Labour advocates higher PIE rate

Wednesday, 16 September 2009 1 Comment

PIEs were introduced as part of a swag of changes around taxation of investments at the time the last Labour government introduced KiwiSaver.

Interest earned in PIEs was capped at 30% as an incentive for people to save.

However Cunliffe told the House recently, during the committee stages of the Taxation (International Taxation, Life Insurance and Remedial Matters) Bill, that the gap between the top PIE rate and the top personal rate is creating a loophole.

"It is our view, on reflection, that in fact the top portfolio investment entity rate should be equivalent to the top personal income rate, not to the company rate of 30%," he told the House.

"The risk is that this well-intentioned set of vehicles could simply become a way of disguising tax liabilities for upper-income individuals who would otherwise be paying 38%. They could just channel income through a portfolio investment entity and, hey presto, the maximum rate would be 30%."

Cunliffe though was somewhat more equivocal on the issue when asked about it outside the house.

Labour doesn't have a policy of raising the PIE rate, he said.

"But amongst the various issues we might muse on in a select committee context is whether that rate needs further attention."

The government has a formal policy of bringing the top personal, company and investment rates into line - but by lowering the top ones rather than lifting the lower ones.

At present though this is a "medium-term goal" - the period of "medium term" having undergone something of an expansion since the fiscal effects of the global financial crisis hit home.

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