Petrocorp legislation seen as inconsistent

Press, 2 December 1987, Page 40

Petrocorp legislation seen as inconsistent

PA Wellington The Government legislation to enhance the sale of its shares in Petrocorp by turning accumulated losses into future tax credits has raised concern among accountants. The Society of Accountants told Parliament’s finance and expenditure select committee yesterday that the move introduced an, inconsistency in the way losses could be carried forward for tax purposes. The committee is receiving submissions on a Finance Bill allowing Petrocorp’s losses — $999.1 million at last March — to be carried forward and offset against future income for tax purposes. This in spite of a standard requirement for continuity in

at least 40 per cent of the company’s shareholding throughout the period being breached when the Government's 70 per cent in Petrocorp is sold. The bill will require the losses to be “ring-fenced,” or available for offset only by Petrocorp, or its subsidiaries, and it is intended that any future losses will be treated in the same way as those of other companies.

The committee heard from an Inland Revenue Department representative yesterday that at the existing company tax rate, the legislation would cost almost S4BOM in lost tax revenue.

The accountants’ submission said it was “unfortunate that the Government has resorted to a legislative change

to achieve a result that benefits itself because of the value which can thus be placed on tax losses.

“Such an advantage cannot be enjoyed by other shareholders in loss companies.”

But the committee chairman, Government member of Parliament Mr Jim Sutton, said that in making the change the Crown was capitalising on future revenue, as it would receive tax revenue from Petrocorp. “We are capitalising our family benefit,” he said.

The Government has so far this year sold 30 per cent of Petrocorp, 15 per cent of that to Brierley Investments and the remainder to the public. Tenders for the remaining 70 per cent closed a week ago.