Double tax 'sticking point' at CER forum

Closer Economic Relations has much to achieve, but double taxation on dividend returns needs to be addressed urgently, says Business NZ chief executive Phil O’Reilly.

The eighth Australia New Zealand leadership forum, opening in Sydney on Thursday, will focus on using CER and the single market as a springboard for developing new business in third markets.

Mr O’Reilly says one of the vital issues the CER needs to address is mutual recognition of imputation and franking credits.

These credits are a device for offsetting double taxation on dividend returns, but Australian credits aren’t valid for New Zealand shareholders and vice versa. 

This means dividend returns from business’ trans-Tasman investments in effect get taxed twice.

“This is a disincentive for companies to expand across the Tasman and a barrier to the free flow of capital so it is completely alien to the goals of CER and a single economic market.”

Mr O’Reilly says this double taxation is a fiscal boon particularly to the government of Australia, and efforts to persuade it to adopt mutual recognition have so far failed.

“It would be a great birthday present to CER if it were to agree to mutual recognition before its 30^th anniversary.”

While imputation and franking credits are one of the many issues set to be discussed during the forum, co-chairman Jonathan Ling - CEO of Fletchers - says the focus of the forum will be using CER and the single markets as a “springboard” for developing new business in Asia.

This year’s forum meets as Australia considers a new white paper on how best to advance its interests in the Asian century and as the two countries’ Productivity Commissions focus on what more can be done to stimulate greater integration. 

“The theme of this year’s Forum – Australia and New Zealand – together in the Indo-Pacific century – provides the context for a broad vision for the relationship and on how to improve competitiveness and position the two countries for success in global markets,” Mr Ling says.

“Since the last forum a small group has focused on a number of key issues including how to free up trans-Tasman investment, progress the vision of a common border and promote development in the Pacific,” says Mr O’Reilly.

He says New Zealand’s relationship with Australia is critical to New Zealand’s economic success. 

“One year out from the celebration of the 30^th anniversary of CER we need to think big. 

"Continuing in an incremental fashion to develop the single market will not be enough. 

"We need to articulate a new agenda for growth and forge deeper co-operation with Australian business.”