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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Plagued, as it is, by indirect tax disputes and ambiguities, the implementation of GST is expected to usher in a uniform tax regime and bring some clarity to indirect taxation in the e-commerce sector.
The Central Government has granted relief to assesses plagued by the recovery methods adopted by the tax authorities vide CBEC Circular No. 1035/23/2016-CX dated July 4, 2016.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).