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Australia, NZ imputation and franking credits

Saturday 19 July 2008, 1:41AM

By Michael Cullen

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The Australian and New Zealand governments are open to the idea of moving toward mutual recognition of imputation and franking credits between firms that invest in each other’s country, Australian Treasurer Wayne Swan and New Zealand Finance Minister Michael Cullen said today.

Dr Cullen said the lack of mutual recognition was a difficult policy issue, but was of significant concern to the business community.

"Under current arrangements investors on both sides of the Tasman are being

double-taxed," Dr Cullen said. "And investment flows between us are distorted in a way which doesn’t sit well with wider moves towards a Single Economic Market.

"I am pleased that the Treasurer has expressed openness to investigating this issue and to explore possible solutions. It is clear that any solution must be a win-win for both economies."

The first step in the process is to determine whether it is practical and feasible to introduce mutual recognition. And if it is practical, then the second issue is to determine the potential costs and benefits to each economy, the Ministers said.

Hon Swan invited the New Zealand Treasury to make a formal submission on mutual recognition to the Australia’s Future Tax System review which was recently established by the Federal Labor Government and is anticipated to issue its final report by the end of 2009.

New Zealand Revenue Minister, Hon Peter Dunne, who attended the session of the bilateral talks on taxation issues, said that he welcomes the fact that mutual recognition is now formally on the agenda for both countries given its importance to the trans-Tasman business community.