Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Fundamental Threat to Taxpayers may Slide Through

30 October 2006

Fundamental Threat to Taxpayers may Slide Through

Serious concerns are being raised over the latest proposals to tax offshore investment shares using the ‘fair dividend rate of return,’ released on Friday.

Ernst & Young Tax Directors Jo Doolan and Geof Nightingale say all Kiwi taxpayers – whether or not they have offshore investments – should be paying close attention to these proposals and the implications if they are rushed through.

“It’s like an inheritance tax while you’re still breathing,” says Jo Doolan. “Implicitly you will be taxed on part of the capital gains. It’s a complete leap from any system of taxation that currently exists in New Zealand. The proposals represent a fundamental change to our whole basis of taxation. If this goes through, what’s to stop the government applying the same method of tax to the housing market and domestic investments?”

The latest proposals would see individual investors in most cases being taxed on 5% of the market value of their portfolio shares at the beginning of the year, regardless of what they actually earn on their offshore portfolio shares. Portfolio shares are where an equity investment of less than 10% is held in foreign companies. For those who cannot determine a market value then a cost based variant is available. Each year the cost base is increased by 5% and dividends received are not subtracted from the cost base.

The result, say Geof Nightingale and Jo Doolan, is taxation on notional gains, not actual gains. Further, they point out that because the gains are not realised then cash flow difficulties could be faced when having to pay the actual tax.

“On the face of it the latest proposals appear to be a workable compromise on the previous proposals. But with smooth words, the government is actually trying to slide through something that represents a fundamental change to the whole basis of New Zealand’s taxation,” says Jo Doolan.

“Of equal concern is the speed with which this new proposal is being pushed through and with limited consultation,”Geof Nightingale says. “It’s a big risk to take for the Government. Particularly, as the proposals remain complex in compliance terms and will still leave distortions between investing directly and via managed funds.

These fair dividend rate of return proposals have the support of the Minister of Finance and the Minister of Revenue, but the Finance and Expenditure Committee are asking a selected group for further input before giving it their approval. This select group includes the Institute of Chartered Accountants and the Law Society. Taxpayers can still have their say if they oppose this form of taxation and its implications.

Write to your local MP and copy the Finance and Expenditure Committee by 9 November 2006.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Stats NZ: Largest Drop In Terms Of Trade In A Decade As Dairy Export Prices Sour

Lower export prices for dairy, meat, and logs in the September 2020 quarter led to the biggest drop in terms of trade since June 2009, Stats NZ said today. Export prices fell in the September 2020 quarter, down 8.3 percent from its highest ever ... More>>


Stats NZ: Election Boosts October Job Numbers

Job numbers were boosted by general election staff in October 2020, along with rises in the manufacturing, retail, and hospitality industries, Stats NZ said today. Filled jobs rose by 27,667 to 2.2 million in October 2020 compared with September, after ... More>>

Government: New Year Border Exception For Seasonal Workers In The Horticulture And Wine Industries

2000 additional RSE workers to enter New Zealand early next year employers must pay these workers at least $22.10 an hour employers will cover costs of managed isolation for the RSE workers RSE workers will be paid the equivalent of 30 hours work a week ... More>>


Media: Discovery, Inc. Completes Acquisition Of New Zealand’s Mediaworks TV Ltd

Auckland, New Zealand, December 1, 2020 - Discovery, Inc. (“Discovery”), the global leader in real-life entertainment, has completed its acquisition of New Zealand’s leading independent free-to-air commercial broadcaster, MediaWorks TV Ltd, now operating ... More>>

Department Of Conservation: Big Year Underway At Albatross Colony

Familiar faces are returning for the new season of Royal Cam, with a big breeding year underway for the toroa/northern royal albatross colony on Otago’s windswept Pukekura/Taiaroa Head. More than 120 albatrosses, a taonga species, have returned ... More>>

Real Estate: ASB Survey Reveals Majority Of Kiwis Expect House Prices To Keep Climbing


House price expectations are soaring as New Zealand’s housing market shifts up a gear. But stretched affordability is putting a dent in perceptions of whether it’s a good time to buy. While Kiwis reveal they do expect interest rates to fall further. ... More>>

Stats NZ: Births And Deaths: Year Ended September 2020

Births and deaths releases provide statistics on the number of births and deaths registered in New Zealand, and selected fertility and mortality rates. Key facts For the year ended September 2020: 57,753 live births and 32,670 deaths ... More>>