Minister of Revenue and Associate Trade Minister, Todd McClay has concluded a European lobbying mission by signing a tax agreement in Paris to focus on tax avoidance by multinationals.
The OECD's Multilateral Competent Authority Agreement brings New Zealand closer to participating in the global standard for an automatic exchange of information between tax authorities.
For McClay, signing the agreement is a necessary and important step in New Zealand's implementation of the new global standard for Automatic Exchange of financial account information in tax matters, commonly referred to as AEOI.
“The AEOI, announced by G20 leaders in 2013 will be a significant means for improving information to help discover and stamp out tax evasion,” McClay says.
“This agreement means we will be better able to target multinationals who elude tax in New Zealand whilst not placing unnecessary burden upon those who are meeting their tax obligation.
“It complements the work we are separately undertaking with the OECD to tackle the problem of base erosion and profit shifting (BEPS) by multinationals.”
McClay’s visit follows the backing of Spark New Zealand over Government plans to tighten multinational tax arrangements, following a recent Inland Revenue audit highlighting that large multinationals are using sophisticated techniques to defeat the tax rules.
“Multinational taxation arrangements are costing New Zealand hundreds of millions every year in lost taxation revenues,” said Simon Moutter, Managing Director, Spark New Zealand, last month.
“So it’s encouraging to see the Government identifying this issue as a key focus for tax policy work.”
According to Minister of Revenue, Todd McClay, non-resident withholding tax has not been significantly reformed since it was introduced in 1964, originally designed when financial transactions were much less complex than today.
McClay believes that without changes to the rules, there is an incentive and ability for non-residents to shift profits out of New Zealand with no or minimal New Zealand tax paid.