Investment tax plan simply outrageous, says Gibbs

Tony Gibbs

Guinness Peat Group boss Tony Gibbs assured Parliament's finance and expenditure select committee yesterday that he wasn't going to "lambaste" the proposed overseas investment tax changes - but he didn't hold back.

He had three suggestions on how to improve legislation on the tax proposal, which has caused widespread concern:

1. Basically, a "tax-free" situation for overseas investments.

2. More concessions for GPG shareholders.

3. Drop the proposed bill "into the deepest hole".

Nevertheless, he was prepared to concede that the bill consisted of good and bad.

He applauded proposals to remove tax on capital gains on New Zealand and Australian equity investments by collective investment vehicles.

Later in yesterday's hearing, Insurance and Savings Industry Association chief executive Vance Arkinstall noted that that positive step had largely been overlooked by the industry, due to public outrage over the proposal to introduce a tax on unrealised gains in overseas equity investments for individuals and passive funds.

Gibbs expressed his opposition to the move succinctly.

"To tax somebody on something they haven't got - and what's more on something they may never have - is just simply outrageous."

Shareholders in the London-listed - but largely New Zealand-owned - GPG look likely to get off more lightly than most. Intense lobbying by GPG, including a letter-writing campaign, won them a five-year holiday from the proposed taxation changes.

"I am pleased to have what is going to be termed the GPG holiday," Gibbs said. "But if our main submission was taken up there would be no need for anyone to have any holidays and it would be positive for New Zealand."

GPG wants all investors, institutional and individual alike, to have their equity investment in so-called grey list countries to be put on "capital account". Essentially, they would pay tax only on dividends, not capital gains.

That would encourage overseas investors to invest in grey list countries via New Zealand institutions "on basically a tax-free basis".

"Our funds management industry will grow by billions of dollars.

"When they repatriate their funds they'll come back through New Zealand and on into their original country and they'll pay their regular tax wherever they reside."

Although Gibbs said that approach "is not a tax rort", at least one senior tax practitioner, who did not wish to be named, said it would make New Zealand a tax haven.

GPG's second submission was that the bill be dropped and the status quo maintained. Gibbs also submitted that all GPG's shareholders, including institutions, should get the five-year holiday from the proposed regime.