Ministers to end tax hitch

By BRIAN FALLOW

The New Zealand and Australian Governments are expected to use the visit of Australian Treasurer Peter Costello this week to announce an agreement on "triangular tax".

The issue relates to cases where New Zealanders own shares in an Australian company which earns income and pays tax in New Zealand.

The imputation credits generated by the tax paid in New Zealand cannot be used, even by its New Zealand shareholders, because it is not a New Zealand company.

Effectively they are taxed twice on the same income.

The same problem arises for Australian shareholders in New Zealand companies operating in Australia.

Under the planned solution, New Zealand shareholders would be able to claim their share of the imputation credits generated by the tax the company paid here, eliminating the double taxation.



Australian taxpayers in a New Zealand firm paying tax across the Tasman would be able to make use of their share of the associated imputation (Australians call them "franking") credits.

Costello will also discuss how to advance the CER relationship in talks with his counterpart, Dr Michael Cullen, and other ministers on Wednesday.

It is Costello's first official visit.

The two countries' prime ministers and foreign, trade and defence ministers have regular meetings, but no similar arrangement exists for finance ministers.

Costello and Cullen have met serval times at international forums and are understood to get on well.

Costello will also attend a business breakfast in Auckland on Thursday and get a first-hand look at the America's Cup campaign.