Call to end trans-Tasman double tax
Thu, 30 Aug 2012 2:29p.m.
Billions of dollars would be added to the trans-Tasman economy by ending double taxation of dividends, says research commissioned by the Australia New Zealand Leadership Forum.
The research by Sydney's Centre for International Economics and New Zealand Institute of Economic Research was sent to the productivity commissions of both countries on Monday and would be put "in the mix" of an economic project the commissions were carrying out, a spokeswoman for the New Zealand Productivity Commission told NZ Newswire.
A draft report is due on September 18.
The research finds that mutual recognition of franking and imputation credit schemes would cause the trans-Tasman economy to grow by AU$5.3 billion (NZ$6.9 billion) by 2030.
But there would be a short-term hit to tax revenues of NZ$494 million for Australia and NZ$156 million for New Zealand, the Australian newspaper reported.
A change would let people claim personal refunds on the tax companies have already paid on the dividends they distribute to shareholders.
Currently a trans-Tasman imputation regime enables trans-Tasman companies to allocate franking or imputation credits but does not completely eliminate double taxation, because shareholders are only able to use credits from their home jurisdiction, rather than receiving a full credit for the corporate tax paid, CPA Australia has said.
Companies have been lobbying for reform of the imputation regime after an issues paper on strengthening economic ties between Australia and New Zealand was released by the two commissions in April.
Nuplex Industries, which has 38 percent of its sales in Australia and 90 percent of its shareholders in New Zealand, said in June that recognition in New Zealand of franking credits in Australia would increase after-tax returns to New Zealand investors.
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31/08/2012 9:49:32 p.m.
Its been one sided for years and Aussie have been reluctant to change the status as it favour them more than Kiwi's. Many such imbalances exist and we can trace such errors back to Jeffery Palmer when putting together the CER deal etc. Basically handed the Aussie's a blank cheque and they are very very reluctant to let it pass.
30/08/2012 7:49:44 p.m.
On the other side Labour faithful like idiotacre claim that all businesses should be double taxed like this, and anyone who doesn't get taxed like this is ripping hard working beneficaries off!This is one reason many businesseses dont pass profits across borders. Eg Apple earns money outside the USA, then doesn't move that money back through the USA, but will re-invest the money were it was earned, to avoid double dipping like above, and the high 35% company tax rate of the USA. If Apple doesn't move the profit through the USA, they can pay the local company tax rates, and it in turn grows apple worldwide vs needing capital injection from USA shareholders.Fonterra does similar, hence they have invested billions overseas, like the $300+ million they invested in Sanlu before it failed, and the over $500 mil invested in China dairying since. Or Fonterras involment with Americain Dairy, although Americain Dairy is against Fonterra access to US market, as the EU blocks Fonterra access from the EU. Americain Dairy wants Fonterra expertise while trying to block it - wierd business partners.So long as they pay the correct taxes in the country they were earned, its all legal. Fonterra earnings in the USA are taxed at 35% even though our NZ tax rate is 28%.Fonterra gets around the dividend problem partly by reducing dividend. Non-Fonterra NZ dairy companies have complained about it, as Fonterra maximises the dairy payout. The competitors want lower milk prices as they pay Fonterra at the same rate as farmers get paid, so its in their interest to minimize dairy payout and want maximise Fonterra dividends. If government stuff up taxation, its up to individuals and business to make the best of the situation legally. This is why having different tax rates for business/trusts/income is idiotic and why Labour raising income tax to 39% decreased the tax collected from that tax bracket even in boom years with higher rates.
30/08/2012 4:58:05 p.m.
This double taxation on dividends as it stands today disgusts me. It is a lose lose lose situation all round.
Investors lose big time purely through tax and, as in my case, I refuse to own a single Australian share until it is fixed. Because of this NZ and Aussy governments lose, and both countries economies lose... billions is probably correct.
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