As part of its final report of proposals for the future of New Zealand's tax policy, the group flagged it as a problematic aspect of GST.

“Financial services are not subject to GST for reasons of administrative complexity. There is a strong in-principle case to apply GST to financial services but the group has not been able to identify a means of doing so that is both feasible and efficient. The Government should monitor international developments in this area.”

It’s been a divisive issue for the funds management industry.

Boutique managers generally charge GST on their fees but bigger fund managers often do not.

FSC members have an agreement with Inland Revenue to charge GST on 10% of management fees and 60% of trustee fees.

John Berry, chief executive of Pathfinder, said it was a tricky area.

He said the GST scheme as a whole had few exclusions, which made it simple to administer by international standards. “Why should [fund managers’ fees] be different? But you don’t pay GST on the interest on your mortgage because that’s a financial transaction. What is the service that fund managers provide – is it purely financial?”

Applying GST to fund management fees helped smaller firms, he said.

They had to pay GST on the services they outsourced to other providers, such as firms that priced units and maintained the manager’s records of who was on the register and how many units they held.

Not applying GST on management fees would incentivise businesses to keep those functions in-house, he said, which could create a less robust business model because there were fewer external checks imposed.

Inland Revenue last consulted on the issue in 2017 but there has still been no formal decision made.

A spokeswoman for the department said it would write to stakeholders next month and people who took part in the process to update them.