NZ Super Fund seeks tax breaks on big infrastructure projects

The NZ Super Fund wants tax breaks on big infrastructure projects like light rail in Auckland.

The NZ Super Fund - which wants to design, build and operate Auckland's $6 billion light rail network - is seeking tax breaks on big infrastructure projects.

In a submission to the Tax Working Group, the fund said other countries offer tax breaks to support and incentivise nationally significant infrastructure projects.

The Tax Working Group should consider a similar regime for investors and ensure New Zealand can compete with other countries, Matt Whineray said in one of his first moves after being appointed chief executive in June of the $39b public fund.

Other countries have been active in looking to provide that environment to attract long term investors

NZ Super Fund

Whineray and the fund's head of tax John Payne said the fund had partnered with the global Canadian pension and sovereign fund CDPQ to make an unsolicited proposal to the
Government in relation to Auckland's light rail programme.

CDPQ has assets under management of US$238b ($350) and is building Montreal's 67km light rail network.

The submissions said international institutional investors are very interested in infrastructure assets and have choice about where they invest.

"Other countries have been active in looking to provide that environment to attract long-term investors, and New Zealand needs to make sure it is at least as attractive as these countries to attract the investment in infrastructure that we need," the submission said.

Matt Whineray, NZ Super Fund Chief Executive Officer.

Whineray and Payne said in Australia, nationally significant infrastructure projects of A$500 ($544) or more limited tax on profits to 15 per cent for 15 years, compared to the corporate tax rate of 30 per cent but forecast to be reduced to 25 per cent. The capital gains tax was also limited to 15 per cent.

In China, key public infrastructure projects are exempt from income tax in the first three years and taxed on 50 per cent of the taxable income in the following three years.

Brazil and the United States also had incentives for infrastructure.

"These jurisdictions provide long-term certainty for investors and tax settings to encourage investors which ensure that the tax environment does not act as a barrier to investment.

"The Tax Working Group should consider recommending the implementation of a specific nationally significant infrastructure regime to provide certainty for investors and ensure New Zealand can compete with other jurisdictions in attracting long-term capital that brings with it world-class expertise," the submission said.

The tax working group, chaired by former Labour Finance Minister Sir Michael Cullen, will issue an interim report in September and final recommendations to the Government in February.