Imputation credit 'omission' disappoints
Business lobbyists say it is disappointing that a report on improving New Zealand- Australia economic relations has "stopped short" of recommending an end to "double taxation".
BusinessNZ chief executive Phil O'Reilly said a joint report by the two countries' productivity commissions failed to address the issue of imputation credits on dividends, "perhaps the biggest unresolved issue for business in both countries".
Imputation credits acknowledge where tax has been paid at company level and let shareholders credit this tax against their personal tax bill.
However, in both New Zealand and Australia, the credits can only be applied domestically, meaning those who invest across the Tasman are doubly taxed.
Research shows Australian shareholders in New Zealand companies face an overall top tax rate of 60.4 per cent, compared with 45 per cent if it was an Australian company.
New Zealand investors in Australian companies paid a top tax rate of 53.1 per cent compared with 31 per cent for domestic companies.
Such disaparities were "an unnecessary financial burden on trans-Tasman business", said O'Reilly.
"We are on the eve of the 30th anniversary of CER [Closer Economic Relations] - achieving this change in 2013 would be a fitting move towards a true single economic market."
Murray Sherwin, chairman of New Zealand's Productivity Commission, said imputation credits needed further investigation.
"There is a net gain to be had there. The issue is, how does it get distributed and what are the mechanisms by which the distribution of gains and losses might be passed around between the two countries."
Sherwin said the issue had been haggled about for 20 years and needed a clear judgment. Yesterday's report paid special attention to the trans-Tasman labour market.
Nearly half a million New Zealanders live in Australia and around 240,000 entered the country after 2001, when they were given a special visa.
Reports of Kiwis being unable to access welfare or higher education in Australia needed to be addressed, said Sherwin.
However, the commissioners said New Zealand equally needed to look at the thorny issue of "backdoor migration" where people from third nations migrated to Australia via New Zealand.
Other recommendations included:
No common currency, joint tax systems or a customs union.
Lower mobile roaming charges.
Eliminating the remaining tariffs under CER's rules of origin.
Keeping CER's informal approach but with clearer leadership.