The Government has doubled its estimate of how much extra money it will claw in from closing tax loopholes used by multinational companies - it now expects $200 million a year in additional tax, reports the NZ Herald.
Finance Minister Steven Joyce and Revenue Minister Judith Collins today announced the Government's final decisions on proposals to address base erosion and profit shifting (BEPS).
Joyce said the changes would haul in an estimated $200m a year in additional tax being paid by multinational companies.
"The Government budgeted for $100 million annually in out-years for additional multi-national tax, and these decisions mean that will be increased by a further $100 million annually from Budget 2018 onwards."
The revised estimate of extra tax is in line with the extra $200m a year Labour pledged to bring in from tax changes.
Joyce said most multinational companies followed the rules but some attempted to minimise or eliminate their tax obligations.
"I'm confident that the policy decisions we've made will tackle these BEPS activities without reducing the general attractiveness of New Zealand as an investment destination."
The Government says the new measures will:
• Stop foreign parent companies charging their New Zealand subsidiaries high interest rates to reduce their taxable profit in New Zealand.
• Ensure multinationals are taxed in accordance with the "economic substance" of their activities in New Zealand.
Joyce said the new BEPS measures would be included in a tax bill to be introduced by the end of the year, for enactment by July next year.
New Zealand is among 96 countries that are working on a multilateral tax treaty developed by the OECD to tackle tax avoidance strategies used by multinational companies, that are known by the acronym for base erosion and profit shifting (BEPS).
A Herald investigation in March last year found the 20 multinational companies most aggressive in shifting profits out of New Zealand collectively paid virtually no income tax.
The companies in question, including Facebook, Google and Pfizer, said they followed New Zealand laws, and differences in profitability between their New Zealand operations and elsewhere were because of different business models.
Facebook paid just $43,000 tax in New Zealand on $1m in revenue, according to recent financial statements.