Tuesday, 4 December 2007 Media Statement
Consultation continues on reform of international tax rules
The latest round of consultation on the reform of New Zealand’s international tax rules got under way today with the
release of an issues paper seeking feedback on suggested changes to the treatment of foreign dividends under the
proposed reform.
“With the release of this third consultative document, all is on track for the introduction in May of a bill that gives
effect to the comprehensive reform of the way we tax New Zealand companies that have offshore subsidiaries,” Finance
Minister Michael Cullen and Revenue Minister Peter Dunne said today.
“The issue paper’s main focus is the taxation of dividends received by New Zealand companies from their offshore
subsidiaries. It also looks at transitional and consequential matters arising from the move to an active income
exemption, including the repeal of the conduit rules and the treatment of existing foreign losses and foreign tax
credits.
“Our current tax rules for the offshore operations of New Zealand businesses are out of line with the tax systems of
comparable countries, particularly those of Australia. New Zealand taxes the offshore active income – such as
manufacturing income – of its businesses, whereas other countries do not.
“That makes it difficult for New Zealand businesses with offshore operations to compete effectively with similar
businesses in other countries.
“For this reason, the central proposal of the reform is to introduce a tax exemption for active income from the offshore
operations of New Zealand businesses, as announced in Budget 2007.
“It is essential to remove tax disincentives for businesses to locate in New Zealand and expand into other countries
from a New Zealand base.
“Within an increasingly global economy, New Zealand must be able to attract and retain capital, and our businesses must
be able to compete effectively in foreign markets,” they said.
The issues paper, “New Zealand’s International Tax Review: the treatment of foreign dividends and transitional issues”,
is published at www.taxpolicy.ird.govt.nz. The closing date for submissions is 15 February 2008.
ENDS