Inland Revenue says new measures to ensure large multinationals pay the right tax in New Zealand are working well and should mean an extra $200m in tax collected each year.
The Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 made a series of changes to New Zealand's international tax rules as a response to the OECD/G20 Base Erosion and Project Shifting (BEPS) project.
Inland Revenue’s International Revenue Strategy Manager John Nash says the Act included a wide range of measures to protect the New Zealand tax base from aggressive tax practices by multinationals.
“There’s a perception, since late 2012, that some multinationals pay little or no tax anywhere in the world by using international BEPS tax planning techniques,” John Nash says.
“Final tax returns for 2019 and 2020 haven’t been filed yet, so it’s early days, but we’re confident the new anti-BEPS measures are making a difference. We’re very pleased with the behavioural changes in various multinationals restructuring moves because they clearly recognise the effectiveness of the new rules.”
In the wake of the anti-BEPS measures coming into effect, IR has updated its compliance focus on multinationals.
Inland Revenue issued a comprehensive practical guide to all the new measures this week, https://www.ird.govt.nz/internationalas well as setting out its forward programme of work to ensure compliance by multinationals.
“IR closely monitors all foreign-owned corporates with a turnover of more than $30m. They must submit information each year which must include their financial statements and tax reconciliations.
“We also have new intelligence from our tax treaty partners by way of country-by-country reports, telling us how major multinationals have allocated their profits around the world.
“If they don’t play by the new rules, we will know who they are, and they should expect we’ll be in touch. So, it makes sense for multinationals to look at restructuring their affairs, talk with us and get matters right up-front.”
John Nash says the anti-BEPS work must be a joint, world-wide effort.
“That’s why New Zealand has joined with more than 130 other jurisdictions in the OECD/G20 Inclusive Framework, resulting in major legal and practical changes globally.
“We have a wide tax treaty network, including 40 double tax agreements with key trading partners, and a very close relationship with our major tax treaty partner, Australia. We routinely exchange intelligence on taxpayers and specific industries with the Australian Taxation Office.
“Across Asia, we have definitely noticed an increase in exchanges of information between tax authorities. These are a great help in the early identification of aggressive arrangements, which may adversely affect the New Zealand tax base,” John Nash says.