KEY POINTS:
The Government plans to release discussion documents on imputation and on income-splitting for families with children, Revenue Minister Peter Dunne says.
In what has become a tradition, he used his annual speech to the International Fiscal Association to outline the Government's tax policy agenda this year.
Officials have been reviewing the imputation system under which, to avoid double taxation, company dividends are accompanied by tax credits representing the shareholder's share of the tax paid by the company.
The review will also look at whether charities, which pay no tax and which therefore cannot make use of imputation credits, ought to get an equivalent cash refund.
KPMG tax partner John Cantin said there was a strong case for relaxing overly restrictive rules about the use of imputation credits and for looking again at the treatment of non-residents and at refundability.
"If you take the view that company tax is a withholding or interim tax on behalf of shareholders then a logical consequence is that imputation credits should be refundable."
On income-splitting, Dunne said that in most countries it allowed couples to lower their total tax liability by allocating some of the higher-earning partner's income to the lower-earning partner, mitigating the effect of a progressive income tax scale.
But sceptics point to the frequency with which families break up and reform and the practical administrative difficulties that would pose.
Dunne said that if submissions to the discussion document showed strong support for the concept more detailed proposals would be developed, though that would not occur until early next year.
Discussion documents are part of the somewhat slow and tortuous tax policy process which critics say the Government has dispensed with lately - as in recent announcements on stapled securities and the tax treatment of oil production revenue.
But Dunne insisted the generic process was alive and well. Last year alone the Government had issued 11 discussion documents and issue papers, seeking views, for example, on changes to the policy framework on business tax and the international rules.
He drew a distinction between "fundamental" changes, where the Government consulted widely, and cases where anomalies, uncertainties, unintended consequence or significant fiscal risks had emerged which could be dealt with in the existing legal framework.
There was always an opportunity for feedback during the select committee process before the legislation changed, Dunne pointed out.
To engage in wide consultation before announcing the closure of a loophole or the blocking of a scheme that was losing the country millions of dollars in revenue would risk creating enormous uncertainty, he said.
Cantin said using terms like "loophole" often begged significant questions of principle and policy.
And Deloitte's tax partner Thomas Pippos said some of the measures in recent press releases were expected to hit targets considerably wider than those they were supposed to be aimed at.
"And the policy considerations justifying those actions are far from settled."
Hopefully by the time the measures actually become law they would have been refined sufficiently to avoid too much collateral damage, Pippos said. But in the meantime uncertainty would continue.
