Earnings, investment and saving would be boosted in Australia and New Zealand if double-taxation of dividends was removed, the Australia New Zealand Leadership Forum says.
At present 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.
The Australia New Zealand Leadership Forum wants the governments of both countries to change their tax law to abolish the double taxation and has commissioned analysis by the Centre for International Economics and NZIER to show what the economic benefits would be.
The analysis released today indicates that removing double taxation would bring additional growth of at least NZ$5 billion in the trans-Tasman economy over 20 years, as well as further significant growth resulting from increased competition and innovation and reduced management time spent on tax avoidance.
The analysis will inform the work of the Productivity Commissions of New Zealand and Australia as they consider the question of mutual recognition of imputation and franking credits.
Australian Co-Chair of the Forum Rod McGeoch said enhancing business investment was a critical issue and a solution that facilitated greater investment flow in both directions would be welcome in both countries.
New Zealand Co-Chair Jonathan Ling said resolving double taxation of dividends would be a key step towards better integration of the New Zealand and Australian economies.
The Productivity Commissions are expected to release their report on the issue this month.