Big guns maybe hauled in on tax changes

Some form of the fair dividend rule (FDR) – a version of the deemed rate of return method now appears highly likely to be adopted.

Finance and Expenditure committee chairman Shane Jones says officials have been working on fleshing out how the FDR would work in practice and its likely “vices and virtues”.

“We’ll be bringing back a select group of submitters with proven competence and expertise in this area.

It is understood both Rob McLeod and former BT Investments chief executive Craig Stobo, who each put together reports on taxation will both be invited to appear.

The committee has finished hearing submissions on the original proposals in the tax bill, but opposition was so intense the government has substituted those proposals for the FDR option.

“No-one wants to go down the 3000-odd submissions route again,” Jones says.

Critics of the proposals say the method is more complicated than it appears, and that individual investors will still have problems working out their tax each year.

Managed funds are also unhappy that they pay a flat 5%, and say it should be lower.

National is supporting the proposal in principle, although finance spokesman John Key says the rate should be a flat 3% for all investments, whether direct or through managed funds.

Both of Labour’s support parties, United Future and New Zealand First, are supporting the FDR.