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The Government has hinted that withholding tax rates might be cut when it renegotiates New Zealand's tax treaty with the United States next month.
Negotiations on amending the 25-year-old double tax agreement with the US are scheduled for June 16. "We anticipate a number of technical improvements to the existing treaty as well as possible changes to the non-resident withholding tax rates [NRWT]," Revenue Minister Peter Dunne said.
There has been an international trend towards lowering NRWTs on dividends, interest and royalties to encourage cross-border investment. But Deloittes tax partner Thomas Pippos said that as New Zealand was a substantial net importer of capital, officials would be wary about the potential erosion of the tax base.
New Zealand's tax treaties impose NRWT rates of 10 per cent on interest and royalty payments. On dividends the nominal rate is 15 per cent but under the complex foreign investor tax credit regime it is effectively zero so long as the dividend is fully imputed.
New Zealand is also in the throes of renegotiating its tax treaty with Australia, which has cut its rates in treaties with several countries, including the United States.
