Revenue Minister Michael Woodhouse said the international tax avoidance review should be ready by June 30.
Revenue Minister Michael Woodhouse said the international tax avoidance review should be ready by June 30.
New Zealand should reap more gains than losses in a worldwide clampdown on multinational firms using complicated structures to avoid paying tax, Revenue Minister Michael Woodhouse says.
The country is taking part in the Organisation for Economic Co-operation and Development's (OECD) efforts to plug gaps in international rules that haveenabled global companies to shift profits to other jurisdictions harbouring low or no tax environments. While that will likely have an impact on New Zealand firms with international operations, Woodhouse told parliament's finance and expenditure select committee that the country should come out ahead due to its suite of double tax arrangements and agreements with other nations.
"My sense is that when the noose is tightened around these countries we will probably be net beneficiaries of the tax base," he said.
In October last year, EY international tax partner Andy Archer said he expected New Zealand's 20 biggest companies would face increased regulatory costs as a result of the OECD's base erosion and profit shifting (BEPS) project, which could also lead to higher tax bills.
Woodhouse said New Zealand has been phasing in a number of initiatives that meet the BEPS guidelines, including changes to thin line capitalisation and transfer pricing rules, information sharing agreements, and is looking at the hybrid mismatch and interest limitation framework. At the same time, IRD has been working to lift compliance and is actively case-managing the top 50 companies by turnover on a one-to-one basis.
IRD commissioner Naomi Ferguson told the committee her department would be ready to implement BEPS recommendations as they were made.
International tax avoidance came under scrutiny earlier this year with the leak of documents known as the Panama Papers outlining a web of transactions designed to minimise tax for clients of Panamanian law firm, Mossack Fonseca, and putting New Zealand's regime for foreign trusts under the microscope.
That regime is currently under review by former PwC chairman John Shewan, and Woodhouse told the committee that is on track to be completed by the June 30 deadline set by the terms of reference.
Woodhouse downplayed early steps to review the disclosure regime by the Inland Revenue Department, saying his predecessor, Todd McClay, asked officials what they would drop to put issues concerning transparency on the work programme, something they weren't prepared to do.
When pressed by Labour finance spokesman Grant Robertson, Woodhouse said he and his predecessor would have been concerned if there were plans to drop the foreign trust regime put before the minister by officials.
"What I understand is that that was subsequently clarified between the minister and IRD," he said.
