Tax changes may have unintended consequences: Hildyard
Tower Investments says that if the latest proposals for taxing international investments goes ahead then the inequity problem between managed funds and direct investments would remain unresolved.
Wednesday, October 4th 2006, 7:26AM
Under the proposals managed funds would pay taxes under a "fair dividend rate" based on 5% of the opening rate value, whether or not the investment made a profit, while direct investors would pay a maximum of 5% but only to the extent that the investment was profitable.
Hildyard believes that the proposed changes restore a tax-created disparity and may disadvantage managed-fund investors, and could compromise the objectives of KiwiSaver.
"The 5% rate is too high and will have other unintended consequences if it is not addressed," he says.
Hildyard remains positive about KiwiSaver and says for it to get off to a good start there needs to be equity between managed funds and direct investments.
"KiwiSaver is a managed fund, and as such it should provide investors with all the benefits that managed funds offer without having to jump an additional tax hurdle compared with direct investment."
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