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This Business Chat is with Tony Gibbs, executive director of Guinness Peat Group, chairman of Turners & Growers Ltd and Staveley Inc., and a director of Coats plc, NGC Holdings Ltd, PrefSure Holdings Ltd and Tower Ltd.
Gibbs has gone from his first job peeling potatoes on a boat to more than 20 years of high level involvement in New Zealand listed companies.
He has worked with 1980s corporate raider Sir Ron Brierley, since the 80s - first with Brierley Investments and then Guinness Peat Group following a corporate restructure.
Gibbs also grows his own brand of Ezypeel mandarins on his Matakana property, north of Auckland, which led to a friend giving him the nickname, The Mandarin of Matakana.
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Top of mind for many of our readers are the tax changes on overseas shares coming into effect in April. GPG has a five year exemption from the new regime.
Can you explain what the tax changes mean for New Zealand investors in foreign companies and how GPG will be treated under the regime?
Last year was a big year of changes because originally the tax changes were that the government was going to tax anybody holding shares offshore, excluding Australia, they were going to tax people on an 85 per cent unrealised gain basis ie they want to tax people on something they haven't got and something they may never have.
Now, there was a lot of us who went to the select committee over this and there was, I think, over 3,600 submissions and at the end the government abandoned that terrible idea and they came up with something that is now in place called the fair dividend rate.
What that means is every company, apart from New Zealand and some Australian companies, have been deemed to have paid a five per cent dividend whether they've paid it or not.
In my view this is still a capital gains tax but it's far better than being taxed on 85 per cent of unrealised gains. So that's now called the FDR regime and that came into effect on about the 19th of December, just prior to Christmas and it takes effect, as you said, in April.
Originally I went to bat against the original proposal on the basis that GPG, while we may be registered in London was basically, I'm going to say, an historical accident, but GPG is predominantly owned by New Zealanders.
Our register is absolutely dominated by New Zealanders and I think we've got, I'm going to say, 70 or 80 per cent of our register is held in New Zealand.
So while we might be a company that is officially registered offshore - and we are, we're registered in England and we pay tax in England and our head office is in England - we very much feel part of New Zealand and its environment.
All of the GPG directors are New Zealanders with the exception of one, who is an Australian. So our links to New Zealand are strong.
The government argued with me that GPG should simply re-register in New Zealand and while that's easy to say, it's very hard to do.
GPG and its subsidiaries, we're in over 75 countries around the globe and the enormous job of trying to re-register GPG in New Zealand would take years, literally years.
There's all sorts of issues - there's accounting issues, there's banks to consider, there's debt holders, there's bond holders, there's capital note holders, there's all sorts of things.
This is not something you think: "oh what a good idea, lets go and register in New Zealand tomorrow morning". It doesn't work like that.
Now we've never said we won't consider it, but what we've also said is - and the government agreed - that it was impossible to do it and that the current CFC regime - that's the New Zealand controlled foreign corporation regime - is mid-point in being changed and re-thought about right now, so how could you ask us to come here when we wouldn't know what the current tax rules are or likely to be.
So, some common sense prevailed and it was agreed it is going to take two to three years for the government to sort out the CFC regime and it's going to take GPG four or five years in coming here, if it's going to come here, therefore the answer was - it was my answer - give us the five year exemption or a five year holiday and that was agreed basically, that was agreed.
Having said that, it took a lot of lobbying to get it because there were lots of issues and I've given you a brief overview.
The effect of it all was they then dropped the 85 per cent and that's what they gave us the holiday on and then I had to go back and lobby again to get it on the FDR rate which is now law and to the government's credit it honoured its commitment to GPG shareholders and we now have a five year exemption on the FDR rate.
So what it means is for the next five years is, for the next five years the direct shareholders, not the indirect but the direct shareholders, ie the mums and dads, will not have to pay the FDR rate which is this deemed five per cent capital over five per cent dividend for five years.
There's a lot of debate around food miles currently. Do you think this will have any effect on the Turners & Growers business?
Well I think frankly it's a ludicrous debate. Let me just give you a little something that I was told and I can't guarantee how accurate it is, but it's got that big hint of truth to me.
Let's talk about bird flu in England for a minute.
I am reliably told - how reliable it is I don't know, but it sounds right - that if bird flu hits England, there is no known way they could ever seal off their borders because they only - in England, Ireland, Scotland and Wales - have enough food at any point in time to feed the nation for a week.
Now, against that background the do-gooders are now saying flying stuff from New Zealand - and the next thing will be, diesel in ships from New Zealand - "it's a bit far away, maybe we should penalise them for that".
Well the English in my view are going to wake up one day to a few facts of life and that is the world feeds them, they don't feed the world.
They don't grow anything worth having, apart from some good apples that they do grow over there, but very little else is grown in England.
Another interesting phenomenon is going to occur as well. I'm also told there are middle classes being formed in India that have populations twice and three times the size of the British Isles who will willingly take and pay for good quality produce.
So England with all its pomp and ceremony and wanting to charge people food miles or freight miles or whatever, just may have to pay up or otherwise they won't get the goods.
So I think you can see I'm not a fan of people trying to charge New Zealand growers yet more.
Click on the two audio tracks with this story to listen to the full transcript of Tony Gibbs' interview.
