I’ve had a number of responses to my Blog on tax. These are published here as the comments function is currently turned off. If you would like to add something email me at blog@goodreturns.co.nz

Prospect of fairness unlikely
Hi Phil, a belated comment on your capital gains Blog. In all the discussion about the tax, people seem to have ignored the comment in the discussion paper to the effect that the government believe it is in the best interests of the country that New Zealanders invest at home rather than overseas. Surely this is as much, if not more, the driving force behind the tax than the raising of revenue itself. So long as this belief exists in our socialist government, the prospect of making tax on overseas investments more equitable is unlikely, Cheers, Alan Milton.

Tax driving good people away
When Dr Cullen learns the simple lesson of not penalising New Zealand savers he may get somewhere. Before I retired I had the good fortune to work for a well known electricty supply organisation in Auckland for 26 years. They had a National Provident lump sum super scheme in place with a dollar-for-dollar subsidy with a cap of 10% of your salary etc.
When I worked overtime under Rob Muldoon I frequently paid the top tax rate of 56% (prior to the Lange Govt reforms) and then put that money into providing for my retirement.
When I retired the lump sum was paid out and I pay income tax on the interest this earns as if it were wages, salary etc. There is NO CONCESSIONARY INCOME TAX RATE FOR RETIREES IN NZ. However there are concessions in place in Australia for retirees for income tax. Therefore Dr Cullen and Labour want to penalise your savings despite the wall-to-wall rhetoric of talk wanting you to save. Yeah Right!
Take as an example the ASB Bank Headstart bank account for children, babies etc. The deduction is 19.5% at source on children’s savings. Again a concession could apply.
How can the New Zealand government expect to attract ExPats back home only to find draconian rules to tax foriegn investments held by Kiwis whilst the Cullen Fund and ACC invest ovewrseas no doubt granting themselves a dispensation from the de facto capital gains tax legislation beyond Australia.
The same will apply to Ex Pats concerning their as of right workplace Super from Australia where no doubt this Government will want a slice of the value of the earnings from that fund or apply a Capital Gain tax to that.
There is no incentive to save in New Zealand and if you do the government wants its pound of flesh every which way. A good starting point would be to ask Sir Bob Jones, Sir Ron Briely and others why they dont reside in New Zealand these days?
We in New Zealand are driving good people away for good and we wonder why they keep on moving away. – R. Clarke.

One of the things that struck me about the AXA results this week is how big the BNZ deal is.

As the company keeps pointing out it makes them “the clear leader in retail wealth management” space – a claim others may dispute.
With the deal funds under management increases from $2.5 billion to $8.4 billion. Not bad in anyone’s book. What’s big about it is AXA gets 40,000 new clients and access to tens of thousands more.

And it’s exclusive. We understand the deal to distribute products through the BNZ is exclusive and for quite a long period of time – possibly as many as 10 years.

As we pointed out in the story AXA will move BNZ’s funds to its Assure platform and “migrate existing Bank of New Zealand Investment Management customers to AXA products and services over the next 18 months.

We also understand that the deal puts AXA back into the home loan space. Good Returns will be providing more detail on this as info comes to hand.

It’s going to be interesting to watch how AXA does digesting this deal and how it runs things.

The last deal like this was ANZ and ING getting together a number of years ago now. One of the observations is that while a deal like this gives size and distribution, managing it effectively is a major task.

The two other things of interest in the results were the strength of AXA’s risk business and what is happening at Spicers. More on these later.

To me it seems there are two trends developing in the financial services area which are to some degree anti-adviser. One is the emergence of online financial services – a la Rabobank and my previous post. The second is insurance companies’ desire to sell direct to the public.

Tower has talked about it being a growth part of the business. Asteron has done a deal with AA in a joint venture (which is direct via telephone and the Internet) and I see over in Russell’s Blog some others are mentioned as having had success selling directly.

So in insurance there is evidence of more emphasis on direct sales.

Rabobank has been my example of investment sales online, but the AMP announcement last week adds another dimension.

It says two strong areas of its business are life and workplace savings. Managed funds are being trimmed back.

I suspect what AMP is saying will be repeated by others. Workplace super and KiwiSaver are going to be big.

My question is how do advisers get a piece of the action? My view is that some of the smarter ones will sell services to employers on a fee basis, but the majority of advisers will miss out on this growth area.

These are quite high-level thoughts at the moments – or observations – and need to be developed further. Is a trend developing? I’m interested to know what others think.

Email your thoughts on this idea to blog@goodreturns.co.nz (The comments section of the Blog has been turned off for a while due to spammers being a pain and making lots of irrelevant posts).

The Rababank move into retail financial services is really interesting as it is not just a bank offering an online call account.

It seems to me, on the face of things, this is the closest a big financial services organisation has got to selling products online since AMP tried with Liquid.

If you recall AMP spent millions on building a site that offered news, information, data and the ability to buy financial products. However, it pulled the plug after a couple of years (and if I was into puns I would suggest all the liquid was poured down the drain).

Liquid, I believe, could have succeeded, or at least done it better but for a few fundamental mistakes. One was running before it could walk (or swimming before it could paddle).

Rabobank is a much smaller proposition. It has its call account, along with competitive term deposits that will attract people.

As we reported on Good Returns it has also done a deal with three fund managers to sell their products, and it plans to offer things like model portfolios, advice etc through its site. A couple of other sites offer managed funds online, such as FundSource and Moneyonline.

Assuming Rababank is successful it may well – I suspect – add other products such as insurance to its offering.

Time will tell if this is the real birth of online financial services in New Zealand.

The government’s plans to change the way offshore investments are taxed appear to be turning into a shambles.

We’ve gone from things like risk-free rate of return right through to something that taxes investors on an earnings per share basis.
It is clear a huge amount of work is going into this and I understand from some sources that the officials have gone done a number of routes and ending up finding they were cul-de-sacs.

However it seems that time is running out and a solution isn’t clearly imminent. Maybe there is no simple answer – other than a capital gains tax?

Now I am not advocating a CGT, but the idea of a CGT, or avoiding one, has become a fixation of the government.
As it’s often said no government would be politically brave enough to introduce one, especially in this environment where many in the nation are rooting for tax cuts.

My observation – which is shared by others – is that the government is dead set keen to make sure its new proposals aren’t seen, or construed, as a CGT. (Look how National finance spokesman keeps trying to make political capital by calling it a CGT or a new tax).
If that becomes its underlying objective, then I am sorry to say whatever comes out of it will fail.

What I want to see are changes made to tax on New Zealand investments, as proposed, and a regime that is simple and investors can understand.

Ministers say the changes to New Zealand and international tax regimes will be introduced together rather than separately. I’m not so sure that will be the case.

If you would like to comment on this Blog then email your thoughts to Blog@goodreturns.co.nz as the comment function has been turned off due to spammers – the bastards.