retirement.org.nz

I consulted a large number of stakeholders during this consensus building process. They represented a range of interests reflecting the breadth of the investment and savings industry in New Zealand. The basis for my engagement was not that New Zealand necessarily has a poor savings rate, but that taxation is distorting the efficient allocation of what savings New Zealanders do have. Taxation rules are necessarily arbitrary, but in the case of the taxation of investment income, outcomes have become sub-optimal, in my judgment, as after-tax return considerations mean investors incur transactions costs and assume different portfolio risks than would be the case if investors focused on gross (pre-tax) returns. The optimal allocation of our scarce capital resources is therefore distorted and New Zealand’s potential growth rate is arguably lower as a result. October 2004.
 

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Towards Consensus on the Taxation of Investment Income