Loopholes to be closed

Press, 8 March 1984, Page 9

Loopholes to be closed

PA Wellington The Government plans retrospective legislation to close a tax loophole for certain interest payments. A definition of “interest” introduced last year required that for an amount of discount or premium to be taxable as interest, the money lent had to be paid to the borrower.

It did not provide for the situation where the money lent was paid or applied on behalf of, or for the benefit

of, the borrower rather than direct to him.

The Minister in charge of the Inland Revenue Department, Mr Falloon, said yesterday that the proposed legislation would remedy the omission.

“Parliament clearly did not intend that payments in the nature of interest should escape taxation as interest simply by the circuitous payment of loan money,” Mr Falloon said.

The extended definition of interest brought down last

year applied to all money lent after Budget night, July 28.

Mr Falloon said, “As a matter of equity it is necessary to ensure that all lenders since the 1983 Budget night amendment are treated in the same manner.

“Accordingly, it is intended that the proposed amendment when it is passed will have effect from the beginning of the new regime for the taxation of interest, that is from July 29, 1983.”