The government released three consulting papers today which proposes to strengthen New Zealand’s rules for taxing large multinationals.

The proposals are considered to be in line with the OECD BEPS project (base erosion profit sharing) aiming to develop best practice in relation to what is perceived to be an issue worldwide. The documents include:

  • Tackling concerns about multinationals booking profits from their New Zealand sales offshore, even though these sales are driven by New Zealand-based staff
  • Preventing multinationals using interest payments to shift profits offshore, and
  • Implementing New Zealand’s entrance into an international convention for aligning our double tax agreements with OECD recommendations.

This is not a new issue and has been in the pipeline for a long time. While there are existing tax rules that attempt to minimise any tax “leaks” i.e.: the transfer pricing and thin capitalisation regime, the government seems to be working to tighten any loopholes and getting a fair piece of the proverbial pie.

The question is how far these proposals will reach and would there be a negative impact on NZ with these large entities maybe shifting to better waters.

Submissions on the consultation document on implementing the international convention are open until 7 April. Submissions on the other two are open until 18 April. Ministers will consider final proposals arising from the documents later in the year.