Get tax treatment right

20th November 2006
KPMG media release

Get tax treatment right or risk losing managed funds overseas, says KPMG

Failure to address the disparities between taxation of managed funds and direct investors could have a profound effect on New Zealand’s funds management industry and, therefore, KiwiSaver, says Murray Sarelius, KPMG tax partner.
Getting the tax treatment right may be central to attracting funds to locate here, he says.

A recent survey carried out by KPMG and the United Kingdom Investment Management Association found that the three biggest factors in determining where to base a fund were the taxation of the fund, the taxation of the investor and the regulation of the fund.

The survey, "Taxation and the Competitiveness of UK Funds", published in October this year, found that fund managers in the UK were shifting to offshore locations such as Ireland and Luxembourg because those jurisdictions offered something the UK did not. The survey concluded: "The tax authorities’ attitude and the overall lack of stability and certainty of the UK regime are considered to have a significant influence on the decision of participants to locate funds outside the UK."

"Fund managers need to operate in an environment of certainty, as retrospective changes to a fund’s tax treatment creates investor equity issues. This is as true of fund managers operating in New Zealand as those operating in the UK.
"The current tax changes, if properly implemented and administered, create the opportunity to make New Zealand a more attractive domicile for funds and the location of their management. This must be relevant to the current tax proposals and for KiwiSaver," says Murray Sarelius.

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