Nats would adopt tax proposal
National would adopt the government’s latest set of investment tax changes – but at a lower rate.
Wednesday, October 11th 2006, 6:51AM
by Rob Hosking
The latest proposal is for all offshore investments to be taxed at a maximum rate of 5% - both gains and any distributions. Managed funds will pay the full 5%, while individual direct investors pay less than that if their investment makes a less than 5% gain.
Key says the 5% is too high and a rate of 3% is a better option.
“Currently the tax position draws people to seek housing. I would rather see balanced portfolios and I think the way is to try to redraw tax on other assets. Rather than whack a capital gains tax on all assets.”
Key says he does not like capital gains taxes because they are difficult to enforce and encourage avoidance behaviour.
For offshore investment he favours a rate of 3% which applies to everyone – individuals and funds.”
It would apply regardless of how well, or how poorly, an investment performed.
Although Key says he is not totally comfortable with the idea of people paying a tax when their investment is not doing so well, he says having the rate as low as 3% should make it more palatable.
That would also attract people into diversifying their portfolio, and would also encourage them to use managed funds, as a 3% rate would allow them to make a decent after-fee and after-tax return on their investments.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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