Cut tax on savings income, working group tells govt
The long-standing complaint that income from savings is taxed too high in New Zealand has received a powerful endorsement from the government's Savings Working Group.
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Hawke’s Bay
The long-standing complaint that income from savings is taxed too high in New Zealand has received a powerful endorsement from the government’s Savings Working Group.
In its final report, released this morning, the working group recommends that - as a minimum step – the tax rates on income from interest, dividends, and other savings should be indexed to inflation.
That though is the least the government can do. It needs to go further, the working groups says.
The PIE (portfolio investment entity) regime introduced by the last government already allows a lower tax rate for certain types of savings – investment in PIEs pay tax at their marginal tax rate but this is capped at the company tax rate of 28%.
This regime should be extended to other forms of saving, including interest paid by resident withholding tax (RWT) on bank deposits, the group says.
“Most investors in PIEs are effectively able to access a tax rate that is either 5 or 12.5 percentage points lower than their prima facie marginal tax rate,” the report says, and it wants this extended to other forms of saving.
Going even further, investors in companies who are caught by the imputation regime should have their imputation credits refunded if their marginal rate of tax is below 28%.
The report also recommends continuing to push for transtasman mutual recognition of imputation and franking credit something New Zealand governments have been trying to get for nearly 20 years but with minimal interest from the Australian government.
Rob Hosking
Tue, 01 Feb 2011
Tue, 01 Feb 2011
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Cut tax on savings income, working group tells govt
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