Bill aims to end twin tax

By BRIAN FALLOW

A tax bill introduced this week sets out to end the overtaxation of Maori authorities.

The authorities include not only traditional land-owning trusts and incorporations, but also the Treaty of Waitangi Fisheries Commission and the Crown Forestry Rental Trust.

The tax rules applying to Maori authorities are complex, unwieldy and out-of-date, having last been revised 50 years ago.

The major anomaly is double taxation, which has been largely eliminated from the rest of the tax system.

Maori authorities' income, unless distributed in the the year it accrues, can be taxed twice: in the authority's hands at 25c in the dollar, and then at 33c when paid out.

This is considered especially unfair because Treasury estimates that 90 per cent of Maori earn $38,000 or less and so are taxed on their other income at 19.5c or less.

The legislation lowers the tax rate authorities pay from 25c to 19.5c and sets up an imputation-style regime so that any payouts from tax-paid income will be accompanied by credits representing the person's share of the tax paid by the authority.

Only if his or her marginal tax rate is higher than 19.5c will any further tax be payable.

Helena Fagan, a tax manager with Ernst & Young, said a separate regime for Maori authorities was justified by their special characteristics: individual members typically inherited their rights and could not transfer them, and the entities had limited powers to dispose of their assets, especially land.

The bill also relaxes the "public benefit" requirement for a charitable tax exemption. An entity will not be disqualified from the exemption just because only those linked by blood ties are eligible.

The legislation will make it easier for marae to qualify for the sort of charitable tax exemption that community halls generally get.

Helena Fagan said the general thrust of the legislation was in line with the preferred outcome that emerged from extensive consultation with Maoridom.