Respectful proactivity tackling a taxing problem

Nobody likes paying tax, but when large, global corporations appear to be getting away with millions of dollars when the taxman chases the rest of us for every penny, then no wonder we feel aggrieved.

Some blame companies and accuse them of greed and avarice, but I think it’s the system that allows them to get away with it that should take the biggest rap.

One accountant told me the best in his profession prefer the private to the public sector, because that’s where the serious money is. As a result he said, accountants working for big companies work very hard to reduce the tax burden by squeezing everything out of the tax law. Meanwhile, the ones in the public sector have a hard time catching up with them.

A harsh, and probably false view, but governments worldwide have been slow to catch up with the complexity of global company networks.

That’s why this week’s release of three consultation papers, proposing new measures to ramp up New Zealand’s rules for the taxing of large multinationals is to be welcomed.

Finance Minister Steven Joyce stressed the importance of fair play. ‘‘Our broad-based low rate tax system continues to perform very well for New Zealand overall. However, it’s important that it keeps evolving to ensure that all companies operating in New Zealand pay their fair share of tax.

‘‘The proposals in these documents are in line with the recommendations from the OECD’s base erosion and profitshifting (BEPS) project which has developed best practice measures for the global response to BEPS.

‘‘We welcome multinationals’ participation in our economy, but we also expect them to pay tax based on their actual levels of economic activity here.’’

Consultation will engender trust in any new system imposed, providing companies are protected if they are obliged to share sensitive tax information with foreign agencies - it cuts both ways. The documents are available at www.taxpolicy.ird.govt.nz.