ING calls for tax changes sooner rather than later

11 October 2004

ING calls for tax changes sooner rather than later

New Zealand financial services company, ING (NZ) Limited, has called on Government to progress without delay the Stobo report on the taxation of investment income, tabled yesterday by Finance Minister Michael Cullen.

Managing Director Paul Fyfe believes the report represents “a positive step towards finally removing a number of fundamental distortions in the area of investment taxation”. And because much of what is outlined in the report has the backing of both Government and industry, he sees no valid reason for delaying the introduction of change until April 2007, as signalled by Dr Cullen.

“We’ve seen previous attempts to address this issue start – only to peter out with no perceptible improvement. The result is that investors today are overly influenced by tax rather than other considerations.

“However, I don’t see why the proposed changes can’t be completed and effected at least a year earlier than the date indicated. The industry has made it clear it is willing to work hard towards this goal, but it will be up to Government and the IRD to see it through.”

According to Mr Fyfe, there is already unanimity over the removal of inconsistencies such as the current taxation of capital gains on direct investment via managed funds, and the inequity where all superannuation fund investors are taxed at 33% regardless of their own individual tax status. The latter so-called ‘look through’ regime is something ING strongly supports. However, there is less consensus over Mr Stobo’s preference for an Investment and Savings Tax (IST) to be applied across the board, i.e. to both overseas and New Zealand investments.

“We do not favour an ‘up-front’ tax that would see investors taxed even when they may have made a loss,” says Mr Fyfe. “Conceptually, there is a place for an IST-type tax, but that is probably in a revised form applied to offshore investments only.

“We’re all aware that the current taxation of investment income is too complex, inconsistent and problematic. While Mr Stobo wants to make life simpler by having just one tax ruling, the reality is this is not a ‘one-size-fits-all’ situation. Our view is by using the IST for offshore investments and the ‘look through’ for domestic investment, things could still be simpler – and fairer – than they are now.” Mr Fyfe is encouraged by the strong will from all parties to see a resolution to the overall issue, and he urges Dr Cullen to build on the momentum already begun.

“Dr Cullen has solicited this report and it is now over to him to make things happen. All investors will be watching expectantly for a positive outcome and for the long-awaited ‘level playing field’ to eventuate.”

ENDS

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