The tax man is coming for Facebook, Google and other multinational companies operating in New Zealand.
The Government on Friday morning released three documents detailing proposed strategies for getting big companies to pay their fair share of tax.
"Our broad-based, low-rate tax system continues to perform very well for New Zealand overall," Finance Minister Steven Joyce said.
"However it's important that it keeps evolving to ensure that all companies operating in New Zealand pay their fair share of tax."
Revenue Minister Judith Collins calls the proposals "principled and yet pragmatic", saying they will have "significant teeth" without turning business away.
The precise amount New Zealand is losing to multinational tax avoidance isn't clear, but estimates range as high as $10 billion a year.
Ms Collins has said it's more likely to be hundreds of millions of dollars.
"There will be an increase in the tax take but we really don't know [how much]."
Last year Facebook paid $43,000 in tax - about the same as a single doctor or lawyer would - despite revenue of $1.2 million. Google paid $361,542 despite $14.9 million of revenue, while Apple paid $9 million despite revenue of $732 million.
The documents released on Friday look at:
- profits being registered offshore, despite being generated by New Zealand-based staff
- preventing multinationals using interest payments to shift profits offshore
- setting up an international convention on taxing multinationals.
"We welcome multinationals' participation in our economy, but we also expect them to pay tax based on their actual levels of economic activity in New Zealand," says Ms Collins.
"We're far more globalised now than we've ever been and we have the same problem that many other jurisdictions have - that our tax policies and implementation are based on people operating in one or two places, but not globally."
PriceWaterhouseCoopers tax expert Geof Nightingale told The AM Show New Zealand's corporate tax take is "very strong" by international standards, but the new measures could bring in several hundred million dollars.
"We collect about 16 percent tax from the corporate tax take and it's actually going up [faster] than economic growth, but Inland Revenue have advised the minister there are a number of areas where the tax is not being collected, and I expect we're going to see measures targeted at closing those gaps.
"One of the difficulties is who will pay this tax. Yes, they'll collect it off the multinationals if they bring these measures in, but there's some risk it'll find its way into the prices of the goods and services they provide."
Ms Collins is calling it a "measured response" and says it keeps New Zealand in line with similar jurisdictions "rather than going out on some sort of tangent".
"We have to remember we are a country that has to have capital come into it, but at the same time New Zealanders who pay PAYE and salary taxes, their views are that they shouldn't have to pay more than they have to and everyone else should pay their fair share."
Submissions on the proposals are open until April 18.