by Rob Hosking
By mid-yesterday word had leaked on the main points of those “modifications” – an option for offshore investments to be taxed on an earnings per share basis.
It is also understood – and this is more welcome to investors – there will be some special rules put in place for investments in Australia.
The moves are the latest in the saga of changing how New Zealanders’ investments are taxed, both domestically and offshore.
It is the offshore proposals, contained in a discussion document last June, which have attracted the most criticism, especially the drive to abolish the “grey list”.
National finance spokesman John Key has attacked the earnings per share proposals saying the idea is a back down and impractical.
“The problem with this new plan from officials is that there are many ways of calculating earnings per share. It's something few people understand properly and it's very technical. Adding a complicating twist like this to what was already a bad idea is silly.”
Complicating the matter is the introduction of new accounting standards, says Kensington Swan tax partner Tony Lines.
“I’m not an expert but the new accounting standards include economic value and that will include the capital gain.” Both Dunne and Finance Minister Michael Cullen are on record as saying they do not want anything which looks like a capital gains tax.
PricewaterhouseCoopers tax partner John Shewan says the earnings per share idea is an improvement on the earlier proposals.
“There will be criticism this is still a tax on capital gains and it is to the extent that the companies’ earnings and capital gain are reflected in the share price.”
Deloitte’s tax partner Greg Haddon says that for investors the issue will be complying with the new approach.
“The concept isn’t difficult to understand,” he says.
“The question though will be whether the average investor will have the time, the inclination or the ability to find the right information.”
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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