Forum Archive Index - February 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Derek,
>
>
>The scenario is one sided - wealth held overseas
>would be taxed on a falling NZ dollar, but there
>would be no compensation for the simultaneous 
>falling of wealth held in NZ.
>
>
Correct, and you will still have to pay tax on your overseas 
investment if the dollar rises again in subsequent years, returning 
you to the position you had before the NZ dollar depreciated.   The 
government collects the wealth tax whether the NZ dollar rises or 
falls.  They can't lose, the corollary of which is that you as the 
investor are almost certain to lose out heavily to the tax man.
> 
> 
>Will farmers be selling off bits of their farms
>to pay for the tax resulting from increases
>in land value ? (This would have bankrupted
>many Southland farmers had this been the case
>in the last 2 years) And meanwhile, would it be
>fair to exempt farmers while taxing other individuals
>who choose to invest elsewhere?
>
>
No, the farmers will be OK because the tax will only apply to listed 
investments.  If you are a private owner of a farm the wealth tax 
will not affect you.

But far from simplifying things the Cullen proposal will introduce a 
new dichotomy between a listed investment and non listed one.  If 
you own your own cafe you will be OK.  If that same cafe is bought 
out by Restaurant Brands and changed into a 'Starbucks', the 
shareholders of Restaurant Brands will get hammered with wealth tax. 
>
>
>Lastly, who could be bothered investing in risky companies
>like A2, BLT, WDT, ITC etc etc, when there is a risk
>of a big tax bill one year, then not being
>able to pay it when the investment falls the next?
>
>This would kill off much innovation in NZ.
>
>
Private investors would certainly be severely disadvantaged.  If you 
were an institution then you might have the critical mass so that 
your good investments would outweigh the bad ones and you would be 
OK.   Perhaps that is why some of the support for this move has 
come from institutions?    If such legislation is introduced, private 
investors will be disadavantaged if they refuse to deal through 
institutions.   Such a law change will mean more fees for 
institutions. SNOOPY














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