Multinationals will be subject to more stringent taxation rules from July 1, following the passage of the Governments BEPS bill.
Officially known as the Taxation (Neutralising Base Erosion and Profit Shifting) Bill, the BEPS bill will implement a number of measures that will make it more difficult for multinationals to shift profits from New Zealand to overseas jurisdictions where they can be taxed at a lower rate.
It is intended to bring New Zealand into line with OECD rules on BEPS announced in 2015. Earlier this month David Bradbury, head of the OECD’s tax policy and statistics division visited New Zealand and gave his support to the bill.
It has faced some criticism however for its restrictive attitude to transfer pricing and even accusations that it departs from the OECD standard.
When the bill was in select committee, Deloitte Tax Partner Patrick McCalman told Newsroom that the concern with transfer pricing restrictions was that they were “one size fits all”.
McCalman told Newsroom there were particular issues with the way the bill went against the “arm’s length principle.
“The arm’s length principle is the basis on which the OECD and NZ to date has signed up to how we deal with when people transact across border with associates,” McCalman said.
This concern was shared by the ANZ bank which noted it in a written submission on the bill.
Unanimous Parliamentary Support
The passage of the bill was a foregone conclusion, given it had the unanimous support of Parliament.
It was initially announced but not introduced by then-Minister of Finance Steven Joyce and Revenue Minister Judith Collins under the previous Government. New Revenue Minister Stuart Nash introduced the legislation on December 12 last year.
Nash said the changes would bring in an extra $200 million in revenue once fully implemented.
“It’s very important legislation in terms of maintaining the integrity of the tax system,” Nash said.