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Pressure from two major trading banks has prompted the Government to rethink measures to close a tax loophole that allows foreign businesses to benefit from leasing overseas assets owned by New Zealanders.
In June, the Government proposed law changes as part of the Taxation Bill to stop New Zealand parties from claiming depreciation deductions on buildings and passing the savings on to the tenants. But yesterday, it decided to delay the decision after receiving more than a dozen submissions on the proposal, including one from the ANZ and another from the ASB's parent company the Commonwealth Bank of Australia.
Finance Minister Michael Cullen said in a joint statement with Revenue Minister Peter Dunne the submissions on the proposed changes had raised a number of complex policy issues that needed more consideration. In particular, the pair said, there were concerns over the appropriate treatment of leases in existence when the changes were announced in June.
Inland Revenue deputy commissioner of policy Robin Oliver said it had initially brought in the proposal because of concerns that hundreds of millions of dollars of potential revenue would be lost over the next 20 years with non-Kiwi companies standing to benefit.
"There are very few New Zealanders doing this but we wanted to put the policy in place before it became more common. We think they [the tax schemes] were starting to be marketed around the place."
But, he said, the submissions process had unearthed more companies than the Government was aware of and had raised transitional issues.
Oliver said there would now be further consultation with the affected parties. The measures which could see the finance lease rules expanded to include overseas assets were due to be pushed through as a supplementary paper to the Taxation Bill by the end of the year. But Oliver said the delay may mean the changes would have to wait until next year's Taxation Bill.
