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Copeland: New tax rules flatten the playing field

Thursday, 21 September 2006

Copeland: New tax rules flatten the playing field

United Future finance spokesperson, Gordon Copeland, said today that the new tax rules for share investments will level the playing field between that class of investment and residential rental properties.

“Until now the playing field has been steeply tilted in favour of residential properties,” said Mr Copeland.

“Put another way, investment in shares, especially through superannuation and other managed funds, has until now been greatly disadvantaged.

"Currently share investments made through such funds (now referred to as Portfolio Investment Entities or PIE’s) see all income and capital gains taxed at a flat rate of 33 cents.

“By comparison, investment in residential rental property sees income taxed at the marginal tax rate of the investor (73% of all tax payers pay tax at either 15 cents, or 19.5 cents) and there is no tax at all on capital gains.

“The tax bill now before Parliament's finance and expenditure select committee will radically reduce the tax impost on share investments.

"Income (usually dividends) will now flow through the PIE’s and be taxed at the rate applicable to the investor, be it 15 cents or 19.5 cents with a cap at 33 cents. There will be no tax at all on capital gains.

“I have worked consistently since coming into Parliament to see present distortions removed, (or at least minimised to the greatest extent possible) so that Kiwis invest based on the underlying quality of the investment rather than on tax advantages.

“I’ve no doubt that the present system has contributed materially to the over-investment in property which distinguishes New Zealand from countries such as Australia, the USA and the UK.

"Hopefully the changes now announced, including the dividend yield income tax methodology for overseas share investments, will lead to a rebalancing of a badly skewed national investment profile.

“I regard this as a critical factor in efforts towards the transformation of the NZ economy," said Mr Copeland.


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