Heavyweights put up tax alternatives

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Industry heavyweights have weighed in with counterproposals for the government’s changes to how investments offshore are taxed.

Tuesday, September 12th 2006, 5:32AM

The ISI has suggested a “modified grey list” which would mean no capital gains tax on investments in the existing grey list countries plus others with a similar regime: but exempting non-distributing vehicles – i.e. vehicles such as the Open-Ended Investment Companies (OEICs).

“Our industry acknowledges that OEICs are seen as a particular problem, in that they often pay little tax in any jurisdictions and rely on capital growth to provide the return,” ISI chief executive Vance Arkinstall told the Finance and Expenditure Select Committee.

“This industry promotes OEICs but would be prepared to see these excluded from the regime in order to achieve resolution.”

The ISI also proposes a “black list”, where investments would be subject to capital gains tax.

AXA suggested the proposed capital gains tax rate be lowered from 85% of the gain to 60% -although its own calculations suggest 35% is closer to fair value.

The 60% is suggested “as an accommodation to the concerns of officials and the Government over the fiscal cost.”

The company also opposes the unrealised nature of the regime, saying no country in the world taxes unrealised capital gains.

AXA also focussed on the way the government had left life insurance as a separate issue to be dealt with later on. It says life policies should be able to elect into the portfolio investment entity (PIE) regime and be treated the same way as defined benefit superannuation schemes.

Tower remains “strongly opposed” to the repeal of the grey list and the consequent extension of the capital gains tax on offshore investments.

All investors, including managed funds, should be exempt from capital gains tax, it argued.

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