NZ government backs off 'death-sentence' tax

Xsol chief executive officer John Blackham's argument that proposed company tax reforms could kill local hi-tech start-ups seems to have carried weight with the government.

It has announced a partial backdown that will give existing companies a five-year grace period. It has also modified the proposed capital gains tax on investment from overseas, so it is less of a burden on local investors.

"The government is eager that the public see the proposed changes to taxation on overseas investments as fair and reasonable and we have listened very carefully to the hundreds of submissions on this proposal," says revenue minister Peter Dunne.

As part of the deal, the government has agreed to exclude from the new tax rules interests in foreign companies where:

  • The company is resident, and listed on a recognized exchange in Canada, Germany, Japan, Norway, Spain, the United Kingdom or the United States;
  • The company is liable to income tax in the foreign country, because it has its place of incorporation or head office there;
  • The company is listed on a recognized exchange in New Zealand;
  • The company is widely held and has a substantial New Zealand shareholder base;
  • The company is not a mutual fund, or investment trust.

"The five-year holiday will give those companies the opportunity to consider shifting their headquarters to New Zealand, which will bring considerable benefits to this country," Dunne says.

The amendments will be introduced to Parliament in the form of a supplementary order paper during the first reading of the Taxation (Annual Rates, Savings Investment, and Miscellaneous Provisions) Bill, scheduled for later this week.

Copyright © 2006 IDG Communications, Inc.

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