Australian investments to be treated like local ones
Investments in Australia will maintain their capital tax-exempt status under modified tax proposals being considered by the government.
Friday, February 10th 2006, 1:24AM
by Rob Hosking
“That is a real plus for managed funds. You will be able to invest in managed funds in Australia the same way as in New Zealand.”
There have been rumours the government would backdown on the earlier proposals, which would subject investments in the seven “grey list” countries to the same tax regime as other offshore investments.
Fyfe, who is one of the negotiators for the industry with ministers and officials, told advisers the shift was an important one.
The industry, and tax practitioners, have argued there should be some exemption for Australia because of the moves towards a single economic market.
Fyfe says from an economic point of view there are still problems with the government proposals.
“It means Australasian equities will be advantaged over other offshore investments, and that is going to mean investors will be overweight in the Australasian market.
“There will have to be a correction at some point and that could have a very very bad effect on New Zealand.”
The government is sticking to its option of taxing investments offshore by the comparative value (CV) method, although the option of taxing by earnings per share is now being discussed.
The industry has argued the comparative value method, which taxes the change in value of a share over a period, should be modified to tax only 50% of the change in value.
Earlier, Finance Minister Michael Cullen had dropped hints he might be amenable to compromise on this “presumably we will meet somewhere in the middle”, he told one post Budget forum last year.
However it now appears the government is sticking to its original 100%.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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