Empty handed on mutual recognition
New Zealand's ministers again raised the issue of trans Tasman recognition of imputing/franking credits with Australian ministers last week - and came away empty handed.
Trade Minister Tim Groser, who headed the ministerial expedition to Canberra, told Net Prophet, "I don't think we are any closer on this".
Groser says the two countries have a fundamentally different attitude to the issue: government stand to lose tax revenue if mutual recognition is adopted, but New Zealand is more relaxed about this than Australia.
"At first blush this will cost us money," Groser says. "It looks like about $300 million a year, I think, in tax revenue for New Zealand and about three to four times that for Australia. So the impact is not small.
"But our view is the benefits for economic growth, for the long term efficient usage of resources, of people, of capital outweigh the tax loss.
"We didn't worry about the loss of revenue when we cut tariffs because there were other benefits to the economy."
Australia's own review of its tax regime, conducted by its Secretary of the Treasury Ken Henry earlier this year, raised the question of mutual recognition and indicated that eventually there would probably have to be a change to the present regime, but this would most likely be in the context of a wider review of the whole imputation regime.
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