Revenue Minister Judith Collins has welcomed a second round of negotiations between China and New Zealand tax officials aimed at updating the current double tax agreement signed between the two countries in 1986.
“The aim is to agree a new treaty, adopting modern treaty language and concepts, including agreed measures to deal with base erosion and profit shifting,” Ms Collins says.
New Zealand tax officials will meet with Chinese officials in Beijing next week for the second time since 2014, to discuss a new treaty.
Double tax agreements are an important facilitator of trade and investment between countries because they ensure businesses don’t get taxed twice.
They provide greater certainty for both taxpayers and tax administrators about how cross-border investment income will be taxed. They reduce compliance costs and lower tax on some income.
Tax agreements are also used in the global fight against tax evasion, with signatories agreeing to share more tax information under the global standard set by the G20 and OECD.
China is New Zealand’s largest trading partner in goods and second largest overall including trade in services.
“In this context, it is vital to ensure our double tax agreement with China is up to date and follows best practices,” Ms Collins says.
Revenue Minister Judith Collins has today welcomed the release of a tax officials’ paper, seeking feedback on options to reduce the cost to employers of administering PAYE information.
“We are aware that certain aspects of PAYE, such as correcting simple errors and sending that information to Inland Revenue, are still largely manual. This can impose excessive compliance costs on business.
“The Government is looking to reduce some of these costs as part of Inland Revenue’s Business Transformation programme, so business owners can concentrate on the job of growing their businesses,” Ms Collins says.
A tax bill currently before Parliament contains proposals for reducing employers’ PAYE compliance costs by integrating the PAYE process into normal business activity.
Further proposals released today would make the task of correcting PAYE information errors easier by allowing employers to use payroll software to make corrections to already filed returns, or in some circumstances, to make corrections in a subsequent return. However, the proposals would not mean that all employers would need to shift to digital services.
“It’s important that all businesses should benefit from simplified PAYE error correction processes. For that reason, employers who currently file through Inland Revenue’s website or on paper could continue to do so. Employers would be able to access their filed returns through myIR to correct their records, and paper-based error correction forms would continue to be available to employers for the foreseeable future,” Ms Collins says.
The paper, PAYE error correction and adjustment, is available at: www.taxpolicy.ird.govt.nz Submissions close on 15 September 2017.
Revenue Minister Judith Collins welcomed the tabling in Parliament today of the OECD-led multilateral instrument.
“The Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting (known as the Multilateral Instrument) allows several thousand tax treaties around the world to be quickly updated in line with OECD recommendations.
“The Multilateral Instrument is a major new weapon in the fight against base erosion and profit shifting (BEPS) because tax treaty abuse is often the basis for BEPS techniques. 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.
“Tabling the treaty is another step forward along with other recently announced measures which aim to:Stop foreign parents charging their New Zealand subsidiaries high interest rates to reduce their taxable profits in New Zealand Stop multinationals using artificial arrangements to avoid having a taxable presence in New Zealand Ensure multinationals are taxed in accordance with the economic substance of their activities in New Zealand Counter strategies that multinationals have used to exploit gaps and mismatches in different countries’ domestic tax rules to avoid paying tax anywhere in the world Make it easier for Inland Revenue to investigate uncooperative multinational companies.”
Two Orders in Council signed this week will help strengthen New Zealand’s tax agreements with India, and with San Marino, to prevent tax evasion, says Revenue Minister Judith Collins.
The Third Protocol to New Zealand’s double tax agreement (DTA) with India updates previous exchange of information provisions and inserts an article relating to assistance in the collection of taxes into the DTA.
“This will make the existing exchange of information provisions in the DTA operate more effectively, and allow each country to assist each other in the collection of unpaid taxes,” says Ms Collins.
Similarly, the tax information exchange agreement (TIEA) with the Republic of San Marino implements the current international standard for exchange of information between New Zealand and San Marino.
While exchange of information provisions have traditionally been included in DTAs, new international standards require the exchange of information with tax jurisdictions with which DTAs may not be appropriate. The new TIEA with San Marino allows that requirement to be implemented.
The agreements will come into force once diplomatic formalities have been completed in each country, Ms Collins says, and will give signatories greater ability to share information to prevent tax evasion.
Finance Minister Steven Joyce and Revenue Minister Judith Collins have today announced the Government’s final decisions on proposals to address base erosion and profit shifting (BEPS).
“The new measures will significantly strengthen our tax rules and our ability to ensure that multinationals are taxed fairly and on the basis of their actual level of economic activity in New Zealand,” Mr Joyce says.
In combination the new measures will:
- Stop foreign parents charging their New Zealand subsidiaries high interest rates to reduce their taxable profits in New Zealand.
- Stop multinationals using artificial arrangements to avoid having a taxable presence in New Zealand.
- Ensure multinationals are taxed in accordance with the economic substance of their activities in New Zealand.
- Counter strategies that multinationals have used to exploit gaps and mismatches in different countries’ domestic tax rules to avoid paying tax anywhere in the world.
- Make it easier for Inland Revenue to investigate uncooperative multinational companies.
“These changes will result in an estimated $200 million a year in additional tax being paid by multi-national companies,” Mr Joyce says. “The Government budgeted for $100 million annually in out-years for additional multi-national tax, and these decisions mean that will be increased by a further $100 million annually from Budget 2018 onwards.”
“These decisions have been arrived at after weighing up public feedback on three government discussion documents relating to: hybrid mismatch arrangements; interest limitation rules; and transfer pricing and permanent establishment avoidance,” Ms Collins says.
“For the most part, the proposals will proceed as originally devised but in some instances, public feedback made a good case for refining the scope of proposals or for fleshing out technical detail. We’ll carry out further targeted consultation on such matters of technical detail (including draft legislation), without reducing the effectiveness of the proposals.”
“It is very important that every company operating in New Zealand pays their fair share of tax,” Mr Joyce says. While most multi-national companies follow the rules there are some that attempt to minimise or eliminate their New Zealand tax obligations. The proposals target these multinationals.
“I’m confident that the policy decisions we’ve made will tackle these BEPS activities without reducing the general attractiveness of New Zealand as an investment destination.”
“As we’ve done in the past for BEPS matters, we’re releasing reports and Cabinet papers detailing our key decisions. We are also releasing the public submissions we received,” Ms Collins says.
It is expected that the BEPS measures will be included in a tax bill to be introduced by the end of the year, for enactment by July 2018.
The documents released today can be found at www.taxpolicy.ird.govt.nz
Transport Minister Simon Bridges and Energy and Resources Minister Judith Collins have announced the Government’s 2017 electric vehicle (EV) registrations target has been achieved 5 months early.
“This is great news and a reflection of the work undertaken by the Government and private sector in normalising the purchase and integration of EVs into the New Zealand vehicle fleet,” Mr Bridges says.
“Currently, around 200 EVs are registered monthly with a total of 4,027 EV’s now registered in New Zealand. If registrations continue to increase, as we have seen this year, we will be on track to meet our challenging target of 64,000 EVs registered in New Zealand by the end of 2021.
“The positive acceptance of EVs in New Zealand is having real benefits. The rising uptake has led to increased manufacturer confidence. They are now offering more choice in new EVs than ever before. We are also seeing an increase in the number of used EVs importers are bringing into the country.
“It is great that both private and public sector organisations are helping uptake by choosing EVs over conventional petrol or diesel vehicles for their fleets. Over the past year we’ve also seen an increase in businesses opting for EVs as non-passenger vehicles, including light vans for food delivery, public transport and refuse trucks, all of which are great uses for EVs,” Mr Bridges says.
“Going electric is not only good for business, but makes best use of New Zealand’s plentiful renewable energy supply, improves air quality and minimises greenhouse gas emissions,” Ms Collins says.
“The recent announcement by Volvo, that from 2019 all new models it produces will be fully electric or plug-in hybrid, shows there is a changing global perception of how EVs are perceived. These latest figures show that New Zealand is on the right track.”
In May 2016, the Government announced its Electric Vehicle Programme, a wide ranging package of measures to encourage the uptake of EVs in New Zealand. The target is to double the fleet each year, reaching 64,000 EV registrations by the end of 2021.
There is also a strong and growing interest in EVs amongst New Zealanders, with over 50,000 visits to the EV website since its launch in September 2016. The Government’s EV website can be found at: www.electricvehicles.govt.nz
The Government is planning major changes to how IRD pays social support so that people can know better what their entitlements are and be sure of receiving the right amount, Finance Minister Steven Joyce and Revenue Minister Judith Collins say.
“The Working for Families system is very complex and has been since it was introduced,” Mr Joyce says. “More than 40 per cent of people receiving Working for Families are underpaid, while a quarter of all people get paid too much and end up owing money to Inland Revenue.”
“The old IRD system wasn’t designed to handle income support payments like Working for Families,” Ms Collins says. “Our new system will allow us to base payments on better information and allow IRD to be much more accurate and adaptable to families’ changing circumstances and incomes.”
The Government has released a new consultation document, Better administration of social policy, which goes through the proposed changes and how they will affect families.
“As well as lifting family incomes, this year’s Budget began the process of simplifying people’s taxes and entitlements so they can easily see what they should be receiving. These proposals are the next step in creating a more straightforward tax and transfer system which responds quickly and simply as people’s circumstances change,” Mr Joyce says. “It will provide a better system for hundreds of thousands of New Zealand families.”
Along with Working for Families changes, the Better administration of social policy consultation document also contains proposals for improving processes for child support and student loans.
“Child support payments will be automatically deducted from the wages or salary of all liable parents, and more comprehensive information about both parents’ incomes taken into account, including income from trusts. And if the receiving parent wishes, Child support payments could be passed on to them as soon as Inland Revenue had processed the payment,” Ms Collins says.
“We’re also proposing that a wider range of employment income would have student loan repayments deducted from New Zealand-based borrowers, reducing the chance of large end-of-year bills.”
Full details of the proposals are in the discussion document Better administration of social policy available at www.makingtaxsimpler.ird.govt.nz. Submissions close on 15 September 2017.
Muslim community gathers to celebrate Eid
Members of the Muslim community will gather at Parliament tonight in a celebration of the Islamic festival of Eid ul-Fitr (Eid), Minister for Ethnic Communities Judith Collins says.
Ms Collins is hosting the celebrations in the Grand Hall with around 100 people including distinguished guests from the Muslim community, Race Relations Commissioner, Dame Susan Devoy and Members of Parliament.
“For members of the Muslim community, Eid is about celebrating the special meaning of Islam in their lives. In developing New Zealand’s national identity, Muslim Kiwis have added much to our cultural richness, diversity of talent and skills.
“Sharing celebrations such as Eid plays an important role in making New Zealand a more tolerant and vibrant nation.
There are around 46,000 Muslims in New Zealand. Most are based in Auckland and are of Fijian-Indian extraction belonging to the Sunni sect.
In addition to immigrants from India, Africa and the Middle East there are around 1000 Māori and over 9,000 people born in the Pacific who identified themselves as Muslim in the 2013 Census.
A study into New Zealand’s retail fuel market confirms that it has features which may not be consistent with a workably competitive market, Energy and Resources Minister Judith Collins says.
The Study found that retail fuel margins have increased significantly over the last five years while fuel margins for aviation and commercial road users have been flat or falling. It also found that higher petrol prices in the South Island and Wellington are not explained by higher costs in those areas.
“There were difficulties in comparing the information received from the companies, and some very specific information that was required could not be obtained.
“As a result, the Study doesn’t definitively answer whether fuel prices are reasonable or not. However, the Report does conclude that “we cannot definitely say that fuel prices in New Zealand are reasonable, but we have reason to believe that they might not be.”
“This is a very complex area and the Study takes us a significant step forward in our understanding. I have now instructed my officials to assess the recommendations of the Study and report back to me by November.
“Furthermore, the Market Studies powers announced recently by the Minister of Commerce and Consumer Affairs will give the Government the option to direct the Commerce Commission to undertake a further competition-specific fuel market study, backed by the ability to require comparable data across companies. There is currently no legal mechanism to do this.”
“I would like to thank Z Energy, BP, Mobil and Gull for taking part in the Study.”
The Fuel Market Financial Performance Study, MBIE summary of the Study and the Cabinet paper are available here.
Minister for Ethnic Communities, Judith Collins, will tomorrow address the annual EPIC NZ (Ethnic People in Commerce) conference at Sky City Convention Centre which will bring together New Zealand’s ethnically diverse business community.
EPIC NZ will strengthen the links between government and the ethnically diverse business community, while providing valuable insights into digital disruption, innovation, and how to succeed in an ever changing global economy.
“Diversity is essential for the growth of New Zealand’s businesses. Research shows diversity helps build a stronger economy and creates jobs by encouraging innovation, deepening links with international markets and providing the skills we need for growth,” says Ms Collins.
Small Business Minister Jacqui Dean will also attend the conference this year to address the large number of small businesses in the audience. The conference provides information and support to help small businesses thrive.
“We want to ensure all businesses, including small and medium businesses have the opportunity to realise the benefits from innovation and diversity. EPIC NZ will showcase the New Zealand business story, new trends, and provides a platform to connect participants with inspiring business leaders,” says Ms Collins.
“I am pleased to see that government agencies will also be in attendance, to provide businesses with the opportunity to engage and access the support and services available to them.”
“EPIC NZ helps build links and connections between ethnic communities and the broader New Zealand business community. New Zealand’s diverse and growing population brings a range of skills and experience that can help create jobs and opportunities for all New Zealanders.”
Further information including the conference programme and speakers is available on the Office of Ethnic Communities website: https://ethniccommunities.govt.nz/events/epicnz-conference-auckland-30-june-2017