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Surge In Dividend Payments Entirely Predictable Following Trust Tax Hikes

Commenting on news today that companies’ dividend payments more than doubled in the tax year to 31 March from $23.6 billion to $49.4b ahead of the increase in the trustee tax rate from 33 to 39 percent, Taxpayers’ Union Head of Campaigns, Callum Purves, said:

“While there is a case to be made for aligning the trustee tax rate with the top rate of income tax, this should be done by bringing the top income tax rate down from Labour’s punitive 39 percent, not by jacking up the trust tax to the same level.

“Clearly, today’s news shows the significant effort people are willing to put in in order to avoid the higher trust tax rates. This will only be exacerbated now that the higher 39% rate is in force. When the difference was just 5 percentage points, the asset protection advantages outweighed the higher rate in many cases.

“Now that the trust and income tax rates are 11 percentage points higher than the company and PIE tax rate of 28 percent, there is an even stronger incentive to move their assets out of trusts and into company structures and PIEs because the asset protection advantages are no longer worth the much higher rate.

“Rather than hitting those at the big end of town with higher taxes who can simply rearrange their finances into different structures, these changes hit the little guy – grandchildren putting money aside for their grandchildren or farmers whose family home is within the farm – and who can’t easily change their tax structures.

“It is now clear that the trustee tax rate has failed in its objectives and those with the means to do so are simply avoiding paying the higher rate as predicted. Nicola Willis needs to revisit these unfair changes immediately before they have an even more punitive effect on Kiwi families.”

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