However, he and Finance Minister Grant Robertson decided to withdraw the bill the following day, fearing a public backlash over the proposed change would erode confidence in KiwiSaver.
The aim of the change was to level the playing field between fund managers, requiring them all to pay 15 per cent GST for providing fund management services. Currently some can get away with paying no GST or paying a rate of 1.5 per cent.
Inland Revenue estimated the change would generate an extra $225 million in tax revenue a year.
The problem was this could have eroded investors' fund balances, including KiwiSaver balances, by a similar amount, depending on the extent to which fund managers passed on the cost with higher fees.
Parker partly blamed the media for his U-turn, saying coverage that included Financial Markets Authority forecasts around how the change could affect KiwiSaver balances long-term, spooked the public.
However, he didn't front-foot the change in a press conference, let alone mention it in a press release he sent out on the tax bill, which dealt with other types of tax changes too.
Parker said he was also disappointed the boutique fund managers that pay more GST than their larger competitors didn't speak out in support of the proposed change.
"This backlash has been a surprise to us based on the information we had from Inland Revenue," Parker said last week.
"There has been engagement with the funds management sector before this proposal came out. And the feedback I had from the Inland Revenue Department was that there were some in favour and some against."
Parker wouldn't name individual fund managers that backed the change.
The Herald asked Inland Revenue to disclose who it consulted with. The department responded saying the request would need to be considered under the Official Information Act, which means it could take 20 working days to get an answer.
Nonetheless, Booster, Devon Funds Management, Implemented Investment Solutions, Kernel, and Simplicity, were among the 11 fund managers the Herald spoke to that weren't consulted and were happy to be named.
The Herald didn't speak to a single manager that had been directly consulted.
Some fund managers recalled Inland Revenue consulted more widely on GST applied to investment fund fees in early 2020, as Covid-19 started wreaking havoc. But they hadn't heard anything since.
Pie Funds chief executive Mike Taylor said he had been made aware of the change by advisory firm, PWC.
Devon head of retail Greg Smith said it was odd a change this significant, affecting so many people, wasn't properly consulted on.
He worried the Government was making a habit of forging ahead with major policy changes without adequately consulting industry. Smith pointed to changes to the investor visa category as an example.
Kernel chief executive Dean Anderson said he was concerned about any legislative change, consulted or not, that created confusion and impacted consumer trust in KiwiSaver.
Taylor believed KiwiSaver should be as tax efficient as possible. He said it was a savings vehicle, not a means of generating tax.
Simplicity chief executive Sam Stubbs argued the tax change was akin to a "wealth tax", as the fund fees that can be taxed are applied to fund balances.
