Investment tax proposals outdated and misguided, says academic

The government’s proposed changes to how collective investments are taxed belongs in the closed economy of another era, says Auckland University Associate Professor Anthony Endres.

Tuesday, October 4th 2005, 6:33AM

by Rob Hosking

"The current rapid pace of international financial integration, increasing cross border corporate activity and the exceedingly small, open nature of the New Zealand economy make the creation of a uniquely New Zealand approach to portfolio taxation seem rather dated," he says in his submission on the discussion document released by the government shortly after this year’s Budget.

“In general the proposals … would have been suitable for New Zealand in the 1950s and 1960s when the economy was considerably insulated from international capital markets; they are not outward looking, 21st Century proposals.”

And he says that if the government wants a capital gains tax "then more serious consideration should be given to harmonising the proposed tax with the Australian system. To set up a complex, costly system for New Zealand seems misguided."

One of the areas of the proposals which has attracted the most attention has been the suggestion that investments in the seven grey list countries be subject to the same capital gains tax as investments in other offshore vehicles.

Investments within New Zealand will not be subject to the capital gains tax.

Endres says it is increasingly difficult to distinguish between domestic and offshore investments.

"How are such companies as AMP, the ANZ and Telstra defined— they are listed on both the ASX and NZX and have extensive operations in the NewZealand economy? Are they defined by their home exchange? How is Lion Nathan defined –it has extensive operations in New Zealand? How are the Australian Foundation Investment Trust or the Foreign and Colonial Investment Trust defined?"

Endres says any changes should be aimed at developing a regime, which “should not depart materially” from the regime, which applies in Australia.

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

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Investment tax proposals outdated and misguided, says academic

The government’s proposed changes to how collective investments are taxed belongs in the closed economy of another era, says Auckland University Associate Professor Anthony Endres.

Tuesday, October 4th 2005, 6:33AM

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