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.