Telecom New Zealand Says Tax Law Change Cut Full-Year Net by $27 Million

Telecom Corp., New Zealand’s largest phone company, said full-year profit fell more than previously estimated after tax changes introduced in the May 20 budget reduced earnings by about NZ$38 million ($27 million).

The increased tax provision meant net income in the year ended June 30, excluding one-time gains or losses, was at the lower end of a range of NZ$362 million to NZ$402 million, the Auckland-based company said in a statement. That’s a fall of as much as 25 percent from NZ$481 million in the previous year.

Telecom previously said earnings may drop to as low as NZ$400 million because of slow domestic demand, falling prices and the effects of an outage on the company’s new mobile network. The stock slid 23 percent the past six months, the third-worst performance on the benchmark NZX 50 index.

The government removed the ability for companies to claim tax depreciation on buildings, resulting in increased provisions for many publicly traded businesses. Finance Minister Bill English also announced a cut in the company tax rate to 28 percent from 30 percent beginning in 2012.

A second taxation law before parliament will be enacted this year and will result in a one-time tax payment of NZ$20 million to NZ$30 million in the 12 months ending June 30, 2011, Telecom said, without providing more details.

The company’s effective tax rate will be around 37 percent in 2011, it said.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.

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