Trustees seeking refuge in PIEs could weaken our capital markets

In an unprecedented move, the three parties presented together at last week’s finance and expenditure select committee hearing on the government’s bill to increase the trustee tax rate to 39% from April 1.

Outlining the joint submission, NZX head of policy and regulatory affairs Kristin Brandon, said the proposal created a potential discrepancy of 11% between rates applied to trusts and PIEs. As PIES have narrower investment mandates, this was likely to discourage and decrease investment in small and emerging sector companies. 

“If local markets can’t attract local companies they would look to list offshore, particularly in Australia, reducing local investment options to consumers into domestic investment into New Zealand assets.”

SIA chief executive Bridget MacDonald said there would be duplication with financial product managers repackaging existing products as PIEs, including bank savings and term deposits. She said this was already happening and wouldn’t help the government's revenue stream.