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Cullen Announces Tax Policy Work Programme

The tax system needs to be better attuned to New Zealand's needs in a changing world economy, Revenue Minister Michael Cullen said today.

Achieving this is one of the aims of the Government's tax policy work programme over the next 18 months, Dr Cullen told a PricewaterhouseCoopers tax conference.

"We will be working to ensure that our investments offshore and within New Zealand are treated as similarly as possible for tax purposes. This work will include a review of our foreign investment fund rules on New Zealanders' investments overseas."

"Another main theme of the work programme is the coherent taxation of savings and the entities through which individuals invest and save. One of our aims here is to make the tax rules between different types of entities more consistent, and to look at whether the tax system creates disincentives to long-term savings."

"Tax simplification is also a major emphasis of the tax policy work programme. The tax system must be capable not only of raising the necessary revenue, but also of minimising compliance costs for New Zealand businesses that operate here and internationally."

"Part of our efforts in protecting the revenue base will be directed at tax avoidance, closing further loopholes in the law and putting the spotlight on specific tax avoidance schemes."

"The Government's tax policy work programme reflects the fact that the tax system has an important role to play in New Zealand continuing to be a quality player on the world stage." Dr Cullen said.

Attached: the Government's tax policy work programme

Tax Policy Work Programme*
As at 24 November 2000

Start point is 1 November 2000.
Items in bold italics are the major items.

2001 2002

Issues - New Zealand in a changing global economy
Thin capitalisation changes (part of simplifying interest deduction rules) Enacted
GST and imported services Consultation Enacted
Trans-Tasman triangular taxation Consultation Consultation
Foreign investment funds review Consultation
New Zealand's involvement in OECD project on harmful tax competition As necessary
Tax treatment of research and development expenditure Consultation Enacted
Bloodstock depreciation Consultation ?
GST and tax-free shopping Consideration ?
Select Committee review of trans-Tasman business harmonisation As necessary
High-value cross border leasing tax issues Enacted
Electronic commerce, records and administration As necessary
Making bribes to non-residents non-deductible - international commitment Enacted
Approved issuer levy remedials - October 2000 Bill Enacted
Coastal shipping taxation issues As necessary
Deductibility of expenses against dividend withholding payment income Consultation & Enacted
Available subscribed capital and dividends with underlying foreign tax credits Consultation & Enacted
Russian, Japanese & South African double tax agreements Finalise
Other double tax agreements as necessary As necessary

* This work programme is subject to change.

2001 2002

Issues - The taxation of savings and entities
Various unit trust issues Consultation & Enacted
Review of taxation of Maori authorities Consultation Enacted
Review of taxation of partnerships Commence
Review of trusts taxation Commence
Review of credit Unions taxation As necessary
Taxation of savings - TET(taxed, exempt, taxed) As necessary
Review of GST on financial services Consultation
Tax issues to do with pre-funding superannuation As necessary
Review tax status of Crown-owned entities Commence

Issues - Tax simplification
Rewrite Parts C, D and E of Income Tax Act Consultation Enacted
Review of compliance and penalties legislation Consultation Enacted
Small business tax simplification Consultation Enacted
Interest deductions for companies Enacted
Late payment penalty mitigation rules - October 2000 Bill Enacted
GST on fringe benefits in FBT return - October 2000 Bill Enacted
Self-assessment codification Enacted
Tax issues concerning holiday pay etc on transfer of a business Consultation Enacted
Deductibility of partnership pensions Consultation Enacted
Specific binding rulings issues Consultation Enacted
Disputes resolution review Consultation
Tax treatment of retirement villages - clarification Consultation ?
Distributions, death and taxes - consideration of issues Consultation Enacted
Accrual rule issues regarding natural love and affection loan forgiveness Consultation & Enacted

2001 2002

McLeod Tax Review Support as necessary

Base maintenance -
Trusts and minor beneficiaries - October 2000 Bill Enacted
Restraints of trade - October 2000 Bill Enacted
High income individuals tax avoidance schemes Consultation Enacted
Consideration of Law Commission's report on tax privilege Consultation ?
Tax treatment of super funds that invest into passive super funds Report to Govt ?
Resident withholding tax and companies - October 2000 Bill Enacted
Timing policy issues - Mitsubishi and similar issues Consultation

Tax Policy to meet specific Government objectives
Gaming / racing review As necessary
Review of tax issues for charities Consultation Enacted
Carbon charges As necessary
Student Loan Scheme – review by the Education and Science Committee; reciprocal agreements with UK and Australia As necessary

2001 2002

Confirmation of annual tax rates Enacted
Fringe benefit tax review Commence
GST - sundry issues As necessary
Extra payment of family support - 27 in one year Enacted
Issues regarding IRD collection of Accident Compensation premiums Enacted
Human Rights Act consistency compliance issues As necessary
Government Super Fund restructuring As necessary
Tax consequences of SILNA (South Island Landless Natives Act) settlements Enacted
Child Support avoidance/review As necessary
Netherlands social security agreement As necessary
Eligibility of Accident Compensation payees to child & parental tax credits As necessary
District Health Boards - tax exempt status and transitional measures As necessary
Overseas racing stakes - should be exempt - October 2000 Bill Enacted
Waitangi Fisheries Commission - tax consequences of distributions - October 2000 Bill Enacted
National Provident restructuring & Government Super Fund definition As necessary
Tax consequences of Housing Corp restructuring As necessary
Tax consequences of review of Local Government funding As necessary
Tax consequences of Public Works Act review As necessary
Tax consequences of remuneration of Local Government members As necessary
Tax consequences of review of the Public Trust As necessary
Sundry corrections Ongoing

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