The Government has backed down over a proposal to tax fees on KiwiSaver funds, less than a day after endorsing it.

The proposal meant managed funds and KiwiSaver providers would have had to pay a flat 15 percent GST on fees.

Revenue Minister David Parker defended the proposal this morning on breakfast television, but this afternoon he changed and issued a statement.

“During extensive consultation, views were mixed on the merits of the technical change.

Large companies profiting from the current set-up were opposed to the change, while smaller providers were more supportive of change.

This was because these providers who did charge the full GST on their service fees faced unfair competition from the bigger players.

However, since the announcement, it has become clear that smaller providers now oppose it too.”

National Leader Christopher Luxon said “it’s absolutely fantastic that New Zealanders have been saved from another Kiwisaver tax.

“But I can tell you, you cannot trust Labour on tax and this is evidence of that.”

Luxon said “the bottom line is they can dress it up any which way they wish. But the reality is, this was an attack on hardworking Kiwis.”

But David Parker said “It’s important to clear up some inaccurate representation of the proposal.

New Zealanders’ KiwiSaver contributions and balances were not going to be taxed under this legislation. However, it is clear from the reaction to this proposal that it has caused concern for Kiwis.”

The Financial Services Council said it welcomed the Government’s decision today. 

“At the heart of the issue are good retirement outcomes for all New Zealanders. We believe that a GST tax on KiwiSaver fees was not conducive to this goal.