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.”


Ends


© Scoop Media

 
 
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

 

17 Year Sentences In Baby Moko Case: Attorney General On Plea Bargain

“The Crown’s decisions in this case, including the decision to accept the manslaughter pleas, were motivated by the need to secure convictions for this horrendous killing and to avoid the significant risk that either of the defendants could escape such a conviction because of evidential issues.” More>>

ALSO:

No Rail For New Harbour Crossing: National Giving Up On Rail In Auckland

The National Government’s decision to scrap two planned rail lines in Auckland shows it is giving up on a city-wide rail network in Auckland, and on thousands of commuters who sit in traffic jams every single day, the Green Party said today. More>>

ALSO:

Gordon Campbell: On The Ombudsman’s Verdict On Paula Rebstock And Ian Rennie

Unfortunately, the brave and damning report by Ombudsman Ron Paterson on the “flawed” and “unfair” inquiry conducted by Dame Paula Rebstock into events at MFAT pulls back the veil on a far wider issue. More>>

ALSO:

Charities' Report: Stressed Families - Overstretched Services

“Like so many of the whānau and families they serve social service organisations are under huge financial stress. The support demanded from desperate people in communities is far outreaching the resources available.” More>>

ALSO:

Detention: Wellingtonians Protest Treatment Of Refugees

Peace Action Wellington (PAW) and around 50 Wellingtonians blockaded the Australian High Commission, creating a symbolic detention centre to protest the Australian Government's policy of mandatory offshore detention for refugees and asylum seekers. More>>

ALSO:

Diver's Alarums: Breach Means Training Provider Must Repay $1.47 Million

The New Zealand School of Outdoor Studies is to repay $1.47 million (GST-exclusive) to the Tertiary Education Commission (TEC) following an investigation which showed that some student enrolments between 2009 -2014 could not be validated and that courses were under-delivered against their agreement with the TEC. More>>

ALSO:

Education: Government Plans Suggest Bulk Funding Return

Plans by the Government to return to bulk funding are likely to see increased class sizes and schools most in need missing out on much-needed resources, Labour’s Acting Education spokesperson Grant Robertson says. More>>

ALSO:

Interim Report: Auckland Looks Long Term To Pay-Per-Km Road Pricing

Aucklanders can expect to be paying variable rates per kilometre to travel on the city's most congested roads under an emerging transport strategy being formulated by the government and the Auckland Council. More>>

ALSO:

Despite Promises: Government Extends Iraq Deployment

Cabinet has agreed to extend New Zealand’s contribution to the joint New Zealand-Australia mission to train Iraqi Security Forces until November 2018. More>>

ALSO:

On The 'Terrorism' Card:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
 
Parliament
Search Scoop  
 
 
Powered by Vodafone
NZ independent news