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Property Funds, Accountants Welcome Tax Moves

Fuseworks Media
Fuseworks Media

Wellington, Dec 13 NZPA - Listed property trust and tax
consultants welcomed changes or mooted changes to the tax system,
saying they would level the playing field for investors and
companies offshore.

Shares in commercial property funds like Kiwi Income Property
(KIP), Macquarie Goodman, AMP Office and ING also rose a few cents
as investors welcomed changes to the
Taxation (Annual Rate, Savings Investment, and Miscellaneous
Provisions) Bill.

"In particular, it removes the problem of lower-income earners
being over-taxed on their earnings through managed funds and the
over-taxation of managed funds' investments compared with
individuals," Revenue Minister Peter Dunne said today.

KIP said currently investors were taxed on all income distributed
by the trust.

The new rules "means that any capital gains derived by the trust
and the benefit of tax allowances will effectively pass through to
most investors.

Meanwhile, Ernst & Young welcomed a review of international tax
rules to avoid companies going to cheaper bases offshore.

"Essentially the Government is proposing to bring in an active
income test for offshore activities," tax director Jo Doolan said.

"So, if businesses are going to be manufacturing goods offshore
they won't be penalised by the tax system, as they currently are."

"It's a long-awaited positive move to bring New Zealand into
line with other countries, like Australia."

Ms Doolan said
companies could now envision a more competitive future "and make
economic decisions that are not tax driven".

"Under the existing rules if New Zealand companies wanted to
expand offshore then the answer was move out of New Zealand if you
do not want to suffer the tax consequences.

"When we are wanting companies to focus on high value and to
export, having a tax system that penalises them from operating
offshore had the ability to seriously curtail our future growth."

The Finance and Revenue Ministers, Michael Cullen and Peter
Dunne, said today the Government was looking at a radical shift,
"one that distinguishes between active income, such as
manufacturing and industrial activity, and passive income, such as
royalties and interest".

"Under such a distinction, offshore active income would be
exempt from New Zealand tax, rather than taxed as it is earned, as
happens now."

The Ministers said they wanted to ensure New Zealand companies
with offshore subsidiaries obtained the same advantages in another
country as their competitors.

"The tax rules of nearly all other countries distinguish between
active and passive income, and either delay taxing offshore active
income until dividends are paid or exempt it altogether, as
Australia does."

But KPMG sounded a cautious note, saying the test of
effectiveness would depend on the level of so-called "base
maintenance" provisions which had the potential to further increase

It also noted that shareholders would be taxed when profits were
distributed through dividends, clawing back the benefits of the

"There is an opportunity to do better [than other countries] and
this should be taken."

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