Forum Archive Index - December 2002

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

Hi Allan,
 

> 
>The following answers are all from the perspective of a U.S.
>investor governed by  our taxation laws.
> 
>Q.  Can anyone name another country that gives tax paid back to
>foreign investors.  A. Yes, Australia.  We do get the imputation
>credits from Australia.  It works out (for us) to be exactly equal
>to the supplemental payments that is sometimes provided by NZ co's.
>
>

I'm really surprised by this answer.   IIRC correctly, the US market 
doesn't have an imputation credit equivalent system for its own 
citizens investing in their own market.   So I'm really surprised 
that an American citizen can claim franking credits from Australia.

Are you sure you can claim franking credits Allan?   Or are you 
thinking of withholding tax?   I know there are bilateral investment 
agreements for withholding tax.

>
> 
>Q.  How much tax do you show on your income tax return. A. We must
>show the full amount of the dividend plus the supplemental
>payment.
>
>

Ah so my suspicions, at least in the case of the USA, are correct.  

The gross dividend payment you receive and declare 'at home' includes 
some of the tax paid by to country in which the investment is 
domiciled.  Tax that is not withholding tax.  I am fairly sure that a 
New Zealander investing in the United States cannot claim the same in 
reverse.

>
> 
>Q.  Overseas investors are simply repatriating the dividend money
>back offshore -- (and not) -- helping the local economy bubble
>along.  A.  When I receive a dividend it goes in a Bank of New
>Zealand account held for additional future investments.  On my last
>two trips to NZ, I withdrew some money to spend while I was in NZ
>and thereby helped the economy bubble along.  It also makes more
>sense to leave the money in NZ dollars and not incur currency
>commissions on each transaction. 
>
>

OK, I'll cross you off my list of American corporate cowboys Allan 
;-). 

The point of my original question, apart from wanting to stir the pot 
(no pun intended Allan), was to highlight what happens with large 
institutional shareholders.  I would doubt that, for instance, Edison 
Mission Energy puts more money back into New Zealand than the 
dividends they take out of Contact.

>
> 
>Q.  Is government policy contributing to the shortage of investment
>capital available in NZ.  A.  To the contrary.  This situation makes
>it more likely that foreign capital will be attracted to the NZ
>capital markets thereby increasing the overall size and liquidity of
>the markets.  A goal which has been continually sought by many
>Kiwi's.
>
>

I accept your point about improving the overall liquidity of NZ 
markets.  But the overall size?   If a foreign investor merely buys 
shares in a New Zealand company that is already well established and 
paying dividends we are just replacing a New Zealand shareholder with 
an overseas one.  Does changing who owns the slices of the pie, 
change the size of the pie?

>
> 
>Q.  Why are NZ co's so intent on giving higher payouts to overseas
>investors, at the expense of the hapless home market investor?  A. 
>I think this has already been answered by another contributor, but I
>will say that what it  does is treat overseas investors just as a
>Kiwi would be treated on the identical investment.  In other words
>it evens things up for the overseas investor since NZ does not give
>imputation credits to us. (as Australia does for U.S. investors)
> 
> 

I am all for treating all investors equally.  I realize that with tax 
systems all over the world differing, this is not an easy task.  
However, I do have a concern that giving foreign investors superior 
tax treatment to the locals might distort the local market.

SNOOPY



---------------------------------
Message sent by Snoopy 
e-mail  tennyson@caverock.net.nz
on Pegasus Mail version 2.55
----------------------------------
"You can tell me I'm wrong twice, 
but that still only makes me wrong once."

----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/chat/forum/