Govt mulls crackdown on multi-national tax

  • 06/09/2016
Revenue Minister Michael Woodhouse (Simon Wong)
Revenue Minister Michael Woodhouse (Simon Wong)

The Government is set to crack down on the way multi-national companies are avoiding taxes.

Revenue Minister Michael Woodhouse on Tuesday announced the launch of a discussion document proposing New Zealand adopts OECD recommendations about cracking down on a strategy to reduce taxes called "hybrid mismatch arrangements".

The arrangements - one of the base erosion strategies used - see companies to set up separate entities in two or more countries, sometimes with no other purpose other than to receive deductions or foreign tax credits by exploiting the way different jurisdictions treat financial instruments.

The OECD has recommended countries remove tax advantages using the strategy by "linking" the rules between countries.

Australia and Britain have already introduced taxes to crack down on the practice from next year.

"It is important that our rules complement those of other countries," Mr Woodhouse said.

"Our international tax rules are sound, but the Government considers that New Zealand's rules on hybrids can be stronger."

If New Zealand were to adopt the anti-hybrids recommendations, the rules would apply to foreign companies doing business in New Zealand and Kiwi companies overseas.

The discussion paper makes nine key recommendations about changes to tax law.

But Green Party leader James Shaw said the Government was just playing catch-up on tax avoidance.

"Last year, Apple in New Zealand had revenues of $732 million yet paid only $6.4 million in taxes here. The year before was similar and so was the year before that," he said.

"A week ago, the Prime Minister was still defending the small amount of tax Apple paid here."

He said better resources were needed at the IRD to fight tax avoidance.

Submissions on the proposal close in October.