Multinational companies such as Apple, Facebook and Google have been put on notice - they will need to pay tax on the income they generate in New Zealand.
New Government measures to ensure multinational companies pay their fair share of tax come in on July 1.
Revenue Minister Stuart Nash said companies should ideally pay tax in the right country. The legislation would ensure multinationals paid tax based on the actual economic activity they carried out in New Zealand.
It was not in the interest of NZ taxpayers if multinational companies avoided paying taxes in this country, he said.
“The changes address the problem of companies operating cross-border and using aggressive tax structuring to reduce the tax they pay.”
Estimates from Inland Revenue were the measures could result in an extra $200 million of tax revenue each year, once fully phased in.
Nash said the extra tax would contribute to other Government priority areas like health housing, education and policing.
Crowe Howarth Australasia tax advisory managing partner Scott Mason told the Otago Daily Times it was difficult to argue foreign companies should not pay a reasonable amount of tax in New Zealand based on the true economic extent of their trading activities here.
However, care had to be taken to ensure New Zealand's domestic rules were not over reaching, nor out of line with OECD approaches to the same issue.
“NZ equally has companies based here trading in other countries, operating on the same basis as the Googles of this world, only paying minimal tax outside of New Zealand. Accordingly, we do not want to trigger overly aggressive responses in those jurisdictions on a tit-for-tat basis.”
It would also be interesting to see how the $200 M of extra tax revenue was calculated, Mason said.
*Dene Mackenzie is business editor of the Otago Daily Times.