Labour targets tax avoiders

NZ Herald

24 Jun, 2014 07:00 PM2 mins to read

Facebook, Apple and Google are in Labour's crosshairs for alleged tax avoidance. Photo / AP

Special commissioner would probe minimisation schemes by internet-based firms

Internet giants Apple, Google and Facebook will likely be targeted under plans for a crackdown on tax avoidance by big multinationals which Labour is set to announce today.

Labour will reveal its fiscal strategy, including plans to boost revenue by as much as $200 million a year by reducing tax avoidance.

Labour has previously indicated it wants to front-foot the thorny issue of tax minimisation on New Zealand revenue by internet-based businesses, rather than relying on international efforts led by the OECD group of developed economies, which is the preferred approach of the National Government.

Early this year, amid growing international concern over tax minimisation by Facebook, Google, Apple and Amazon, Labour's revenue spokesman David Clark suggested a Labour Government may go so far as to ban Facebook or other companies that did not pay their fair share of tax in this country.

Labour quickly retreated from that suggestion. Today's plan hinges on setting up a special commissioner for tax avoidance who would focus on multinational corporations.

Under that commissioner, a new corporate tax unit would "embed" Inland Revenue Department (IRD) auditors in corporations which have a history of tax avoidance either in New Zealand or abroad.

The embedded IRD officials would review multinationals' financial plans where they may affect their tax bills to prevent tax avoidance from occurring in the first place.

However the Herald understands the plan excludes the major banks despite their settlements with IRD early this decade totalling more than $2 billion over their use of complex financial transactions to reduce their tax bills.

Labour's view is the banks are already adequately monitored by the Reserve Bank.

Labour Leader David Cunliffe has previously indicated tax will increase for the wealthy under a government he led and today will also see plans for a new progressive tax rate structure.

Labour further plans to reduce tax avoidance by aligning the tax rate for trusts with that new structure. It projects anti-avoidance measures will boost revenue by $20 million in the initial 2015-16 year, rising to $200 million a year by 2018-19.

The projections are less ambitious than those Labour released during the 2011 election campaign, which suggested anti-avoidance measures could raise as much as $300 million a year in additional revenue.