Professor Rob Salmond's claims (reported in the New Zealand
Herald on Tuesday) that the rich are taxed less in New Zealand than
in comparable countries because New Zealand has a comprehensive GST
but no capital gains tax ignores some important facts, says Casey
Plunket, a member of the 2010 Tax Working Group (TWG) and a tax
partner at Chapman Tripp.
"Salmond suggests that people who invest in company shares
which they sell for a profit are being under-taxed, because there
is no capital gains tax. This confuses legal liability with
"Although the investor pays no tax, the company does. That
tax reduces the sale price for the shares, because it reduces the
company's current assets, and the post-tax cash flow the buyer
can expect from the company. Economically, the corporate income tax
is a tax on shareholders rather than companies."
New Zealand had a high corporate tax rate by international
standards – 28% compared to the OECD average of 25.5% -
and a very comprehensive corporate income tax base. As a result,
corporate income tax accounted for a higher proportion of tax
revenue here than in most other OECD countries.
"That is the reason why the TWG did not advocate a capital
gains tax. The high corporate tax means we don't have the same
need for one as many other countries, and in many cases, it would
actually lead to double taxation," Plunket said.
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
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Under Indian domestic tax law, capital gains earned by a non-resident on transfer of shares or interest in a foreign company which derive ‘substantial value' from underlying Indian assets are liable to tax in India.
India and Mauritius have recently signed a Protocol revising the tax treaty between them to enable India to impose tax on capital gains derived by a Mauritius resident on transfer of shares of an Indian Company.
The double tax avoidance arrangement between India and Mauritius ("India-Mauritius DTAA") was amended through the protocol ("Protocol") earlier this month.
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