5 April 2000

Foreign tax credit abuse legislation to be finally enacted

The Government is to revive an anti-avoidance measure that has been awaiting enactment since 1994, Revenue Minister Michael Cullen announced today.

"The legislation was originally five clauses of a bill introduced in 1994 and enacted a short time later," Dr Cullen said. "But the five clauses, which deal with the abuse of foreign tax credits, were held over pending the outcome of what later became the Wine-box inquiry."

"These provisions are desirable and always have been, so it is time they were dusted off, updated and enacted."

"The Government will include them in a taxation bill scheduled for introduction in May," Dr Cullen said.

The draft legislation:
- Reinforces existing legislation, putting beyond doubt that Inland Revenue can treat as void any tax avoidance arrangements involving credits for tax paid in another country.
- Denies a foreign tax credit to a taxpayer if a corresponding benefit is provided to an associate of that taxpayer.
- Streamlines the legislative process of including countries on the list of those whose tax practices are not acceptable to New Zealand.

"Once enacted, the changes will be effective from today, to avoid any retrospectivity in the 1994 bill," Dr Cullen said.

ENDS

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