The Government has announced its final decisions on proposals to address base erosion and profit shifting (BEPS).

A statement from Finance Minister Steven Joyce and Revenue Minister Judith Collins says it is expected the BEPS measures will be included in a tax bill to be introduced by the end of 2017, for enactment by July 2018.

“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.

The statement says that 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.”

“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.”

The Government has released a number of documents on the key submissions as well as public submissions made.