A joint study by the Australian and New Zealand Productivity Commissions has failed to respond to the challenge of moving the trans-Tasman relationship to a new level.
That is the view of the Australia New Zealand Leadership Forum (ANZLF).
Strengthening Trans-Tasman Economic Relations has made detailed and in most cases useful recommendations in a range of areas, but they are largely unquantified in terms of economic benefits, and taken together will not deliver the step change that is required to enable the two economies to compete more effectively in the Asian century.
“It is particularly disappointing that the report hedges its bets on the biggest issue of all – double taxation,” said Australian ANZLF co-chair Rod McGeoch.
“Currently, 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 result is that Australian equity investors effectively pay 60 cents in the dollar on their investments in New Zealand and New Zealanders effectively pay 53 cents in the dollar on their investments in Australia. This is a significant disincentive to trans-Tasman business.”
New Zealand ANZLF co-Chair Jonathan Ling said it was surprising that the report recommended removing investment restrictions to realise the benefits from the free movement of capital, yet kicked for touch on mutual recognition of tax credits, leaving it to the two Governments to decide.
“Our research, which was undertaken with the support of numerous trans-Tasman corporates and which we shared with the Commissions, shows that movement on this issue would transform the investment relationship, add to GDP and net welfare gains in both countries and result in improved competitiveness and productivity,” said Mr Ling.
Mr McGeoch and Mr Ling urged the Australian and New Zealand Governments to seize the opportunity to liberalise and expand the flow of trans-Tasman investment through introducing mutual recognition of imputation credits.
“A clear choice has now been put before the two Governments and the ball is firmly in their court. From the point of view of business, there could be no better way to celebrate 30 years of CER than for the two Prime Ministers to announce this policy in 2013,” Mr Ling said.