Hive News Friday: Collins to unveil BEPS tax moves; Voters see housing as biggest election issue

Revenue Minister Judith Collins is expected to unveil at least three measures to crack down on Base Erosion and Profit Shifting (BEPS) by international companies later this morning.

Collins is due to give an address at a conference around mid-morning and the IRD is expected to release three consultation papers on BEPS at the same time.

The focus will be on whether New Zealand follows Britain and Australia in implementing a diverted profits tax, although the IRD's work programme has focused more on interest limitation rules, hybrid instruments and rules around transfer pricing.

This December 2016 cabinet paper on transfer pricing and the diverted pricing tax (DPT) idea is the latest indication of the IRD's thinking ahead of the new minister's first big announcement on the issue.

The IRD appeared less keen to adopt a British and Australian style DPT in full, and instead suggested New Zealand adopt a package of its own measures.

"The aim of the DPT is to tax profits that multinationals divert offshore (rather than allocate to their New Zealand operations). While it is likely to achieve greater taxation of these profits, it could impact on perceptions of the predictability and fairness of New Zealand's tax system for foreign investment," IRD said.

"We currently consider that a better approach is to take certain features of a DPT and combine them with the OECD's BEPS measures and some domestic law amendments to produce a package that is tailored for the New Zealand environment," it said.

"This approach should be as effective as a DPT in addressing transfer pricing and PE (Permanent Establishment) avoidance-related BEPS strategies in New Zealand, but it would do so within our current frameworks and with fewer drawbacks. However, we do not wish to rule out the adoption of a DPT at this early stage of policy development."

IRD said in the cabinet paper its package would not tax non-resident suppliers without a material physical presence in New Zealand. It noted that some of these companies included those "that have been the focus of some public concern in New Zealand and internationally."

It did not name them, but the main public concern has been around Apple, Facebook, Google and Uber.

Permanent Establishment refers to the part of international tax treaties relating to whether an international company has a 'fixed place of business' in a country that would require it to declare a permanent establishment in that country, and therefore have to declare income more fully.

Meanwhile, Patrick O'Meara reported Mossack Fonseca, the company at the heart of the Panama Papers, has quit New Zealand.

In other news...

Katie Bradford reported that TVNZ's Colmar Brunton poll had found 27% of voters named housing and housing affordability as their most important issue ahead of the September 23 election. The poll found 20% said education was the top issue, while 16% said the economy was the most important, followed by health, the environment and immigration.

In a move that won't do any harm for Labour's chances of winning New Zealand First's support in any coalition negotiations, Andrew Little announced Labour had nominated Winston Peters to fill David Shearer's position on the Intelligence and Security Committee.

While you were sleeping...

The Washington Post reported Attorney General Jeff Sessions misled the Senate about his contacts with Russia's ambassador to the United States. Democrats called on Sessions to resign and some Republicans called on Sessions to recuse himself from investigating the Russian connection with the Trump White House.

Snap, the owner of the video and picture messaging app with over 150 million users called Snapchat, floated on the US stock market at a 40% premium to its Initial Public Offering price this morning, which values the company at nearly US$30 billion. Snap lost (yes lost) US$514.6 million last year on revenues of US$404.5 million. (CNBC)

Tweets of the day:

Dan Goldberg on how Senator Franken appears to have asked the key question that will cause Sessions and Trump plenty of grief.

Imagine it's 1985 and I tell you Senator Al Franken is instrumental in ensnaring President Donald Trump.

Have a great weekend and look out below for some weekend reads.

cheers

Bernard

3 March 2017