The Government has taken another step towards its goal of establishing New Zealand as an international financial services hub, yesterday calling for submissions on proposed tax breaks for foreign investors seen as vital to the plan.
Industry figure Craig Stobo, who has been a key driver of the initiative, welcomed
the progress but said further prerequisites such as an adequate investor protection regime and final commitment from the Government were yet to be secured.
Revenue Minister Peter Dunne yesterday released a paper outlining changes to the tax system, "to remove an anomaly that results in overseas investors being over-taxed" when they invest in New Zealand-based managed funds.
"This creates a potential disincentive for foreign investment in New Zealand's financial services industry," Dunne said.
With the Government investigating the potential of establishing New Zealand as a base or domicile for international fund managers, "it is timely to consider how this tax problem might be resolved", he said.
Craig Stobo, who claims credit for the financial service hub idea and who was appointed to lead the private sector group charged with developing it, has been pushing for a "zero rate" for non-resident investors for some years.
However the tax issue was just one of three key obstacles to the financial services hub plan.
"Clearly we have to have a regime here that's not only friendly or orthodox on a tax basis, but which is also attractive for non-residents who are looking for investor protection as much as New Zealand residents.
"Thirdly you have to have a very pro-development stance from Government in this area because you really are promoting effectively the quality of our regime.
"None of those three things are in place yet."
Stobo said the Government's work so far including the establishment of the group he is leading was encouraging, "but they've yet to pull the trigger".
Yesterday's discussion paper estimates the proposed exemption would shrink the tax take by $10 million per annum based on the current profile of the investment markets.
The Herald understands Prime Minister John Key has received advice suggesting financial services could grow into a billion-dollar industry, producing annual tax revenues of $250 million and creating 3000 to 5000 new high-paying jobs.
