Investor tax plan a plot - Brierley
08 May 2006
By DAVID HARGREAVES
The Government's new investment tax scheme is designed to fail and will be replaced within a year by a full-scale capital gains tax, investment veteran Sir Ron Brierley says.
In a rare interview, Sir Ron, chairman of Guinness Peat Group and founder of Brierley Investments, said the regime, planned for introduction in April, was half-baked and an administrative nightmare.
"The whole thing is an absolute mess. Who would come up with a scheme as complicated as this? It is totally retrograde."
He believed, however, that the plan, which could lead to "many thousands" of GPG shareholders paying tax on unrealised gains in the company's share price, was "meant to be a mess".
The Government "are not totally stupid. The truth is that this scheme is complicated and unworkable on purpose. It will only last a year.
"The next phase will be to say, 'This is not working - from now on all investments will be subjected to tax.'
"It is just a straight capital gains tax by the back door. This is a capital gains tax by stealth and the people who are at the moment sitting back complacently saying they will not be affected by the current proposals are the ones who should be most alarmed."
At the moment, individual Kiwi investors do not face capital gains tax on property investments and are generally taxed only on share dividends. Sir Ron says that will end.
The new proposals do not include any tax on property and exempt investors from tax on shareholdings in New Zealand and Australian companies. But people who buy more than $50,000 worth of shares in companies outside those countries will be liable to tax on 85 per cent of unrealised gains in the share price.
This also applies to managed funds on any such purchases outside Australia and New Zealand.
The amount payable is capped at 5 per cent in any given year but the investor will build up a large deferred tax liability that would be payable once the shares were sold and the money repatriated to New Zealand.
GPG is registered in London so some of its shareholders will be hit, as will shareholders in the former Brierley Investments, which is now called BIL and based in Singapore.
GPG had argued for an exemption from the new regime on the basis that it is in effect a New Zealand company because four of its five directors are Kiwi and about 80 per cent of its shares are held in New Zealand.
New Zealand GPG director Tony Gibbs has launched a strong offensive against the Government, urging it to reconsider. Last week he sent letters to GPG's 27,000 Kiwi shareholders, exhorting them to write to the prime minister to protest against the proposed changes.
Sir Ron believes that once the Government decides to launch a full-scale capital gains tax it will drop the unrealised capital gains tax anyway.
"They will just say, 'Look, let's forget the tax on unrealised gains.'
"The 85 per cent and the 5 per cent - who would come up with that? But that is the irony and that is the devious aspect. It is not meant to work."
Asked how he could be so confident of what the Government was planning, Sir Ron said: "I believe what I'm saying to you is accurate."
08 May 2006
By DAVID HARGREAVES
The Government's new investment tax scheme is designed to fail and will be replaced within a year by a full-scale capital gains tax, investment veteran Sir Ron Brierley says.
In a rare interview, Sir Ron, chairman of Guinness Peat Group and founder of Brierley Investments, said the regime, planned for introduction in April, was half-baked and an administrative nightmare.
"The whole thing is an absolute mess. Who would come up with a scheme as complicated as this? It is totally retrograde."
He believed, however, that the plan, which could lead to "many thousands" of GPG shareholders paying tax on unrealised gains in the company's share price, was "meant to be a mess".
The Government "are not totally stupid. The truth is that this scheme is complicated and unworkable on purpose. It will only last a year.
"The next phase will be to say, 'This is not working - from now on all investments will be subjected to tax.'
"It is just a straight capital gains tax by the back door. This is a capital gains tax by stealth and the people who are at the moment sitting back complacently saying they will not be affected by the current proposals are the ones who should be most alarmed."
At the moment, individual Kiwi investors do not face capital gains tax on property investments and are generally taxed only on share dividends. Sir Ron says that will end.
The new proposals do not include any tax on property and exempt investors from tax on shareholdings in New Zealand and Australian companies. But people who buy more than $50,000 worth of shares in companies outside those countries will be liable to tax on 85 per cent of unrealised gains in the share price.
This also applies to managed funds on any such purchases outside Australia and New Zealand.
The amount payable is capped at 5 per cent in any given year but the investor will build up a large deferred tax liability that would be payable once the shares were sold and the money repatriated to New Zealand.
GPG is registered in London so some of its shareholders will be hit, as will shareholders in the former Brierley Investments, which is now called BIL and based in Singapore.
GPG had argued for an exemption from the new regime on the basis that it is in effect a New Zealand company because four of its five directors are Kiwi and about 80 per cent of its shares are held in New Zealand.
New Zealand GPG director Tony Gibbs has launched a strong offensive against the Government, urging it to reconsider. Last week he sent letters to GPG's 27,000 Kiwi shareholders, exhorting them to write to the prime minister to protest against the proposed changes.
Sir Ron believes that once the Government decides to launch a full-scale capital gains tax it will drop the unrealised capital gains tax anyway.
"They will just say, 'Look, let's forget the tax on unrealised gains.'
"The 85 per cent and the 5 per cent - who would come up with that? But that is the irony and that is the devious aspect. It is not meant to work."
Asked how he could be so confident of what the Government was planning, Sir Ron said: "I believe what I'm saying to you is accurate."
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