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Govt may make money from tax changes

The government now expects to lose less revenue from its proposed changes to how offshore investments are taxed than originally expected. In fact, it now says it might raise more in tax from the changes.

Friday, August 19th 2005, 6:30AM

by Rob Hosking

Tables which accompanied the 2005 Budget included estimates the proposed changes to the offshore investment tax regime would probably cost the government about $130 million a year.

Yesterday’s pre-election economic and fiscal update shows a dramatic change in that estimate.

At the most, officials now estimate the cost to the government would be between $80-90 million.

However they also say the taxman could be $50-60 million up on the deal.

The impact of changes to how the government taxes offshore investment has continually been wound back by official forecasters.

When the government first did a rough estimate of the cost of likely changes following the release of the Craig Stobo report last year it was calculated the changes would see a drop in tax collected of about $250 million a year.

The gradual winding back of that estimate – to the point where the government may now reap more money – will give fuel to National finance spokesman John Key’s claim the move is a “tax grab”.

Submissions on the government discussion document outlining the proposed changes close on 30 September.

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

« Cullen and Key debate tax changesSovereign takes regulation bull by the horns »

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