Tax changes in the wind

Speculation is growing that the Craig Stobo review of taxation on investments will recommend removal of the capital gains tax on active managed funds.

Friday, October 15th 2004, 3:15AM

Stobo himself is remaining quiet on the content of his report - he told Good Returns earlier this week that he is still putting the final touches on his report and that he was not prepared to give any hints as to its content.

He has though consulted widely on the issue, meeting with more than 60 stakeholders.

Reports are that there is some strong industry consensus on where the review is heading and the outcome positive for the industry.

Unconfirmed reports suggest the capital gains tax on active funds - long a bugbear of the financial services industry - maybe for the chop.

It is understood the report will suggest adopting the controversial ‘risk free rate of return’ method, but only for offshore investments.

For domestic investments, a form of resident withholding tax is understood to be under consideration.

Stobo’s brief was to come up with options to “resolve issues and inconsistencies in the tax law…whether those investments occur directly in companies, other entities, or indirectly via intermediaries.”

And although he was specially told not to consider any alternatives to the current TTE (tax/tax/exempt) model, his terms of reference also explicitly stated that he was not to be concerned about whether any proposals would bring in more or less tax.

However any proposals do have to “protect the New Zealand tax base from erosion”. The other goal is to minimise compliance costs to taxpayers.

Finance minister Michael Cullen will be speaking to a conference on tax issues this morning. Good Returns will report on that speech at 9.45am. Visit Good Returns around morning tea time to see what he has to say. Or send an email to reminder@goodreturns.co.nz and we will send you a reminder email!

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