New Zealand Law Society - Omnibus tax simplification bill supported by majority

Omnibus tax simplification bill supported by majority

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The Finance and Expenditure select committee has released its report on the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Bill, with a majority recommending that it be passed with amendments.

The omnibus bill would amend the Income Tax Act 2007, the Tax Administration Act 1994 and the Student Loan Scheme Act 2011.

It seeks to introduce 16 measure to make tax simpler for businesses, to implement the G20/OECD standard for Automatic Exchange of Financial Account Information in Tax Matters, and to implement the disclosure requirements for foreign trusts recommended by the Government Inquiry into Foreign Trust Disclosure Rules.

The bill also contains three measures to enable the deployment of Stage 1 of Inland Revenue's Business Transformation Programme.

Foreign trust disclosure rules

The committee makes a number of recommended amendments to the provisions for foreign trust disclosure rules. It considers that the definitions of "settlor" and "settlement" are too wide, and recommends an amendment which would insert sections 59B(3)(b) and 59D(2)(c) into the Tax Administration Act to limit the definition of settlor and settlement to persons who have provided money, goods, or services that are more than incidental.

"The proposed amendments would exclude people who have only provided services to the trust that are below market value, and are minor and incidental to the activities of the trust, from being a settlor for the purposes of the foreign trust disclosure rules," it says.

An amendment to clarify the definition of "foreign trust" is also proposed. "Foreign trust" is defined in the Income Tax Act 2007, but the committee recommends inserting a new clause to amend section HC 11 to clarify that the definition of "foreign trust" applies to all trusts with a foreign settlor at a point in time, regardless of whether a distribution has been made. It says this would address any confusion around the definition.

The Labour, Green and New Zealand First parties have issued a minority view, saying they support passage of the bill, but expressing concern at provisions relating to foreign trusts.

The bill was referred to the committee on 11 August 2016 with submissions closing on 9 September 2016. The committee received 24 submissions and heard from 13 submitters.

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