Gareth Morgan shows how foreign corporates avoid paying tax, and what we can do about it

Source: www.interest.co.nz --- Friday, July 15, 2016
Tweet By Gareth Morgan * Some claim that Uber has joined the ranks of other tech companies like Google, Apple and Facebook in minimising their New Zealand tax obligations. How do foreign companies keep their tax bills low in New Zealand and what we can do about it? The tax base needs to be comprehensive if it is to be fair and efficient. A broad base enables personal income tax rates to be kept as low as possible and, if there are no gaps in the tax base, decisions are made on the basis of economic return, not the incidence of tax. Business income is part of the tax base and New Zealand is one of the few jurisdictions that operates imputation credits to ensure that the profits distributed to shareholders (not all profits are distributed) aren’t taxed twice. Corporate tax provides 25% of the overall income tax revenue, PAYE provides 60%, and other personal income tax (for example earnings of the self-employed and term-deposit holders) provides 15%. So corporate tax is significant and protecting the integrity of the corporate tax base is important on both fairness and efficiency grounds. How foreign corporates minimise their tax bill Foreign-owned or partly foreign-owned firms operate in New Zealand and are expected to pay New Zealand tax on the profits they make here. If such firms were exempt income tax (paying tax only at home where tax rates may be lower) foreign firms would have an unfair tax advantage over domestic firms. But ...

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