Hon Peter Dunne
Minister of Revenue
Tuesday, 4 December 2012 Media Statement
Dunne explains NZ’s tax approach to multinationals
Tax systems around the world are adjusting to corporate giants with huge internet footprints, but very little physical
presence, Revenue Minister Peter said today in addressing issues around the tax treatment of large multinational
“The reality is that tax regimes internationally have generally been developed for an industrial age, and have struggled
to keep pace with new business models and technologies not contained by location or national borders,” Mr Dunne said.
“That is the challenge that we face in New Zealand, but it is very much a global issue faced by other nations too. The
problem is not just that these large companies are not paying substantial tax here, but that they tend not to be paying
substantial tax anywhere.
“We see Britain and Australia facing exactly the same issues, and our rules are already very similar to those adopted by
Australia last week,” he said.
Mr Dunne said the answer to taxing multinationals appropriately in various jurisdictions would be found through
international projects and agreements, and that New Zealand is involved in these talks, particularly through the OECD.
“A key issue is that foreign companies are taxed on the activities that they actually perform in New Zealand, so under
international norms, New Zealand, like any other OECD nation, may have no right to tax profits from revenues generated
from New Zealand.”
“Again, for cross-border transactions, the New Zealand tax system, like those of tax jurisdictions around the world,
focuses on a physical presence and taxable activity occurring here,” Mr Dunne said.
“However, the internet has made it possible to provide an increasing range of services to distant customers from
anywhere in the world. This means that overseas-based internet companies have a very limited physical presence in most
countries in which they operate – including New Zealand.
“Since the bulk of what these companies do, in terms of programming, designing websites, running servers, selling
advertising, is done overseas, New Zealand, like other countries, may have very limited taxing rights.
Mr Dunne said concerns that such multinationals are not paying appropriate levels of tax need to be balanced against
those complex realities.
“There are no easy answers or quick fixes here, but there are definitely fundamental issues that need to be tackled to
get a fairer system,” he said.
“This is, as I say, a global problem requiring a global response and New Zealand will be involved in working up that
response,” he said.
He said New Zealand participates closely in the OECD project on profit shifting by multinationals and the global erosion
of the corporate tax base.
“Part of the OECD’s work will focus on how tax structures such as the double Irish technique may be used to minimise the
tax which is payable in Ireland and other foreign countries.
“We are also closely involved with related initiatives such as the systematic reviews of country regimes being
undertaken by the Global Forum on Transparency and Exchange of Information for Tax Purposes and the OECD’s Forum on
Harmful Tax Practices.
“I can assure you that any activities multinational businesses, or their New Zealand subsidiaries, perform in this
country will be taxed appropriately,” he said.
Mr Dunne said on the international front measures such as transfer pricing, thin capitalisation, and general
anti-avoidance rules are already in place to make sure international firms pay an appropriate level of tax in New
“We also have a growing network of tax treaties to help stamp out tax avoidance through information sharing with other
As part of Budget 2010, the Government took steps to stop foreign multinationals from reducing their New Zealand profits
through debt funding by tightening the thin capitalisation ratio from 75% to 60%. The Government’s tax policy work
programme includes a project to ensure that certain investment structures cannot be used to escape the application of
Mr Dunne has requested a report from Inland Revenue into the tax treatment of such companies.
“Our tax laws need to evolve and they will. This is a challenge, and it is about fairness, and it will be met.”