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FX Networks chairman dismisses 'tax exile' label

Colin Hill, the largest single shareholder in New Zealand fibre operator FX Networks, has rebutted NBR's claim that the Isle of Man, where he lives, is a tax haven, as it is routinely described.

Mr Hill's investment vehicles, Peregrine Company Managers and Peregrine Offshore Services Limited (both registered to Burleigh Manor on the Irish Sea island hold 208,956 shares in FX, or 34.93% of the company (see other holders here; they include Roger de Salis, founder of Opto Networks, which has pledged to use FX's backhaul network in its bid for the government's $300 million rural broadband tender, and which has allied with the surprise Torotoro Waea bid).

FX Networks - cited by the Commerce Commission as a positive example of the way regulatory changes have spurred new private investment - was recently awarded a major contract for the the government's "Karen" fibre optic network, displacing TelstraClear.

Earlier this week, FX  - perhaps in a snipe at Telecom's Chorus division - claimed a "land speed record" for rolling out more than 500km of new fibre to connect five more cities to the high-speed Karen network.

FX also maintains more than 2000km of its own fibre and, as has been in talks with The Regional Fibre Group about its bid for the $300 million rural broadband tender.

The company is also a player in the government's urban-centred ultrafast broadband (UFB) project.

 He wrote to NBR last night:

As chairman and effectively a major shareholder in FX, I would like to correct an impression given in your article.

The Hill family shares are administered by Peregrine as trustees for the Berrag Trust which owns 35% of FX.

The Isle of Man, where I have lived for 14years, is not part of the UK and is a British Island Protectorate.

Our Parliament is 1000yrs old and the tax rate is 18% becoming 20%.

But the "tax haven label" comes from the fact we have no capital gains tax, gifts tax and estate duty very unlike the UK who hate it.

In some ways you could say it has similarities to NZ. VAT or GST is common with the UK.

FX was set up about six years ago, with my brother-in-law  (at that time married to my wife's youngest sister) Roger De Salis.

I financed FX single handed until others later took up some of the strain.

At the time I did not realise what we were getting into.

I think you will agree we have turned over the telecoms industry in NZ.

Roger has now gone his own way and still has a very small share in FX; less than 5%.

I have three daughters, two of which are Kiwi citizens and the third has an application pending to live in NZ.

Eventually my assets will devolve to them and FX would then be a majority New Zealand owned company not owned in some "tax haven".

Regards
Colin Hill

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Comments and questions
2

He has conveniently left out mentioning the 0% corporations (company)tax which allows for excellent structuring opportunities [There are also caps on total personal tax - CK].

"Tax havens" in a pure form do not exist. Every jurisdiction taxes something or has "employee levies", "social security levy" or similar. The definition of a tax haven is generally accepted as "low tax" jurisdictions. Of which Isle of Man would definitely qualify prima facie.

The OECD prints a list regularly but it is highly political as to whether you are on it or not. As you can see Isle of Man is not listed as a tax haven.

http://www.oecd.org/dataoecd/38/14/42497950.pdf

Yet it shares most of the features of say the Cook Islands which is listed as a tax haven (Cook's taxes personal income tax) or Samoa (likewise). Sadly for the Cooks and Samoa their lobbying power to get off this list wasn't as effective as Isle of Man.

Who cares, if he is increasing investment in, and competition in, the NZ telecoms market. We have to really get over the tax satus of investors and focus instead on what they bring to NZ economic development.