NZ Herald business editor at large

Key has 'lost moral compass' on tax regime, Labour says

The New Zealand Herald investigation into multinational tax has sparked a political scrap with Labour finance spokesman Grant Robertson saying John Key has "lost his moral compass" after the Prime Minister admitted he didn't think the current regime was fair.

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Robertson said if the Prime Minister accepted the current situation was morally wrong "he needs to take a firm stand and demand a law change.

If it's not illegal and just immoral then surely a law change would enable a level playing field where multinational companies contribute accordingly."

He called on the Government to follow Australia's lead and move at a local level to tighten rules on tax avoidance.

Speaking on TV3's The Nation, Key said the Government was potentially prepared to look at unilateral action on tax but preferred to wait and see what happened with the OECD's multilateral tax treaty on Base Erosion and Profit Shifting (BEPS).

Quite what he meant by a potential look at unilateral action was unclear.

On Friday, Revenue Minister Michael Woodhouse was more resolute, saying New Zealand was already held up as a model for getting multinationals to pay tax. He didn't feel New Zealand was missing out on tax revenue despite the Herald investigation showing 20 companies with revenue of nearly $10 billion paid almost no tax.

"This is a live issue. And there will be further investigations as to whether we can continue tightening up the global framework for multinationals and their tax obligations. But if you are asking me if New Zealand is missing out somehow, I have seen no information to suggest that that is the case," Woodhouse said.

Labour's call for an inquiry into multi-national tax payments has been backed by representatives of the local information technology industry.

NZRise co-chair Don Christie, also a director of IT firm Catalyst, said he and his counterparts in the New Zealand technology industry faced unfair competition from foreign-owned firms who were able to minimise tax bills by routing money offshore.

Simon Moutter, chief executive of telecommunications company Spark, has also expressed concern about the advantages tax rules give international companies.

"It is a material advantage to pay no tax in a country," he says.

"What we're seeing is the emergence, particularly with these digital businesses, which are very lightweight and don't have much economic footprint on the ground of New Zealand. They are profit-shifting and stripping a lot of value out of the country and not leaving much behind."

EY tax partner Aaron Quintal said he believed the OECD talks presented the best path for New Zealand.

He believed it would deliver big changes in global tax rules to an extent business had not seen since the deregulation of the 1980s.

"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."

While Robertson accepted the need for a multilateral solution, he argued that New Zealand should also be changing its own laws in the interim.

"This is a problem that has a national and international dimension," he said. "There is work going on internationally which is important but fundamentally we need to enforce the law and create a better system that makes sure everyone pays their fair share."

- NZ Herald

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