New Zealand First and ACT correct to oppose Inland Revenue proposals to tax shareholder loans

The Taxpayers’ Union is welcoming reports that New Zealand First and ACT are opposing Inland Revenue’s proposal to tax shareholder loans. The group says the parties are right to push back against a plan that risks creating unfair double taxation.

Taxpayers’ Union spokesperson Tory Relf said:

“We’re pleased to see New Zealand First and ACT taking a principled approach to what is a complex issue. Company loans to shareholders are common in companies with only one or a few shareholders. As long as the loan is repaid in full, there is no issue.”

“Shareholders would have had to repay the loan from tax-paid income. Inland Revenue hasn’t proposed refunding the tax if the loan is repaid, which creates an obvious double taxation problem.”

“Other countries have already recognised this issue. The United Kingdom has rules that prevent this sort of double taxation.”

“The solution is simple. If Inland Revenue is worried about loans that are never repaid, the law should simply deem any outstanding shareholder loans to be dividends when a company is liquidated and tax them accordingly.”

“We simply do not understand why Inland Revenue has made this issue so complicated and unreasonable when the fix could be so straightforward.”