A lifeboat is launched as Tolis founders
Fund managers and life offices may actually get what they want now the tax credit scheme has been sunk.
Friday, November 20th 1998, 12:00AM
A lifeboat may have been launched yesterday when politicians sunk legislation which would have established a tax credit scheme for low and middle income earners who save.And if there is indeed a lifeboat it would have to be named 'Irony'.
The government yesterday failed (54 votes to 66) to pass the taxation of life insurance and superannuation (Tolis) tax credit legislation and is back to square one with this issue.
It said in July that if it failed to get the tax credit scheme operable (retrospectively) by April 1 it would introduce, temporarily, a proxy rate for these funds.
The irony of this situation is that a proxy rate was the financial service industry's preferred solution to the problem.
It preferred this option as it was easier and less costly to introduce and run than the tax credit scheme.
Armstrong Jones managing director Paul Fyfe says, "the government should now deliver on that promise (to introduce a proxy rate)."
He says work also needs to begin with the industry to find a long-term solution to the problem.
Fyfe and Investment Savings and Insurance Association acting chief executive Vance Arkinstall have both criticised the politicians and MMP for the bill's defeat.
The ACT party's stance as a champion of lower taxes is a conundrum, Fyfe says.
"The party professes to support lower tax rates, and yet they chose to vote against a bill that would have seen a tax break for over half a million savers."
Likewise he is "amazed" about New Zealand First's flip-flops on the bill.
ACT opposed the bill, describing it as bad legislation, and because low-income earners would no longer be eligible for family support, student allowances and other income-related benefits.
Likewise Labour opposed it because of its impact of low-income earners.
However, Labour's deputy leader Michael Cullen had proposed an amendment to the bill to solve these problems.
"On a number of occasions I offered the Minister of Finance a compromise solution whereby Labour was prepared to support the bill. The solution was to remove those provisions whereby the Tolis tax credits would have been offset against family assistance measures such as family support and student allowances."
The government refused to budge.
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