Major tax bill passes

“Foreign owned banks operating in New Zealand will be required to pay sufficient tax on their New Zealand income as part of a major tax bill passed by Parliament yesterday,” Revenue Minister Michael Cullen said.

“New thin capitalisation rules will ensure that the income of banks cannot be sheltered by interest deductions arising from excessive debt. Banks will not have access to interest deductions if they do not hold a level of equity equivalent to 4 per cent of their New Zealand banking assets, weighted for risk.

“The bill also makes it easier for businesses to claim tax deductions for environmental expenditure, allowing environmental costs, like other business costs, to be taken into account for tax purposes.

“It introduces statutory ‘privilege’ – or a right not to disclose certain documents – to confidential tax advice that is given by advisors such as chartered accountants, a change that has been welcomed by tax professionals.

“The bill introduces several business-friendly changes. They include clarification of the income tax rules on transfers of assets and liabilities to beneficiaries when a taxpayer dies, a reform that is long overdue. They also include technical amendments to the tax depreciation rules to improve their operation and reduce compliance costs. “The changes include the introduction of a six-year tax exemption on income from non-resident drilling rigs and seismic ships involved in exploration for petroleum in New Zealand, as part of a package of measures to boost gas exploration.

“This very important bill reflects the priorities of the government’s tax policy work programme, which include promoting growth and innovation, making the tax system easier for businesses to work with, reducing compliance costs and protecting the revenue base. I am very pleased that it has been passed,” Dr Cullen said.

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