The Australian and New Zealand Productivity Commissions have called on the two governments to settle, one way or another, the vexed issue of mutual recognition of imputation credits.
Both countries allow companies to attach imputation (in Australia "franking") credits to their dividends, representing a share of the company tax paid, which shareholders can use to offset, sometimes completely, the tax payable on the dividend income.
But the credits are useless on the other side of the Tasman, discouraging transtasman investment.
Mutual recognition would improve economic efficiency and result in a more integrated capital market between Australia and New Zealand, the commissions conclude in a report on strengthening transtasman economic relations. It would benefit New Zealand more than Australia.
The 20-year-old debate needs to be settled, the commissions say.