The government has quietly added Shane Jones' Provincial Growth Fund to the list of government entities that are exempt from paying tax.
The move was done so quietly that Revenue Minister Stuart Nash's office had to check with Forestry and Regional Development Minister Jones' office when BusinessDesk asked for confirmation.
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A Nash spokesperson confirmed that Provincial Growth Fund Ltd was created in September to hold the loan and equity investments of the fund.
"It has no operational role in the day-to-day management and administration of Provincial Growth Fund Investments," the spokesperson said.
Effective October 4, PGFL was added to Schedule 4A of the Public Finance Act, which lists all public-purpose Crown-controlled companies, and Schedule 35 of the Income Tax Act, the latter bestowing on it tax-exempt status.
"The company meets the necessary criteria to be exempt from income tax. This includes 100 per cent of its shares being held by ministers of the Crown and the fact that its primary purpose is to carry out government public policy – investing in regional economic development," the spokesperson said.
This raises the question of whether the proposed Venture Capital Fund, which aims to stimulate investment in early-stage ventures, will be added to the list.
The spokesperson says the bill establishing that fund is still before the select committee – the Finance and Expenditure Committee is shepherding the bill through to its second reading.
Another question is why the New Zealand Superannuation Fund, which is tasked with helping to relieve the costs of meeting the ageing population's superannuation needs, is not tax-exempt.
The Super Fund and ANZ Bank vie for position as the nation's largest taxpayers. In the year ended June, the Super Fund paid about $500 million in tax, taking its contributions to government coffers to about $6.5 billion since its inception in 2001. The Super Fund has returned about 42 per cent of the government's contributions in tax.
The spokesperson says the Super Fund tax issue was raised in the Tax Working Group's report and that issues relating to tax and how different entities fit which the government's public policy purposes are being addressed as part of the tax policy work programme.
The controversial $3b PGF was established in early 2018 as part of the coalition government agreement between the Labour Party and Jones' New Zealand First Party.
One of its early proposed investments was a $9.9m loan to Westland Milk which was rescinded when that dairy producer was taken over by Hongkong-based Jingang Trade Holding, otherwise known as Inner Mongolia Yili Industrial Group.