By Alex Tarrant
Labour Party finance spokesman David Cunliffe says he does not favour a recommendation for the indexation of the inflation component of interest on savings for tax purposes, as it benefits those who can already afford to save.
The recommendation was put forward by Savings Working Group in its report earlier this year to the government on how to improve the level of national savings in New Zealand. If implemented it would mean interest earned from term deposit savings would not be taxed for the full amount of interest, but only after the earnings were adjusted to cover for inflation over the period of the deposit.
Labour has been attacking Finance Minister Bill English for not outlining how the government would look to improve New Zealand's savings rate, apart from saying it will look to control government spending, with English replying that both the Opposition and media should wait until the May 19 Budget to find out what moves it will make.
English has repeatedly said the budget would focus on 'savings and investment'.
The government has indicated it will make some changes to the KiwiSaver scheme, although will not provide further details.
Yesterday the Workplace Savings Group revealed concerns the government might cut the member tax credit Kiwisaver incentive and the Housing New Zealand first home deposit subsidy as it seeks to cut budget spending in areas other than health, education and justice.
In Parliament today English told media the government was committed to Kiwisaver, and to increasing national savings, "and you’ll have to wait for the budget for any detail on the changes."
“We’ve indicated that across Working for Families, student loans, Kiwisaver, there will be some changes to make them sustainable, and you’ll have to wait for the budget,” English said.
“We’re dealing with a series of events which have led to a very large deficit. At the same time we also need to increase national savings so we can get more jobs and more investment, and you’ll have to wait for the budget for details on that," he said.
Labour has attacked the National government for not outlining the changes it plans to make to the Kiwisaver scheme, saying it would have to make up for cuts to KiwiSaver with other initiatives to help lift private savings.
“For National to have any credibility on savings, Mr English will have to announce other savings measures in Budget 2011, such as indexing savings tax for inflation or a lower rate of tax for savings income,” Cunliffe said.
Cunliffe said he did not like the indexation idea.
“Measures of this sort will, however, disproportionately benefit wealthy Kiwis who already have more ability to save. They are also fiscally expensive relative to the additional savings generated," Cunliffe said.
“Labour believes that lifting New Zealanders’ savings is crucial to our future. We will continue to lead the savings debate as we did when we established KiwiSaver. We will carefully analyse measures Mr English announces before releasing any detail of future Labour policy,” he said.