In Box: Report fails trans-Tasman challenge

A joint study by the Australian and New Zealand Productivity Commissions has failed to respond to the challenge of moving the trans-Tasman relationship to new level.
That is the view of the Australia New Zealand Leadership Forum (ANZLF).
ANZLF says that the Trans-Tasman Economic Relations report’s recommendations are largely unquantified in terms of economic benefits, and taken together will not deliver the step change that is required to enable the two economies to compete more effectively in the Asian century.
“It is particularly disappointing that the report hedges its bets on the biggest issue of all – double taxation,” said Australian ANZLF co-chair Rod McGeoch.
“Currently, companies based in Australia or New Zealand with operations in the other country have their profits taxed twice, since neither country recognises the other’s system for offsetting tax credits. The result is that Australian equity investors effectively pay 60 cents in the dollar on their investments in New Zealand and New Zealanders effectively pay 53 cents in the dollar on their investments in Australia. This is significant disincentive to trans-Tasman business.”
New Zealand ANZLF co-chair Jonathan Ling said it was surprising that the report recommended removing investment restrictions to realise the benefits from the free movement of capital, yet kicked for touch on mutual recognition of tax credits, leaving it to the two governments to decide.
“Our research, which was undertaken with the support of numerous trans-Tasman corporates and which we shared with the Commissions, shows that movement on this issue would transform the investment relationship, add to GDP and net welfare gains in both countries and result in improved competitiveness and productivity,” said Ling.
• The report: Strengthening Trans-Tasman Economic Relations is on www.productivity.govt.nz
• ANZLF research: The costs & benefits of mutual recognition of imputation & franking credits is on www.businessnz.org.nz. M