Tax bill passed

Legislation introduced in November in the Taxation (Base Maintenance and Miscellaneous Provisions) Bill passed through its final stages in Parliament yesterday. New thin capitalisation rules for foreign-owned banks operating in New Zealand are the main feature of the new legislation, which is expected to receive Royal assent next week. For more information see the media statement from the Minister of Revenue and the media statement from the Minister for the Environment.

Hon Dr Michael Cullen
Minister of Revenue

MEDIA STATEMENT

Major tax bill passes

"Foreign owned banks operating in New Zealand will be required to pay sufficient tax on their New Zealand income as part of a major tax bill passed by Parliament yesterday,” Revenue Minister Michael Cullen said.

"New thin capitalisation rules will ensure that the income of banks cannot be sheltered by interest deductions arising from excessive debt. Banks will not have access to interest deductions if they do not hold a level of equity equivalent to 4 per cent of their New Zealand banking assets, weighted for risk.

"The bill also makes it easier for businesses to claim tax deductions for environmental expenditure, allowing environmental costs, like other business costs, to be taken into account for tax purposes.

"It introduces statutory 'privilege' - or a right not to disclose certain documents - to confidential tax advice that is given by advisors such as chartered accountants, a change that has been welcomed by tax professionals.

"The bill introduces several business-friendly changes. They include clarification of the income tax rules on transfers of assets and liabilities to beneficiaries when a taxpayer dies, a reform that is long overdue. They also include technical amendments to the tax depreciation rules to improve their operation and reduce compliance costs.

"The changes include the introduction of a six-year tax exemption on income from non-resident drilling rigs and seismic ships involved in exploration for petroleum in New Zealand, as part of a package of measures to boost gas exploration.

"This very important bill reflects the priorities of the government's tax policy work programme, which include promoting growth and innovation, making the tax system easier for businesses to work with, reducing compliance costs and protecting the revenue base. I am very pleased that it has been passed," Dr Cullen said.

Contact: Patricia Herbert, press secretary, 04 471 9412 or 021 270 9013
Email: [email protected]

Hon Marian Hobbs
Minister for the Environment

Environment-friendly tax changes good for business

Changes to tax legislation, including tax deductions for businesses cleaning up contaminated sites, were welcomed today by Environment Minister Marian Hobbs.

"The new tax law, passed by Parliament last night, will make it easier for businesses to do their bit towards a clean, healthy and safe environment. Environmental costs, like any other business cost, should be taken into account for tax purposes," Marian Hobbs said.

The changes update, clarify and expand tax deductions for business environmental expenditure.

"This is excellent news for businesses putting practices in place to reduce their impact on the environment," Marian Hobbs said.

A key benefit for business is that work towards restoring contaminated sites is now immediately tax deductible. Taxpayers with restoration liabilities can also opt to take part in a site restoration fund, setting aside money for future site restoration.

The tax deductions cover environmental expenditure such as preventing, remedying or mitigating the discharge of contaminants, monitoring the effects of pollution and testing options to deal with environmental issues. Examples of environmental improvements might include earthworks or ponds to reduce the effect of contaminants, or planting trees to reduce the impact of contaminants on a stream.

"The tax changes are another step to ensure businesses are assisted towards sustainable practice. As part of its work with industry the Ministry for the Environment will also promote these tax benefits," Marian Hobbs said.

More information is available online at www.ird.govt.nz or in an upcoming Inland Revenue Tax Information Bulletin.

Media contacts: Trevor Henry, press secretary, tel 04 471 9131; 021 843 679
e-mail: [email protected]

Ali Tocker, media advisor, Ministry for the Environment, tel 04 917 7569, 027 452 6242
e-mail: [email protected]

Technical enquiries to Helen McDonald, tax advisor, Dr Cullen’s office, 471-9728.