Dunbar, David2007-11-202022-07-052007-11-202022-07-0520032003https://ir.wgtn.ac.nz/handle/123456789/18578In March 2002, the New Zealand and Australian governments released a joint discussion document, Trans-Tasman Triangular Tax. The joint media statement noted that: Clearly, triangular tax reform requires a bilateral approach that preserves the Australian and New Zealand tax bases and is acceptable to business and government in both countries… The mechanism under consideration is one that allocates both Australian franking credits and New Zealand imputation credits to shareholders in proportion to their ownership of a company. This mechanism is known as the “pro rata allocation” model, and its adoption was confirmed in February 2003. The discussion document noted that the following alternative methods to relieve triangular taxation had been considered by both governments, but were rejected: apportionment, mutual recognition (including pro rata revenue sharing), streaming. The Ministers invited interested parties to comment on the workability of the pro rata revenue sharing proposal, and said that their advice would be taken into account in deciding whether or not to proceed with this proposal. This working paper examines the strengths and weaknesses of the pro rata allocation mechanism and contrasts that solution with the streaming alternative. From the perspective of a New Zealand individual shareholder, the analysis will demonstrate the significant additional taxation advantages associated with streaming. Accordingly it is possible that the latest initiative may not produce a feasible solution. Trans-Tasman companies may continue to devise tax-driven strategies that provide their individual shareholders with an after-tax rate of return which is comparable with what they would have received under the streaming model. Also examined, will be a range of debt, equity, and profit repatriation strategies which are currently used to solve triangular taxation. These include floating special purpose subsidiaries, the use of hybrid instruments, and techniques to minimise Australian capital gains tax. The pro rata allocation model is unlikely to lead to any significant decrease in Trans-Tasman tax-driven investment.pdfen-NZTaxation lawNew Zealand's tax systemAustralia's tax systemTaxation coordinationText