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‘Fair Dividend Rate’ under consideration

18 October 2006

‘Fair Dividend Rate’ under consideration

The FEC has announced that it will take further submissions from invited parties on the proposal that offshore share investments be taxed using a fair dividend rate method. No further call for public submissions will be made.

It is good that FEC is calling for further submissions on the fair dividend rate proposals, says Geof Nightingale a tax director with Ernst & Young.

"The fair dividend rate proposal, while better than the previous proposal to tax offshore shares, is still complex and in finalising the design and drafting of the law, it is important to get it right. Key to that is consultation with interested parties."

"It is unfortunate that time does not allow for further public submissions as this is a matter of great public interest as reflected by the 3,000 submissions received by the select committee on the initial highly unpopular proposals. The select committee must be careful to ensure that its invited parties represent the full range of the public interest," says Mr Nightingale.

"While the fair dividend rate approach under consideration does reduce some of the concerns regarding imposing capital gains tax on offshore shares, and solves the issue of not paying tax in a loss year, it will still leave a significant number of taxpayers dealing with complicated tax calculations on offshore shares where in the past they simply reported dividend income."


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