NZ wary of corporate tax backlash

Tax avoidance by multinationals is better dealt with by an international treaty than harsher measures brought in by Australia and the United Kingdom, Revenue Minister Judith Collins says.

In an interview with TV3’s The Nation, the minister said she had not ruled out the idea of diverted profit tax, which comes into effect in Australia this month for global companies. But Collins said the 40 per cent tax penalty Australia was using was ‘‘very draconian’’.

‘‘That is a pretty harsh measure which might sound great, but even Australia is saying they’re expecting $100m and the size of their economy [is] five or six times our size.

‘‘We believe we can get pretty much the same result or even better working with the the OECD.’’

The Government’s preference is to be part of an OECD treaty on BEPS (base erosion and profit shifting), which aims to stop loopholes letting companies to shift profits to low or no-tax locations.

In the May Budget, the Government estimated it could retrieve about $250m over three years from tightening up on multinational tax dodging.

Labour has criticised that sum as too conservative, claiming it could retrieve up to $600m, or $200m a year.

But Collins said the revenue from big corporate tax evasion was expected to rise. ‘‘We believe we will get to at least $300m.’’

The other risk to Australia’s punitive approach was that other countries would do the same to New Zealand.

‘‘We are an exporting nation, we need to be very careful how we do these things and what we don’t want to do is end up with a situation where we’re considered a difficult and dangerous place to operate.’’