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No tax break for UK listed trusts: IRD

There is unlikely to be any other GPG-style exemptions to the proposed changes to investment tax rules – either for UK listed investment trusts or Australian unit trusts.

Friday, June 9th 2006, 6:03AM

by Rob Hosking

Inland Revenue Department senior tax policy adviser David Carrigan told an Eriksen Associates' superannuation and investment conference in Wellington this week that there are good policy reasons for allowing GPG a five-year holiday from the tax changes – and those reasons do not apply to the listed investment trusts.

Those reasons are tied up with the upcoming review of controlled foreign company rules. If GPG was a resident New Zealand company under the present rules, investors would face extra tax.

“If there was an exemption for active income (under a changed controlled foreign company regime) GPG might be able to become an New Zealand resident company again,” Carrigan told the conference.

“That’s the reason for the five year holiday.” Carrigan acknowledged the other reason was “a lot of pressure.” The same issue does not apply for listed investment trusts, Carrigan says.

A key part of the controlled foreign company regime review is looking at taxation of active investments by CFCs, which most countries make exempt but which New Zealand – at this stage – does not.

“Those investment trusts do not, generally speaking make active investments so they can’t really argue they should have five years to see how the review of the controlled foreign company regime goes.

“And if we do exempt UK investment trusts we are saying to investors ‘don’t invest in New Zealand managed funds industry but do invest offshore through UK investment trusts’.

“So I think they will have some trouble convincing the select committee they need a five year holiday.”

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

« New disclosure bill delayedSovereign takes regulation bull by the horns »

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AIA 4.55 ▼2.29 ▼2.59 ▼2.65
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BNZ - Mortgage One 5.15 - - -
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HSBC Premier 4.49 2.25 2.35 2.65
HSBC Premier LVR > 80% - - - -
HSBC Special - 1.99 - -
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ICBC 3.69 2.25 2.35 2.65
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