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What readers think of tax changes

Thursday, April 13th 2006, 10:20AM

by Philip Macalister

We have had quite a few emails this week about the proposed tax changes to investments. The following is a sample of what people are saying.

Jim Minto at Tower is supportive of the changes:
Back in 1987 I attended a unit trust conference in Auckland which filled a hotel ballroom and I believe was attended by close to 800 people.
The BNZ Unit Trust Group was launched there amid much hope for an industry that would grow along the lines of international parallels in managed investment. 2005 saw the BNZ decide to exit the manufacturing of this product. In Australia its parent NAB is a market leader in this area.

Other companies are either disinvesting quietly or removing focus from this area.
In the last 10 years the Australian industry has quadrupled in size whereas New Zealand has grown by 11% absolute over the whole period based on figures I have seen. Net of investment returns there has been major shrinkage.
My point is this industry has stagnated around the participants and one of the key reasons has been the tax inefficiency of funds. The industry has suffered tax disadvantages against other forms of direct investment in New Zealand and offshore.
The industry needs a level playing field and these changes create that level playing field particularly for Australasian investment. I support that.
The government has moved to fix a longstanding problem and this will benefit investors. The government deserves credit for that.
The past offshore tax treatment of investment has been extremely complex with many gaps. The solution announced is not to everyone's satisfaction. Yes there are shortcomings but the industry has had an opportunity to lobby.
Most of this industry is owned by Australian institutions and I know the parent organisations will be embracing this announcement with enthusiasm.
My view is the industry should take this as an opportunity and move forward.

Novel approach to tax
Phil agree re skewing investment to approx 2% of world's capital markets does nothing for normal portfolio diversification and hence raises New Zealand investors' portfolio risk for no good apparent reason.
Also the concept of taxing unrealised capital gains is a novel approach not found in more sophisticated tax jurisdictions which really understand the need to lift savings rates.
This is a fairly blunt tool to encourage investment in local markets as opposed to looking at reasons investors prefer offshore investments versus our own market.

Use UK model
Well, well here we go again. You save hard to set yourself up for the future and guess what you get pinged! Another reason to think about whether New Zealand is the right place going forward- we are from the UK and have been here nine years.
I can see accountants getting wealthier, why don't they just use the UK CGT model. It is a hell of a sight easier and fairer.

NZ rest home for world
As always with this government, it takes from the sensible people who do save and pay their debts and don't overspend. Its so-called needs to save the "ordinary hardworking people" from themselves.
As I see it if you are a hardworking, ordinary middle-class person than you want to and will look after yourself and would prefer to do so with the money you make.
Who gives them the right to take and give my money to people who do not look after themselves or are stupid enough to spend what they don't have?
To punish people who are smart enough to invest and save is just plain stupid. What will happen is that the money will go out of New Zealand and New Zealand will be just another state of Australia.
Propping up the New Zealand money market artificially will only lead to more problems.
The socialist principles have never worked worldwide and do not guarantee a better life for people who want to achieve on their own merits.
More people will look at their future will leave and the people coming to New Zealand are the ones who cannot make in the world on their own or come here for a "retirement" lifestyle and do not contribute to the growth of the country.
Only a healthy competitive business will increase the wealth of the country and can compete on the world market.

As usual I welcome any comments. Please send them to blog@goodreturns.co.nz
« First thoughts on tax changesMy view on the future shape of the advisory industry »

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