Mary Holm continues her inexplicable crusade to create more unwilling converts the the proposed changes to the taxation of international investments in this article. Several things lead me to use the term inexplicable - Holm fails to explain what great problem this proposed change is meant to solve, and why this solution - for preference over the others proposed - is best.
Instead Holm provides us with a comparison of the effect of the tax change on two types of funds -
- International index funds (very popular with investors, and suffer under the system)
- International active funds (not very popular with investors, and will enjoy a modest improvement in tax treatment).
Yet she completely ignores that the greater problems with our tax system are probably around investment in property. She completely ignores the effect of the proposed tax changes on investors that hold international shares directly - and they are not all held by John Key. Lots of kiwis hold and trade international shares. When we worked with the National Bank to develop their online share-trading system we knew this was a crucial part of its functionality - and it has been a major factor in that system becoming the market leader.
The fact is that this is a band aid fix of a band aid fix. The current FIF regime is a nonsensical piece of a tax system. Within that system it is a lesser piece of nonsense. Going to the expense and effort of prioritising it above the other areas, and then replacing it with something equally non-sensical is simply a waste of time and money.
Defending it is a waste of Holm's talent. Especially given the comment in an earlier article by Holm that:
"All in all, I think the status quo is better. "
Why not make that message clearer, louder, and longer, and we can move towards more sensible proposals?
Diana Clement on the other hand, in an article buried on page 10 (which you can read here) of the same section of the paper has discovered yet another unintended consequence of the new tax - a disincentive to migrants.