Creditors are poised to receive greater protection from businesses owing debts of more than $150,000 as the Government has now set a threshold for reportable tax debt, Revenue Minister Judith Collins says.
Changes to the law earlier this year allowed Inland Revenue to disclose information about companies with significant tax debt to certain approved credit reporting agencies. A recent Order in Council sets a threshold of $150,000. A company’s tax debt over this amount may be disclosed to certain credit reporting agencies.
Ms Collins says this information can be critical for smaller creditors who would otherwise be unaware they were dealing with a business that has a significant tax debt.
“Usually when a company’s tax debt reaches this level, it’s likely that other options to resolve the debt have been unsuccessful and Inland Revenue may be considering insolvency and enforcement proceedings. At this point the risk to other creditors is greatest.
“This approach we’re taking to debt is similar to the commercial approach. It means that smaller creditors dealing with a business carrying significant tax debt will be able to make more informed decisions about credit risks,” Ms Collins says.
The $150,000 tax debt threshold was decided after extensive consultation and will come into force on 29 June 2017. It is currently limited to companies.
The Government is proposing to make tax simpler for individuals, with people whose only income is from a salary, wages or investments no longer being required to file tax returns to receive tax refunds or to calculate any additional tax.
The consultation document, Better administration of individuals’ income tax, was released today by Finance Minister Steven Joyce and Revenue Minister Judith Collins.
“The Government is very keen to ensure that the tax system is as simple as possible so people can clearly see the link between their efforts and their after-tax income,” Mr Joyce says. “We started the process in Budget 2017 with the tax threshold changes and the removal of the Independent Earner Tax Credit, and this is the next step to a simpler fairer tax system.”
Ms Collins says currently, many people might be owed a refund or have tax to pay and not realise it.
“This could occur if they haven’t worked for the full year, they have fluctuating earnings, or some of their income has been taxed at the wrong rate,” Ms Collins says.
“It would mean that Inland Revenue will have better income information and will be able to calculate and issue refunds, or let people know if they have tax to pay without the need for taxpayers to do anything else.”
“Under this new system people will be much less likely to end up with large tax bills at the end of the year. They’ll be paying a more accurate amount through the year and receive any refunds automatically. This is good news for about three million taxpayers,” Mr Joyce says.
Submissions close on 28 July 2017. See www.makingtaxsimpler.ird.govt.nz for the detailed proposals.
New Zealand signs OECD Multilateral Instrument
A new treaty signed in Paris this week is a significant step forward in the fight against base erosion and profit shifting (BEPS), says Revenue Minister Judith Collins.
"Many BEPS techniques involve tax treaty abuse. The Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting (known as the Multilateral Instrument) allows a worldwide network of several thousand tax treaties to be quickly updated to adopt recommendations from the OECD’s BEPS Action Plan.
"Renegotiating all these tax treaties bilaterally to include the OECD recommendations would be too time-consuming to be practical. The Multilateral Instrument is an innovative solution, which allows these treaties to be rapidly updated,” she says.
The Multilateral Instrument includes articles on “permanent establishment” avoidance, treaty abuse, dispute resolution and hybrid mismatches. These address the key treaty-related BEPS issues. The extent to which these provisions are incorporated into New Zealand’s treaties will depend on the final positions of both New Zealand and our treaty partners.
While these positions will be confirmed upon ratification, preliminary positions will be made available by the OECD on its website.
Once both parties have signed and ratified the Multilateral Instrument, it will prospectively modify most of New Zealand's existing bilateral treaties. It is likely that New Zealand’s treaties will begin to be modified from 2019.
Ms Collins says the signing of the Multilateral Instrument by a significant number of jurisdictions demonstrates the power of a global solution to the BEPS problem.
“This has been almost two years in the making and I am very proud that New Zealand was heavily involved in its development," says Ms Collins.
Media contact: Julie Johnston 021 280 3253
Inland Revenue will receive more information about US multinationals operating in New Zealand following the signing of a new bilateral arrangement with the US Internal Revenue Service to share country-by-country reports.
Revenue Minister Judith Collins says this is great news as it means Inland Revenue will have better information about how multinationals allocate profits from their operations here.
“This will further enhance Inland Revenue’s risk assessment processes to make sure that the right amount of tax is being paid,” she says.
The arrangement will see country-by-country reports exchanged between the two countries on an annual basis starting from 2018.
Inland Revenue will reciprocate by sharing information on New Zealand-based multinationals with the IRS.
“The exchange of country-by-country reports is a key part of the OECD’s work on base erosion and profit shifting so I’m pleased to see we’ve been one of the first to sign a bilateral arrangement with the US,” Ms Collins says.
Energy and Resources Minister Judith Collins has announced the appointment of Lana Stockman and Mark Sandelin to the Electricity Authority.
The Electricity Authority is an independent Crown entity established in November 2010.
It is responsible for the governance and regulation of the electricity market and its objective is to promote competition, reliable supply, and the efficient operation of the electricity sector for the long term benefit of consumers.
Lana Stockman and Mark Sandelin have been appointed for terms of five years each commencing 6 June 2017. They fill vacancies left by Hon Roger Sowry and David Bull, who have now completed two terms with the Authority.
“Lana brings her experience working in executive and senior advisory roles in the Australian infrastructure sector, and experience in the New Zealand electricity industry. Mark brings significant legal expertise and skill, including dispute resolution experience, with the versatility to apply it to different issues.
“These appointments will benefit the Authority by bringing different skill sets and fresh thinking, complementing the appointment of Allan Dawson and Sandra Gamble in April.
“I would also like to take this opportunity to thank Hon Roger Sowry and David Bull for their significant contribution to the Authority since its establishment. Both also served the Electricity Commission, the Authority’s predecessor, so have dedicated a noteworthy period of time to New Zealand’s electricity sector,” Ms Collins says.
There will continue to be six members of the Authority, with the others being Dr Brent Layton (Chair), Allan Dawson, Sandra Gamble and Susan Paterson.
Background information on appointees:
Lana has recently returned to New Zealand from Australia, where she was Vice President Regulation at Aurizon Network, a top-50 ASX listed company offering rail and road based freight and infrastructure solutions. She was also a General Manager at Energy Australia, a board member of the Electricity Retailers Association of Australia, and a member of the Ministerial Advisory Council on smart meters in Victoria. Lana also has experience in the New Zealand electricity industry, including as an advisor to the Electricity Authority and its predecessor. She is degree qualified in both engineering and finance and coupled with a broad energy market experience, brings fresh thinking, and strong leadership, communication and relationship management skills.
Mark is currently a Partner at Minter Ellison Rudd Watts, and a Director of Fairway Resolution Limited, which is a Crown-owned company that provides independent dispute resolution services and other conflict management services. He is also Deputy Chair of the Auckland Grammar School board of trustees. Mark brings significant legal expertise and skills – he has practiced law for over 30 years, specialising in commercial and contract litigation work. He has extensive experience in dispute resolution, can apply his expertise to a range of issues, and has strong governance, leadership, communication, and relationship management skills.
Revenue Minister Judith Collins will travel to Europe today to represent New Zealand at a signing ceremony signifying New Zealand’s commitment to the OECD effort against base erosion and profit shifting.
“I’m honoured to represent New Zealand at the signing ceremony in Paris marking New Zealand’s entry into the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. This OECD measure works to prevent abuse of tax treaties by amending a worldwide network of several thousand bilateral tax treaties,” Ms Collins says.
Ms Collins will also travel to Norway to attend meetings related to her Energy and Resources portfolio.
Ms Collins will meet with the Norwegian Minister of Finance, the State Secretary of Petroleum and Energy and French and Norwegian industry leaders, in the oil, gas and renewable energy sectors to discuss future energy challenges, and discuss investment opportunities in New Zealand.
“France has a growing renewables industry and a number of innovative energy projects. I’m also interested in learning more about Norway’s approach to environmental protection and other regulatory operating systems in the energy sector.”
Ms Collins will leave on June 4 and return on June 11.
Revenue Minister Judith Collins has today welcomed the start of Inland Revenue’s information campaign on the Automatic Exchange of Information (AEOI) which is part of the OECD-led effort to combat tax evasion.
From 1 July 2017, financial institutions in New Zealand will be required to identify accounts held or controlled by foreign tax residents, and collect relevant information. This information will be reported to Inland Revenue by 30 June every year.
AEOI rules require financial institutions to pass on more information from foreign tax residents with both pre-existing and new accounts. This is in preparation for the first international exchange of information which will take place next year.
“Inland Revenue will pass this information on to the relevant foreign tax authorities to make sure everyone’s paying the right amount of tax. Taxpayers’ privacy and data security are important concerns for Inland Revenue and information will be shared safely and securely.
“The information campaign targets foreign tax residents with accounts here but also New Zealanders with accounts overseas since their information may be shared with Inland Revenue by other jurisdictions,” Ms Collins says. “This means a New Zealand tax resident with a bank account overseas can expect to have their identity and details such as their balance information shared.”
KiwiSaver schemes will be exempt from the information exchange so savers’ account information won’t be shared.
The initial list of 58 jurisdictions Inland Revenue can share with will be announced shortly and will be added to over time as more countries put the appropriate confidentiality and data safeguards in place.
More information is available at www.ird.govt.nz/infoshare.
Media contact: Julie Johnston 021 280 3253
Revenue Minister Judith Collins has today welcomed the release of an officials’ issues paper on the taxation of employee share schemes for start-up companies.
“Employee share schemes are an important remuneration tool for start-ups as they can assist companies to both attract and retain talented staff. However, it is equally important that employee share schemes are taxed like any other form of remuneration.
Generally, employees who receive free or discounted shares from their employer are taxed on that benefit when they acquire the shares. If the employee is receiving a large proportion of their remuneration in this way, paying the tax can be difficult. Even valuing the shares can be difficult, if the company is in the early stages of development.
The officials’ issues paper, Taxation of employee share schemes: start-up companies sets out proposed deferral rules aimed specifically at start-up companies with employee share schemes.
The deferral rules would delay the time when the employee recognises income from the benefit. Generally the employee would not have income unless and until the shares are sold or listed on a stock exchange. There would be a seven year limit on the deferral.
“Shares in start-up companies can often be difficult to value or sell, making it hard for employees to meet their tax liabilities when they become the full owner of the shares. Deferring the taxing point should ease that problem,” says Ms Collins.
The issues paper follows the development of new rules for taxing employee share schemes that were included the recently introduced Taxation (Annual Rates for 2017-18, Investment and Employment Income, and Remedial Matters) Bill. These recommendations:
ensure that employee share scheme benefits are taxed in a similar way to equivalent cash remuneration prevent benefits equivalent to share options being provided tax free give employers a deduction matching the employee’s income expand and modernise the tax exemption for widely offered share schemes.
“The proposals contained in the issues paper are aimed at greater fairness without penalising start-ups,” Ms Collins says.
Submissions on the consultation document at, www.taxpolicy.ird.govt.nz close on 12 July 2017.
Many business expenses currently written off as black hole expenditure would become tax deductible under proposals released as part of Budget 2017, Revenue Minister Judith Collins says.
“Some costs of investigating the viability of a new proposal or project – that is, feasibility expenditure – are currently neither immediately tax deductible, nor depreciable. As a result, it falls into what businesses describe as the black hole,” Ms Collins says.
“Tax consequences should not be an obstacle to businesses innovating and pursuing opportunities for growth. The discussion document we are releasing today therefore proposes improved tax treatment for feasibility and black hole expenditure.
“Where no asset is created on the balance sheet, feasibility expenditure would be immediately deductible for income tax purposes. Where an asset is created we’re proposing that the feasibility expenditure would be capital expenditure for tax purposes.
“In addition, capitalised feasibility expenditure and other expenditure on an asset abandoned part way through construction would become immediately deductible if it is also expensed under International Financial Reporting Standards.
“We’re asking for views on a range of aspects of the proposals including the timing for application. If businesses are not making investments today because of the current treatment, we welcome feedback on making the change retrospective. Doing so would give businesses certainty that investments currently being considered would be in line for this improved tax treatment,” Ms Collins says.
“The Government has already resolved many types of black hole expenditure over the past few years to improve productivity and remove a tax impediment to growth. These proposals will allow an even wider range of costs to be deductible for tax purposes.”
Public feedback on Black hole and feasibility expenditure at www.taxpolicy.ird.govt.nz is open until 6 July.
The fact that 138,000 people have switched electricity retailers already this year shows competition is strong and consumers continue to shop around for a good deal on their power bill, says Energy and Resources Minister Judith Collins.
“The What’s My Number website is a quick and easy way for New Zealanders to figure out if they are already on the best deal, or if they could be saving on their power bill by switching provider.”
More than 2.3 million New Zealanders have switched since the What’s My Number campaign started in 2011, with total estimated savings valued at $251 million.
“The government is committed to a competitive retail electricity market that empowers consumers. The number of New Zealanders switching providers shows that consumers continue to seek out the best deals for themselves.”