'Not far enough' - Opposition on tax crack down

Labour Party finance spokesman Grant Robertson said the cabinet discussion document didn't explain why a diverted profits tax had been taken off the table. Photo / Marty Melville

Opposition parties have welcomed government moves to crack down on tax avoidance by multinational companies, but tempered this support with criticism they come too late and do not go far enough.

The Herald this morning reported a cabinet discussion paper showed an about-face in government policy with plans having been drawn up to unilaterally toughen our tax regime to clamp down on tax leaking offshore.

Proposed measures, expected to be circulated for public consultation in February, include arming Inland Revenue investigators with more information-gathering powers, shifting the burden of proof in transfer pricing cases, and tightening loopholes that allow companies to claim they have no taxable presence in New Zealand.

Both the Labour and the Green parties this morning said they supported the proposed measures, but also pressed for even more action - including lobbying for a diverted profits tax that Michael Woodhouse said would only be implemented if this new policy package failed to deliver results.

Labour Party finance spokesman Grant Robertson said the cabinet discussion document was thin on detail and failed to adequately explain why a diverted profits tax had been taken off the table.

"The document basically says 'They [the UK and Australia] are going there' - so why aren't we?," he said.

Robertson was also critical of the timing of the measure, following nearly a year of public debate about the issue.

"We're doing to have a discussion document released next year, so there's no way they'll be able to make te required legislative changes before the election. This is an effort by government to park this up as an issue," Robertson said.

"That won't work: We won't let them. We want to have a conversation during the election campaign about whether everyone is paying their fair share of tax."

Green Party co-leader James Shaw echoed these criticisms. "Better late than never is my first reaction. It's a bittersweet moment: This has taken them forever, and it doesn't go far enough," he said.

Shaw said digital companies with only a virtual footprint in New Zealand would not be caught up in the proposed crackdown and this unresolved problem needed action.

"When this story blew up in March, a lot of the public concern was about companies like Google and Apple who have a huge commercial presence in New Zealand and yet pay next to no tax."

Shaw said a diverted profits tax would act a signal to both these companies and to the wider public that the government took the problem seriously.

"A lot of people are asking 'If they don't pay tax, why should I?' It leaks through to the rest of the economy and undermines confidence in the system."

The business community this morning also began to weigh in on the debate, with umbrella group Retail NZ saying more action was needed to extend GST to cover online sales shipped into the country.

Retail NZ's spokesman Greg Harford, said: "New Zealand-based firms selling online or in retail shops have to charge up to 25 per cent more than big foreign retailers, and this costs the Government at least $200 million in lost revenue. Fixing this loophole is a no-brainer, and easy to do."