Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search


Dunne explains NZ’s tax approach to multinationals

Hon Peter Dunne

Minister of Revenue

Tuesday, 4 December 2012 Media Statement

Dunne explains NZ’s tax approach to multinationals

Tax systems around the world are adjusting to corporate giants with huge internet footprints, but very little physical presence, Revenue Minister Peter said today in addressing issues around the tax treatment of large multinational companies.

“The reality is that tax regimes internationally have generally been developed for an industrial age, and have struggled to keep pace with new business models and technologies not contained by location or national borders,” Mr Dunne said.

“That is the challenge that we face in New Zealand, but it is very much a global issue faced by other nations too. The problem is not just that these large companies are not paying substantial tax here, but that they tend not to be paying substantial tax anywhere.

“We see Britain and Australia facing exactly the same issues, and our rules are already very similar to those adopted by Australia last week,” he said.

Mr Dunne said the answer to taxing multinationals appropriately in various jurisdictions would be found through international projects and agreements, and that New Zealand is involved in these talks, particularly through the OECD.

“A key issue is that foreign companies are taxed on the activities that they actually perform in New Zealand, so under international norms, New Zealand, like any other OECD nation, may have no right to tax profits from revenues generated from New Zealand.”

“Again, for cross-border transactions, the New Zealand tax system, like those of tax jurisdictions around the world, focuses on a physical presence and taxable activity occurring here,” Mr Dunne said.

“However, the internet has made it possible to provide an increasing range of services to distant customers from anywhere in the world. This means that overseas-based internet companies have a very limited physical presence in most countries in which they operate – including New Zealand.

“Since the bulk of what these companies do, in terms of programming, designing websites, running servers, selling advertising, is done overseas, New Zealand, like other countries, may have very limited taxing rights.

Mr Dunne said concerns that such multinationals are not paying appropriate levels of tax need to be balanced against those complex realities.

“There are no easy answers or quick fixes here, but there are definitely fundamental issues that need to be tackled to get a fairer system,” he said.

“This is, as I say, a global problem requiring a global response and New Zealand will be involved in working up that response,” he said.

He said New Zealand participates closely in the OECD project on profit shifting by multinationals and the global erosion of the corporate tax base.

“Part of the OECD’s work will focus on how tax structures such as the double Irish technique may be used to minimise the tax which is payable in Ireland and other foreign countries.

“We are also closely involved with related initiatives such as the systematic reviews of country regimes being undertaken by the Global Forum on Transparency and Exchange of Information for Tax Purposes and the OECD’s Forum on Harmful Tax Practices.

“I can assure you that any activities multinational businesses, or their New Zealand subsidiaries, perform in this country will be taxed appropriately,” he said.

Mr Dunne said on the international front measures such as transfer pricing, thin capitalisation, and general anti-avoidance rules are already in place to make sure international firms pay an appropriate level of tax in New Zealand.

“We also have a growing network of tax treaties to help stamp out tax avoidance through information sharing with other countries.”

As part of Budget 2010, the Government took steps to stop foreign multinationals from reducing their New Zealand profits through debt funding by tightening the thin capitalisation ratio from 75% to 60%. The Government’s tax policy work programme includes a project to ensure that certain investment structures cannot be used to escape the application of these rules.

Mr Dunne has requested a report from Inland Revenue into the tax treatment of such companies.

“Our tax laws need to evolve and they will. This is a challenge, and it is about fairness, and it will be met.”


© Scoop Media

Parliament Headlines | Politics Headlines | Regional Headlines



Housing Issues: Homelessness On The Horizon For Baby Boomers

Baby Boomers who have held down jobs and contributed to the well-being of New Zealand through their taxes may yet become homeless in late middle age or early retirement without urgent Government action, says The Salvation Army. More>>


Treasury Has Doubts On Christchurch Rebuild And... Auditor-General Follows Up On EQC

Despite the improvements made, EQC could still learn better from complaints and improve its customer focus and interactions... Although the programme is nearing completion, EQC needs to provide the best service possible for the home owners whose homes are still to be repaired. More>>


Man Who Banned 'Into The River' Out The Door: Appointments To The Film And Literature Board Of Review

Internal Affairs Minister Peter Dunne has announced seven appointments to the Film and Literature Board of Review... “The new members of the Board... will provide a strong mix of skills and experience to help the Board carry out its functions, while representing a cross-section of society.” More>>


Climate Marches: New Zealanders March For Solutions Not Pollution

Ahead of the UN Climate Summit in Paris more than 15,000 New Zealanders have taken part in the Peoples Climate march in Auckland, kicking off the largest climate mobilisation the world has ever seen... More>>


Labour: Little Announces New Shadow Cabinet

“Labour had an impressive intake of fresh faces after last year’s election and newest MPs have now had a year to show what they’re made of. This reshuffle rewards hard work and continues my drive to renew our Caucus line up." More>>


Because Reasons: Someone Reckons David Seymour Is Politician Of The Year

Trans Tasman's 11th annual Roll Call has thrown a curve ball this year, ignoring the likes of John Key, Bill English, and Winston Peters to pick its politician of the year from the ranks of the new generation. More>>


Whaling: NZ Deeply Disappointed By Japan's Decision

“New Zealand is strongly opposed to whaling in the Southern Ocean. We call on Japan to take heed of the 2014 International Court of Justice decision and international scientific advice concerning their whaling activities.” More>>


Relevant Consents Gained: Government Unveils RMA Reform Package

The government has formally hauled down the flag on its attempts to alter the balance of environmental and economic priorities in the Resource Management Act, unveiling a 180-page Resource Legislation Amendment Bill containing reforms that have been largely endorsed by most political parties. More>>


Get More From Scoop



Search Scoop  
Powered by Vodafone
NZ independent news