Tax On Overseas Firms In N.Z.

Press, Volume CIII, Issue 30477, 26 June 1964, Page 1

Tax On Overseas Firms In N.Z.

(Prom Our Parliamentary Reporter)

WELLINGTON, June 25.

The Government’s thoughts on legislation controlling overseas investment in New Zealand were given by the Minister of Finance when he presented the Bydget to the House of Representatives this evening.

Mr Lake also announced three major changes in the taxation on income from overseas investment.

Recent take-overs of New Zealand enterprises by foreign interests had focused attention on the effects of substitution of overseas for New Zealand ownership, Mr Lake said.

“There are bound to be enterprises where retention of New Zealand control . of domestic companies is more likely to serve the public interest in such matters as seeking export markets, competitive pricing of imports, or high reinvestment of profits in New Zealand.” There was also a possibility that some sections of industry became unduly dominated by overseas concerns. The vulnerable balance of payments obliged New Zealand to try to hold' commitments for remittances abroad to a reasonable level. The control of overseas investment had been studied by the governments of many other countries, but no satisfactory solution had been found. . The Government wanted to continue to attract worthwhile investment from abroad; but it had to keep in mind the impact on the balance of payments and had to try to preserve the general freedom of New Zealand residents to employ or dispose of their property as they thought fit. Discussing the legislation

being examined by the Government, Mr Lake said the limited control now exercised on overseas capital issues would remain substantially unchanged. In the case of take-over offers from overseas, it was thought it might be desirable for the Government to have a “watching brief” and a reserve power to intervene when that was desirable in the public interest. That could be achieved by requiring registration of offers and providing that in certain circumstances the Government could indicate within a short period that consent was required before an overseas take-over could proceed. On taxation on income from overseas investment, the Minister said the present law tended to discriminate against New Zealand taxpayers. Exemption from dividend tax at present applied to nonresident companies would be abolished. Interest and royalties payable from New Zealand to overseas residents would, in general, be made liable for taxation in New Zealand. Withholding Tax

As dividends were not paid directly by New Zealand branches of overseas firms, an income tax in the form of a withholding tax would be applied to payments of dividends, interest, and royalties to companies and individuals not resident in New Zealand. This would be 30 per cent for dividends and 30 per cent for interest and royalties paid to. companies, and 15 per cent for interest and royalties paid to individuals. Dividends to overseas companies or individuals in Australia and Japan would be taxed at the rate of 15 per cent.

Mr Lake said the introduction of the tax for individuals would be delayed until next April. For companies, the

tax would apply immediately. In the case of companies which derived income from New Zealand but which did not declare dividends from New -Zealand and would not be liable to pay the withholding tax, Mr Lake said there would be an additional tax at a flat rate of 7i per cent on the taxable income from New Zealand of such companies, other than mutual life insurance companies.