Tax reforms a powerful, may make business in NZ tougher

Article – BusinessDesk

Tax reforms a powerful package but may make it tougher to do business in NZFriday 03 March 2017 01:50 PM

Tax reforms a powerful package but may make it tougher to do business in NZ

By Rebecca Howard

March 3 (BusinessDesk) – Retail NZ said a proposed crackdown on tax avoidance by multinational companies doesn’t go far enough while EY New Zealand said the reforms as a whole will make it tougher to do business in New Zealand.

Finance Minister Steven Joyce and Revenue Minister Judith Collins today presented three consultation papers proposing new measures to strengthen New Zealand’s rules for taxing large multinationals.

“Multinationals provide many benefits for the New Zealand economy, and the government is committed to making New Zealand an attractive place for them to do business. However, this does not mean rewarding firms that are aggressive in attempting to flout the current rules,” the ministers said.

Companies including the Alphabet-owned Google, Facebook and Apple have been criticised for booking profits in low-tax jurisdictions and the huge reduction in tax owed prompted the Organisation for Economic Cooperation and Development to call for a worldwide crackdown on that kind of behaviour.

The three papers focus on concerns about multinationals booking profits from their New Zealand sales offshore, even though these sales are driven by New Zealand- based staff, preventing multinationals using interest payments to shift profits offshore, and implementing New Zealand’s entrance into an international convention for aligning double tax agreements with OECD recommendations.

Submissions on the consultation document on implementing the international convention are open until April 7. Submissions on the other two are open until April 18. Ministers will consider final proposals arising from the documents later in the year, Collins said in a speech to the International Fiscal Association today.

She said Inland Revenue had advised her that up to $300 million a year in tax was being lost, possibly more, under current rules.

EY New Zealand executive director David Snell said he was reassured by the “measured approach” in the speech by Collins and that most corporates actually pay the right amount of tax. He noted the package is “powerful” and places new Zealand at the forefront of implementing BEPS, along with Australia and the UK.

However, he also questioned whether there was a “case for action” as the evidence wasn’t there concerning multinational company avoidance “that would justify reform.” He also said “reforms taken as a whole will make it tougher to do business in New Zealand.” He noted that tax administration power for Inland Revenue will increase compliance costs and disputes for cross-border businesses, there is more uncertainty around the tax base and more tax interest deductibility restrictions will put up the cost of doing business here.

Retail NZ said it was disappointed that the proposed crackdown on tax avoidance by multinational companies hasn’t included moves to require firms to register for GST if they are selling goods to New Zealand customers.

“The government is moving today to collect between $200 and $300 million that big multinational firms are sending off to tax havens, but the government is also missing out on at least another $200 million because it does not require foreign firms to register for GST when selling to Kiwis,” Greg Harford, Retail NZ’s general manager public affairs said.

“Foreign retailers are operating in New Zealand today and doing significant amounts of business online without paying New Zealand tax. Many are massive global firms – some have annual turnover close to the size of the whole New Zealand economy. Our government should be requiring retailers to register for GST, just like domestic retailers are required to,” said Harford.

(BusinessDesk)

Content Sourced from scoop.co.nz
Original url