About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds Other Sites:   depositrates.co.nz  |   landlords.co.nz
Last Article Uploaded: Monday, September 1st, 4:55PM
rss
Latest Headlines

Review supports TTE, not TET

The first release from the Government’s Tax Review panel has come out broadly in favour of the current tax treatment of savings.

Thursday, June 21st 2001, 11:39AM

by Rob Hosking

The Government’s Tax Review panel has come out broadly in favour of the current tax treatment of savings.

The taxed-taxed-exempt (TTE) approach currently used, which taxes the original income, plus the returns on the savings but exempts the withdrawal of those savings, is probably the best available tax treatment, the panel says. Although it does explore options for reducing the tax rate on earnings from savings – i.e. a TtE approach – in its first issues paper.

This view is at odds with the TET regime currently being advocated by Finance Minister Michael Cullen.

"The panel is not convinced that tax concessions would benefit national saving, and therefore favours retaining the present TTE regime," panel chair Robert McLeod says.

The official rate of saving in New Zealand is around 2% of GDP – a figure made up of aggregate savings by householders businesses, and the government.

A truer measure would also include investments in education and consumer durables, the panel says. If these were included the total value of savings would be around 20%.

New Zealand’s saving problem is not low savings, but rather poor quality savings, the panel says.

"New Zealand’s comparative lacklustre economic growth over the past two or three decades is attributable more to our earning a low average rate of return on investment than to a lack of investment," the report says.

The key issue for tax therefore is whether or not the system encourages households to invest savings in poorer performing assets.

It is this issue which is behind the recommendation of a tax on the family home – a recommendation which the panel concedes does not have a great chance of being implemented but one which its members thought should be a focus of public debate.

The tax, if implemented, would bring in $750 million a year to the government at current rates, and would also deflect some New Zealanders to investing in other assets, the panel says.

"A substantial amount of capital would flow elsewhere," McLeod says.

Cullen and other political parties have been quick to distance themselves from the panel's recommendation.

However, the political difficulties are only the start of the problems with the idea, PriceWaterhouseCoopers tax partner John Shewan says.

Shewan is broadly complimentary of the report: "it addresses the issues that needed to be addressed, and it's going to be useful not only for the professional community but also for the politicians."

He says there are major practical problems with such a tax on the family home.

"It would be fairly easy to avoid with devices such as family trusts, and overall I suspect it would be wonderful for the accounting industry but very unproductive for the overall economy.

"There is also a liquidity issue – a retired person would probably not have the cash flow to pay the tax. In those cases it would effectively be a death duty by the back door, because people would not be able to pay it until after they died and their estate is wound up.

More stories:


Finance Minister Michael Cullen not totally committed to TET
Saving and investment in New Zealand and the Super Fund
Government review recommends tax on housing

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

« Breakthrough on Aust tax creditsSovereign takes regulation bull by the horns »

Special Offers

Commenting is closed

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
  • Bank advice 'an area of concern'
    “In other words, the true home of 'too much selling and not enough advising...’; If someone walks into a bank and says...”
    10 hours ago by Dirty Harry
  • What’s the point of independent advisers?
    “Good work from Mr Berry. The “views paraphrased from the large fund manager” are ridiculous and if these views are...”
    10 hours ago by Brent Sheather
  • What’s the point of independent advisers?
    “Great article. Is one of the problems also that the providers (banks/insurance companies/fund managers etc) don't offer...”
    10 hours ago by btw
  • Leave KiwiSaver alone: Commentator
    “Nice commentary Claire - although by looking at global examples, Politicians (of all parties) can't help but fiddle with...”
    12 hours ago by Clayton Coplestone
  • Higher standards imposed on advisers
    “In my extensive time working with both AFAs and RFAs my experience has been that the quality of risk advise given by RFAs-...”
    1 day ago by Cyril
Subscribe Now

Weekly Wrap

Previous News

MORE NEWS»

Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AMP Home Loans 7.24 5.99 6.39 6.65
AMP Home Loans $200k+ 7.14 5.89 6.29 6.55
AMP Home Loans LVR <80% - - 5.85 6.29
ANZ 6.74 6.05 6.49 6.65
ANZ LVR > 90 6.74 6.55 6.99 7.15
ANZ Special - - 5.99 -
ASB Bank 6.75 6.09 6.40 6.65
ASB Bank Special - - 5.99 6.19
BankDirect 6.75 6.09 6.99 6.65
BankDirect Special - - 5.99 6.19
BNZ - Classic - - 5.99 ▼6.19
Lender Flt 1yr 2yr 3yr
BNZ - GlobalPlus 6.74 5.99 6.39 6.59
BNZ - Mortgage One 7.15 - - -
BNZ - Rapid Repay 6.74 - - -
BNZ - Std, FlyBuys 6.74 5.99 6.39 6.59
BNZ - TotalMoney 6.74 - - -
Credit Union Auckland 6.70 - - -
Credit Union Baywide 6.45 5.90 6.50 -
Credit Union North 6.45 - - -
Credit Union South 5.75 - - -
eMortgage 6.04 6.15 6.69 7.19
Finance Direct 6.10 6.45 6.69 7.10
Lender Flt 1yr 2yr 3yr
First Credit Union 6.45 - - -
General Finance 5.95 6.25 6.50 7.10
HBS Bank 6.15 5.85 5.99 6.25
HBS Special - - - 5.95
Heartland 6.45 6.75 7.00 7.60
Heretaunga Building Society ▲6.70 ▲6.00 6.50 -
Housing NZ Corp 6.74 5.99 6.19 6.60
HSBC Premier 6.84 5.95 5.95 6.55
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 6.75 5.99 6.39 -
Lender Flt 1yr 2yr 3yr
Kiwibank ▲6.65 5.99 6.39 6.65
Kiwibank - Capped 5.65 6.50 - -
Kiwibank - Offset ▲6.55 - - -
Kiwibank LVR > 80% - - ▼5.89 -
Liberty 5.64 - - -
Napier Building Society 5.80 6.00 6.70 -
Nelson Building Society 6.95 6.15 6.60 -
NZ Home Loans 6.85 6.09 6.40 6.65
Perpetual Trust 7.70 - - -
RESIMAC LVR < 80% 6.59 6.35 6.58 6.77
RESIMAC LVR < 85% - - - -
Lender Flt 1yr 2yr 3yr
RESIMAC LVR < 90% - - - -
RESIMAC LW DOC - - - -
SBS Bank 6.15 5.85 5.99 6.25
SBS Bank Special - - - 5.95
Silver Fern 5.95 6.10 6.55 7.05
Sovereign 6.85 6.09 6.40 6.65
Sovereign Special - - - 6.19
The Co-operative Bank 6.70 6.00 6.00 6.25
TSB Bank 6.74 6.00 6.19 6.60
TSB Special - - ▼5.79 -
Wairarapa Building Society 6.20 5.75 5.95 -
Lender Flt 1yr 2yr 3yr
Westpac 6.59 6.09 6.39 6.65
Westpac - Capped rates - 6.74 6.99 -
Westpac - Offset 6.59 - - -
Westpac Special - - 5.99 6.19
Median 6.70 6.03 6.39 6.60

Last updated: 1 September 2014 9:03am

News Quiz

What is the name of a new website aimed at improving the financial literacy of New Zealanders?

Get Smart

Money Sorted

Be Dollar Wise

Financial Literacy for You

The Exchange

MORE QUIZZES »

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
 
Site by PHP Developer and eyelovedesign.com