1 00:00:00,640 --> 00:00:03,920 Speaker 1: Here, the Duplessy Allen An ird proposal to crack down 2 00:00:03,920 --> 00:00:06,560 Speaker 1: on company loans to shareholders doesn't look like it's going 3 00:00:06,640 --> 00:00:09,280 Speaker 1: to happen. To explain why, we're joined by The Herald's 4 00:00:09,320 --> 00:00:11,879 Speaker 1: Wellington business editor, Genate tib Cherany hygiene. 5 00:00:12,960 --> 00:00:14,720 Speaker 2: Hey, now this looks more like. 6 00:00:14,640 --> 00:00:16,880 Speaker 1: A decision that's being taken at the political level than 7 00:00:16,960 --> 00:00:18,239 Speaker 1: Ird's level. Is that fair? 8 00:00:19,960 --> 00:00:21,560 Speaker 2: Well, Actually, there's been a bit of a turn of 9 00:00:21,600 --> 00:00:25,279 Speaker 2: events here. In earlier this year and late last year, 10 00:00:25,920 --> 00:00:31,200 Speaker 2: IRD consulted on basically cracking down on companies that lean 11 00:00:31,320 --> 00:00:34,080 Speaker 2: money to shareholders because if you do that, if I'm 12 00:00:34,120 --> 00:00:37,800 Speaker 2: a shareholder and I get loans from the company that 13 00:00:37,920 --> 00:00:40,160 Speaker 2: I have a shareholding in, I don't need to pay 14 00:00:40,280 --> 00:00:43,040 Speaker 2: tax on that loan. So there could be instances where 15 00:00:43,080 --> 00:00:45,800 Speaker 2: I'm receiving a loan, but actually I should be receiving 16 00:00:45,840 --> 00:00:49,400 Speaker 2: dividends or income, and dividends and income would be taxed. 17 00:00:49,640 --> 00:00:52,879 Speaker 2: So IRD recognized that, So it said, hey, maybe we 18 00:00:52,880 --> 00:00:55,160 Speaker 2: should tax some of these, not all of them, but 19 00:00:55,560 --> 00:00:57,760 Speaker 2: some of these loans, like the big ones, particularly if 20 00:00:57,760 --> 00:01:02,800 Speaker 2: they aren't repaid quickly. So it consulted on that. It 21 00:01:02,840 --> 00:01:07,000 Speaker 2: got feedback that apparently, according to Nikola Willis today wasn't 22 00:01:07,120 --> 00:01:11,480 Speaker 2: very positive. So the government has decided not to push 23 00:01:11,520 --> 00:01:16,360 Speaker 2: on with taxing big loans that aren't repaid quickly. So 24 00:01:16,440 --> 00:01:20,840 Speaker 2: that was one of id's initial proposals. So what happened 25 00:01:20,840 --> 00:01:23,160 Speaker 2: with that was New Zealand First and ACT came out 26 00:01:23,160 --> 00:01:25,360 Speaker 2: and said they didn't like it. Of course, you know, 27 00:01:25,360 --> 00:01:29,240 Speaker 2: they don't want to upset shareholders small businesses, particularly in 28 00:01:29,280 --> 00:01:32,040 Speaker 2: you know, forestry and property. That's where where this sort 29 00:01:32,040 --> 00:01:35,000 Speaker 2: of arrangement is used quite a lot. So they said no. 30 00:01:35,040 --> 00:01:37,240 Speaker 2: And today I took to Nichola Willis and she said no. 31 00:01:37,480 --> 00:01:39,959 Speaker 2: She also doesn't think it's a good idea. 32 00:01:40,560 --> 00:01:42,959 Speaker 1: And so as I, as I kind of intimated it 33 00:01:42,959 --> 00:01:45,240 Speaker 1: has been taken. This decision is being taken at a 34 00:01:45,240 --> 00:01:48,720 Speaker 1: political level. ACT also doesn't support it. New Zealand First 35 00:01:48,760 --> 00:01:51,440 Speaker 1: doesn't support it. Does ACT have a point here that 36 00:01:51,480 --> 00:01:52,880 Speaker 1: it would lead to double taxation. 37 00:01:54,800 --> 00:01:58,440 Speaker 2: Look, I think you know ACT has a similar view 38 00:01:59,120 --> 00:02:02,200 Speaker 2: around double tax in regard to this this issue as 39 00:02:02,200 --> 00:02:04,279 Speaker 2: it does when it comes to like a capital gains 40 00:02:04,320 --> 00:02:08,600 Speaker 2: tax for example. According to Nicola Willis, Inland Revenue decided 41 00:02:08,680 --> 00:02:12,160 Speaker 2: its original proposal might have been an overkill or it 42 00:02:12,280 --> 00:02:15,880 Speaker 2: was it was going too far. But speaking to her today, 43 00:02:15,919 --> 00:02:18,160 Speaker 2: and this is sort of hot of the press, it 44 00:02:18,200 --> 00:02:21,320 Speaker 2: hasn't even been written yet, but she said they were 45 00:02:21,360 --> 00:02:26,000 Speaker 2: still wanting to look at instances where companies issue loans 46 00:02:26,040 --> 00:02:29,800 Speaker 2: to shareholders and and that's a way to funnel money 47 00:02:29,800 --> 00:02:32,440 Speaker 2: out of a company and then that company is liquidated. 48 00:02:33,000 --> 00:02:36,160 Speaker 2: So she recognized that was still an issue and they 49 00:02:36,200 --> 00:02:39,400 Speaker 2: were still looking at how to address that now, whether 50 00:02:39,440 --> 00:02:43,919 Speaker 2: that's addressed by you know, taxing the loans or something else. 51 00:02:44,000 --> 00:02:46,399 Speaker 2: I think that's the issue thus still looking to work 52 00:02:46,480 --> 00:02:52,200 Speaker 2: through now. She mentioned SPQR that fancy Auckland pontsby Road 53 00:02:52,280 --> 00:02:56,480 Speaker 2: restaurant that was liquidated. I think that was something that 54 00:02:56,480 --> 00:03:00,280 Speaker 2: that might have you know, happened in that instance. So 55 00:03:00,639 --> 00:03:02,799 Speaker 2: they have kind of closed the door on coming down 56 00:03:02,840 --> 00:03:05,080 Speaker 2: with a big stick on this issue, but they're still 57 00:03:05,120 --> 00:03:08,400 Speaker 2: looking at whether to fix the issue of you know, 58 00:03:08,560 --> 00:03:11,120 Speaker 2: funneling money out of a company and then liquidating the company. 59 00:03:11,200 --> 00:03:12,600 Speaker 1: Yeah, too, right. I remember that there was there was 60 00:03:12,600 --> 00:03:15,280 Speaker 1: a fair amount of money, wasn't It was like that goodness, 61 00:03:15,280 --> 00:03:16,919 Speaker 1: I feel like there was about one hundred thousand dollars 62 00:03:16,960 --> 00:03:19,040 Speaker 1: that was owed to the owner of something with these SPQR. 63 00:03:20,320 --> 00:03:24,360 Speaker 2: Yeah, just from memory, it might have been more. But 64 00:03:24,560 --> 00:03:28,120 Speaker 2: you know the use of these shareholder loans, like it 65 00:03:28,200 --> 00:03:32,680 Speaker 2: sounds very niche, but at the moment shareholders o companies 66 00:03:32,760 --> 00:03:37,080 Speaker 2: twenty nine billion dollars, So that is twenty nine billion 67 00:03:37,120 --> 00:03:38,680 Speaker 2: dollars is a lot of money and you have to 68 00:03:38,680 --> 00:03:40,720 Speaker 2: look at that and go, well, all of those genuine 69 00:03:40,800 --> 00:03:46,000 Speaker 2: loans or is this loan arrangement being used to minimize 70 00:03:46,160 --> 00:03:50,600 Speaker 2: tax builds one way or another. So I'll be interested 71 00:03:50,600 --> 00:03:54,880 Speaker 2: to see exactly what id's feedback is on the feedback 72 00:03:54,960 --> 00:04:00,520 Speaker 2: it received on its consultation, because the experts of spoken 73 00:04:00,560 --> 00:04:04,240 Speaker 2: to have mixed views on this, like they don't all 74 00:04:04,280 --> 00:04:06,560 Speaker 2: agree with the politicians that this is an overkill, Like 75 00:04:06,840 --> 00:04:10,720 Speaker 2: some of them do really think that the system is 76 00:04:10,760 --> 00:04:14,080 Speaker 2: being brought it basically and people who should be paying 77 00:04:14,120 --> 00:04:15,600 Speaker 2: tax are not interesting. 78 00:04:15,640 --> 00:04:16,919 Speaker 1: Yeah, it might have been a lot more than that, 79 00:04:16,920 --> 00:04:19,839 Speaker 1: maybe one point four million. Thank you very much, Jane appreciated. 80 00:04:19,920 --> 00:04:22,119 Speaker 1: Janet tob Trainey, the Herald's Wellington Business editor. 81 00:04:22,560 --> 00:04:25,760 Speaker 2: For more from Heather Duplessy Allen Drive, listen live to 82 00:04:25,839 --> 00:04:29,000 Speaker 2: news talks'd be from four pm weekdays, or follow the 83 00:04:29,040 --> 00:04:30,680 Speaker 2: podcast on iHeartRadio.