Inland Revenue’s multinational enterprises compliance focus

Lexi Mills

Lexi Mills

Lexi Mills

TINZ board member with delegated authority for events and AML.

We now live in an age of collaboration and partnership between government and communities. To foster that relationship takes high levels of accountability and transparency. As part of Inland Revenue’s role in furthering these principles, it has published the Multinational Enterprises Compliance Focus to achieve a “no surprises” approach to the taxation system within New Zealand. This report outlines the revenue collected for the 2015-16 financial year from multinationals and how it was spent. As well, compliance activities and corporate tax governance strategies are being pursued by the IRD to ensure multinational enterprises are paying their share of taxes.

A key feature of an effective democracy and strong integrity systems is a high level of engagement with stakeholders. The report achieves this by setting clear expectations for multinationals as to their tax obligations under New Zealand law, while highlighting the contribution made by multinationals to the economy. The “no surprises” approach should support an increase in compliance with New Zealand law which, in time, could lead to a more positive perception of multinational enterprises by our communities.

In recent years, a topic that has experienced particular scrutiny is tax base erosion and through shifting profits (BEPS). BEPS refers to tax base erosion and profit shifting that is the result of unintended gaps and mismatches between different countries’ tax systems. These gaps are used to shift profits to locations where there is very limited real activity by the business, or it is completely absent. This results in low taxes, and little or no overall corporate tax being paid. This report includes Inland Revenue’s response to the issue, outlining the past, present and future action items and strategies being deployed to combat base erosion and profit shifting.

In order to tackle BEPS, the 15-point plan developed by the Organization for Economic Cooperation and Development (OECD) has been adopted by Inland Revenue. These strategies cover key requirements, metrics and enforcement measures to respond to the threat of BEPS. Through the actioning of the plan, New Zealand will contribute towards the global efforts to combat BEPS and achieve a stronger taxation system. In order for this to be successful it is essential that there is strict enforcement, as well as continuous development of policy to prevent the use of alternate methods to achieve tax neutrality.

Through its open approach, Inland Revenue demonstrates its transparency and good governance. In this way, it further contributes to New Zealand’s position as the number one ranked country for ease of doing business. It demonstrates that ease of doing business is different from ease of tax avoidance. Transparency International New Zealand congratulates the Inland Revenue on its informative and easy to follow publication and looks forward to many more like it.

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