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Crack Opens To Solving CER Investment Headache

Tue, 27 Aug 2002

Crack Opens To Solving CER Investment Headache

The Employers & Manufacturers Association (Northern) is warning, if enacted, the list of proposals in the review of Australia's international tax rules released late last week by Treasurer Peter Costello, will leave New Zealand further behind in the race for growth promoting investment.

"Treasurer Costello's review of Australia's international tax rules is 'pro-investment, pro-growth, and pro-business'; it could make it even harder to justify investing in New Zealand than in Australia," said Alasdair Thompson, EMA's chief executive.

"But New Zealand won't get a better chance than this to push the case for more equitable tax rules under CER in both countries, especially the double taxation of dividends," he said.

"Our Government should be making the strongest possible representations to Canberra under the terms of the Costello tax paper (www.taxboard.gov.au ).

"The tax rules are a major obstacle holding back more Australian investment in New Zealand based enterprises.

"Australians wanting to invest in New Zealand domiciled businesses are deterred because dividends paid in New Zealand are taxed both here and when they are repatriated.

"Equity funding in Australia is harder to attract for New Zealand companies operating there, putting them at a disadvantage to their Australian based competitors.

"The international tax rules can also mean when shareholders in a New Zealand domiciled business in Australia outnumber those here, the business concerned takes its head office to Australia where it pays most of its tax.

"Recent examples have been Baycorp and Lion Nathan. Once the Australian shareholders of companies like The Warehouse outnumber those in New Zealand, they too may make the move across the Tasman.

"The same types of principle apply for Australian companies operating in the United States, hence the reasoning behind the Australian review.

"EMA is urging Government to make the development of an investment friendly tax regime its top priority.

"This should be one allowing imputation credits to be distributed to New Zealand domiciled shareholders from tax paid surpluses generated here at the same time as fully franked dividends are distributed to Australian shareholders from tax paid surpluses generated there.

"The current 'triangular' tax discussion proposals released jointly by New Zealand and Australia in March this year may not go far enough to resolve the investment quagmire.

"We need our officials and Government alike to give this issue the highest priority."

Ends

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