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Industry Reacts to Move to Close“Tax Loophole”

4 March 2004

Media Release

Industry Reacts Strongly to Govt. Move to Close “Tax Loophole”

The NZ Petroleum Exploration and Production Association today described the decision by the Government to close a tax loophole as a “knee jerk reaction undertaken without industry consultation.

“This is the second so-called tax loophole to be closed within a week – the other relating to stapled securities,” Association Executive Officer John Pfahlert said.

The Government has singled out the oil and gas industry for special treatment, leaving other sectors untouched and still able to offset international losses.

“If the Government is genuinely concerned about the erosion of the tax base then all industries should be treated in a similar fashion,” said Mr Pfahlert.

“We certainly wouldn't describe the current law as a loophole.

“The position in New Zealand has always been that this country taxes income from foreign branches of New Zealand companies and allows any losses to be set off against the onshore income of those companies.”

He said he was unaware of any companies currently operating in New Zealand who had structured their affairs to avoid paying tax.

Mr Pfahlert said that the change announced this morning is lopsided and inequitable in two respects:

1. New Zealand will still tax the income of foreign branches
2. However, losses of foreign branches of those companies who are not in the petroleum mining industry will continue to be deductible.

While the government has announced that it would be consulting industry on the proposed changes, Mr Pfahlert said it is clear that any consultation would be meaningless – since it has already announced that the changes will be effective from today.

ENDS

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