Petroleum Mining Law Changes

Press, Volume CIX, Issue 32119, 15 October 1969, Page 30

Petroleum Mining Law Changes

(New Zealand Press Association) WELLINGTON, October 14. Investors in a petroleum or mineral exploration company who purchase their shares for the purpose of resale will be taxed on the profit or loss they make.

This is one of a number of provisions contained in amendments to the Land and Income Tax Amendment (No. 2) Bill introduced in Parliament today which seeks to update the existing 32-year-old petroleum mining taxation legislation.

Previously profits made on the sale of shares in such companies, as is generally the case in other commercial concerns, were not taken into account for taxation purposes.

Introducing the detailed and technical amendments to the bill, which implements budgetary provisions, the Minister of Finance (Mr Muldoon) said they were designed to put the tax act in better form to meet the situation which bad arisen following the discovery of oil off the New Zealand coast.

As well as blocking "loopholes" in existing legislation, rhe amendments recognise that tax concessions should be given to companies and others who are prepared to spen< often large sums in searching for petroleum and minerals.

Mr Muldoon said that since the finding of oil at the Maui

, No. 1 site off the Taranaki coast, the whole investment 1 climate in oil and minerals in > New Zealand had been put on i a new plane. To preclude undue advant- ' age being gained by specu--1 lators in mineral and i petroleum exploration shares, the amending measure provides that if shares are i acquired for the purpose of , resale or as part of an over- . all undertaking with a view ’ to profit, the profit or loss : made on the sale or disposi- ■ tion of the shares is brought . to account for taxation pur- ( poses. HOLDING COMPANIES No amendment is made to : existing legislation which entitles investors in shares in such companies to claim as a , deduction against ordinary assessable Income one-third of the calls on their shares. But this concession is now extended to calls in mining holding companies in certain circumstances. Mr Muldoon said the purpose of this amendment wai to provide that when a profit

>or loss on mining shares was to be taken into account for I tax purposes the fact that a 'deduction might already have (been allowed for one-third of I calls on those shares would also be taken into account in calculating the over-all profit or loss. The one-third deduction is aimed at the investor who is i leaving his capital at risk iand not at the speculator who I will dispose of bis shares. ONE-THIRD DEDUCTION The amendments also provide that the one-third deduction for calls on shares tn mining companies be extended to calls on shares in mining holding companies, provided the capital contributed is used to finance mining activities. A "mining holding company" is defined as any New Zealand company which, in the opinion of the Commissioner of Taxes, is engaged exclusively or principally in ithe holding of shares in. or 'the investment of money in, or the making of loans to, any mining company. The amending measure provides that when a company , which would otherwise be assessed on profits on sales; of mining shares ploughs those profits back into further investment in mining or exploration for petroleum or the specified minerals, taxation will be deferred. ■ The company has six years •to do this and the profits i will be assessed if the investment is realised at any time ' but again there will be opportunity to reinvest. RECENT CASE Referring to this provision, Mr Muldoon said that in a recent case in New Zealand a company which was wholly owned by New Zealand residents was extensively eni gaged in the mineral and .petroleum mining field as ; part of its general under{taking. The company was now proI posing to sell to another company, in which the New Zea- • land public would be participants, its shares in a subsidiary which was engaged in petroleum exploration. "It seems that in the particular circumstances the profits on the shares could be assessable under the genera! law. “However, this company takes considerable financial risks in exploring and searching. and it is felt that in this type of case, particularly with our own New Zealand residents involved, the company should be given the opportunity to plough any profits it made back into further development and exploration of minerals and petroleum,” said the Minister.