25 October 2013
McClay backs OECD action plan for taxing multinationals
An Inland Revenue report released today by Revenue Minister Todd McClay strongly endorses measures outlined in an OECD action plan dealing with the taxation of multinational companies in relation to base erosion and profit shifting (BEPS) concerns among OECD member countries.
“The OECD action plan is a far-reaching document outlining the 15 points of focus over the next one to two-and-a-half years to address base erosion and profit shifting by multinationals. The IRD report supports the OECD approach and the particular focus and priority given to actions recommended in the plan,” says Mr McClay.
“This co-ordinated, structured plan is what we need to tackle this threat to tax bases around the world. As we have always said, we need a global response to this global problem. The action plan represents an international commitment to combat the problem, while the 15 points for action will help establish an international standard for tax rules.”
The IRD report released today recommends aspects of that plan which New Zealand could benefit from implementing. The issue of large multinationals shifting their profits to countries in order to gain the most favourable tax result (known as base erosion and profit shifting) is of huge importance to OECD member states who are concerned about how this practice can distort and erode their respective tax bases. New Zealand officials had participated in the development of the OECD action plan.
“The central issue is that international tax standards have not kept pace with developments in the global economy. While it may seem like a simple matter to clamp down on the corporates involved, Governments are mindful of the threat to international trade arising from knee-jerk reactions. For these reasons it will be difficult for any single country, acting alone, to fully address the issue,” says Mr McClay.
“What we’re looking at is an overhaul of international tax rules to update global tax rules from the industrial age to the digital age. Taken in that context, the OECD’s suggested timetable for addressing the issue over a period of up to two-and-a-half years is dynamic and ambitious. We will continue to support the OECD initiative.”
Mr McClay said that he would be considering both the OECD report and officials’ recommendations outlined in the IRD report and that his decisions would be reflected in the Government’s updated tax policy work programme to be released in November.
“Ultimately, the approach we take in dealing with the problem will have to be tempered by the careful balancing of all the factors involved, including any compliance costs. Consultation with New Zealand’s business community and tax practitioners will be a big part of our approach,” says Mr McClay said.
With regard to another issue that is sometimes seen to be linked with BEPS, the payment of GST on imported goods and services (online shopping), Mr McClay said he is intending to release a consultation paper on the issue later in the year.
The latest report, and earlier reports released in April 2013 and December 2012 can be found on Inland Revenue’s tax policy website: http://taxpolicy.ird.govt.nz/publications/year/2013
Media contact: Rob Eaddy 0274 596 200