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

 


Proposals to limit excessive non-resident tax deductions


Hon Peter Dunne
Minister of Revenue

Monday, 14 January 2013 Media Statement

Proposals to limit excessive non-resident tax deductions

Proposals in an Inland Revenue officials’ issues paper released today would bolster the taxation of highly leveraged investments made by foreigners, through changes to the thin capitalisation rules, Revenue Minister Peter Dunne said.

“I referred in December to upcoming proposals for strengthening New Zealand’s tax laws and I am pleased to see these now released,” he said.

The thin capitalisation rules are intended to prevent non-residents from using excessive interest costs to reduce their tax liabilities, but have not been effective in all cases.

The issues paper proposes a number of measures to beef up the rules.

The first of the two major proposals is to extend the rules to non-residents who act together to operate businesses in New Zealand; the rules currently apply only if a single non-resident controls the business.

The second proposal is to disregard some shareholder debt when calculating the global indebtedness of the foreign investor. At the moment this debt can be included and used to justify a high level of indebtedness in New Zealand which can then be used to offset tax liability.

Mr Dunne said the two proposals would modernise the rules to reflect changes in global investment structures.

“In particular, they recognise the growing role of private equity investors, who often have high interest costs but are not subject to the thin capitalisation rules in their current form,” he said.

“New Zealand has overhauled its international tax system since 2007 by removing barriers to overseas investment by New Zealanders.

“The issues paper shifts the focus to investment in New Zealand by non-residents, and proposes changes to limit excessive tax deductions for interest costs. I think that would be a fairer outcome” he said.

The proposed changes are expected to leave most foreign investors unaffected as they are already subject to the thin capitalisation rules and have relatively low levels of debt.

They have also been designed to limit any effects on investors who use third-party debt, such as debt from an unrelated bank.

“The tax laws relating to foreign investment are a delicate balancing act. We want to ensure that a fair amount of tax is paid, but do not want to discourage investment,” Mr Dunne said.

“On the other hand, the proposals in this paper represent one step more towards ensuring that non-resident investors pay their fair share of tax,” he said.

Submissions on the issues paper, which can be found at www.taxpolicy.ird.govt.nz, close on 15 February, 2013.

ENDS

© Scoop Media

 
 
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

More Rent Assistance, Less State-Owned Housing:
John Key Speech - Next Steps In Social Housing

"We are going to ensure that more people get into social housing over the next three years, whether that is run by Housing New Zealand or a community provider.

The social housing budget provides for around 62,000 income-related rent subsidies a year. We are committed to increasing that to around 65,000 subsidies by 2017/18, which will cost an extra $40 million a year." More>>

ALSO:

The Future Of Work: Andrew Little - State Of The Nation 2015

In 2005 when I led the EPMU we worked together with Air New Zealand to find a way to keep engineering jobs that were heading overseas. A lot of these workers were people I’d known for years and they were facing not just losing their jobs but not being able to find the kind of work they do without going overseas. A lot of people were facing personal and financial upheaval.

It was hard work but in the end we kept more than 300 skilled and well-paid jobs in New Zealand. And we managed to benefit Air New Zealand and its workforce with productivity gains too... More>>

 

Gordon Campbell: On The Sabin Case, The Pressures On Greece And (Songs About) Coyotes

Mike Sabin is a National MP, and the current chairman of Parliament’s law and order committee. Yet reportedly, he is being investigated by the Police over an assault complaint... However, the PM will not comment on any aspect of the story. More>>

ALSO:

Houses, ISIS, King (& Catton): PM Post-Cabinet Press Conference

The Prime Minister met with reporters to discuss: • Social housing, the Auckland housing market • The prospect of joining international forces to combat ISIS • David Bain’s compensation • The lowering of the flag for the King of Saudi Arabia's death ... More>>

ALSO:

Gordon Campbell: On Tomorrow’s Speeches By John Key And Andrew Little

The Key government has already kicked off the political year on a stridently ideological note, with Environment Minister Nick Smith choosing to lay all manner of sins at the door of the RMA. Tomorrow, the government will wheeling out its best salesman – Prime Minister John Key – to sell its plans for state housing… . More>>

ALSO:

Transport: Auckland Looks To Light Rail

The Board of Auckland Transport has called for an investigation into a light rail network, which could relieve traffic congestion on some of the region’s busiest roads. This stems from work in 2012 (the City Centre Future Access study) which responded to a government request to develop a robust and achievable solution for access to the CBD. More>>

ALSO:

RMA: Smith's Claims Don't Match Evidence - Greens

The Motu group’s research into the impacts of planning rules looked at the costs related to housing development but not the benefits of environmental protections and does not recommend significant changes to the RMA to reduce the cost of new house builds. More>>

ALSO:

Gordon Campbell: On The Similarities Between John Key And David Cameron

For years now, David Cameron has been the closest available thing to a mentor/analogue to our Prime Minister, such that Key watchers could be interested in an analysis of Cameron that appeared in the British press over the Christmas break. More>>

Gordon Campbell: On Ian Fletcher Resignation & GCSB’s New Role

It may well be that after being shoulder-tapped in Queensland for the GCSB job, three years of living in Wellington has been enough for Fletcher and his family, given that the pending review of the GCSB would have required an even longer commitment from him. Three years of Wellington’s weather is enough for anyone... More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
More RSS  RSS News AlertsNews Alerts
 
 
 
Parliament
Search Scoop  
 
 
Powered by Vodafone
NZ independent news