Capital Market Development Paper Released

December 16, 2009 New Zealand FinanceNew Zealand Taxation

Government Building @ WellingtonOn December 16th, the Capital Market Development Taskforce (CMDT) released their final report to the New Zealand Government.

The Taskforce’s paper consists of six groups of recommendations for New Zealand’s capital markets. According to the report, if implemented, the ideas will improve the contribution of capital markets to the country’s economic growth and bring significant fiscal benefits to New Zealanders.

The CMDT has proposed that regulations be established to improve financial advisory services and information available to investors, along with improving investment literacy. Suggestions include replacing investment statements and prospectuses with more standardized disclosure documents. Warnings should be applied to high-risk and complex investments products.

The paper identifies several perceived gaps in the capital market, and aims to remedy them. Key recommendations include partial listing of central and local-government companies, government intervention in developing the local annuities market and establishing New Zealand as agricultural capital market hub.

According to the CMDT, the Reserve Bank and the New Zealand Stock Exchange should collaborate to improve the country’s settlement and clearing infrastructure. Also, tax biases between different savings and investments need to be eliminated through options such as : the risk-free return method, denial of depreciation deductions on buildings, a general capital gains tax, or an asset specific capital gains tax.

The full CMDT report can be viewed on the Ministry of Economic Development website.

Photo by Remon Rijper