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New Zealand to implement tax assistance agreement next year

New Zealand to implement tax assistance agreement next year

WALINGTON: The Convention on Mutual Assistance in tax matters will be operational in New Zealand from January 1, 2015, Revenue Minister Todd McClain has said.

The Convention, signed in 2012, provides for administrative co-operation between tax authorities in the assessment and collection of taxes.

It provides for all forms of mutual assistance: exchange on request; spontaneous exchange; tax examinations abroad; simultaneous tax examinations; and assistance in tax collection; while also protecting taxpayers’ rights. It provides the option to undertake automatic exchange of tax information.

Exchange of information between tax authorities will also become increasingly common in 2015. From January 1 the “Convention on Mutual Administrative Assistance in Tax Matters” becomes fully operative in New Zealand.

This will allow Inland Revenue to request information from the tax authorities of other countries and to seek assistance in collecting outstanding tax debts from taxpayers who have disappeared overseas. We have already seen many situations where the IRD have asked follow-up questions of New Zealand taxpayers as a consequence of information received from offshore.

Tax matters are not at the forefront of most people’s minds at this time of year, but the wind down for the holiday period provides an opportune time to look forward to the coming year and consider what it may bring on the tax front.

At an international level, the term “BEPS” (“base erosion and profit shifting”) is the current buzz word among the tax community and media.

Essentially this refers to strategies employed by multi-national enterprises to shift taxable profits to jurisdictions with no or low tax. Plenty has been said in the media recently about how little tax the likes of Google or Apple pay in certain countries relative to the income earned from those countries.

Although that may seem a bit distant from the activities of businesses locally, BEPS work is being undertaken by our government and others around the world to address this problem and to ensure our tax rules work sensibly in the digital age. The IRD recently released a policy document in this area which noted several issues of focus over the coming year.

Finally, we will be keeping an eye on the Australian government as it conducts the “white paper” review of its tax laws throughout next year. The outcome of that process could have a knock-on effect for our own tax laws, including any potential reduction in the company tax rate. It promises to be another year full of activity in the tax world.