Tax rejig looked at to encourage short term investment

By NZPA

Monday 12th July 2004

Finance Minister Michael Cullen says a rejig of tax laws may encourage investors to switch funds from long term investments like property into short term investment like the high-tech sector.

Dr Cullen today welcomed the release of an issues paper inviting consultation on how to improve the tax rules on depreciation of assets.

Dr Cullen said he was concerned that current economic depreciation rates did not reflect " the reality of economic life in a time of rapidly advancing technology".

"If they do not, they may have a disincentive effect on the level of capital investment and may be biased in favour of long-term investments such as rental housing and against short-term investments such as high tech machinery."

He said it was important that investment decisions were not made for tax purposes.

Today's paper was the first step in a policy making process and suggested ways of reducing possible tax biases and resolving practical problems with application of tax rules. The closing date for submissions on small technical issues contained in the paper is August 31. The closing date for larger issues is September 30.

The larger issues include methods of calculating depreciation for plant, equipment and buildings and the extent to which rental property owners should be able to separate out structural components of a building and depreciate them at different rates.

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