18 April 2013
Dunne: multinationals tax report shows NZ on track
The latest report on international progress in reviewing the taxation of multinationals shows New Zealand is well placed on the issue, Revenue Minister Peter Dunne said today.
The Treasury and Inland Revenue officials’ report on the OECD’s base erosion and profit shifting (BEPS) work takes stock of New Zealand’s rules and provides an update on its continuing work.
“It is almost universally accepted that this is a global issue that requires – and is getting – a global response, but my determination is that New Zealand drives that hard and is to the forefront of the work, and that is happening,” Mr Dunne said.
“This report certainly gives me confidence that we are strongly in that mix and contributing. Our tax laws are at or above world standards,” he said.
Mr Dunne said that the multinationals tax issue is not new and current global concerns have arisen due to a range of factors.
”There has been a worldwide trend towards lower company tax rates – and this includes New Zealand – as economies look to encourage business, but it has also included growing mismatches between different countries’ tax systems.
“Multinationals often do not pay tax in the countries where they are headquartered, owned, or where their business is done because of deficiencies in domestic laws and the application of tax treaties.
“Many countries, including New Zealand and other OECD nations, only tax foreign companies on activities that they actually perform in their countries and multinationals have exploited these differences to minimise their global tax liabilities.
“So the root of the problem lies in how nations work, or fail to work together – and that is why the answer is the global response that New Zealand is involved in working towards,” Mr Dunne said.
He said New Zealand, like every other country, still has a responsibility to ensure its own domestic tax rules are sound.
“And our tax laws are strong. We have always sought to protect our taxation rights and we act quickly to address problems with our rules as they arise.
“New Zealand has a vigilant and responsive approach to tax issues,” he said.
“On the policy side, actions include introducing the bank minimum equity rules, re-characterisation of stapled stock, elimination of conduit, and tightening of the thin capitalisation rules.
“And we continue to propose changes where necessary, as with the recently released officials’ issues paper on thin capitalisation.”
Mr Dunne said the ongoing OECD work will help highlight areas where New Zealand can further strengthen its domestic laws.
Transparency of the New Zealand tax affairs of multi-nationals doing business here is also an issue worth considering, Mr Dunne said.
Australia has proposed that the Australian tax affairs of large multi-nationals should be made public in a simplified way.
”Such a move, in itself, is not a complete solution as there are many factors to consider.
“Taxes paid may be high or low in comparison to turnover for any number of reasons, but I have tax officials monitoring the Australian proposals very closely,” Mr Dunne said.
He said that the Government will continue with its two-pronged approach to the issue; participating in international efforts particularly, while working on further strengthening domestic rules.
The officials report can be found at www.taxpolicy.ird.govt.nz
Mark Stewart | Press Secretary | Office of Hon Peter Dunne
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