NZICA questions benefit of international tax changes

International tax changes will add to the costs of doing business abroad and do little to make New Zealand better off, according to the New Zealand Institute of Chartered Accountants (NZICA).

One such change is to the way New Zealand taxes non-portfolio foreign investment - taxpayers that own 10% or more of a foreign company but don't have a controlling stake.

The key change is the removal of the grey list - a list of eight countries in which such investments are not subject to tax - for all countries except Australia.

"NZICA's approach is to examine policy issues from the point of view of what is in the best interest of the public as a whole," NZICA tax director Craig Macalister said.

"While these rules will mean taxpayers with these sorts of assets will need more assistance to comply from their chartered accountant, we are not convinced that New Zealand will be better off."

The NZICA said it opposed the removal of the grey list of exempt countries, citing the compliance cost for taxpayers for which it said very little revenue would be raised.

Another change was the introduction of an active income exemption that removes the income of the foreign entity from New Zealand tax if the passive income in below 5%, and even if exceeded only passive income is taxable.

Macalister said that calculating the 5% passive income threshold was easier said that done.

He said that while the changes were meant to make New Zealand-owned businesses more competitive internationally, business owners would bulk at the compliance requirements.

"For many, these changes are an additional cost of doing business abroad and it seems to contradict statements by the government that it wishes to reduce compliance costs for business," he said.

The differing direction being taken by Australia was also highlighted by Macalister as problematic.

"Australia, in its approach to make Australian businesses more competitive, has designed a set of rules that target arrangements to avoid or defer Australian tax and are likely to be less onerous on Australian businesses than New Zealand's rules."

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