NZ Tax Crackdown Could Hurt Genuine Investors

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

18 January 2002

Two leading accounting firms in New Zealand have expressed concern that genuine investors could be caught up in the government's planned crackdown on tax efficient investment schemes.

The New Zealand Inland Revenue Department and the Treasury announced earlier this week that they had released an issues paper detailing the extent of the problem and proposing solutions. The government is concerned to stamp out investment schemes in which the amount claimed in tax deductions exceeds the amount invested, due to the risky nature of the venture.

However, international accounting firm, KPMG, is dubious about the proposals: 'There has been an air of inevitability about a legislative solution to the proliferation of mass-marketed tax schemes for some time,' it admitted, referring to the renewed popularity of the schemes, which all but died out in the late 1980s. However, in its Taxmail newsletter, the firm gave voice to its fears: 'KPMG's concern is that the proposals will pick up investments undertaken for primarily business or commercial reasons...and thus not intended to be caught.'

PricewaterhouseCoopers revealed that it shares the concerns of KPMG, and commented on Thursday that: 'A targeted solution is required so that investments such as the standard forestry schemes are not affected'.

Both accounting firms agreed that in order to ensure that the proposals are targeted correctly, if enacted there should be a strong 'avoidance' focus in keeping with the Government's description of the problem, rather than a targeting of genuine investment schemes.

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