Tax evaders given years till compliance
The Government continues to move slowly on global tax evasion and no action is likely for four to five years, according to a statement by Revenue Minister Todd McClay.
Companies like Facebook and Google have been under fire around the world for shifting revenue and profits to different jurisdictions to avoid paying tax.
New Zealand was supportive of the global move to counter tax evasion and had agreed to align its information-sharing timetable with that of Australia, Mr McClay said.
G20 leaders announced in September last year a programme for the automatic exchange of information aimed at cracking down on tax evasion.
In May this year, New Zealand, along with other OECD countries, joined in the general declaration of support for the move. Australia, which holds the G20 presidency this year, announced its implementation last month.
Mr McClay said multinational companies using base erosion and profit-shifting measures to avoid tax was a global problem.
New Zealand was committed to joining other OECD countries in finding a global solution.
New Zealand would begin exchanging information on a voluntary basis from 2018, aiming for mandatory reporting in 2019.
That would give New Zealand’s financial industry enough time to comply, he said.
Labour Party revenue spokesman David Clark said the Government had just gifted a five-year tax holiday for foreign companies dodging their tax payments.
”Todd McClay has pretended he is doing something about overseas companies dodging their tax duties by joining an international initiative but he admits nothing will happen for five years,” Dr Clark said.
”This isn’t good enough. While international co-operation is important, the Government should be looking at moves it can take right now, not some time in the future.”
The principle was simple. If a company made a profit in New Zealand, it needed to pay its tax in New Zealand, Dr Clark said.
Deloitte Dunedin tax partner Peter Truman said until now, countries had agreed protocols for information-sharing on a bilateral basis.
They were generally reactionary with a request for information from one country to another was made and acted on.
The United States had introduced a wide-reaching regime under the Foreign Account Tax Compliance Act that required reporting from offshore to the US on bank account details for US dollars.
As part of the OECD project, there was a move to standardise information exchange protocols.
Individual countries could sign up and avoid the need for a plethora of bilateral agreements.
”This move also includes a change in approach where information is exchanged automatically, rather than on a request.
It is likely to impose additional compliance costs on the banking and finance industries but is being done in the hope tax evasion through use of overseas bank accounts reduces significantly,” Mr Truman said.
