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Cullen says no more tax holidays

By Rob Hosking

Thursday 25th May 2006

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Finance Minister Michael Cullen says no-one else is getting the sort of tax holiday the government is giving investors in Guinness Peat Group.

After a major public campaign, and a great deal of private lobbying of New Zealand First and Prime Minister Helen Clark, the government last week declared it would provide a five year tax holiday for investors in firms which meet five very specific criteria.

It had previously ruled out giving GPG investors any sort of exemption: Cullen stated less than a week before the backdown that GPG's "call for a special exemption makes no sense in terms of tax policy or fairness".

Under the "GPG amendment" to the tax bill currently before Parliament, investors in firms which meet the criteria will not have to comply with the new offshore investment tax rules currently being steered through Parliament, for five years.

GPG is the only company which fits all five: most of the country's investment trusts fit four of the five criteria.

First New Zealand Capital's Peter Irwin has called for the government to allow investment trusts the same sort of holiday it is offering GPG investors.

Cullen has ruled that out, and in the process attacked the existence of such investment trusts.

"I see suggestions are made that those who set up UK investment trusts should have some kind of transitional exemption," he told the House in answer to questions from National Finance spokesman John Key on Tuesday.

"Those trusts are set up deliberately as avoidance mechanisms using the 'grey list', and, as usual, the party that calls for tax cuts supports the avoidance of tax obligations, which raises tax for everybody else in the country."

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