The Hillary Institute & EHF Submission on Amending Foreign Investment Funds Rules for Migrants
Submitted on 27 January 2025
Our Organisation - the Hillary Institute & Edmund Hillary Fellowship
The Hillary Institute of International Leadership is a registered charity, founded in 2007 with Sir Edmund Hillary. Its purpose is to recognise and celebrate transformative global leaders (Hillary Laureates) who embody the humanitarian commitment of Sir Edmund Hillary. Today there are eleven Hillary Laureates who are established social or environmental justice leaders in their field.
The Edmund Hillary Fellowship (EHF) is a wholly-owned subsidiary of the Hillary Institute, and is a limited liability company with charitable status. In 2016 it partnered with Immigration NZ to deliver the world’s first Global Impact Visa programme. Over 500 Fellow including global entrepreneurs, investors and changemakers from more than 50 countries, have been a part of this talent attraction programme over the past seven years. Their engagement in NZ has delivered a realised benefit of $111 for every $1 of governme funds invested, creating access to international capital, networks and expertise. EHF’s purpose is to partner with Aotearoa NZ to find and build solutions to our toughest challenges.
Our Position
EHF was one of a group of interested parties that commissioned an NZIER report on the impact of the current Foreign Investment Fund regime on attracting and retaining talent in New Zealand. (Wilson and Fry 2024). Other parties included the American Chamber of Commerce in New Zealand, the Auckland Business Chamber and the NZUS Council.
We are pleased to see that the New Zealand Inland Revenue Department (IRD) has released an Issues Paper on the effects of the Foreign Investment Fund regime on globally mobile talent.
In our view, the Foreign Investment Fund ("FIF") rules do not match New Zealand’s aspirations (and need) to attract and retain global talent and investment. Furthermore, the current regime is out of step with the rest of the OECD, creating an economic cost to the country because it deters talented people from moving here long term. Appropriate reforms to the international tax regime will reduce those costs and support high-impact initiatives, such as the Global Impact Visa. This partnership between EHF and Immigration New Zealand was specifically designed to attract, integrate and retain high value migrants so that this country can benefit from their expertise, networks and investment.
By the very nature of being entrepreneurs, our Fellows tend to have illiquid investments in their country of origin or long-term residence, even if they are still in the start-up phase and not making any income. Some of these Fellows are also ex-pat New Zealanders, seeking to return home but who face being taxed by New Zealand on investments they made before coming here.
EHF, as an organisation, is aware of a number of our Fellows who are fundamentally impacted by the current regime. It is proving a considerable barrier for experienced entrepreneurs and investors when considering whether to migrate to or remain in New Zealand long term. The regime inhibits their ability to be as active in investing, founding new businesses and mentoring as they have to limit their time here.
The NZIER report looked at the reasons why, despite New Zealand’s desire to attract skilled and talented people (including through programmes such as the EHF Global Impact Visa), New Zealand’s relative economic performance has, at best, barely kept pace with the rest of the developed world.
The report concluded that New Zealand is not yet a place where talent wants to live. Surprisingly, a key part of the reason lies in New Zealand's international tax provisions - such as the Foreign Investment Fund (FIF) regime - which, in effect, discourage those with much-needed skills and connections from staying here.
And this is not just a problem for the present. The current regime also has implications for the future of New Zealand, particularly given this country’s desire to increase foreign direct investment and attract global talent in a highly competitive global market.
Implications and impact
EHF is currently in discussions with the New Zealand Government, including Immigration New Zealand, about reinvigorating the Global Impact Visa (GIV) programme.
To date the programme has delivered significant value to New Zealand’s innovation investment and R&D development ecosystem. New Zealand now has highly experienced entrepreneurs, technology leaders and innovation investors who would not necessarily have come to New Zealand otherwise. Independent research from Curran Associates shows that in 2022/23 alone Fellows raised more than $312.2m in capital for New Zealand-based business organisations and directly invested over $114.8m. They contributed innovation skills/capacity and helped businesses scale by gifting time and expertise, and leveraging global connections (more than 5,155 pro bono hours gifted to NZ business organisations). Across the country, Fellows created hundreds of new jobs and over 100 new businesses, making more than $45.5m in salary payments. Fellows hold more than 110 different NZ governance positions.
The FIF regime will have a fundamental impact on the success of a future GIV programme, which has attracted outstanding global talent to New Zealand and delivered a realised economic benefit of $111 for every $1 of government funding, creating access to international capital, networks and expertise.
Our Recommendations
We strongly support moving forward with the proposed changes to the Foreign Investment Fund (FIF) regime - and doing so promptly. The issues within the current regime are well-defined, and government officials, along with other stakeholders, have identified straightforward solutions that align with the tax policy principles underpinning the FIF framework.
We believe there is merit in a broader look at the international tax settings in New Zealand. However, among the options presented in the Issues Paper, we would favour the deferral method over the revenue account method. We believe the deferral method provides a more balanced approach and could resolve the double taxation issue faced by some migrants, including Fellows.
In considering the deferral method proposed:
- We agree with the proposed treatment of dividends set out in the Issues Paper;
- We agree that the deferral method should be elective;
- We also believe that the deferral method should be available to everyone and should not be reversible.
We believe that time is of the essence in addressing the issues that have been clearly identified. EHF is registering strong demand from prospective Fellows who are keen to come to New Zealand but the current international tax regime will continue to be a barrier for that migration. We would therefore urge the Government to address the FIF issues in the 2025 calendar year, including passing required legislative amendments. This will give those impacted some certainty that New Zealand is serious about reform and take advantage of a significant opportunity to boost productivity and investment into Aotearoa New Zealand.
We join others in also encouraging a broader and defined work programme, with a timeline to address other aspects of current international tax rules that are impacting on New Zealand’s ability to attract and retain skills and talent, including supporting ex-pat New Zealanders to come home.
In Conclusion
The current Foreign Investment Fund regime presents a significant challenge to Aotearoa New Zealand’s imperative to attract more talent and investment, and deliver sustainable technology growth and exports. Our experience is that the existing tax rules create barriers for Fellows, who are often entrepreneurs with illiquid assets, limiting their ability to fully contribute to New Zealand’s economy and innovation ecosystem. The impact on the future success of initiatives like the Global Impact Visa programme, which has already delivered impressive economic and social value, underscores the need for reform. We are supportive of changes that will help ensure New Zealand remains an attractive destination for the kind of transformative leaders who can drive the country’s growth and global impact.