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Government announces BEPS decisions

Finance Minister Steven Joyce and Revenue Minister Judith Collins have today announced the Government’s final decisions on proposals to address base erosion and profit shifting (BEPS).

“The new measures will significantly strengthen our tax rules and our ability to ensure that multinationals are taxed fairly and on the basis of their actual level of economic activity in New Zealand,” Mr Joyce says.

In combination the new measures will:

  • Stop foreign parents charging their New Zealand subsidiaries high interest rates to reduce their taxable profits in New Zealand.
  • Stop multinationals using artificial arrangements to avoid having a taxable presence in New Zealand.
  • Ensure multinationals are taxed in accordance with the economic substance of their activities in New Zealand.
  • Counter strategies that multinationals have used to exploit gaps and mismatches in different countries’ domestic tax rules to avoid paying tax anywhere in the world.
  • Make it easier for Inland Revenue to investigate uncooperative multinational companies.

“These changes will result in an estimated $200 million a year in additional tax being paid by multi-national companies,” Mr Joyce says. “The Government budgeted for $100 million annually in out-years for additional multi-national tax, and these decisions mean that will be increased by a further $100 million annually from Budget 2018 onwards.”

“These decisions have been arrived at after weighing up public feedback on three government discussion documents relating to: hybrid mismatch arrangements; interest limitation rules; and transfer pricing and permanent establishment avoidance,” Ms Collins says.

“For the most part, the proposals will proceed as originally devised but in some instances, public feedback made a good case for refining the scope of proposals or for fleshing out technical detail. We’ll carry out further targeted consultation on such matters of technical detail (including draft legislation), without reducing the effectiveness of the proposals.”

“It is very important that every company operating in New Zealand pays their fair share of tax,” Mr Joyce says. While most multi-national companies follow the rules there are some that attempt to minimise or eliminate their New Zealand tax obligations. The proposals target these multinationals.

“I’m confident that the policy decisions we’ve made will tackle these BEPS activities without reducing the general attractiveness of New Zealand as an investment destination.”

“As we’ve done in the past for BEPS matters, we’re releasing reports and Cabinet papers detailing our key decisions. We are also releasing the public submissions we received,” Ms Collins says.

It is expected that the BEPS measures will be included in a tax bill to be introduced by the end of the year, for enactment by July 2018.

The documents released today can be found at