Editorial: Key's hurry on financial services hub unseemly

5:30 AM Saturday Dec 4, 2010

Prime Minister John Key. Photo / Steven McNicholl

The Prime Minister sounded like the business manager he used to be when he made public his impatience with preparations for making this country a tax-free hub for financial services.

"There's been advice from the Ministry of Economic Development which basically says, if you want to do this you've got to deliver the Magna Carta of documents," he told an International Business Forum dinner in Auckland this week.

"I don't need the Magna Carta," he said, "just get on and do something - which is why I have told Gerry [Brownlee] to deliver me a paper that has zero rating of funds and we'll work on that."

Whoa, Mr Key. Business audiences might lap up that sort of thing but prime ministers have an economy to consider. Granting tax-free status to any sector of the economy is more than a loss of potential revenue. It influences patterns of investment across the whole private sector.

An economy cannot suffer too many such distortions before business becomes less certain whether it should follow market signals or seek political favours.

Just about every business could justify tax-free status on the basis of the jobs it creates. If administrative services to foreign funds has a case for tax exemption we are all ears.

Funds should locate their back office functions here for the reasons Mr Brownlee suggests: transparent, stable and neutral law, consistent regulation and taxation, a talent pool, time-zone advantages.

Industries worth having pay tax. Beware powerful impatience.

Balance - Not left or right (New Zealand) | 10:08AM Monday, 06 Dec 2010

Agreed. Key's plan is stupid. New Zealand is a country enginnering innovator, number 8 wire exponents, would be manufacturers. Why get involved in the fake shallow hollow money shuffling game? It's not a honest work.

Gandalf (St Heliers) | 10:08AM Monday, 06 Dec 2010

Why would you give tax breaks to a risky industry we have no natural talent for and a terrible record in? Utter stupidity. And total tax exemption goes too far.
I do agree with National on tax breaks in principle and like their pragmatism, but apply them to things we have a natural aptitude for like film or maybe biotech, or something like emerging high tech industries. Not finance.

Scribe (New Zealand) | 10:08AM Monday, 06 Dec 2010

Dear Editor, please note the original speech, as reported, said that the tax free status only applied to funds kept off-shore. The Fund managers did not want these funds artificially burdened with NZ tax when they were nowhere near NZ's territory.

Presumably only the management fees and staff salaries would be subject to NZ tax as is proper. Many countries overseas have customs and tax free zones on their soil, so as to expand the nations skills base and encourage ex-pat staff to immigrate back home where their expertise is vitally needed.