Foreigners and returning New Zealanders who have been away at least 10 years might be given a tax holiday on their overseas income when they come here to work, Revenue Minister Michael Cullen signalled today.
He said the measure was being considered as a way to help businesses attract talented peopleto work in New Zealand.
Dr Cullen told the Chartered Accountants National Tax Conference the provision would apply only to people who came here to work as employees, and only on income earned offshore.
Details will be published in a discussion document to be released within the next few weeks.
Dr Cullen said the Government had not decided how long the exemption should apply.
"It can be difficult for New Zealand to compete on wages with much larger economies to attract the highly skilled to work here," he said.
"And to the extent that New Zealand businesses have to pay higher salaries to compensate for the New Zealand tax liability of an individual's offshore investment, the business rather than the individual will be the ultimate beneficiary of the change."
The proposal is based on an idea in the 2001 tax review, which recommended exempting for seven years the overseas income of foreign nationals who become residents in New Zealand for tax purposes.
Other measures canvassed in his speech to reduce obstacles to international investment included whether the profits from the sale of certain shares should be exempted from New Zealand tax when the investors were exempt from tax in their own jurisdiction.
Dr Cullen said that should assist the flow of venture capital to New Zealand by removing a disincentive for investors who were tax exempt in their own country but became subject to tax when they sold their New Zealand shares.
He said the Government had decided not to go ahead with the tax review's recommendation of a discounted tax rate for new foreign direct investment.
That would not be sustainable because it would be too difficult to police the boundaries and the costs of implementation would probably outweigh any benefits.
