NZ Herald business editor at large

The Economy Hub: Big tax changes coming

Business is facing change on a scale it hasn't seen since the 1980s as multi-nationals are targeted with new tax rules, says EY Partner Aaron Quintal.

"This is radical change that hasn't been appreciated," he told The Economy Hub show. "The fact that the public is now interested in tax has changed the political momentum around the world."

OECD moves to reach multi-lateral agreement on corporate profit shifting were coming and were going to be big, he said.

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The difficult question was working out where the value was added in the global corporate model.

In the old days when a company made something like t-shirts you could see it where the value was added, he said. But in today's world when it is all about technology, intellectual property and brand value it wasn't clear where the value was added.

"Is it at its headquarters, is it where the customers are, is it where the IP is owned, is it where the R&D is done. They should be paying tax where they add the value."

Ultimately the solution to the issue would have to be multi-lateral via bodies like the OECD, Quintal argues.

"The problems are driven off differences in tax system. It's those mis-matches that people are making the most of."

Any changes made by individual nations probably wouldn't achieve much, he said. It was questionable how well countries, like Australia, that tried to jump the gun and go it alone would do.

The problems are driven off differences in tax system. It's those mis-matches that people are making the most of.

The good news was that New Zealand's tax system was already in good shape and we probably faced less change than many other countries, he said.

The disruptive effect of the new tech companies was also undermining the tax base, said JBWere executive director Bernard Doyle.

The obvious example was retail where high street stores that paid tax were up against online retailers that didn't.

The other issue, from an investor point of view, was that as geographically opaque companies like Apple accumulated cash it wasn't easy to value them, he said.

"Apple is a company that has accumulated a lot of offshore profits and investors don't know how much of that can be delivered back to them because the tax environment is changing."

Doyle agreed that changes had to come from multilateral talks.

"I think it would be pre-mature for New Zealand to try and dive in," he said.

- NZ Herald

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