Australian tax changes promising

Recent Australian tax moves should bring greater urgency to changes to New Zealand’s foreign tax regime, according to PriceWaterhouse Coopers tax partner Paul Mersi.

Australian Treasurer Peter Costello recently released a discussion document on a review of that country’s international taxation arrangements.

The proposals represent both a possible threat and a possible opportunity for New Zealand, Mersi says.

The batch of items up for discussion which would make investment into Australia more attractive.

These include improving the treatment of international investors in Australian managed funds, and altering the foreign income fund regime.

The briefing papers from New Zealand’s Inland Revenue Department to the incoming government talks generally of an increasing need to focus on international tax issues but goes no further than that.

There is growing competition between countries to use tax to attract investment.

"Tax isn’t the only thing people base an investment decision on, but at the margin it is something that can be quite influential," Mersi says.

The proposals are more focused than New Zealand’s McLeod tax review, which was released last year and which was a far more all encompassing view of the tax system.

The Australian governments have history of being prepared to alter their tax regime to attract foreign investment that goes back to the 1950s and 1960s.

New Zealand has – certainly since the mid-1980s – taken a more neutral approach.

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