Trans-Tasman work valuable but double taxation still a problem

BusinessNZ has welcomed the interim report by the Productivity Commissions of Australia and New Zealand on strengthening trans-Tasman economic relations.

The joint study by the two agencies makes recommendations into areas where the two countries can draw closer, with improved economic outcomes for both.

BusinessNZ Chief Executive Phil O’Reilly says the study does not contain any ‘big bang’ solutions but this is not surprising given that many significant issues have already been resolved through decades of cooperative work while other potential directions such as a currency union or a customs union have been discarded.

“The Productivity Commissions’ joint work adds to this valuable ongoing dismantling of barriers between our two economies.

“The Commission’s recommendations on issues like harmonising business law where appropriate and in improving occupational licensing systems are on target.

“However, it is disappointing that the double taxation of company income has not received more attention in the interim report.  This is the largest unresolved issue for business in both countries.

“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.  This is a sharp disincentive to trans-Tasman business and is an obvious issue for the Productivity Commissions to address. Hopefully this issue will feature in the final report in December.”

Research* commissioned by BusinessNZ outlining the scale of double taxation has been made available to the Productivity Commissions. The study found that a system of mutual recognition of imputation and franking credits would bring significant net benefit to both economies over time.

Mr O’Reilly said BusinessNZ would continue to work with the Productivity Commissions and was supportive of their policy work aimed at enhancing the productivity and competitiveness of both nations.

*The costs and benefits of mutual recognition of imputation and franking credits NZIER & CIE, August 2012 is on www.businessnz.org.nz