23/11/20

NEW ZEALAND: Country losing $577m a year to 'global tax abuses', international study estimates.

As published on stuff.co.nz, Monday 23 November, 2020.

New Zealand is losing US$401 million (NZ$577m) a year through global tax evasion, much of it through profit-shifting by multinationals, an international lobby group has estimated.

The figure is included in a report published by the Tax Justice Network which estimated that “international tax abuse” by companies and wealthy individuals is costing countries globally US$427b.

The report suggests multinational tax avoidance is a comparatively small problem in New Zealand compared to overseas, with US$175m lost here due to overseas tax evasion by businesses.

It estimated total tax losses due to “global abuses” at 0.6 per cent of the country’s tax take, versus 5.35 per cent in the UK, 2.5 per cent in the United States and 1.1 per cent in Australia.

But the lobby group estimated New Zealand was inflicting US$555m of tax losses on other countries, including Samoa and Fiji, by “enabling corporate tax abuse”.

Concerns in New Zealand about international tax avoidance have mostly focused on the use of brazen tax loopholes employed in the past by technology firms such as Apple, Facebook and Google.

But the Tax Justice Network calculated that the trading partner most responsible for New Zealand’s tax losses was China, followed by Australia and only then the US.

The report identified the Cayman Islands and then the UK, the Netherlands, Luxembourg and the US as being most responsible for enabling tax leakage globally, with the US, UK and Germany the “biggest losers” in dollar terms.

“37.4 per cent of global tax losses are enabled by the UK spider’s web, ie. the UK, with its overseas territories and crown dependencies,” it said.

The Tax Justice Network’s members include Public Services International, which represents more than 700 trade unions in 154 countries.

The report was compiled with the benefit of data released by the OECD on multinational corporations’ financial affairs in July, and has garnered widespread international attention.

The Washington Post said the report was the first to make use of OECD data showing how much profit and revenue multinational companies reported in each country, how many employees and assets they had, and how much tax they paid.

However, the dollar-figure estimates of tax losses in each country relied on some assumptions and required the use of machine-learning tools as well as expert advice from several universities.

Deloitte tax partner Bruce Wallace and PWC tax partner Geoff Nightingale have both forecast the OECD may face an uphill battle securing agreement on more controversial reforms of the international tax system, despite the election of US President-Elect Joe Biden.