11 April 2002

The Government will modernise the tax rules on organisations managing Maori assets held in communal ownership, Revenue Minister Michael Cullen and Maori Affairs Minister Parekura Horomia announced today.

"The present rules date back to the early 1950s and have not kept pace with changes in tax law," Dr Cullen said. "As a result, taxpayers can face undue complexity and, in some cases, even double taxation."

Mr Horomia said there had been repeated calls from Maori over the years for the rules to be overhauled as, in their present shape, they were probably inhibiting Maori economic and social development.

"Tax rules specific to Maori authorities will continue to be needed because of the unique way that Maori freehold land and other tribal assets are administered and owned, including communal ownership and restrictions on the ability to sell," Mr Horomia said.

The main features of the proposed legislation are:
ć The definition of "Maori authority" for tax purposes will be tightened to include only organisations that manage Maori assets.
ć New tax rules relating to Maori authorities will be based on the company imputation model.
ć The tax rate applying to Maori authorities will continue to be lower than the company tax rate because most members are taxed at a lower personal tax rate. The new withholding tax rate will reduce from 25 percent to 19.5 percent.

Other changes relate to the "charitable" status of Maori organisations for tax purposes:
ć Entities that qualify as charities will not be excluded from the associated exemption from income tax simply because they benefit people connected by blood ties.
ć Marae on Maori reservations whose funds are solely applied to the administration and maintenance of the marae will qualify for a "charitable" income tax exemption.

"The proposed changes have been the subject of consultation throughout the country with Maori organisations and their advisers, and we are confident that they will be widely welcomed by the Maori community," the Ministers said.

The new rules will be included in the taxation bill to be introduced in May.

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