The Post

NZ may pay a price from OECD tax clampdown


AN INTERNATIO­NAL crackdown on multinatio­nal tax rorts could result in more jobs for tax advisers and some companies paying less tax in New Zealand, tax experts say.

G20 finance ministers meeting in Peru on Friday endorsed reforms drafted by the Organisati­on for Economic Co-operation and Developmen­t (OECD) to ensure global giants such as Google, Apple and Amazon pay tax on all their profits.

But Andrew Dickeson, director of taxation services at Auckland accounting firm Staples Rodway, said the reforms would mean more work for tax administra­tors, the costs of which could be charged to New Zealand companies by their overseas parents.

The OECD’s tax crackdown is aimed at preventing an estimated US$100 billion (NZ$149 billion) to US$240b of corporate profits slipping through the cracks between countries’ tax laws.

Dickeson said the goal of the reforms was to ensure multinatio­nals’ tax bills reflected their economic activity in each country.

‘‘Rather than looking at ‘form’, you would be looking at ‘substance’; what you were doing in that country.’’

Although that might seem fairer, that would mean companies would have to make many more ‘‘subjective’’ decisions – for example, about how much profit and tax they might need to attribute to a warehouse in New Zealand – he said.

New Zealand businesses with subsidiari­es overseas would also need to better account for them to overseas tax authoritie­s.

‘‘I think there will be more compliance work. The tax advisers are going to do well out of this; the more complexity, the

actually more will be charged in fees – it is kind of inevitable.’’

In the case of multinatio­nals with branch offices in New Zealand, that extra work might often be done by tax administra­tors employed at regional offices in Australia or further afield, which would then charge their New Zealand subsidiari­es for their time.

‘‘They don’t do it overseas for free; there would be a management charge, so ironically there would be more money leaving us.’’

He said it was too soon to attempt to quantify the dollar impact.

Deloitte tax partner Bruce Wallace said he shared Dickeson’s concerns and also felt there was potential for disputes between tax authoritie­s about where tax should be paid, which could lead to ‘‘double taxation’’ of some company profits.

‘‘Tax changes are always going to lead to compliance costs, and what we are talking about here is a pretty fundamenta­l change, so people will have to go back and revisit their models and arrangemen­ts.’’

Revenue Minister Todd McClay expected to introduce the necessary legislatio­n before the end of next year.

 ?? Photo: REUTERS ?? G20 finance ministers endorsed an OECD plan to crack down on multinatio­nal tax rorts at a meeting in Lima on Friday.
Photo: REUTERS G20 finance ministers endorsed an OECD plan to crack down on multinatio­nal tax rorts at a meeting in Lima on Friday.

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