNZ / Angus Dreaver
The government decided attack was the best form of defence and Prime Minister Jacinda Ardern put on her angry face at Question Time, reeling off various actions National had taken over the years to weaken KiwiSaver.
Ardern and Parker emphasised their support for KiwiSaver and how important it was for people to save for their retirement.
Anyone following it might have thought they were trying to create a bizarre scenario in which the government was doing a good thing by not doing something it had intended doing the previous day.
Why wasn't it on Labour's radar?
None of this worked, and the big question remained: how did it get itself into this mess to start with?
"From a political management perspective, someone in Labour should have picked this up," said Stuff's political editor Luke Malpass.
'"It seems unfathomable no-one in Cabinet put their hand up and asked 'Hey guys, is this really a good idea?' Or was it the case that no-one had properly read their Cabinet papers that day?"
The latter may well be the case. The change was buried in a bill with the mind-numbing title Taxation (Annual Rates) for 2022-23, Platform Economy and Remedial Matters Bill.
Parker knew what was in it but apparently didn't flag it as a problem with his colleagues. He admitted to media the backlash had been unexpected.
The Herald felt strongly enough about the fiasco to publish an editorial on Thursday.
It said the government would have done much better to include the change in the media statement issued when the bill was introduced.
"An inclusion of the move could have couched the proposal in terms of international comparisons, fairness to harder-hit GST areas and in taking a reasonable return from overseas-based KiwiSaver providers," it said.
"To downplay a major impact is one matter, to fail to mention it at all would seem to be priming the fuse on a political incendiary and handing the opposition a match."
National won't forget this week. As Malpass said, Luxon and Willis will try to "hang this around Labour's collective neck until the next election - 'can they really be trusted?' will be the refrain".
Auditor-General unhappy
The other main issue of the week wasn't a comfortable one for the government either.
Most of the prime minister's post-Cabinet press conference on Monday was taken up with the cost of living payment and Auditor-General John Ryan's criticism of the way it went wrong.
The first of the three payments making up the $350 being given to people who earn less than $70,000 went to an unknown number who weren't in the country.
Willis asked for the investigation and Ryan's conclusion was that while it did not constitute unappropriated expenditure the government should have taken greater care when distributing it, RNZ reported.
The payment, being delivered in three tranches of $116, was a key Budget announcement and it was spoiled by the controversy around it.
Ryan said IRD, which manages the payments, should have a better focus on sending the money where it was supposed to go.
Auditor-General John Ryan says greater care should have been taken with distrbution of the payments. Photo: Controller and Auditor General
Parker, who was involved in this one as well, said IRD had found about 31,000 of the 1.4 million people who received the first payment were possibly overseas.
They would have to provide more information before receiving further payments.
There will be extra checks including data matching as well as searches for non-residential tax returns and overseas IP addresses used to log in to myIR.
Willis had a fine time with this as well, although as a government botch-up it doesn't go near KiwiSaver.
"The auditor-general has made clear that he thinks the government should have taken greater care with both the design of this policy and its implementation; that they failed the test of good stewardship for taxpayer money," she said on Morning Report.
"I'm concerned that ministers were warned that this payment would go to people who weren't eligible, and they didn't blink. They've become so loose and sloppy with taxpayer cash that they didn't think twice about the fact that French backpackers, London investment bankers [and] deceased persons would receive this payment."
In Parliament, National's Chris Bishop managed to exaggerate it into "spraying money all over the world".
While the government claimed all the credit for the payment when it was announced, making it work properly is now seen as IRD's responsibility.
Ardern said at her press conference the eligibility had been clear, the issue had been how to test the resident requirement. "That is what IRD has continued to refine," she said. "Keep in mind we can't instruct IRD on how they do that though…. the commissioner is independent."
Sharma drama ending?
Gaurav Sharma Photo: RNZ / Angus Dreaver
There was one indication of good news this week - Labour might have heard the last from expelled MP Gaurva Sharma and his demands for an investigation into the way he was treated by the whips and the Parliamentary Service.
Sharma on Monday posted a huge, 4700 word article on social media mostly about the complaints he laid against of his former staff members.
It was those complaints, and complaints they levelled at him, that started the whole thing.
In his latest post he went into detail about the claimed uselessness of some of his staff, Stuff reported.
He didn't identify any of them but said they under-performed, lied, were drunk at work, displayed "incompetence in doing basic tasks" or were dishonest.
He shared one of them with another (unnamed) MP and that staffer was given time off in lieu after doing "household chores" for the other MP, thus depriving him of his or her service.
"Sharma's post depicts a very bad run of luck with staff in his office," Stuff's report said.
"On four separate occasions in the post he mentioned he raised 66 issues he had with one staff member with Parliamentary Service and others."
Sharma didn't speak in Wednesday's general debate, a possibility that had been hanging over Labour after it was reported opposition parties were considering given him one of their slots. He either didn't want one, wasn't offered one, or wanted one and didn't get it.
His campaign could be running out of steam, or he could have become discouraged by the media's declining interest - RNZ dealt with his 4700 words in eight paragraphs.
Unless he comes up with some facts to prove his claims and complaints, Sharma is going to be yesterday's story.
*Peter Wilson is a life member of Parliament's press gallery, 22 years as NZPA's political editor and seven as parliamentary bureau chief for NZ Newswire.
