Trans-Tasman Taxation of Companies and Their Shareholders 1945-2005

Abstract

This paper analyses the methods adopted by Australia and New Zealand to tax companies and their shareholders in four key periods from 1945 to 2005. For each period the major concern of the paper is with an analysis of the factors contributing to effective tax rates for different types of Trans-Tasman investment and of the tax effects of those investments in terms of international tax policy criteria in common use in 2005. Despite considerable changes since 1945, both systems still contain biases against Trans-Tasman investment and in some circumstances produce very high effective tax rates on Trans-Tasman investment. This is despite much closer alignment of the two countries' shareholder taxation regimes since the mid 1980s and the provisions, enacted in 2003, which allowed companies from either country to elect to enter the other country's imputation system. The remaining biases in the two systems against offshore investment are in part products of the corporate-shareholder tax history of the two countries and of the worldwide economic environment in which they radically reformed their tax systems in the 1980s. The paper concludes with a discussion of some possible solutions to these biases.