Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search


Proposals to limit excessive non-resident tax deductions

Hon Peter Dunne
Minister of Revenue

Monday, 14 January 2013 Media Statement

Proposals to limit excessive non-resident tax deductions

Proposals in an Inland Revenue officials’ issues paper released today would bolster the taxation of highly leveraged investments made by foreigners, through changes to the thin capitalisation rules, Revenue Minister Peter Dunne said.

“I referred in December to upcoming proposals for strengthening New Zealand’s tax laws and I am pleased to see these now released,” he said.

The thin capitalisation rules are intended to prevent non-residents from using excessive interest costs to reduce their tax liabilities, but have not been effective in all cases.

The issues paper proposes a number of measures to beef up the rules.

The first of the two major proposals is to extend the rules to non-residents who act together to operate businesses in New Zealand; the rules currently apply only if a single non-resident controls the business.

The second proposal is to disregard some shareholder debt when calculating the global indebtedness of the foreign investor. At the moment this debt can be included and used to justify a high level of indebtedness in New Zealand which can then be used to offset tax liability.

Mr Dunne said the two proposals would modernise the rules to reflect changes in global investment structures.

“In particular, they recognise the growing role of private equity investors, who often have high interest costs but are not subject to the thin capitalisation rules in their current form,” he said.

“New Zealand has overhauled its international tax system since 2007 by removing barriers to overseas investment by New Zealanders.

“The issues paper shifts the focus to investment in New Zealand by non-residents, and proposes changes to limit excessive tax deductions for interest costs. I think that would be a fairer outcome” he said.

The proposed changes are expected to leave most foreign investors unaffected as they are already subject to the thin capitalisation rules and have relatively low levels of debt.

They have also been designed to limit any effects on investors who use third-party debt, such as debt from an unrelated bank.

“The tax laws relating to foreign investment are a delicate balancing act. We want to ensure that a fair amount of tax is paid, but do not want to discourage investment,” Mr Dunne said.

“On the other hand, the proposals in this paper represent one step more towards ensuring that non-resident investors pay their fair share of tax,” he said.

Submissions on the issues paper, which can be found at www.taxpolicy.ird.govt.nz, close on 15 February, 2013.


© Scoop Media

Parliament Headlines | Politics Headlines | Regional Headlines


Police Authority: Use Of Taser Was Disproportionate And Unjustified

The Independent Police Conduct Authority has found that an officer’s second use of a Taser on a mentally unwell Hokitika man was disproportionate and unjustified. More>>


Gordon Campbell: On Holidays, Hekia Parata And Badlands

Hekia Parata, adieu. Reportedly, she’s been ‘passionate’ about education. She has “bravely’ led the charge on the government’s education reforms. In the past week , many of the postscripts to Hekia Parata’s career as Education Minister have sounded like a schoolteacher desperately trying to find some reason why a D student can be marked up to C minus. More>>


Minister of Finance: Plan Shows $100 Billion Infrastructure Projects

Finance Minister Bill English has today launched the Government’s Ten Year Capital Intentions Plan (CIP) which shows a pipeline of $100.9 billion worth of infrastructure projects over the next decade. More>>


Werewolf: Safe Landings Gordon Campbell on the safety challenge to the Wellington runway extension.

The safety-related legal challenge revolves around the size of the 90 metre long Runway End Safety Area (RESA) being proposed for the runway extension. More>>


Environment Commissioner: We Need To Work Together On Climate Change And Farming

“The debate around agricultural emissions and the ETS has been polarised for too long,” said the Commissioner. “But the ETS is not the only way forward – there are other things that can be done.” More>>


NZ Super Fund: Seeking To Put A Market Price On Climate Change

Oct. 19 (BusinessDesk) - The New Zealand Superannuation Fund says it will devise a set of rules to assess investment winners and losers under climate change, a strategy that could rule out fossil fuels or producers such as current portfolio member Exxon ... More>>


Rejuvenation: Parata Will Not Contest 2017 Election

Education Minister and National List MP Hekia Parata has today announced that she will not be contesting the next election. She advised the Prime Minister of her decision earlier this year. More>>

Prisons Grow: Government Approves Plans For Increased Prison Capacity

Despite significant progress in reducing crime the number of prisoners has increased faster than projected. This is because the proportion of offenders charged with serious crimes has risen, meaning more people are being remanded in custody and serving more of their sentences in prison. More>>


Get More From Scoop



Search Scoop  
Powered by Vodafone
NZ independent news