BEPS tax bill introduced

A tax bill which will counter base erosion and profit shifting by multinational companies has been introduced into Parliament today. The Taxation (Neutralising Base Erosion and Profit Shifting) Bill contains measures which will prevent multinationals from using:

– artificially high interest rates on loans from related parties to shift profits out of New Zealand;

– hybrid mismatch arrangements that exploit differences between countries’ tax rules to achieve an advantageous tax position;

– artificial arrangements to avoid having a taxable presence in New Zealand; and

– related-party transactions to shift profits into offshore group members in a manner that does not reflect the actual economic activities undertaken in New Zealand and offshore.

For more information see the Minister of Revenue's media statement [added 7 December 2017], the bill, commentary on the bill and regulatory impact assessments.

Hon Stuart Nash
Minister of Revenue

Media statement

7 December 2017

Multinationals tax legislation introduced

Legislation just introduced to Parliament will prevent multinationals from avoiding tax by shifting profits out of New Zealand, Revenue Minister Stuart Nash said today. The legislation also reflects an important objective of the Labour New Zealand First Coalition Agreement.

“Some multinationals use aggressive strategies to pay little or no tax anywhere in the world. This is known as base erosion profit shifting, or BEPS, and is a massive problem. It denies a country its taxation revenue and erodes confidence in the fairness of the tax system. Inland Revenue estimates the new measures could raise approximately $200 million per annum.”

“I am very pleased to introduce legislation that will introduce fairness and equity back into the tax system. New Zealanders expect every company to pay its share of tax, no matter how big or powerful that company may be,” said Mr Nash.

The Taxation (Neutralising Base Erosion and Profit Shifting) Bill contains measures aimed at preventing multinationals from achieving a tax advantage through:

artificially high interest rates on loans from related parties to shift profits out of New Zealand
hybrid mismatch arrangements that exploit differences between countries’ tax rules
artificial arrangements to avoid having a taxable presence in New Zealand; and
related-party transactions to shift profits to offshore group members.

“The proposed new rules will be an effective response to current avoidance techniques, but are not the end of the story. The Government will continue to investigate further options, both legislative and administrative, to counter aggressive tax practices.

“Multinational companies are a welcome part of our economy but they must abide by the rules. They must pay their fair share of tax,” Mr Nash says.

The legislation is expected to have its First Reading on Tuesday 12 December.