Details of the Government’s tax policy work programme as announced on 16 March 2012.
RESPONSIBLY MANAGING THE GOVERNMENT’S FINANCES AND TAX SYSTEM [COHERENCE/INTEGRITY]
Employee benefits – Review of the treatment of certain untaxed benefits that are substitutes for salary.
Mixed-use assets – Reforming the rules for determining deductibility of expenditure relating to assets used both privately and for income-earning.
Remedial work – There are a number of areas that require remedial changes to effectively implement existing policy, such as GST, CFCs, IFRS, life insurance, “black hole” expenditure and the look-through company rules.
Review of employee allowances – Several interpretation issues in the area of employee allowances have arisen which has meant that a wider policy response on allowances is needed.
Specified mineral mining – Review of concessionary rules for specified mineral mining (largely gold mining).
Student loans – Review the student loan scheme with a focus on overseas-based borrower debt.
Taxation of foreign retirement savings – Review the tax treatment of foreign retirement savings.
Thin capitalisation – The project will examine the ordinary thin capitalisation limits in order to maintain the New Zealand tax base.
Time period for income tax refunds – Consider whether the time periods for income tax refunds should be aligned to four years.
Various charities-related issues – This work includes the Department of Internal Affairs’ review of the Charities Act 2005, cultural giving, Schedule 32 review (overseas-focused organisations), applications for inclusion on Schedule 32, gift aid, payroll giving intermediaries, various donations tax credit remedial issues and regulations to specify charitable organisations for student loan purposes.
Valuation of livestock – Review of the ability to move from one livestock valuation method to another and, in particular, exits from the herd scheme.
BUILDING A MORE COMPETITIVE AND PRODUCTIVE ECONOMY
Active income exemption for branches (and financial institutions) – Extend the existing active income exemption for non-portfolio foreign investment funds (FIFs) and controlled foreign companies (CFCs) to include foreign branches and, following that, further extend to active financial institutions.
Dividend review – Review dividend rules for closely held companies.
Double tax agreements and Tax information exchange agreements – Negotiate new agreements to maintain and expand the network.
Financial reporting – The setting of minimum financial reporting requirements for taxpayers who do not have to prepare general purpose financial statements.
GST cross-border issues – Review the GST treatment of business activities that are in substance exports but do not qualify for zero-rating since there is no tangible export.
Imputation – Review the current rules on the use of imputation credits, whether companies should be able to stream imputation credits and refundability of imputation credits, particularly to charities.
Mutual recognition – Mutual recognition of trans-Tasman imputation credits (should it be advanced) is where both New Zealand and Australia would recognise for imputation purposes company tax paid in the other jurisdiction.
Non-resident investment through NZ limited partnerships (hybrid entities) – Review of the tax treatment of non-resident limited partners in NZ limited partnerships.
Savings and investment taxation review – Examine the effects of different possible tax reforms on savings and investments (such as whether the tax treatment of PIEs and direct investors should be aligned).
BETTER PUBLIC SERVICES
Broadening definition of income for student loan repayment purposes – Align the definition of income used for student loans with that used for other social policy programmes.
Business transformation – Inland Revenue’s departmental work programme, including information-sharing.
Interface between welfare and tax systems – Initiatives following on from the Welfare Working Group’s recommendations that may require system changes, such as incentives to move into paid work, interface between the welfare system and Working for Families and Child Support.
Legislative changes to improve debt collection – Consider further policy changes to improve the collection of debt.
Secrecy review – Further work on the approach to the maintenance of secrecy.
Earthquake issues – Resolving issues arising from the Canterbury earthquakes. This work is ongoing and is largely focused on depreciation issues.
Developing and implementing any Budget 2012 initiatives as appropriate.
International obligations – Fulfilling international obligations such as providing support for the Global Forum on the transparency and exchange of information for tax purposes.
Supporting Ministers – Dealing with issues as they are raised by Ministers.
Supporting other policy areas, committees and agencies – This work includes providing support for the Rewrite Advisory Panel and also involves input on tax issues that arise out of non-tax Government priorities, such as flexi-superannuation.
Managing bills in Parliament, including in 2012:
- Child Support Amendment Bill
- Student Loan Scheme Amendment Bill
- Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill
- Taxation (Income-sharing Tax Credit) Bill