Mark Lister, 3 October 2018

Dear Tax Working Group,

I was quite upset with one aspect of your report the other week. It was that part where you consider imposing a capital gains tax on people who buy New Zealand shares directly, then give PIEs run by fund managers an exemption because it’s going to be too hard for them to adjust their systems.

That bothered me partly as it would render my job much less necessary, but also because it would be a massive step backwards for our capital markets, investor education and many New Zealand businesses.

I can see why you might want to tilt the playing field in favour of big fund managers. I hear properties in Parnell have had quite a hike in rates, and it’s also getting more expensive to insure beach houses.

I also understand why this free ride will come at the expense of businesses like the one I work for, given we help people invest in shares directly.

I’ve found a few silver linings though. I should be able to let a few analysts in the team go, as we won’t need to research local companies anymore. We’ll just buy an index fund to cover New Zealand, then refocus our full attention internationally.

We’ll buy Paris Airport instead of Auckland, US tech stocks instead of Vista and Pushpay, and eBay instead of Trade Me. No drama.

We won’t need to bother with investor roadshows or conferences either. If people are incentivised to only invest via funds, there’s no point filling town halls across the country with people keen to learn about the market and hear what CEOs have to say about their businesses.

Getting people involved like that is usually a hassle anyway, especially with the younger ones. They come away all enthusiastic about investing or worse still, fired up about starting businesses of their own.

Mind you, I do feel sorry for smaller, growing companies. They’ll be the real losers from this policy nuance. Many of them would love to get bigger, take their products to the world and employ many more staff along the way.

That’ll be tough without a broad investor base and the same access to capital, but I guess they can all jump ship to Australia. The ASX would love to have them, and they could leave a few back office roles here even if the best jobs are relocated to Sydney.

The big listed companies will be fine, foreign investors will pick up the slack there. About 40-odd per cent of our market is already owned by foreigners, so why not let them have even more as direct investors ditch all their shares.

So there you go Tax Working Group, I’ve come to terms with it. Just go for the easiest option and you can probably rush something through this side of Christmas. Those of us who used to quite enjoy following and investing in New Zealand businesses will get over it.

Whenever we drive to the Mount my five-year-old points out the cranes at Port of Tauranga. She’s only got 200 shares but she thinks she owns one of them, and that each time it moves a container she gets some money.

Next time I’ll just tell her we have no idea whether she still owns that crane or not, nor do we care. Someone running a fund somewhere is looking after her money these days, so we can relax and forget about that financial literacy stuff.


This article was also published in the NZ Herald on 2 October under the title "Mark Lister: Capital gains plan a 'massive step backwards'".