13 April 2006

Ministers reject 'misleading' foreign investment tax claims

Finance Minister Michael Cullen and Revenue Minister Peter Dunne today rejected what they say are 'misleading' claims about the effect of the new rules announced this week for taxing New Zealanders' earnings on overseas investments.

"Both GPG and ABN-AMRO Craigs continue to assert that thousands of New Zealanders who hold overseas investments outside Australia will be hit hard by the new rules," the Ministers said.

"They claim such people, not necessarily wealthy and sophisticated investors, who hold shares directly will have to pay tax on 85% of the unrealised capital gains on their investments. That is incorrect.

"Individuals whose investments cost $50,000 or less and couples whose holdings cost up to $100,000 will not be affected by the new rules.

"GPG also claim that institutional investors such as managed funds will be worse off after the proposed changes. Again this is misleading ? bordering on untrue. Managed funds are already paying tax on their capital gains on investments like GPG. The proposals don't increase this tax ? they reduce it because only 85% of the capital gain will be taxed.

"The two companies also talk about a tax on 85% of the unrealised capital gain, without adding the important qualification that any such taxes for individuals will be capped at 5% of the increase in value.

"Perhaps the true reason for GPG's comments in particular come towards the end of the company's statement when it pleads for a special exemption from the rules, on the grounds that it's a great New Zealand company.

"GPG is not registered in New Zealand, it's registered in the United Kingdom and its call for a special exemption makes no sense in terms of tax policy or fairness," the Ministers said.

ENDS

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