New Zealand is well-placed to take advantage of the economic benefits of oil and gas exploration, Energy and Resources Minister Judith Collins announced today at the launch of the 2017 Block Offer petroleum tender.

“The global exploration and production industry is cyclical – the low number of permits granted in last year’s Block Offer reflects a significant downturn in the sector,” Ms Collins says.

“However, activity in New Zealand and globally is expected to pick up as operator margins improve. The Government will continue to ensure we reap the benefits of petroleum and mineral exploration while adhering to strong environmental and health and safety provisions.”

The annual Block Offer was first introduced in 2012 and provides an effective way for the Government to manage how petroleum permits are allocated.

This year’s Block Offer includes five offshore release areas (in Northland - Reinga, Pegasus - East Coast, Hawke Bay, Taranaki and Great South - Canterbury), and two onshore release areas (in Taranaki and Southland). There is also one offshore/onshore release area in Taranaki.

The total acreage included in the tender is 481,735 km², comprising 5,102 km² onshore and 476,632 km² offshore.

“New Zealand’s petroleum sector is small by global standards but is nonetheless a significant contributor to the economy. Between 2011 and 2015, oil companies invested $7.7 billion in oil and gas exploration and production in New Zealand. Other parts of the economy also benefit from the sector’s demand for goods and services.

“In order to encourage exploration activity, we need to maintain our reputation as open for investment and a good place to do business. At the same time, the Government’s regulatory framework will ensure New Zealand’s unique environment continues to be protected and its high standards of workplace health and safety are maintained.”

More information about Block Offer 2017 can be found on the New Zealand Petroleum & Minerals website https://www.nzpam.govt.nz/

It’s a pleasure to welcome you all to New Plymouth in the Taranaki province, the heart of oil and gas production in New Zealand.

Although I’m relatively new as Energy and Resources Minister, I’m very enthusiastic about the future of this dynamic and extremely productive industry.

I’d particularly like to acknowledge PEPANZ for organising the conference, and our international guests for showing their interest this year. I hope you enjoy your time in New Zealand.

Industry downturn

There’s no doubt the last few years have been particularly challenging for the industry. Global markets have experienced an oversupply of oil leading to lows in prices not seen in very many years.

This has created an extremely tough operating environment for all in the sector, and New Zealand hasn’t been immune.

I recognise the difficulties you’ve all faced through the downturn as many of you have had to make very tough decisions about where your expenditure goes.

And there has been a human toll, too, with many parts of the industry having to downsize.

But this is a resilient industry, and we can take comfort in the fact that market downturns are symptomatic of the cyclic nature of the industry.

It’s promising to see signs that global oil prices may have reached their lowest point in this commodity cycle, indicating a sustained recovery.

Additionally, the current high level of merger and acquisition activity globally, and particularly in New Zealand, indicates a continued willingness to invest in the sector. 

Economic benefits

As we look back on where the industry has come from, now is a good time to take stock of just how much of a vital role oil and gas plays in the world economy. It’s a role that will continue for some time yet.

The contribution the sector makes to economies around the globe is particularly significant. While it’s widely appreciated just how integral petroleum is to the transportation and energy generation sectors, it’s not as well-known just how much it contributes to quality of life more generally.

It’s commonly used in chemicals, plastics and synthetic materials. This includes everything from clothing to asphalt for roads, fertilisers for agriculture, to smartphones that have become so prevalent around the world.

And there are no signs the contribution the sector makes in keeping economies going will abate any time soon.

This will be particularly evident as a world population that’s expected to increase from around 7.5 billion currently to around 9.7 billion by 2050 puts increasing demands on global resources.

The International Energy Agency projects that oil and gas will make up about half of the world’s energy consumption in 2040. Most of the projected growth in oil demand to 2040 will come not from fuel for passenger vehicles but from freight, aviation and petrochemicals, where alternatives are scarce.

Climate change

Of course, economies around the world have a responsibility to limit the effects of climate change. There’s much we can do and a great deal of work is underway globally, including in New Zealand, in encouraging greater use of renewable forms of energy and greater uptake of electric vehicles.

But looking at the broader picture, we also need to take a balanced approach.

If nations abide by the Paris Agreement pledges, the IEA forecasts that 37 per cent of electricity will be generated from renewables globally by 2040, meaning petroleum products will still form a large part of the energy mix for decades to come. That’s why taking a long-term view of global energy supply is in everyone’s interests.

It’s important to emphasise, too, in the debate around the sector’s contribution to carbon emissions, that not all oil is burned and turned into energy sources such as transport fuels and electricity generation.

The petroleum industry has a role in transitioning to low carbon fuels. Natural gas has 40 per cent lower carbon emissions than coal for electricity generation, making it a key transition fuel. It’s believed natural gas could displace coal as an energy source in countries such as China and India, where coal is heavily used.

Local Benefits

I’d like to put the focus on the local industry for just a moment, and pay tribute to the contribution it makes to this region. It’s appropriate that this year’s conference is held in New Plymouth. New Zealand and Taranaki in particular, has had a long and productive history in oil and gas dating back to the 1800’s.

Over time, it’s grown to become a major contributor to the nation’s economy, with fields developed in Taranaki in the 1950s still producing oil and gas today.

Oil is New Zealand’s sixth largest commodity export, and gas is a major contributor to domestic industries, households and electricity generation. Annually, oil and gas production contributes more than $2.5 billion to New Zealand’s GDP.

Jobs in the sector are typically highly skilled and well-paid, and there are flow-on effects too, with other parts of the economy benefitting from the industry’s demand for goods and services.

All of New Zealand’s oil and gas is produced from fields in the Taranaki region at present, and some of these fields are expected to continue producing oil and gas into the 2030’s and 2040’s. Significant potential exists for discovery and development of new fields not just in Taranaki but other parts of the country too, if exploration activities are successful.

Looking at New Zealand more broadly, in addition to our producing oil and gas fields in the Taranaki Basin, we offer 17 known petroleum basins across our Exclusive Economic Zone. These frontier basins are largely underexplored and are considered to have significant potential for commercial petroleum discoveries. But more about that soon.

Regulatory regime

I’d like to take a moment to recognise the petroleum sector’s commitment to workplace health and safety. I know that for you, ensuring your employees are safe and that your work is carried out to international best practice is part of your bottom line.

We all know the likelihood of a major spill is low, and we have never had a major spill in New Zealand. While the government has developed a robust regulatory regime, your focus on upholding excellent health and safety standards- which often go above our requirements- helps ensure New Zealand is protected from a damaging event.

I do understand the importance of ensuring that you can continue to develop your practices as the sector evolves and that our wider regulatory regime allows this to happen.

In 2013, the Government amended the Crown Minerals Act – the key legislation setting out how rights to New Zealand’s petroleum and mineral resources are managed. The amendments encouraged development of the Crown’s mineral estate, simplified the legislation where appropriate, and ensured better coordination between government agencies.

A key focus for me this year is making sure our regulation remains world-class; ensures that risks are appropriately managed; and that health and safety and Crown Minerals Act objectives are met.

We have several main areas of work underway at present.

Some offshore oil and gas fields are, for the first time in New Zealand, nearing the end of their lives and we need to think about how best to decommission them. NZ Petroleum and Minerals is working with other government agencies to develop the regulations for decommissioning and I am leading the group of Ministers involved in this.

We need to make sure the environment is protected but I want to make sure that risk and cost are appropriately balanced.

Following concerns raised by the Parliamentary Commissioner for the Environment about liability for the failure of onshore petroleum wells and NZ Petroleum and Mineral’s investigation into historic abandoned wells last year, I’d like to announce that consultation has begun on potential responses to this issue.

Realistically the likelihood of well failure is low and operators are usually responsible for managing any issues. To give perspective, of the almost 1000 wells drilled in New Zealand to date, third parties have only had to pay in four cases. As an industry we need to work out the best way to manage this. The consultation document is available on MBIE’s website, and I’m looking forward to hearing your views. If you’re interested, there is a presentation on this topic tomorrow.

We’re also looking at offshore financial assurance. Last year my officials worked with the Ministry of Transport to develop legislation to ensure that operators of offshore installations have appropriate levels of insurance to cover the costs of potential oil spills.

All of this work is about being clear in our expectations of industry and creating the regulatory certainty you need to get on with the job.

It’s about balancing economic and environmental interests, while ensuring New Zealand remains a predictable and globally competitive investment destination.

I’d now like to move onto the next part of the today’s proceedings, which is to formally launch Block Offer 2017.

Block Offer 2017

When we introduced the annual Block Offer in 2012, our goal was to increase exploration activity in the petroleum sector by building an efficient, stable and transparent process.

That goal is built on year on year, with Block Offers continuing to provide investors with the opportunity to develop portfolios featuring multiple basins of varying levels of maturity.

Since 2012, we’ve awarded 45 exploration permits through the Block Offer process, attracting new operators to our shores including Chevron, Statoil, Woodside and ONGC Videsh.

This indicates to me that we’ve captured international attention in a relatively short period of time, boding well for the future potential of our oil and gas resource.

We all know the impact the drop in oil price has had on exploration across competitive tenders globally. But we also know petroleum development is a long-term game. It’s important we maintain that focus, and continuing our Block Offer puts the spotlight on New Zealand as a compelling place to invest.

We offer a very favourable proposition to potential investors.

Along with our well-developed infrastructure and the potential of our resources, the other point about investing here is that we’re highly regarded as a good place to do business.

You’ll soon be presented with more detail about what’s in this year’s Block Offer, which comprises a total of 481,735 km² across eight release areas. I’d like to just draw your attention to a couple of highlights in this year’s Block Offer.

Hawke Bay 

The East Coast-Pegasus Basin is one of New Zealand’s most prospective basins, with known petroleum systems and natural oil and gas seeps. The Hawke Bay release area is located in that basin. In Block Offer 2016, areas in Hawke Bay more than six nautical miles from shore were included in the tender area. We have included areas of Hawke Bay outside three nautical miles from shore in Block Offer 2017 to allow more shallow-water acreage and more of the known gas prospects in the area to be investigated. The current market conditions favour relatively lower-cost opportunities such as shallow-water exploration.

Southland 

This is the first time parts of the Southland Basin have been included in the Block Offer. The Southland Basin is an onshore basin that is considered to have very similar geological characteristics to the Taranaki Basin and has been lightly explored for oil and gas. The current market conditions favour relatively low-cost onshore opportunities such as the Southland Basin.

Nominations

I’d also like to signal the beginning of the Block Offer 2018 process – which starts with the request for industry nominations.

This year’s nominations process for Block Offer 2018 has been made more robust to ensure consistency in how proposed areas are considered. This is industry’s chance to signal areas that are of interest to them in terms of prospectivity, and I invite you to make a nomination. This will be covered in more detail by New Zealand Petroleum & Minerals during this Conference.

Conclusion

Thank you for the opportunity to address you. Putting the tough few years behind us, I believe we can look forward to a new cycle in which activity in New Zealand and globally increases as operator margins start to improve.

I look forward to your interest in investing in our industry.

New Zealand is well-placed to take advantage of the economic benefits of oil and gas exploration, Energy and Resources Minister Judith Collins announced today at the launch of the 2017 Block Offer petroleum tender.

“The global exploration and production industry is cyclical – the low number of permits granted in last year’s Block Offer reflects a significant downturn in the sector,” Ms Collins says.

“However, activity in New Zealand and globally is expected to pick up as operator margins improve. The Government will continue to ensure we reap the benefits of petroleum and mineral exploration while adhering to strong environmental and health and safety provisions.”

The annual Block Offer was first introduced in 2012 and provides an effective way for the Government to manage how petroleum permits are allocated.

This year’s Block Offer includes five offshore release areas (in Northland - Reinga, Pegasus - East Coast, Hawke Bay, Taranaki and Great South - Canterbury), and two onshore release areas (in Taranaki and Southland). There is also one offshore/onshore release area in Taranaki.

The total acreage included in the tender is 481,735 km², comprising 5,102 km² onshore and 476,632 km² offshore.

“New Zealand’s petroleum sector is small by global standards but is nonetheless a significant contributor to the economy. Between 2011 and 2015, oil companies invested $7.7 billion in oil and gas exploration and production in New Zealand. Other parts of the economy also benefit from the sector’s demand for goods and services.

“In order to encourage exploration activity, we need to maintain our reputation as open for investment and a good place to do business. At the same time, the Government’s regulatory framework will ensure New Zealand’s unique environment continues to be protected and its high standards of workplace health and safety are maintained.”

More information about Block Offer 2017 can be found on the New Zealand Petroleum & Minerals website https://www.nzpam.govt.nz/

Revenue Minister Judith Collins today welcomed Inland Revenue’s decision to exercise discretions on income equalisation for farmers who are significantly affected by the recent flooding around the Franklin Ward, Hauraki District and Thames- Coromandel District.

“This step will help provide relief for those famers by giving them an option to help address the financial consequences of the flooding,” Ms Collins says.

The income equalisation scheme allows farmers to better manage peaks and troughs in their income by allowing money to be put aside from a better year and withdrawn against a less favourable year.

Inland Revenue has decided to relax the rules for farmers who are significantly affected to allow late deposits from the 2016 income tax year to be made up to 30 April 2017, regardless of when the 2016 tax return is filed or the due date for filing that return.  Also early refunds will be allowed.

“I have every sympathy for affected farmers. They should consult their accountants to consider whether this relief will be helpful in their particular situation,” Ms Collins says.

Inland Revenue will provide more information at www.ird.govt.nz. For information on the income equalisation scheme, see www.ird.govt.nz/business-income-tax/income-equalisation/how-it-works/.

 

 

Businesses, local councils and organisations with projects to spark interest in electric vehicles can apply for the second round of the Government’s Low Emission Vehicles Contestable Fund, opened today by Energy and Resources Minister Judith Collins.

The fund is one of a suite of initiatives in the government’s electric vehicles programme, which has a target of doubling the numbers of electric vehicles every year to reach approximately 64,000 by the end of 2021.

“The government wants to see more people swap to electric vehicles which are cheaper to run and maintain than petrol-fuelled vehicles,” Ms Collins said.

“Electric vehicles are powered by New Zealand’s more than 80 per cent renewable electricity and will reduce transport emissions, which is good for New Zealand.”

Up to $3 million is available in this round with another funding round planned to run later this year.

“Electric vehicles are becoming an increasingly viable option for New Zealanders with prices becoming more competitive and more models available which can cover a distance of over 200km on one charge.

“The first round of this fund saw 15 projects funded, including the delivery of at least 100 new public charging stations around the country. It also saw support for an electric car sharing scheme and electric trucks, buses and supermarket delivery vans.

“New Zealanders will be able to see electric vehicles and charging stations in their neighbourhoods. This fund is helping kick-start innovative projects that are building momentum for change,” Ms Collins said.

The fund will offer up to 50 per cent funding towards projects that encourage and support the uptake of electric vehicles and other low emission vehicles on public roads and that make use of New Zealand’s renewable electricity advantage. This could include projects in the areas of: electric and plug-in hybrid electric cars, vans, trucks and buses, or associated technologies or services.

Applicants have six weeks to submit their proposals to the Energy Efficiency and Conservation Authority (EECA) with the funding round closing on 26 April.

Good morning and thank you for inviting me to your 20th Annual Payroll Conference. It is a pleasure to be here.

You’ve asked me to talk about how Inland Revenue’s ‘Making Tax Simpler’ is progressing and how advice and feedback from payroll professionals like yourselves shaped the proposals in the forthcoming Bill.

I’ll talk to you about the current PAYE proposals- what they cover, how they’ll be implemented and how we used your feedback in their development.

But first, I think it’s useful to look at the background and provide some context for the development of these proposals.

As you’re aware, through the Business Transformation programme, Inland Revenue is investing in a complete overhaul of the tax system: involving customers, staff, policy, processes and replacing aging technology.

The objective is to take advantage of modern digital systems to make tax less onerous and to integrate tax requirements into normal business processes.

In doing so, we want to enable businesses to spend more time focusing on growth and innovation – developing productive opportunities and not be tied down with compliance requirements.

Put simply, it’s about Making Tax Simpler. Making it easier for people to deal with Inland Revenue and get it right from the start.

This transformation is a multi-staged process, taking place over several years. While we’re working at pace, we need to ensure it’s meeting the needs of New Zealanders, so we’re being very deliberate in our approach.

We want to ensure it is manageable and successful for all parties while minimising risk to this critical part of our economy. And it’s already delivering solid gains.                                        

The first stage has gone live with a number of core processes and filing GST direct from accounting software has been possible since early 2016.

Of course GST isn’t a payroll issue, but the success and positive feedback these significant changes have received shows that the changes are working and delivering benefits.  While there have been a few technical issues to work through (as was expected with such a large change) we can have real confidence as we move forward with PAYE and other future initiatives.

For example, last year, following the introduction of direct GST filing from software, Inland Revenue asked more than 4000 SMEs what had changed for them since 2013 and found that on average:

they’re spending 25% less time on tax, their in-house costs have reduced 24% and around half say tax isn’t stressful! 

Along with the key Transformation goals of time saving and reducing tax costs, we are also endeavouring to reduce ‘tax stresses for SMEs, so that’s a great start.

Further to that, the recent, February 7 “Stage 1 cut-over” included additional GST improvements which will take full advantage of the efficiencies technology can provide. Amongst other things the new capabilities enable customers to more easily amend returns and track payments and refunds on line. 

So the key Government objective, taking advantage of modern digital systems, making tax a less onerous part of taxpayers’ lives and integrating tax requirements into normal business processes, is being achieved with GST.  

We recognise that issues and opportunities around PAYE are very different to GST but I’m confident we can achieve similarly positive results.

PAYE Proposals

Last November, my predecessor, Michael Woodhouse, outlined a number of proposals aimed at making tax a less onerous part of the payroll process. The PAYE proposals focussed primarily on how you do it – process improvements.

The proposals are designed to provide significant efficiencies and better integrate tax into your core business processes. Our objectives are:

to update PAYE processes so that employers using software can get more value out of it. to make providing PAYE information part of the payday process rather than on a separate timetable to suit Inland Revenue

Rather than reiterate the detail of these, of which you will largely be aware (and which you can discuss in IRD’s presentation later today), I thought you may be interested in how your submissions informed the proposals.

Firstly, can I thank you for the nearly 90 written submissions and 1,000 comments we received on the original proposals through the Making Tax Simpler consultation.

The advice and feedback from you, the payroll professionals, and other experts has been carefully considered. 

This feedback has helped shaped the Government’s decisions which are reflected in the Taxation bill which I am proposing to introduce very shortly. 

Payday Reporting

Effective from 1 April 2019, we are proposing to replace the requirement for an employer monthly schedule with ‘payday’ reporting of employee information.  So as part of the payroll process, you can integrate the next step, the provision of PAYE information to Inland Revenue. Do it all at once, direct from the payroll software, on the payday timetable your business has established, not a date set by Inland Revenue. Specifically:

employers using payroll software, payroll intermediaries and those above the electronic filing threshold will report their PAYE information within 2 days of payday those below the electronic filing threshold and not using software will have 7 days after payday to report. 

This proposal also has benefits for the wider community. Providing this information on a payday basis will help IRD improve how they administer such things as Working for Families, Child Support and Student Loans. Payday reporting and faster processing will reduce the likelihood that employees will miss out on entitlements or incur debt. 

The current delays in receiving and processing the information in the current system mean it can be months before issues get picked up and corrected.  Correcting employee information more quickly will be a significant win and importantly, should reduce the queries you have from employees about issues with their tax or other deductions.

Although the proposal is that payday reporting of PAYE information will be required from 1 April 2019, Inland Revenue is working on providing payday reporting for early adopters who are keen to use the system sooner.

So how did your feedback help shape this Payday Reporting?

Submissions were generally positive from employers with large payrolls, their representatives such as Business New Zealand and from the payroll software industry.

A common area of comment raised was around the processes for error correction and adjustment and access to already filed information. 

I am told that you will have better access to already filed information and further consultation is proposed on processes for error correction and adjustment - these are aimed at largely automating the process.  The objective is that when you correct information in your payroll system, it should generate the information Inland Revenue requires - making these requirements a natural by-product of your own process. 

Submissions from employers with small payrolls were mixed. Some who were using payroll software thought that everybody should and supported the proposal to be able to file PAYE information directly from software. 

However, a number voiced their concern about all employers being required to use payroll software – 45,000 New Zealand employers have only one staff member and some employers felt that they were just too small to justify payroll software. 

The proposals in the bill that I am introducing to Parliament will not require employers to use payroll software.  But it will require all employers to file information relating to each payday.  Employers not using software will be able to file their PAYE information through Inland Revenue’s website and an updated version of myIR.

The smallest organisations will be able to file on paper if they prefer although we are hoping that the new digital services will convince many to go online.

Reduced threshold for electronic filing PAYE information

A reduced threshold for electronic filing of PAYE information was proposed. In 1999, a threshold of $100,000 a year of PAYE and ESCT was set for electronic filing. Employers above this threshold need to send their PAYE information to Inland Revenue electronically, organisations below the threshold can file on paper. This hasn’t changed since 1999, but business practices certainly have. 

Today, most organisations are connected to the internet. They do their banking, and a multitude of other normal business activities, online. Just over 91% of payments made to Inland Revenue are made electronically.

Feedback on the reduced threshold was mixed. Over 63% of those below the current electronic filing threshold already file electronically and the number filing electronically is increasing each year.  Despite the mixed feedback, because electronic filing is less costly to administer and administration costs fall on taxpayers, the Government is proposing to reduce the electronic filing threshold.  

The proposed new threshold of $50,000 a year of PAYE and ESCT will still exempt the smallest organisations. As an indication, it would require an employer with four full time employees at the average wage (or ten full timers at the minimum wage) to file through Inland Revenue’s website or through payroll software. And there will be an exemption from electronic filing for any employers who cannot access digital services.

Paying PAYE at the same time you pay your staff

We also listened to your feedback on the proposal that employers pay PAYE to Inland Revenue at the same time you pay your staff.  While some commented that this would reduce compliance costs, a number of businesses were concerned about cash flow.  It’s worth noting that this money doesn’t belong to the employer and is effectively held in trust until it is time to pay it to Inland Revenue.  Paying it to Inland Revenue on payday could:

further reduce compliance costs, potentially reduce the likelihood that the money is used for other purposes and enable PAYE and deductions of KiwiSaver contributions, student loan repayments and child support payments to be passed on more quickly.

In light of the submissions, the Government decided not to require employers to pay their PAYE and other deductions to Inland Revenue on payday. The current payment obligations, either twice monthly for the largest employers and payroll intermediaries or monthly for the rest, will remain the same. (However, if employers want to take advantage of doing everything at the same time including paying Inland Revenue on payday they will be able to do so.)

Ending Current Payroll Subsidy

In line with the more widespread use of electronic services, the Government has also decided to end the current payroll subsidy from 1 April 2018.

In the early days of electronic filing, the subsidy helped improve the quality of PAYE information transmitted to the IRD, by encouraging employers to use listed payroll intermediaries. But time and technological advances have overtaken the subsidy and we believe there is no longer a case to subsidise (a maximum of $10 a pay run) one type of payroll service over others.

Not surprisingly, many submissions suggest the subsidy should be extended or that Inland Revenue should make payroll software available for free.  The Government has not accepted those suggestions.  Through the changes I have outlined this morning it is instead proposing to invest in making the system better for all employers.

Some final thoughts

Earlier I mentioned that Inland Revenue’s Business Transformation is being managed in stages. While this means that risk is being managed prudently, it also means that some of the benefits might be staggered.  For example, the benefits from increased processing speed won’t be completely realised until all PAYE information is fully processed in the new computer system - that is not expected to be until late 2019.  

The changes from Inland Revenue’s Business Transformation will open up a fully digital system for those who want to eliminate paper interactions with Inland Revenue.

Our new software will make changes more quickly but, as mentioned, technology is only part of the solution, both business and Inland Revenue will need to change processes and continue to look for and share improvement opportunities.

Government recognises that the requirement to change processes will involve some costs in the short term but as evidenced by the GST example, real compliance cost reductions are achievable by updating our tax systems.

So, those are the main PAYE proposals arising from last year’s public consultation. Feedback in the consultation phase was hugely valuable and was critical in their development – again, my sincere thanks for your contributions.

Please also be assured that you are welcome to comment during the select committee stage. If you don’t know how to do that I suggest you Google “How to make submissions to a select committee” there is a handy guide available and submissions can be made electronically. 

I know these proposals involve changes and change can always be a bit daunting… but what I’ve outlined today is intended to help make the PAYE component of your jobs a little easier and a little smoother. They should also help businesses by making their processes a little less costly and assist individuals by helping to make their tax affairs more accurate.

Thank you again for inviting me to speak to you today. I very much look forward to continuing to work together and looking for improvements. 

 

Good morning and welcome everyone. Thank you for inviting me to your Downstream 2017 conference.

Having an affordable and secure supply of energy underpins everything we do- from the economic viability of our businesses, to the well-being of our households, to our individual quality of life.

At the same time, it is striking, coming into this industry, to see the amount and the rate of change you are experiencing now, and are likely to experience in the coming years.

Technological and consumer changes

In the short term, there are some proposed regulatory changes going on, such as changes to the Transmission Pricing Methodology. This is a longstanding issue for the sector. It’s important it gets resolved but it’s also important the cost to consumers and communities are considered.

However, broader changes are coming from developments in technology. Distributed generation, batteries and demand management technologies are beginning to penetrate the market. I understand New Zealand is experiencing some of the international trend of exponential growth in the uptake of solar photovoltaics (albeit off a low base) despite it not yet being economic for most households.

These technologies are exciting - when coupled with the ‘internet of things’ - and are giving consumers greater choice and control in meeting their power needs.

Meeting the expectations of empowered consumers will challenge the operation of the energy system as we know it.

It will also disrupt existing business models.  And given New Zealand’s open and competitive energy markets, this disruption may not be led by businesses typically identified as ‘energy companies’.

These changes are occurring against the wider energy challenges that we all face too – such as volatile oil prices, and the global response to the Paris Agreement on climate change.

In my view, these challenges also provide a lot of opportunity.

To be resilient, ensure continuous security of supply, affordable energy, and to meet the environmental and consumer demands of the market, the energy sector must do more than just respond to change- it must drive the change.

And I’m excited to already be seeing examples of this in my engagement with the sector.

The Government is focused on encouraging, and removing any barriers to, market-led innovation.

I’m sure as an industry; you are positioning yourself to make the most of the opportunities that change provides. I believe in this new environment we are well placed to thrive.

New Zealand’s energy advantage: enhancing innovation in the energy sector

Last year the Smart Grid Forum assessed New Zealand’s rate of uptake of the opportunities offered by smart technology.

While we haven’t yet seen the same scale of smart grid development activity as some other countries, New Zealanders are enthusiastic about technologies such as solar PV and electric vehicles.

The Forum identified that there are difficulties for people in evaluating the benefits of different options.

We need to assist consumers to cut through some of the complexity associated with new technologies and ensure prices reflect the value of services, so that opportunities for consumer benefit can be realised.

It is encouraging to see so many New Zealand firms embracing the challenges posed by new technologies.

Many companies are developing innovative ways to use technology, engage consumers, and provide an enhanced service which leaves them more competitive and better positioned in the market.

Our competitive electricity market has allowed the sector to innovate, and the retailing space is changing rapidly, with the new entrants forcing the incumbents to think harder and respond with a range of more flexible products, forcing downward pressure on prices.

There are 32 electricity retail brands operating in the market today – more than double the number in 2010.

Our long history of developing our domestic resources has led to us having an international reputation for our knowledge and skills in many areas of energy technology and development, and energy system management.

There are many opportunities to innovate within the energy sector, and there is a significant international demand for our expertise, technologies, and services.

I believe, with your help, we can continue to grow our high-value energy technology exports to achieve greater returns for New Zealand.

Globally New Zealand is well placed –

First, we have a renewable energy advantage.

New Zealand’s renewable energy resources are amongst the best in the world. In 2015, 40 per cent of our total primary energy was generated from renewable sources, leaving New Zealand ranked fourth amongst the Organisation for Economic Co-operation and Development (OECD) countries.

And in 2016, New Zealand ranked 9th out of 130 comparator countries in the World Energy Council’s Energy Trilemma Index, which ranks countries on how well they achieve the energy ‘trilemma’ balance of security, equity and sustainability. New Zealand was the best performing country in the Asia-Pacific region.

We are a world leader in geothermal energy, have excellent wind resources, extensive hydroelectricity, and forestry resources as a source for bioenergy.

These resources have a key role to play in helping us transition to lower-carbon future, along with improving energy efficiency and productivity to do more with less.

But, New Zealand also has abundant non-renewable energy resources.

Oil, gas, and mineral resources already make an important contribution to the New Zealand economy.

Gas continues to be an important contributor to domestic industries and is used in around 260,000 homes. Gas also accounts for about 15 per cent of our electricity generation. It is an important fuel for supporting electricity security of supply during peak demand periods and dry years.

And we shouldn’t forget that coal is still a vital source of energy in the South Island – heating hospitals, schools and dairy processing.

Resources, like petrol, diesel, gas and coal, play a significant role in meeting domestic energy security and global energy demand and will do so for some time.

The fact is we need to have a mix of energy options. This ensures we have security of supply that makes good economic and environmental sense. It also positions New Zealand for higher economic growth and a lower-emissions future.

The Government’s priority areas, set out in our Energy Strategy, are diverse resource development, environmental responsibility, efficient use of energy, and secure and affordable energy. These areas are all important.

Our collective challenge is balancing these priorities so that we can deliver the energy that New Zealand households and businesses need, in a way that meets their changing expectations.

Progressing the Government’s initiatives – My priorities

Another striking thing about the energy sector is that renewable energy technology is now a major growth industry. The latest Bloomberg New Energy Finance figures show that global investment in renewable energy grew in 2015 to nearly six times what it was in 2004.

The International Energy Agency’s (IEA) latest renewable energy market report highlights a growing global focus on the transport and industrial sectors as areas where large gains can be made in both energy efficiency and emissions reduction.

The IEA’s analysis shows that renewable electricity alone will not get countries to where they need to be to meet their climate change commitments. It reports that progress in renewable penetration into the heat and transport sectors will be needed.

Given that New Zealand has already largely decarbonised our electricity generation - which was 81 per cent renewable in 2015, third in the OECD - our greatest potential for reducing emissions in the wider energy sector lies in process heat and transport.

Both of these areas have a very high proportion of non-renewable energy and are key areas of focus for me this year. They are also opportunities for the electricity industry, particularly transport.

The Government’s Electric Vehicles Programme is one of the ways New Zealand can make more of new technology and leverage our existing renewable electricity advantage.

Research commissioned by EECA found that electric vehicles driven in New Zealand result in 80 percent fewer carbon emissions than an equivalent non-electric car over the whole life cycle, as a result of our highly renewable electricity generation.

Last year Minister Bridges told you about the Government working with industry and councils to explore a wide range of options for encouraging EV uptake.

I’m pleased at the progress we have made.

First, we have introduced the Energy Innovation Bill which includes:

changes to EECA’s levy funding, which will give it the ability to focus on encouraging energy efficiency and the use of renewables in process heat and transport; and measures to encourage the uptake of electric vehicles (EVs) – such as extending the road user charge exemption to heavy electric vehicles and allow bylaws for EVs to use special lanes.

The Bill is now currently before select committee and I expect that it will be passed by mid-year.

Second, the Government has recently conditionally approved 15 projects to receive around $3.5 million from the Low Emission Vehicles Contestable Fund. This first funding round was heavily oversubscribed with around 80 applications, which shows the enthusiasm New Zealand has to demonstrate and use low emission vehicle technologies.

There’s some exciting projects, for example:

The Warehouse will install, and provide free for six months, electric vehicle charging stations at 20 stores in areas that are underserviced for EV charging. Auckland Transport are giving EVs priority parking and installing 60 charging stations at their parking and park and ride sites across the region. The Thames-Coromandel District Council are setting up three fast charging stations around the Coromandel Peninsula. In Southland, PowerNet will support local businesses to incorporate electric vehicles (EVs) or plug-in hybrid electric vehicles (PHEVs) into their fleet mix.

These initiatives are a great way to raise the profile of EVs and their charging infrastructure. They will be seen by thousands of people – from shoppers, public transport users to tourists.

In the industrial sector, I am encouraged to see large industry players investigating transitioning to lower emissions fuels such as gas, geothermal and bioenergy for process heat.

I intend for process heat to be a focus of the refreshed New Zealand Energy Efficiency and Conservation Strategy (NZEECS). The strategy sets the overarching direction for government support and intervention to promote energy efficiency and renewable energy use.

As you are aware, consultation has been undertaken and I am working with officials to finalise the strategy in the coming months.

The strategy guides EECA, which is already working in partnership with more than 100 large energy-using businesses to use energy more efficiently. I want to make sure EECA focusses on where the most gains can be made and that it has a well-targeted work programme to deliver the refreshed NZEECS and unlock New Zealand’s renewable energy, energy efficiency and productivity potential.

Last year the previous Minister announced that he was going to develop energy targets and he engaged with a lot of stakeholders about what the targets might look like.

I too want to signal the Government’s vision for the sector. I agree that this will help businesses with capital investments decisions and help align research and development investments with Government priorities. I’m really interested in using targets to do this, and this work is currently underway.

I know there has been a lot of debate about what the targets should be but I think the correct areas we should be focussing on are:

improving our energy productivity (getting more value out of the energy we use); increasing our amount of renewable energy in electricity (Government’s 90% target), and; increasing renewables in our total energy supply (which includes transport energy and process heat).

Finally, I have a strong desire to ensure that our electricity, gas and fuel markets remain competitive and there is downward pressure on prices.

For example, I am very concerned that fuel prices are unreasonably high and that consumers are not getting a fair deal. We need to know why this is happening and determine if what people are paying at the pump is reasonable.

My officials have begun a fuel market financial performance study which will offer new insights into our fuel sector and help us understand if there is an issue and, if there is, show where we need to focus to address it.

I’ll have more to say on this once they report back to me in June.

The future of the energy sector

One thing is certain, in the future the energy sector will be very different than it is today.

I can’t tell you what it will look like. But I venture that the businesses and markets that will deliver it are not those that we are currently familiar with.

We will see changes in the fuels and technologies we use, and the way households engage with, and control the use of, their energy.

In response, business models will change and adapt to accommodate and drive these changes.

While renewables make up a significant proportion of electricity generation, electricity makes up only 25 percent of our total energy demand.

We need to broaden our renewable energy use beyond electricity, and increase its use in the transport and process heat sectors.

A continued focus on the effectiveness of market signals is essential if New Zealand is to navigate these changes in a way that is economically efficient and maintains energy security, while reducing emissions.

Energy is an enabler across the economy – a part of everything we do. There are choices that we all, government, businesses and consumers, can and will make about energy in this transition.

Thank you.

Minister for Ethnic Communities, Judith Collins congratulates the 62 groups receiving $520,000 from the new Ethnic Communities Development Fund.

The contestable Fund is aimed at improving New Zealand’s social cohesion and supporting the development of established and emerging ethnic communities.

Projects were considered in three categories: cultural events, leadership development and social cohesion.

Cultural events included those for Chinese New Year, Diwali and an African film festival.

Training courses to build entrepreneurial capability among women in Auckland and workshops to train ethnic leaders to be mentors in their communities gained funding in the leadership development category.

Among projects in the social cohesion category were sports and recreational activities for teenagers from refugee backgrounds and marae-based activities to build understanding in a diverse neighbourhood. This was the largest category, including projects aimed at building a sense of belonging and inclusion across New Zealand society.

Projects must be completed during 2017. A list of funded projects is available on the Office of Ethnic Communities website.

The Fund received 134 funding requests totalling about $2.7m. The next funding round will open in August for 2018 projects.

“I look forward to seeing these initiatives progress and contribute towards building strong and connected communities,” Ms Collins says.

Finance Minister Steven Joyce and Revenue Minister Judith Collins have released three consultation papers proposing new measures to strengthen New Zealand’s rules for taxing large multinationals.

“Our broad-based low rate tax system continues to perform very well for New Zealand overall,” Mr Joyce says. “However it’s important that it keeps evolving to ensure that all companies operating in New Zealand pay their fair share of tax.”

“The proposals in these documents are in line with the recommendations from the OECD’s base erosion and profit-shifting (BEPS) project which has developed best practice measures for the global response to BEPS.”

The consultation documents contain proposals for:

Tackling concerns about multinationals booking profits from their New Zealand sales offshore, even though these sales are driven by New Zealand- based staff Preventing multinationals using interest payments to shift profits offshore, and Implementing New Zealand’s entrance into an international convention for aligning our double tax agreements with OECD recommendations.

“We also need to be mindful of the New Zealand context so the proposals address some specific BEPS arrangements that Inland Revenue has observed,” Ms Collins says.

“We welcome multinationals’ participation in our economy, but we also expect them to pay tax based on their actual levels of economic activity in New Zealand.”

Submissions on the consultation document on implementing the international convention are open until 7 April. Submissions on the other two are open until 18 April. Ministers will consider final proposals arising from the documents later in the year.

The consultation documents are available at www.taxpolicy.ird.govt.nz.

Address to International Fiscal Association Conference

Thank you for inviting me to open your conference.

It is a pleasure to be here.

I haven’t been in the Revenue portfolio very long but I have learned very quickly how important this grouping of professionals is to the success of our tax system.

Your professional advice provided in analysing policy proposals and suggesting improvements makes your contribution invaluable.

I take over the Revenue portfolio at a significant point for our economy and for the tax system.

Today I want to focus on one of the most significant items on the tax policy work programme – New Zealand’s response to base erosion and profit shifting or BEPS. 

The Government is releasing three BEPS consultation papers today:

BEPS – transfer pricing and permanent establishment avoidance BEPS – strengthening our interest limitation rules New Zealand’s implementation of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS

BEPS

Base erosion and profit shifting, or BEPS, the tactics used by some large multinationals to minimise their exposure to tax and spirit profits out of a country is not new.

As a small, open economy we’ve been aware of our potential vulnerabilities to this issue for several years and have been progressively strengthening our rules. 

Therefore, we are well placed when we assess our tax system against the OECD’s 15 point Action Plan.

 But we know there are areas where we could do better and we are progressing reforms in those areas.

Our strong starting point gives us the luxury of being able to take a considered, balanced approach.

The Government has therefore taken a measured approach to addressing base erosion and profit shifting, by prioritising the specific problems that Inland Revenue has actually observed in its investigations of multinationals.

We have also taken care to create a coherent package of measures. Stripping the tax benefits from one type of arrangement is ineffective if multinationals can get the same benefit from switching to a different arrangement. 

We also need to ensure the BEPS reforms fit within New Zealand’s overall tax framework and do not unduly discourage foreign investment.

With these principles in mind, in the last year, the Government has implemented a number of measures to address BEPS.

These include applying GST to offshore service providers, introducing legislation to strengthen non-resident withholding tax rules, limit the use of look-through companies as conduit vehicles, and clarify that New Zealand’s general anti-avoidance rule overrides tax treaties.

Hybrids

The Government is committed to the implementation of the OECD’s suggested rules for dealing with hybrid mismatches. 

We are encouraged by the evident determination to implement the rules which is also being shown in the UK, the EU and Australia. 

But we recognise that the rules need to be implemented in a way that takes account of New Zealand’s existing tax framework.

To make sure this happens, officials are continuing to consult on the design of measures to address BEPS caused by hybrid mismatches.

The hybrids consultation process is a good example of the private sector and officials working together to address unintended consequences while ensuring the rules remain robust and effective.

As part of that, and in line with our generic tax policy process, I understand that my officials are keen to explore options for further consultation on this matter with you on technical aspects that may arise relating to legislative drafting.

But hybrids are only one of the BEPS issues.  This is why we are releasing three BEPS consultation papers today that propose new measures to strengthen our rules for taxing multinationals. 

Transfer pricing and permanent establishment avoidance

The first discussion document consults on proposals to counter permanent establishment avoidance, strengthen our transfer pricing rules, and help Inland Revenue deal with uncooperative multinationals. 

These proposals are aimed at large multinationals that are able to report low taxable profits in New Zealand despite significant economic activity here.

Permanent establishment avoidance

The first proposal targets permanent establishment avoidance.  As you know, in order for New Zealand to tax a non-resident on its sales here, the non-resident must have a PE in New Zealand.  Our concern is that some non-residents have structured their affairs to avoid a PE at law, even when one exists in substance.  This typically involves the non-resident engaging a related party to undertake sales activities instead of carrying them out itself.  The fact that the non-resident and the related entity are legally separate means the related party’s sales activities do not give rise to a PE for the non-resident. 

This kind of structure can allow multinationals to book the profit from their New Zealand sales offshore for tax purposes, even though these sales are driven by New Zealand-based staff.

To prevent this, the discussion document proposes a PE anti-avoidance rule that applies to large multinationals – that is multinationals with a global turnover of more than 750 million euros.

Under the proposal, a non-resident will be deemed to have a New Zealand PE if they sell goods or services to a person in New Zealand and have a related entity carrying out activities in New Zealand to bring the sale about.  This deemed PE will only arise if the arrangement defeats the purpose of PE provisions in a tax treaty. 

It will stop non-residents from using tax treaties to avoid New Zealand tax.  The OECD has confirmed that tax treaties are not intended to be used in this way.

The new anti-avoidance rule will allow Inland Revenue to tax non-residents when their sales are actually generated through the work of New Zealand staff in related entities, such as subsidiaries or commercially dependent agents.  The rules generally will not apply in respect of auxiliary or preparatory activities (such as advertising and marketing), or the activities of independent agents.  This reflects the definition of a PE in most of New Zealand’s double tax agreements.

The rule will also apply to many third party channel provider arrangements, where a non-resident supplies its goods or services to New Zealand customers in effective partnership with an independent New Zealand distributor.

I want to be clear that if the multinational is simply shipping goods or supplying services over the internet - and has no-one working for it in New Zealand - they are not the intended target of the proposed rule. 

This is consistent with the established international distinction between “trading with a country” and “trading in a country”.

This distinction benefits New Zealand by ensuring New Zealand exporters do not pay foreign income taxes simply because they export their products overseas.

New Zealand is not going out on an international limb with this rule.  Our proposed rule is similar to aspects of rules recently adopted by Australia and the United Kingdom.   It is also broadly consistent with the OECD’s new measures to prevent PE avoidance.  However the OECD’s measures will only apply if both parties to a tax treaty agree to include them.  This means we need our own PE avoidance measure to supplement the OECD’s measures.

Transfer pricing avoidance

Another common way that multinationals shift profits offshore is through transfer pricing.

As I’m sure you know, this is where a related company charges a New Zealand subsidiary an artificially high price for inputs such as raw materials, head-office services, or the rights to use intellectual property.  This shifts the multinationals profits from New Zealand, where we can tax it, into another jurisdiction, where we cannot.

To counter such arrangements, New Zealand has transfer pricing rules which require payments between related parties to be set at an arms-length rate.

However, our existing transfer pricing legislation is over 20 years old.  Since that time multinational transactions have become vastly more complex and less aligned with market behaviours. 

In particular, our current legislation focuses more on the legal form of the related party transaction.  Some multinationals have tried to take advantage of this by legally structuring their transactions in a way that does not reflect their economic substance.  They then use the legal structure to try and justify an artificial price. 

The current legal focus has also allowed some multinationals to try and price transactions using contracts to shift the legal liability, ownership of IP or responsibility for funding arrangements into an offshore entity. These contracts can allow a greater share of the profits to be booked offshore, despite the fact that the offshore entity may carry out very little economic activity in relation to their new responsibilities.  

While our existing rules offer some protection against these practices, they are not wholly effective.  

The OECD has recently developed new transfer pricing guidelines specifically designed to address these issues as part of its BEPS project.  

Australia has also recently introduced similar changes to its transfer pricing legislation.

The discussion document proposes strengthening New Zealand’s transfer pricing legislation so it aligns with the OECD's new guidelines and Australia’s transfer pricing rules. 

It proposes introducing rules requiring transfer pricing to align with the economic substance of a transaction.  It also proposes rules allowing a transaction to be disregarded or reconstructed if it would not have been entered into between independent parties.

Finally the discussion document proposes some rules to make it easier for Inland Revenue to investigate a multinational’s transfer pricing practices.  These include shifting the burden of proof for transfer pricing matters on to the multinational and extending the time bar for transfer pricing from four years to seven years. 

Enforcement barriers

It can be difficult for Inland Revenue to investigate large uncooperative multinationals. 

Inland Revenue must currently prove that the multinational’s tax position is incorrect in relation to transfer pricing.

However, the multinational holds most of the information relevant to determining its own tax position.

This information is often held offshore, which requires the multinational’s co-operation to access. 

To address these issues we are proposing a series of administrative measures to help Inland Revenue assess and collect the right amount of tax. 

The measures generally only apply to large multinationals that refuse to cooperate with Inland Revenue. 

The proposed measures will make it easier for Inland Revenue to assess uncooperative multinationals, by allowing them to be based on the information Inland Revenue has at the time. 

The measures will also require tax to be paid earlier in the disputes process, and allow Inland Revenue to collect relevant information that is held offshore.  

The proposed measures will also contain remedies for Inland Revenue where the non-resident does not cooperate, such as increased penalties and a power to allocate income to New Zealand in the absence of information to the contrary. 

The measures are intended to incentivise cooperation and we so expect them only to be used if the multinational has been given fair notice and an opportunity to comply.

Overall the aim of our proposed administrative measures is to prevent the avoidance of our existing rules without substantially widening their scope or discouraging multinationals from doing business here. 

Even where the new measures apply, Inland Revenue will still have to follow its standard disputes resolution process before it can issue an assessment.

We have designed the measures so that cooperative multinationals should not be affected by them provided they do not use artificial arrangements to avoid paying New Zealand tax.

Interest limitation

It is standard business practice to borrow in order to help finance investments. However, since interest payments are deductible, the use of debt is also a simple mechanism for shifting profits offshore.

For this reason, the design of best-practice interest limitation rules was a focus of the OECD’s BEPS Action Plan.

The OECD ultimately recommended a rule that limits a multinational’s interest deductions based on its earnings – more specifically, its EBITDA.

New Zealand’s current interest limitation rules – the thin capitalisation rules – take a different approach. Those rules limit a multinational’s interest deductions here in an indirect manner, by placing a limit on the amount of interest-bearing debt.

The discussion document I am releasing today on interest limitation does not propose the adoption of an EBITDA-based rule. Generally, the Government considers that the thin capitalisation rules are serving New Zealand well.

Most foreign-owned firms operating here have relatively conservative debt positions and pay significant amounts of tax. Moreover, in recent years the Government has strengthened our thin capitalisation rules by reducing the safe harbour debt to asset ratio from 75 per cent to 60 per cent, and expanded the scope of the rules so they apply to companies that are controlled by groups of investors.

Moreover, an EBITDA-based rule has some significant drawbacks. For example, EBITDA often declines in economic downturns, meaning that firms could face denial of interest deductions when they are also suffering from reduced sales.

A weakness of our current thin capitalisation rule, as compared to an EBITDA-based rule, is it is vulnerable to highly priced related-party debt. Accordingly, the Government is proposing to buttress the existing thin-cap rules with a new mechanism that will cap interest rates on cross-border related-party debt.

Exactly the same incentives that can push firms to thinly capitalise may encourage foreign parents to finance their New Zealand subsidiaries in ways which appear risky in order to justify higher interest rates.  This can allow firms to lower their New Zealand tax liabilities and not pay their fair share of New Zealand tax.

While we do not think that most firms are gaming the system, there are some who appear to be doing so.  We have firms, for example, with both third party and related party debt, where the interest rates on related party debt are much higher than on third party debt.

Small numbers of firms are charging very high interest rates, but this can represent a substantial fraction of related party interest payments.

Under the proposal, the deductible interest rate on a related-party cross-border loan will generally be set with reference to the parent company’s own interest costs.

This proposal is both hard to manipulate and objective. It should ensure that multinationals operating here can only deduct a reasonable amount of interest here in New Zealand, and avoid costly and lengthy disputes over the appropriate interest rate on a loan.

The discussion document also considers other proposals that address specific weaknesses of our existing thin-cap rules without abandoning the general framework.

The most significant of these is a proposal to require firms to value their assets net of their “non-debt liabilities”.

As I have mentioned, the thin capitalisation rules are based on a firm’s debt relative to its assets. However, what constitutes debt under the rules is much narrower than a firm’s total liabilities. A firm’s other liabilities – its non-debt liabilities – are currently ignored under the rules.

The Government is concerned that ignoring these non-debt liabilities means that some firms are able to be very highly geared without invoking the thin capitalisation rules – in fact some have negative equity. The existing rules are failing to treat them as having excessive debt.

This proposed adjustment for non-debt liabilities would bring New Zealand’s rules into line with the rules in other countries, including Australia which otherwise has rules similar to ours.

Multilateral Instrument

Finally, because many BEPS techniques rely on abuse of tax treaties, the BEPS Action Plan recommended a number of changes to strengthen them.

It would be very time consuming for individual countries to implement the recommended amendments on a treaty-by-treaty basis, so the OECD has developed a multilateral tax treaty that will modify a worldwide network of several thousand bilateral tax treaties in one fell swoop.

The Multilateral Instrument will insert a principal purpose test – similar to our general anti-avoidance rule – into treaties to deny treaty benefits to abusive arrangements.

It will also strengthen the treaty permanent establishment definition to prevent multinationals avoiding having a taxable presence in a country and introduce rules to prevent hybrid entities being used to obtain inappropriate treaty benefits.

It is important that these BEPS measures do not lead to unnecessary uncertainty for compliant taxpayers and to unintended double taxation. To address this risk, the Multilateral Instrument also contains an important measure to help business – the ability to submit disputes between competent authorities as to how a treaty applies to independent binding arbitration. 

New Zealand expects to sign the Multilateral Instrument, along with many other countries, in June this year. 

Because this is an unprecedented approach to modifying tax treaties, there will be some novel implementation issues. 

To make sure the implementation goes smoothly, my officials are also today releasing an issues paper asking for your views on this. 

In keeping with our generic tax policy process, we look forward to your feedback. We pay attention to what the private sector says and proposals are always improved by feedback.

While I recognise there is a lot of new material to digest, I encourage you to submit on all three BEPS consultation papers, as your views provide important insights into how the proposals could affect business.

Feedback from submitters will be critical to achieving the intended outcomes of preventing tax benefits from aggressive BEPS arrangements, whilst ensuring New Zealand remains a stable and attractive location for investment.

Conclusion

By closing loopholes and reducing opportunities for gaming the system, we not only ensure that multinationals and others pay their fair share of tax, but we also help maintain confidence in the fairness of the tax system.

I’m grateful to you for the time and effort you put in to review proposals.

I look forward to your continued interest in tax policy.

Thank you

Media contact: Julie Johnston 021 280 3253