Commerce Act 1986 and Commerce Commission review
Last year the government announced a comprehensive review of New Zealand’s competition framework to combat monopolistic practices and boost economic productivity. Limited options and high price points in the grocery, banking and building supply sectors are reflective of market failures resulting from such practices and, subsequently, prompted this review.
Commerce Act 1986: The review includes a revision of the long-standing merger regime embedded in this legislation. Although mergers can enhance efficiency, they may also create a power imbalance in the market and limit consumer choice. The current regime will be reconsidered to mitigate the risks posed by larger companies that make small, incremental acquisitions of smaller companies.
The government also wants to provide greater clarity to the Act’s anti-competitive conduct provisions. Its aim is to increase certainty as to what constitutes anti-competitive collusion – in turn, appeasing concerns that typically deter businesses from engaging in beneficial collaboration.
Commerce Commission: The review will also evaluate the commission’s structure and governance – specifically, whether it is capable of effectively enforcing competition laws. The introduction of specific commissioners and a divisional model to contribute to accountability and strategy will also be considered.
The government’s focus on strengthening competition laws aims to deliver greater choice, lower costs and increase productivity for all New Zealanders.
Reform of overseas investment laws to boost economic growth
The Overseas Investment Act 2005 will undergo significant reform, the government has announced. New Zealand is currently ranked the most restrictive country in the OECD for overseas investment.[1] The reform intends to combat this position by increasing openness to foreign investment that should attract more international investors.
To achieve what the government believes will be a more dynamic and competitive economic environment, a suite of statutory changes have been proposed to reduce barriers to investment where such investment does not present any identified risk to New Zealand’s interests. Key proposed changes include:
- Fast tracking approvals: simplifying the assessment process by establishing basic tests and assuming investment will be permitted unless risks are flagged
- Targeted scrutiny: retaining flexibility to analyse investments on a case-by-case basis and impose conditions or block them if necessary, and
- Retaining current scope: ensuring the government can continue to scrutinise sensitive investments, including farmland.
Legislation to implement these changes is expected to be introduced this year.
Tax changes for charities
Charities can expect to see a raft of tax changes in May. These changes are intended to reduce the scope for exploitation of loopholes in the current framework. In other words, the government wants to ensure that entities receiving tax benefits are distributing their funds for charitable purposes – as opposed to structuring themselves as charities and building up funds that are not being used for charitable purposes.
This review will focus on charities that operate commercial businesses and whether they should pay tax on profits retained in the business. When announcing the changes, the Minister of Finance, Nicola Willis, mentioned that entities such as cereal manufacturer Sanitarium and early childhood education provider BestStart are among the types of organisations potentially impacted by the changes.
This removal of tax-free status is to be balanced against the need to support charities and to recognise the significant role New Zealand charities play in our communities. As a result, some charities may lose certain tax benefits.
These changes are part of a broader tax policy work programme that also includes exploring user-pays models for infrastructure projects and other revenue raising measures. The changes aim to ensure fairness while maintaining vital support for the charitable sector.
[1] BusinessNZ, 6 September 2024.