The Government's plan to charge GST on KiwiSaver accounts amounts to "a brand new tax", an expert says.
That's despite Labour promising no new taxes before being re-elected for its second term in 2020.
On Tuesday, the Government revealed it planned to charge GST on KiwiSaver fees, giving the Beehive an extra $225 million per year.
But experts have said the GST would come at a cost to Kiwis' retirement.
"It's a decrease in your KiwiSaver balance of $20,000," said Allan Bullot, a tax specialist at financial advisory firm Deloitte. "It's a sledgehammer and KiwiSaver is just collateral damage."
According to modelling by the Financial Markets Authority, the tax could slash about $103 billion from KiwiSaver funds within 50 years.
Bullot told AM that figure was "staggering".
"Everybody that I've talked to that's got a KiwiSaver fund and is talking and looking at this… have told me that they consider it to be a brand new tax," he said.
"Technically, is there a new tax that someone's invented? No. Are we coming and looking at something that hasn't been subjected to tax since 1986 and saying, 'We're going to change the legislation'... [it] sounds like a new tax."
Financial Services Council chief executive Richard Kilpin said the tax on KiwiSaver fees would provide bad outcomes.
The proposed Tax Bill was an overreach, he said.
"In the middle of a cost of living crisis, increasing taxes that are then likely to increase the fees that consumers pay to invest in KiwiSaver and managed funds, and potentially decrease returns, is a suboptimal outcome.
"It's disappointing the Government has taken this approach. We look forward to continuing to engage with them and the IRD to get these settings right, as it's what New Zealanders deserve."
While the changes wouldn't come into effect until 2026, National leader Christopher Luxon reiterated his party's belief the Government was "spending money, wasting money and not getting outcomes".
"[Revenue Minister] David Parker can dress it up any way he wants, this is the same man that brought us the cost of living payment that is spraying cash to investment bankers and French backpackers and dead people," Luxon told AM. "He can say whatever he likes but, the bottom line is, it's a big tax and spend Government."
Parker declined to appear for an interview with AM on Wednesday.
He defended the Bill on Tuesday, saying an imbalance would be corrected by the change.
"We're not making any change to principle," Parker told RNZ. "Inland Revenue believes that these changes are necessary to align current practice with the underlying principles in the law.
"There is inconsistent treatment of GST of all services, depending on the way in which people currently invest... I think that it's important that the tax system reflects the underlying principles that financial services are meant to be exempt from GST, but services that are not a financial service are meant to be GST-able."
