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New Zealand Calls For Collective Action On BEPS

by Mary Swire,, Hong Kong

29 July 2014

Further progress on the Organization for Economic Cooperation and Development's (OECD's) base erosion and profit shifting (BEPS) project requires collective action, Todd McClay, New Zealand's Revenue Minister, told a recent conference organized by BDO New Zealand.

Framing the importance of the BEPS initiative for New Zealand, he said: "Countering BEPS helps to level the playing field. Moreover, if New Zealand suffers base-erosion, other taxes must increase to make up the difference, which reduces the efficiency and competitiveness of the New Zealand economy. It is not in the interest of New Zealand businesses and individual taxpayers if multinational companies avoid paying their fair share of tax in New Zealand or anywhere else for that matter."

"I think it's fair to say that New Zealand's rules in this area are as good as any, and better than most. [On] domestic rules applying to such income, we have already made considerable progress. Our thin capitalization rules, transfer pricing [rules], and [regime for the] taxation of passive income of controlled foreign companies were designed to protect New Zealand from base erosion strategies."

"A particular strength of New Zealand's tax system is its reliance on consultation and the willingness of the tax community to engage. I think it is the main reason that tax reform in this country is generally well targeted and has a high degree of buy-in from the public. Consultation helps to ensure that proposals are fair and will not impose undue compliance costs. Crucially it gives taxpayers certainty. We'll be looking for your input again particularly as we face some interesting challenges ahead."

His address came two days after those of the head of the OECD's Center for Tax Policy and Administration, Pascal Saint-Amans, at a hearing in the United States on July 22, 2014. Saint-Amans warned that: "If only a small number of countries attempt to solve BEPS, they may in fact further jeopardize their tax base as businesses move to jurisdictions that have not yet implemented preventive measures or that choose not to do so in order to gain a competitive advantage."

"Uncoordinated, unilateral action by individual countries to exert taxing rights over cross-border activity would only make the problem worse, resulting in double or multiple taxation, increasing disputes for business and among governments, and harming economic growth. The work on BEPS is intended to produce tools that countries can use to address BEPS, in order to ensure that the international tax system continues to function, and that a broader, more robust consensus to eliminate double taxation can be established."

TAGS: compliance | tax | investment | business | tax compliance | tax avoidance | interest | revenue guidance | Organisation for Economic Co-operation and Development (OECD) | corporation tax | audit | group taxation | ministry of finance | tax authority | agreements | multinationals | transfer pricing | New Zealand | standards | regulation | Legislative Scrutiny | trade | services | Tax | Tax Evasion

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