News
Taxing investment income
Proposed changes to the taxation of investment income has been the subject of debate for some time now.
Since at least October 2001 when the McLeod Report was released, there has been comments, criticisms and variations on the theme.
Amid the rhetoric, one could well be excused for not knowing what was proposed, what was rejected, what was promised and what might still be on the drawing board. Set out below is a short chronology of events to date. We expect the next announcements next month followed by a Bill (dealing with both the domestic and off-shore proposals) in May.
The Government has recently reiterated its preference for a “look through” approach for domestic investments made through collective investment vehicles. However, in relation to offshore investments it has recognised the public opposition to the repeal of the grey list exemptions. There has also been suggestion of preferential treatment for Australian investments.
We will keep you informed of developments in future updates.
In the meantime, if you have any questions please contact your usual Bell Gully advisor or any of those listed below. (Click on timeline to enlarge.)
Notes:
- "Tax review 2001" (McLeod Report) recommended taxing offshore portfolio investment and savings through "a risk free rate of return method", essentially taxing investments based on the deemed rate of return.
- "Towards Consensus on the Taxation of Investment Income" (Stobo Report) recommended that domestic portfolio investment be taxed either on the basis of a flat "Income Savings Tax", or alternatively on the basis of a "look through" arrangement for investment vehicles that would tax individual holders on the income derived by the vehicle at personal tax rates. For offshore portfolio investment, the report proposed repealing the preferential tax treatment for investments in the seven "grey list" countries and that offshore equities be taxed, with a flat Income Savings Tax or on a comparative value basis that would tax offshore investments in collective vehicles based on the assets change in value. It recommended that only 70% of the asset change in value be taxable.
- "Taxation of investment income," a discussion document by Inland Revenue adopted the "look through" arrangement for domestic investments. For international investments, it proposed repealing the grey list exemption and taxing offshore investments based on a change in comparative values. It rejected the 70% threshold proposed by the Stobo Report.
- The Government is expected to make an announcement in March 2006, indicating proposals for reform to the offshore investment regime.
- The Government is understood to be working towards introducing domestic and offshore proposals in a Bill to be presented in May.
Bell Gully Tax Team News
Bell Gully's tax team has this month been named as clear market leader in New Zealand for the second consecutive year by International Tax Review's World Tax 2006 guide. The guide notes the firm's "stable of eminent specialists" and its ability to "offer a broad spectrum of first-rate advice".
Bell Gully has been named IFLR New Zealand National Law Firm of the Year for the third consecutive year. Firm Chairman David Simcock will receive the award at the IFLR Asian Awards 2006 ceremony at the Ritz-Carlton in Hong Kong in March. It is the third year in a row, and the fourth time in five years, that the firm has received the award from respected global legal publisher International Financial Law Review. The awards recognise the leading legal advisers in international corporate and financial transactions over the past year.
For further information, please contact your usual Bell Gully advisor or:
AUCKLAND
Willy Sussman
Partner
John Bassett
Senior Associate
Monique Mackie
Senior Solicitor
David Simcock
Consultant
