Radio New Zealand - Te Reo Irirangi o Aotearoa

Union supports private equity tax clampdown

Updated at 7:40 pm on 17 January 2013

A union leader says clamping down on tax loopholes could benefit the workers of firms owned by foreign investors.

The Government is considering restricting the amount of debt private equity investors can heap onto New Zealand companies in order to minimise their tax.

First Union general secretary Robert Reid says workers in media and waste management firms owned by foreign private equity have suffered in recent years.

He says the amount of debt loaded on to these firms has depressed profits and given their owners the cover to keep wages down.

"I would rather see signals sent out to foreign investors that if they come here, they invest in companies properly - they don't invest in highly-leveraged companies, they treat their workers properly.

"Those are much better signals which would do more for the New Zealand economy than worry about getting their investment."

The Employers and Manufacturers Association in Auckland is concerned that the tax changes under consideration might scare off foreign investment.

It says it is a legitimate business practice for companies operating internationally to shift debt from low tax to high tax countries.

Chief executive Kim Campbell said the rules are well understood and Inland Revenue should simply police them. He told Radio New Zealand's Summer Report programme that having another review would simply complicate things.

However, Robert Reid is dismissive of the association's concerns, saying as well as protecting the tax base, the changes would also mean there would be more earnings left over to pay workers.

Listen to report on Checkpoint

Listen to Kim Campbell on Summer Report

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