KEY POINTS:
Guinness Peat Group is happy to have secured its New Zealand shareholders a five-year exemption from new overseas investment tax rules, but remains less than satisfied with other aspects of the tax changes.
Parliament's finance and expenditure select committee reported back on the tax bill on Tuesday after dealing with a mountain of submissions opposed to changes to the treatment of overseas investments.
The Government softened that aspect of the bill and adopted a less harsh "fair dividend rate" approach.
But that had drawn criticism because the rate is set at 5 per cent, which critics feel is too high.
The select committee retained a provision in the bill giving individual New Zealand shareholders in British-based investment company Guinness Peat Group a five-year exemption from the tax.
"I'm grateful that we've maintained our exemption," said GPG's Tony Gibbs yesterday. "I'm very pleased the Government has honoured its commitment to our shareholders."
Gibbs said the exemption the select committee had included in the bill was "a version of the exemption we originally had".
The exemption was not extended to GPG's institutional shareholders, which Gibbs had told the select committee was part of his original deal with the Inland Revenue Department.
But he said they would be better off "by a long shot" under the new system.
"They'll be taxed on 5 per cent of their opening balance as against the original proposal, where they were going to be taxed on 85 per cent of their unrealised gain."
But Gibbs said the new system was far from perfect.
"Without doubt this is still a potential gains tax, and it still is possible in certain circumstances to pay tax on something investors have never received.
"I'm hoping it's an anomaly which will be straightened out by supplementary order papers in due course."
The tax bill gives a two-year exemption to individual investors in the London-based New Zealand Investment Trust.
The trust has about $114 million worth of assets, mostly in New Zealand equities. The balance is in Australian shares. Almost half its shareholders are New Zealanders.
