I'm confused by your -- Ah so my suspicions etc. paragraph. The supplemental payment received by us (if it is full) just offsets the withholding tax. You say "tax that is not withholding tax" -- there is 15% non-resident withholding tax -- the supplemental dividend simply puts us in the same position as a Kiwi investor, we do not get "superior tax treatment to the locals" (which) "might distort the local market".
Australia's system is similar in operation. If the dividend is 100% franked at 30% we end up getting the basic dividend -- the franked amount gives us an imputed credit -- which exactly offsets the withholding tax. In operation we end up even with an Aussie investor as far as Aussie-land goes -- we still have to pay our government taxes, so in that respect are handicapped -- but, that is the cost of doing business with an overseas country.
This also applies to my NZ purchases and dividends. In some cases, as with TNZ, we do not get the benefit of the supplemental payments. We get screwed at the same time we own a dog of an investment vehicle. Live and learn. Ouch.
On the overseas investor increasing the SIZE of your market. I've purchased a number of IPO's in NZ. Since I'm just a small fish I would guess the total number of small fish plus some big one's do increase the overall size of your market. What would happen to your market if all overseas investors quit investing in Jan. of 2003. Me thinks the overall size of your market would shrink terribly. I know our would be much small if all overseas investors decided to just stay home.
Hope this makes things clearer for you Snoopy, or don't I understand what you are trying to say??
Allan
--- On Sun 12/15, tennyson@caverock.net.nz tennyson@caverock.net.nz wrote:From: tennyson@caverock.net.nz [mailto: tennyson@caverock.net.nz]To: sharechat@sharechat.co.nzDate: Sun, 15 Dec 2002 10:46:41 +0000Subject: Re: [sharechat] Overseas ans. to Supp. payments non-NZ holdersHi 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 toforeign investors. A. Yes, Australia. We do get the imputationcredits from Australia. It works out (for us) to be exactly equalto 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 mustshow the full amount of the dividend plus the supplementalpayment.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 moneyback offshore -- (and not) -- helping the local economy bubblealong. A. When I receive a dividend it goes in a Bank of NewZealand account held for additional future investments. On my lasttwo trips to NZ, I withdrew some money to spend while I was in NZand thereby helped the economy bubble along. It also makes moresense to leave the money in NZ dollars and not incur currencycommissions 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 investmentcapital available in NZ. A. To the contrary. This situation makesit more likely that foreign capital will be attracted to the NZcapital markets thereby increasing the overall size and liquidity ofthe markets. A goal which has been continually sought by manyKiwi'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 overseasinvestors, at the expense of the hapless home market investor? A. I think this has already been answered by another contributor, but Iwill say that what it does is treat overseas investors just as aKiwi would be treated on the identical investment. In other wordsit evens things up for the overseas investor since NZ does not giveimputation 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.nzon 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 athttp://www.sharechat.co.nz/chat/forum/Join Excite! - http://www.excite.com The most personalized portal on the Web!
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