Enforcement programme

Over two-thirds of world trade involves multinational enterprises. Well over 50% of world trade comprises associated party transactions which must be transfer priced for taxation purposes. Multinational enterprises are a significant force in New Zealand's economic environment.

The overall goal of our transfer pricing enforcement programme is to maintain New Zealand's share of multinational tax in accordance with our tax law, acceptable income recognition principles and best international practices.

From their inception, New Zealand's transfer pricing rules have always been about striking a balance between protecting the tax base and containing compliance costs. Our regime is effective in terms of its coverage of transactions, including a specific anti-avoidance provision to capture collateral arrangements. The regime is also moderate in placing the burden of proof on the Commissioner to demonstrate a more reliable arm's length amount, provided there has been co-operation in the provision of requested relevant information. This reverse burden of proof and the lack of specific rules about maintaining any specific transfer pricing documentation has meant that the costs of compliance with New Zealand transfer pricing rules are less than those in other countries.

We are not alone in wanting to maintain our fair share of the multinational tax pie - revenue authorities around the world are implementing and updating their rules and regulations on international transactions as well as increasing their audit activities.

Date published: 19 Feb 2009

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