Cullen Sets Out New Zealand Tax Priorities

by Mary Swire, Tax-News.com, Hong Kong

08 March 2004

New Zealand Revenue Minister Dr Michael Cullen announced last week that the “vexed” question of the taxation of offshore investments will be high on the government’s tax policy agenda, set out until December 2005.

Addressing an International Fiscal Association conference, Dr Cullen said that he was aware that the options laid out in an official paper broaching the subject last year were “not perfect”, and revealed that the government was open to suggestions from the private sector as to how the rules can be changed without disrupting tax revenues or investment.

"With your help, I think we can have a process to work through these issues," he commented.

Dr Cullen added that the government will also explore a suggestion by the savings industry as to whether the risk-free rate of return method could be employed in the taxing of domestic investments in order to bring about more consistency in the taxation of savings.

However, the Revenue Minister conceded that a further period of consultation will result in a prolonged delay before new rules come into effect.

"I am prepared to accept this delay on the basis that an interim solution is enacted to deal with the Australian unit trust issue as I am advised that a significant and growing amount of money is flowing into these structures,” he noted.

Dr Cullen also revealed that there will be a further postponement to a proposal allowing a tax holiday for expatriates and foreign workers who had been out of the country for ten years or more and were coming back to New Zealand to work. He explained that the government wished to explore whether the measure could be extended to other groups.

In addition, Dr Cullen told the delegates that New Zealand will begin negotiations with Austria this year on a double tax agreement, conclude the agreement with South Africa and give legal effect in New Zealand to the agreements with Chile and the United Arab Emirates.

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