Wellington, December 7, 2017
Legislation just introduced to Parliament will prevent multinationals from avoiding tax by shifting profits out of New Zealand.
The legislation also reflects an important objective of the Labour-New Zealand First Coalition Agreement.
Some multinationals use aggressive strategies to pay little or no tax anywhere in the world. This is known as base erosion profit shifting, or BEPS, and is a massive problem.
It denies a country its taxation revenue and erodes confidence in the fairness of the tax system. Inland Revenue Department (IRD) estimates that the new measures could raise approximately $200 million per annum.
I am very pleased to introduce legislation that will introduce fairness and equity back into the tax system. New Zealanders expect every company to pay its share of tax, no matter how big or powerful that company may be.
The Taxation (Neutralising Base Erosion and Profit Shifting) Bill contains measures aimed at preventing multinationals from achieving a tax advantage through (a) artificially high interest rates on loans from related parties to shift profits out of New Zealand (b) hybrid mismatch arrangements that exploit differences between countries’ tax rules (c) artificial arrangements to avoid having a taxable presence in New Zealand; and (d) related-party transactions to shift profits to offshore group members.
The proposed new rules will be an effective response to current avoidance techniques, but are not the end of the story. The Government will continue to investigate further options, both legislative and administrative, to counter aggressive tax practices.
Multinational companies are a welcome part of our economy, but they must abide by the rules. They must pay their fair share of tax.
The Legislation is expected to have its First Reading on Tuesday, December 12, 2017.
Stuart Nash is Revenue Minister of New Zealand.