Technology threatening govt's tax

HAMISH RUTHERFORD
Last updated 19:07 28/01/2014

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The Government says it will continue to combat profit shifting by multinationals as it warns that mobile technology makes it harder to collect tax.

Prime Minister John Key said in his opening address to Parliament that the Government continued to support a "broad-base, low-rate tax system". Some fine-tuning would be done this year to ensure it could cope with new challenges.

"This includes maintaining a focus on domestic and international efforts to combat profit shifting by multinationals," Key said.

The low level of tax paid by multinational technology companies has attracted controversy, with social media website Facebook paying less than $30,000 in tax in New Zealand last year.

This has led Labour to reportedly warn that it could consider banning Facebook in New Zealand if it did not co-operate on tax reform.

Finance Minister Bill English dismissed the idea of banning part of the internet, but warned there were risks to the tax base.

English said while at the World Economic Forum in Davos in Switzerland that there was considerable discussion about the tactics used by multinational companies to move profits to low tax jurisdictions, and how mobile technology was undermining traditional means of collecting tax.

"You've got governments that are hungry for revenue, and both of those things are eroding the existing tax base," English said.

Australian Prime Minister Tony Abbott will lead a debate on the issues raised by multinationals at the G-20 Forum in Brisbane in November, but English warned not to expect a solution soon.

"There's no simple answer there," English said. "It needs a co-ordinated international action and judging by how difficult it is to get trade agreements together, getting tax agreements would be a be a bit of a long hard job."

English said the companies complied with the law, but he believed they should "pay their fair share".

It was not a major problem "yet", but could become worse.

"I'm not going to quote figures or name names, but in general ... we run the risk of digitalisation undermining the tax base, making it harder for governments to get revenue."


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- Fairfax Media

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