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Exporters need transfer pricing clarity

17 March 2014

Exporters need transfer pricing clarity

The benefits of the New Zealand Government’s desire to push export led growth, as part of its overall economic strategy, could be stymied by a lack of clarity over proposed cross-border tax changes.

New research from the Grant Thornton International Business Report survey (IBR) reveals that New Zealand business leaders want more guidance relating to cross-border tax planning compared with 12 months ago, in stark contrast with the rest of the world.

Greg Thompson, Grant Thornton New Zealand Partner and National Director, Tax, said that on average the proportion of global business leaders who would welcome more co-operation and guidance from tax authorities on what is acceptable tax planning, dropped 15 percentage points to 53%.

“Large declines were seen in North America (-16%) and the EU (-15%) as well as in BRIC (-15%) and Asia-Pacific (-11%) economies. This indicates those business leaders have a greater level of comfort about their Government’s views on acceptable tax planning.

“In New Zealand, things have gone the other way – there has been a 6% increase in the number of businesses looking for clarity on this subject. Only Peru (18%), Ireland (12%) and Chile (10%) are ahead of New Zealand with greater increases to their concerns,” said Thompson.

“In the last year, especially since the headlines around the levels of corporation tax being paid by multinationals like Amazon, Apple, Google and Starbucks, there has been a lot of rhetoric, but not much tangible evidence of progress being made on this front.

“When multinationals like Amazon, Apple, Google and Starbucks were in the headlines last year it created some hysteria around the world, especially in Europe, America and Asia. This has died down as reflected in the survey showing a global average decline of 15%.

“New Zealand was not caught up in this hysteria and now we are starting to see more concern from New Zealand business leaders spurred by the apparent lack of progress. This is despite a number of exercises under way to establish greater clarity and transparency. For example, the OECD has been given a mandate by the G20 economies to prevent tax base erosion and profit shifting (BEPS) through reform at the global level. Real tangible and workable solutions still seem a long way off.

“Providing greater certainty around transfer pricing was high on the agenda at the World Economic Forum in Davos, Switzerland, earlier this year and remains a key issue for the G20. Much emphasis is now being focused on the G20 meeting in Brisbane in November.

“Media attention has certainly died down over the past year and some global businesses may feel that social pressures relating to tax planning have lessened. There may also be a sense among international corporations that governments are prepared to offer populist rhetoric but actually change very little; after all, these large companies are massive contributors of jobs and economic growth.

"The issue facing New Zealand, reinforced by public statements made by the Government, is that we are a small country and have to stand by and wait for the rest of the world to get clarity around these international tax issues including e-commerce and transfer pricing. Once that has happened, then we can react accordingly. We are the tail, not the dog.

“For the sake of New Zealand businesses, and the Government’s desire to push export led growth, let’s hope that the G20 will start to put some action around the volume of words that have already been spoken on the subject. And hopefully this will lead to further clarity around proposed cross-border tax changes for New Zealand businesses,” he said.

The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of more than 12,500 businesses per year across 45 economies. This unique survey draws upon 22 years of trend data for most European participants and 11 years for many non-European economies. For more information, please visit: www.internationalbusinessreport.com

Data collection
Data collection is managed by Grant Thornton's core research partner – Experian. Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. Fieldwork is undertaken on a quarterly basis. The research is carried out primarily by telephone.

Sample
IBR is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with 3,500 chief executive officers, managing directors, chairmen or other senior executives from all industry sectors conducted between November and December 2013.

ENDS

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