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02 - Policy report: Cabinet paper - Foreign hybrid entity double deductions and BEPS reforms

Document number 02
Date 6 April 2017
Type Policy report
Title Cabinet paper - Foreign hybrid entity double deductions and BEPS reforms
Description

Covering report for Cabinet paper (document #03).

Report number: IR2017/237, T2017/949

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Contents

Tax policy report: Cabinet paper - Foreign hybrid entity double deductions and BEPS reforms


Date: 6 April 2017 Priority: High
Security level: Sensitive - Budget Report no: T2017/949
IR2017/237

Action sought

  Action sought Deadline
Minister of Finance

Agree to the recommendations of this report.

Authorise the lodgement of the attached Cabinet paper.

Either:
  • 10:00 am Wednesday 12 April 2017 for Cabinet on 18 April 2017; or
  • As soon as possible as a late paper for EGI on 12 April 2017.
Minister of Revenue

Agree to the recommendations of this report.

Authorise the lodgement of the attached Cabinet paper.

Either:
  • 10:00 am Wednesday 12 April 2017 for Cabinet on 18 April 2017; or
  • As soon as possible as a late paper for EGI on 12 April 2017.

Contact for telephone discussion (if required)

Name Position Telephone
Steve Mack Principal Advisor, The Treasury [Withheld under section 9(2)(a) of the Official Information Act 1982]
Paul Kilford Policy Manager, Inland Revenue

 

6 April 2017

Minister of Finance
Minister of Revenue

Cabinet paper - foreign hybrid entity double deductions and BEPS reforms


1. This report asks you to refer the attached Cabinet paper to Cabinet Office so that it may be considered either by:

  • The Economic Growth and Infrastructure Committee (EGI) at its meeting on 12 April 2017; or
  • Cabinet at its meeting on 18 April 2017.

2. The paper proposes that Cabinet:

  • Agree to tax law changes to restrict the ability of New Zealand businesses to use double deductions of foreign hybrid entities, particularly Australian Limited Partnerships, to reduce their tax liabilities in New Zealand; and
  • Note the progression of proposals contained in three BEPS discussion documents (Addressing hybrid mismatch arrangements, BEPS – transfer pricing and permanent establishment avoidance, and BEPS - strengthening our interest limitation rules), subject to modification in consultation.

3. If Cabinet agrees to these recommendations, the Budget 2017 revenue forecasts will be adjusted by $100 million per year from 2019/20 (with $50 million forecast in the preceding year).

Recommended action

We recommend that you:

Authorise lodgement of the attached Cabinet paper either:

a. by 10:00 am, Wednesday 12 April 2017 for Cabinet on 18 April 2017.

Authorised/Not authorised   Authorised/Not authorised

OR

b. as soon as possible as a late paper for EGI on 12 April 2017.

Authorised/Not authorised   Authorised/Not authorised

 

Steve Mack
Principal Advisor
The Treasury

Paul Kilford
Policy Manager
Policy and Strategy
Inland Revenue

Steven Joyce
Minister of Finance

Hon Judith Collins
Minister of Revenue