Multinationals tried to 'defeat tax rules'
Foreign-owned companies are likely to pay more tax in New Zealand under proposals put forward in a discussion paper released by Revenue Minister Todd McClay.
However, a banking industry body indicated borrowers could end up bearing the extra cost through higher interest rates.
PWC tax partner Geof Nightingale said the major Australian banks would be among the losers from the changes outlined by the Inland Revenue Department and the Treasury.
Inland Revenue said the changes, if implemented, would increase the amount of tax Inland Revenue collected by about $50 million annually.
The rules concern the ways overseas-owned firms are allowed to account for income they receive from interest, dividend payments and royalties.
The proposed changes would close loopholes surrounding non-resident withholding tax (NRWT).
McClay said the rules surrounding NRWT had not been significantly reformed since the tax was introduced in 1964, when financial transactions were "much less complex".
Without changes, foreign companies could shift profits out of New Zealand with "no or minimal New Zealand tax paid", he said.
Inland Revenue had uncovered instances where large multinationals were using sophisticated techniques to "defeat the tax rules", he said.
McClay said the proposed rule changes tied-in with a larger programme of work being advanced by the Organisation for Economic Cooperation and Development to clamp down on multinational tax rorts.
New Zealand Bankers Association chief executive Kirk Hope said the banking industry would study the proposals closely and would be making a full submission.
Banks took their tax obligations very seriously and the industry supported tax reforms that made sense and got the balance right between workable regulation and economic growth, he said.
"It's important to note though that the New Zealand economy relies on offshore capital to fund our businesses and households.
"Any tax changes that unnecessarily make raising this capital more expensive will potentially mean increased lending costs for New Zealand businesses and households," he said.