BEPS measure takes another step forward

  • Judith Collins

Revenue Minister Judith Collins welcomed the tabling in Parliament today of the OECD-led multilateral instrument.

“The Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting (known as the Multilateral Instrument) allows several thousand tax treaties around the world to be quickly updated in line with OECD recommendations. 

“The Multilateral Instrument is a major new weapon in the fight against base erosion and profit shifting (BEPS) because tax treaty abuse is often the basis for BEPS techniques. The Multilateral Instrument includes articles on “permanent establishment” avoidance, treaty abuse, dispute resolution and hybrid mismatches. These address the key treaty-related BEPS issues. The extent to which these provisions are incorporated into New Zealand’s treaties will depend on the final positions of both New Zealand and our treaty partners.

“Tabling the treaty is another step forward along with other recently announced measures which aim to:

  • Stop foreign parents charging their New Zealand subsidiaries high interest rates to reduce their taxable profits in New Zealand
  • Stop multinationals using artificial arrangements to avoid having a taxable presence in New Zealand
  • Ensure multinationals are taxed in accordance with the economic substance of their activities in New Zealand
  • Counter strategies that multinationals have used to exploit gaps and mismatches in different countries’ domestic tax rules to avoid paying tax anywhere in the world
  • Make it easier for Inland Revenue to investigate uncooperative multinational companies.”