Resident withholding tax (RWT)

Issue: Casual interest payers

Submission

(6 – Corporate Taxpayers Group)

The RWT rules should be clarified as to how they apply to non-banking scenarios, especially in one-off transactions. In particular, there should be separate rules for “casual interest payers” (interest payers outside of the major financial institutions). This should include a special default rate of 33% for casual interest payers and 30% for companies. This would apply where the casual interest payer has not been supplied with a tax file number.

Comment

This is a matter that does not arise specifically from the proposals contained in the bill but is an issue that arises more broadly with respect to the application of the RWT system that we have not been able to consider in the time available.

Recommendation

That the submission be declined.

Issue: RWT on interest and dividends

Submission

(6 – Corporate Taxpayers Group)

As an alternative to the submission above, all fully imputed dividends paid by widely-held companies to resident shareholders should be subject to a final tax of 30%.

Tax on all interest paid between unrelated parties should be capped at 30%.

Comment

This is a substantive proposal that is outside the ambit of the bill and has not been considered.

Recommendation

That the submission be declined.

Issue: RWT on dividends

Submission

(5 – New Zealand Institute of Chartered Accountants, 6 – Corporate Taxpayers Group, 8 – PricewaterhouseCoopers, 10 – KPMG, 11 – Ernst & Young)

The RWT rate on dividends should be reduced from 33% to 30% to align with the company tax rate. (PricewaterhouseCoopers, Corporate Taxpayers Group)

The RWT rate on dividends should be reduced to 30% if paid to companies or PIEs. (Ernst & Young)

Companies should not have to deduct an additional 3% RWT on payment of fully imputed dividends. However, this could remain as an option if a company wished to do so. (KPMG)

The RWT rate on dividends should be reduced to 30% for a dividend paid to an associated person of a closely-held company. (New Zealand Institute of Chartered Accountants)

Comment

This issue is that 30% will not be a final tax to any recipient (all 30% taxpayers have an obligation to file a tax return) whereas 33% will be final to some individuals. The question is one of compliance cost trade off between the dividend payer and the recipient.

Further, this is a substantive proposal that is outside the ambit of the bill and, in the time available, has not been able to be fully considered.

Recommendation

That the submission be noted.