Politicians would only make changes if they had to, Mr Donald, of Polson Higgs, said.
''It is up to voters to understand the magnitude of the problem, see the anomalies and demand something be done about it.''
The tax work published by the Financial Savings Council made a timely contribution to the understanding the magnitude of the problem. It was now time to make the issues understandable, describe the injustices and force change, he said.
''The key issue for us now is how to make the material understandable for the average punter. In a nutshell, the council is saying we have the tax treatment for KiwiSaver all wrong because we tax the compound returns earned every day along the way.''
Over a long period of saving, typically up to 50 years, the impact of taxing the returns on a daily basis rather than not taxing them reduced the amount available by nearly 60%, Mr Donald said.
The impact had been recognised by other countries such as the United Kingdom, the United States and Australia where there were tax concessions within retirement savings schemes and funds were locked in until retirement.
With KiwiSaver, New Zealanders saved with taxed money (T), the returns within the KiwiSaver funds were taxed (also T) while the withdrawals at retirement were exempt from tax (E).
In the older, more mature retirement jurisdictions like the UK, Australia and the US, they used a combination of TET, or EET, he said.
Retirees in those other countries ended up with a lot more money saved for their retirement as a result of reducing or eliminating the tax on the compounding returns within their retirement funds during the savings phase.
A typical saver in those countries would be way ahead of New Zealand, even after paying tax on their withdrawals, he said.
''We all know that somehow investors in rental properties get a tax break investors in other types of investments don't. The council tax paper is very clear on the huge tax subsidy going to not just investors in rental properties but all we homeowners, as well.''
Tax experts calculated the tax subsidy going to homeowners paying off their ''super-sized'' mortgages, compared with an investment in a bank term deposit or a diversified portfolio, amounted to $4 billion a year, Mr Donald said. That was twice the amount going on social welfare payments to lower income earners for their housing.
The council's tax paper assumed taxing the family home was politically impossible so they dropped it. At the same time, the council admitted the anomaly distorted the New Zealand economy by encouraging people to overspend on housing, usually with money borrowed overseas.
In turn, interest rates were driven higher and New Zealanders had less money to spend on other more productive items such as education, health, science and business development.
''We suffer as a nation and will continue to suffer until someone with enough courage confronts the issue head on with a comprehensive capital gains tax, without exemptions. No-one is holding their breath.''
It was estimated 60% of household wealth in New Zealand was tied up in housing, which he said was dead money.
New Zealand Property Investors Federation president Andrew King took issue with the Financial Service Council's claim on tax rates.
Traders in property were taxed on their capital profits, while fund managers were not, he said.
Higher income earners were taxed 33% on their rental income rather than the 28% rate for fund managers and unlike the fund management industry, property investment did not receive taxpayer funds to enhance the returns it provided.
''Unlike New Zealanders using fund managers, property investors do not have to pay around 1% of their investment to the manager regardless of whether a profit is made or not.''
Property investors did not receive government money to help pay for property management, yet the Government gave up to $500 for each KiwiSaver account every year as a contribution towards their fund management fees, Mr King said.
''It's clear rental property does not have a tax advantage over managed funds, so I guess the Financial Services Council must want a lower tax rate because they simply can't compete with property investment returns.
''Perhaps they should lower their fees or just get a better return for their clients, rather than attacking an industry that is simply outperforming them,'' he said.
