Foreign-owned banks could pay up to $360 million more a year in New Zealand tax, following the introduction of new rules, Revenue Minister Michael Cullen said today.
Dr Cullen said new tax rules would be introduced to make sure foreign-owned banks paid enough tax on their New Zealand income. The legislative changes will be included in a taxation bill to be introduced in November.
"The New Zealand tax payments of foreign-owned banks have not appeared to reflect their reported profits in recent times," Dr Cullen said in a statement today.
"I am advised that they are using certain features of our tax rules to pay less tax in New Zealand."
New Zealand's top five banks are Australian-owned.
Dr Cullen said new rules specific to banks would deny them interest deductions if they do not hold a level of capital equivalent to four per cent of their New Zealand banking assets, weighted for risk.
He said once the legislation was enacted banks would be monitored to ensure they paid a level of tax in line with their New Zealand-sourced income and their worldwide operations.
Dr Cullen said the Government had consulted with the banking industry on the development of the proposals and had addressed many of their concerns about the new legislation.
Reserve Bank papers released in August under the Official Information Act disclosed deep concern about wide differences between what banks reported as having paid in tax and how much the Government actually received.
The papers showed that while the banks were reporting tax rates of between 33.4 per cent and 27.1 per cent, in actual fact their effective tax rates ranged between 15.9 per cent and minus 9.8 per cent.
- NZPA
Government tightens tax rules for foreign-owned banks
AdvertisementAdvertise with NZME.