Tax talks accused of skirting main problem

By Phil Boeyen, ShareChat Business News Editor

Monday 4th March 2002

The Employers and Manufacturers Association (EMA) is warning investors not to expect too much from a joint discussion paper aimed at resolving the so-called triangular tax issue between New Zealand and Australia.

Finance Minister Michael Cullen and his Australian counterpart Peter Costello are scheduled to meet in Sydney on Wednesday to release the paper and invite public submissions.

However EMA chief executive, Alasdair Thompson, says the issue now being addressed is just small part of a bigger problem which is causing many New Zealand companies migrate to Australia.

"The present discussions only affect New Zealand resident shareholders in New Zealand companies with tax paying operations in Australia supplying the New Zealand market.

"Likewise, it affects resident Australian shareholders in Australian companies which own New Zealand-based companies supplying into Australia."

Mr Thompson says the main problem is that New Zealand resident shareholders of Australian companies have their dividends taxed in both countries, and the same applies to Australian resident shareholders investing in New Zealand companies.

"It's no surprise Australia does not support the full 'streaming' of imputation credits for tax paid to one or the other country, which would address the major part of the problem, as it is winning handsomely at New Zealand's expense."

Mr Thompson says companies like Lion Nathan and Baycorp have already crossed the Tasman because of the tax issue and he believes more are likely to follow.

"The reverse, where Australian companies migrate to New Zealand when their shareholder numbers exceed those in Australia, is far less likely."

The association says while it applauds the work done so far to try to resolve the triangular tax issue it only highlights the inequity and importance of the underlying principles.

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