Looking ahead

Monday, November 15th 2004, 9:23PM

Undoubtedly the big news this week is the release of the Stobo report in taxation. Followed by TOWER's profit announcement.

All the chatter around the industry about the tax report is pretty positive and there have been plaudits for Craig Stobo. It appears he has consulted far and wide and done a good job at engaging the officials. My pick is that the outcome may look something like this. Offshore domiciled funds will be taxed under the Risk Free Rate of Return (RFRM) basis and locally based funds will come under a resident witholding tax type of regime. This (the latter bit) is very similar to how fixed interest investments are treated.

The key though is that capital gains tax on managed funds will go. Cullen has already made this point clear last week (story). Managed funds have been disadvantaged for years (even before Gareth Morgan started campaigning) because they have to pay CGT and no other investments have such a burden. Maybe we will see a change around in the fund flow numbers?

Some of the big issues will be explaining RFRM to investors. It's not a highly intuitive system, but it is "simple" and gives people certainty about tax. The other plus is that people maybe come more likely to seek advice to help structure their investments.

The other big item this week is Tower's result. Its shareprice contines to track upwards and the news coming out of the company has been positive. The latest item of course being named Fund Source Fund Manager of the Year

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