John Key cornered Facebook founder Mark Zuckerberg at the recent APEC summit in Lima where he told reporters he raised the topic of tax.
John Key cornered Facebook founder Mark Zuckerberg at the recent APEC summit in Lima where he told reporters he raised the topic of tax.
The corporate community fears it has lost the public debate over tax avoidance and a legislative crackdown is imminent.
David Snell, the executive tax director at advisory firm EY, said the business community had failed to make their case over tax fairness and the sector now braced for a range of government measures - including a "Google Tax" - to be introduced next year.
"Multinationals and Kiwi businesses are losing the debate on tax," Snell said, arguing this battle was more over perception than substance.
"IRD figures show that the top 500 corporates pay $6 billion in tax each year. Yet the perception, even among business leaders, is that tax avoidance is widespread. Public opinion is being shaped by misinformation," he said.
The debate sharpened over the past week with public comments by both Prime Minister John Key and Commissioner of Inland Revenue Naomi Ferguson saying the issue was a problem.
Key cornered Facebook founder Mark Zuckerberg at the recent APEC summit in Lima where he told reporters he raised the topic.
"Everywhere you go when there's a discussion about multinationals not paying their tax, people say 'Facebook'," Key told reporters of his discussions with the social-media billionaire.
"There could ultimately be consequences and they should deal with it," Key said of his advice to Zuckerberg.
David Snell of EY
And at the CAANZ tax conference last week where Inland Revenue revised its guidelines for large companies paying tax, department head, commissioner Naomi Ferguson, demanded the business community be more open about their tax arrangements.
"By being more transparent, we can help change the conversation on international tax affairs and rebuild the trust of the New Zealand public in our biggest corporates, especially the multinationals," she said.
Snell agreed his profession and clients had been ineffective in their public communications about tax matters - going as far as to describe his own approach in the past as "naive" - and needed to up their game.
"That it takes the Commissioner to tell us our business is an indictment of our profession," Snell said.
He pointed to compulsory disclosure regimes active, or being implemented, in both Australia and the United Kingdom and said New Zealand should note the trend towards transparency.
"We as advisors have a strong story to tell - it's time that we did so," he said.
The consequences of failing to do so could be stark, Snell said: "By not speaking up on our own behalf, we could be sleepwalking towards the imposition of tough new tax disclosure rules and unnecessary anti-avoidance measures that will hurt business and deter investment."
The shift in mood meant a tightening of rules - and even the possible introduction of new taxes - were now on the horizon, Snell said.
"The government's recently said that tougher tax measures for multinationals are on the way. We expect to see a package of measures early next year," he said, noting a clampdown on interest deductions, making it easier to tax inbound investments.
Snell also said the government was actively looking at following the lead of Australia, which adopted a diverted profits tax.
"Corporate tax compliance is already high and those proposals could do real harm to our economy. It's up to us to make our voice heard. There's a good story to tell. As a profession, we have nothing to fear from the attention," he said.
