Simpler tax regime follows
The New Zealand Parliament passed a Bill that seeks to tighten foreign trust disclosure rules on February 14, 2017.
Revenue Minister Judith Collins said that the Bill was in response to the recommendations of the ‘Shawn Inquiry Report’ submitted by Adjunct Professor (Accountancy) at Victoria University in Wellington and former PricewaterhouseCoopers Chairman John Shewan in the wake of the ‘Panama Papers.’
In his report, Mr Shewan had said that the existing foreign trust disclosure rules were inadequate and that they were unfit to preserve New Zealand’s reputation as a country that cooperates with other jurisdictions to counter money laundering and aggressive tax practices.
“A significant increase in information disclosed when a foreign trust sets up, annual reporting and increased enforcement will satisfactorily address the issues identified. Banning foreign trusts or removing the current tax exemption is not considered to be necessary or justified. In theory, New Zealand’s existing tax disclosure and exchange of information arrangements should be sufficient to deter tax abuse, and its anti-money laundering rules should ensure that funds held by foreign trusts are from legitimate sources,” Mr Shewan had said.
He said that under the current law and enforcement practices, the risk of detection was low and that hence his Report had suggested that disclosure requirements can be justifiably described as ‘light-handed.’
“Strengthened disclosure requirements should act as a deterrent to offshore parties looking to use New Zealand foreign trusts for illicit purposes,” Mr Shewan said.
Ms Collins said that the new Bill includes measures to implement the G20/OECD standard for the Automatic Exchange of Information, to help detect and prevent tax evasion globally.
“The new legislation also contains a number of measures to simplify tax processes. Many businesses report that the most difficult aspect of their tax affairs is calculating and paying provisional tax,” she said.
Helping small businesses
The government will bring into effect on April 1, 2018. the ‘Accounting Income Method,’ as a part of the legislation, giving smaller businesses a new Pay-As-You Go option for provisional tax.
It would allow small taxpayers to use their accounting software to calculate and pay their provisional tax taking the guess work out of calculating provisional tax.
“Other business-friendly measures, commencing on April 1, 2017, include reducing or removing use-of-money interest for a majority of business taxpayers and removing the 1% incremental late payment penalty for new GST, Income Tax, and Overpaid Working for Families tax credits. Use-of-money interest is often seen by businesses as unfair,” she said.
Currently, even if a business pays the correct amount of provisional tax during the year they can still incur the interest. The combination of the accounting income method and the other provisional tax changes will reduce the impact of interest.
This package gives businesses more certainty about their tax payments and more time to focus on growing their business.
Please read ‘Firm offers flexible tax payment scheme’ in this section.