22 Apr 2013

Global solution needed for multinational tax

7:37 am on 22 April 2013

A tax expert says getting a global solution that ensures multinational firms pay their fair share of tax won't be easy.

In a progress report reviewing the taxation of multinationals, Revenue Minister Peter Dunne said New Zealand's rules and enforcement were at, or above, world standards.

Improvements were being considered though, including increasing the effectiveness of thin capitalisation rules, which determined how much interest paid on corporate debt could be deducted for tax purposes.

PWC partner Elle Ward said the issue of Starbucks paying little tax in Britain, despite high customer numbers, sparked concerns among many countries that global groups of companies were not paying their share of tax.

"Starbucks in the UK, for example, ended up explaining their tax position to a parliamentary committee when it turned out they hadn't been paying very much income tax, I think only 8 million stirling over 14 years despite having a huge customer base."

Ms Ward said New Zealand was facing the same problems because it was a global issue and everything was interlinked.

She said if one country had a weak tax system large groups could make the most of that to minimise their global tax position.

Ms Ward said New Zealand needed to work with other countries to come up with a solution that worked for everyone.

She said New Zealand was well represented in the discussions, but progress was slow because there needed to be a consensus among a number of countries about what the issues were and how to solve them.

Ms Ward said New Zealand was doing pretty well in terms of holding up its end of the bargain by having a strong and efficient tax system.

Inland Revenue is also doing work on its ability to collect withholding tax, particularly on interest payments.