NZ buys into G20 deal to tax online profits

Finance Minister Bill English. Photo / Richard Robinson

Countries will exchange information about companies that may be slipping the net.

Finance Minister Bill English says New Zealand will back an agreement reached by G20 finance ministers in Sydney yesterday to collect more tax in the growing global digital economy.

He said there was a strong push at the meeting to have automatic exchange of information about international taxpayers where questions were raised about them.

The ministers agreed to have the new information-sharing regime in place by the end of next year, although New Zealand might not be quite ready by then, he said.

It is one of the early collective measures governments are taking to try to get a bigger share of the huge profits being made by global companies such as Google and Apple.

The OECD had been working on the technical details of what governments could do to tackle what is known as base erosion and profit shifting.

"It signals to international businesses that governments are going to be gradually tightening up," Mr English said from Sydney.

"Clearly over the next four or five years there is going to be a lot of discussion about how to work together to ensure everyone pays their fair share."

The agreement reached yesterday was a first step "and the transparency that goes with that will in itself have an effect".

Mr English said he could not calculate what effect it would have on the New Zealand tax base because it was just an exchange of information.

"But taxpayers who are concerned about that may behave differently."

The information would be enough to allow another tax authority to work out if there was activity it wanted to do something about.

But because of the systems changes at Inland Revenue, it would be quite a job to meet the agreed implementation date for information exchange.

Australia is chairing the G20 this year and has invited New Zealand and Singapore to participate.

Mr English said there was interest in the NZ economy and why it was coming out of the recession sooner and more quickly than a lot of the G20 countries.

"It underlines how New Zealand is a bit further through the cycle than other people so we are looking at interest rates starting to go up and most other developed countries are expecting their interest rates to remain low for quite a long time yet."

Paying a fair share

What is base erosion?

Base erosion - and profit shifting - is the practice in which global companies shift profits, usually legally, to minimise their tax liability.

Who does it?

Most criticism has been directed at digital giants such as Google, Apple, Facebook and Amazon.

What is the G20?

Short for Group of 20, the G20 is a group of 19 countries and the European Union first convened during the global financial crisis in 2008 as an expansion of the G8.

Who belongs?

South Africa, United States, Canada, Mexico, Brazil, Argentina, China, Japan, South Korea, India, Indonesia, Russia, Turkey, European Union, Germany, France, Britain, Italy, Saudi Arabia and Australia.