Making New Zealand more attractive to investors

24 August 2006

Making New Zealand more attractive to investors

Pre-Election tax cuts and radical changes to the taxing of offshore shares are highly likely.

Reading between the lines of Revenue Minister Peter Dunne's speech to the Ernst & Young national tax conference today, it seems clear that the Government will move to address the widening gap between personal tax rates and the 30% company tax rate proposed in the Business Tax Review.

While the Minister clearly stated his preference for a 30% company, trust and top personal marginal rate, he acknowledged that political and fiscal constraints would make this unlikely to be achievable.

Jo Doolan and Geof Nightingale predict that the likely outcome is a 30% company tax rate, and a reduction to 36% for the top marginal individual rate. However, they warn that trusts should expect a rise in tax rate to 36%.

They also predict that due to an unprecedented number of submissions, more than 3,000, the Government will need to bow to public opinion and make significant changes to the proposed taxation of offshore shares. The Minister acknowledged that no tax bill ever emerged unscathed from the Finance and Expenditure select committee but that this one was likely to have more changes than most.

The Minister's annoucement of the timing of the International tax review which he said would result in discussion document by Christmas, is welcome. Jo Doolan and Geof Nightingale believe that for most of New Zealand's key exporters, a comprehensive review of New Zealand's uncompetitive existing international tax rules will deliver a better platfrom for economic transformation than dabbling with export market development tax incentives as floated in the Business Tax Review.

ENDS

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